UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment
(Amendment No.)
Filed by the Registrant [X]
x
Filed by a Party other than the Registrant [_]
¨
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
HADRON, INC.
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(Name
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to Section 240.14a-12 |
ANALEX CORPORATION
(Name of Registrant as Specified In Its Charter)
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(Name
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
PRELIMINARY COPIES
[LOGO]
HADRON, INC.
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
ANALEX CORPORATION
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
April __, 2002
14, 2003
Dear Fellow Shareholders:
Stockholders:
You are cordially invited to attend Hadron, Inc.'sthe Annual Meeting of ShareholdersStockholders of Analex Corporation (formerly Hadron, Inc.) to be held on May 21, 2002,20, 2003, at 11:10:00 a.m. local time at the Tower Club, located at 8000 Tower Crescent Drive, Vienna, Virginia 22182.
At this meeting, you will be asked to vote, in person or by proxy, on the following matters: (i) election of the Company'sCompany’s Board of Directors; (ii) approval of certain amendments to the Company'sCompany’s 2002 Stock Option Plan; (iii) to approve a proposed
name change of the Company to Analex Corporation; (iv) to approve a proposed
change in the state of incorporation of the Company from New York to Delaware;
(v) to approvePlan, including an increase in the number of authorizedshares of Common Stock to
30,000,000 and to add a classreserved for issuance thereunder; (iii) ratification of Preferred Stock; (vi) to ratify the appointment of Ernst & Young LLP as the Company'sCompany’s independent auditors for the fiscal year 2002;2003; and (vii)(iv) any other business as may properly come before the meeting. We also will be pleased to report on the business of the Company and a discussion period will be provided for questions and comments of general interest to shareholders.
stockholders.
Whether or not you are able to attend, it is important that your shares be represented and voted at this meeting. Accordingly, please complete, sign and date the enclosed proxy and mail it in the envelope provided at your earliest convenience. Your prompt response is important and would be appreciated.
Sincerely,
/s/ Sterling E. Phillips, Jr.
Sterling E. Phillips, Jr.
President and Chief Executive Officer
/s/ Jon M. Stout
Jon M. Stout
Chairman
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Sincerely, |
/s/ STERLING E. PHILLIPS, JR. |
Sterling E. Phillips, Jr. |
President and Chief Executive Officer |
/s/ JON M. STOUT |
Jon M. Stout Chairman |
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting, please complete, sign, and return promptly the enclosed proxy in the envelope provided to ensure that your vote will be counted. You may vote in person if you so desire even if you have previously sent in your proxy.
If your shares are held in the name of a bank, brokerage firm or other nominee, please contact the party responsible for your account and direct him or her to vote your shares on the enclosed card.
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i
HADRON, INC.
ANALEX CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
STOCKHOLDERS
TO BE HELD ON MAY 21, 2002
20, 2003
TO THE SHAREHOLDERSSTOCKHOLDERS OF HADRON, INC.:
ANALEX CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of ShareholdersStockholders of Analex Corporation, a Delaware corporation formerly known as Hadron, Inc., a New York corporation (the "Company"“Company”), is scheduled to be held on May 21, 200220, 2003 at 11:10:00 a.m., local time, at the Tower Club, 8000 Tower Crescent Drive, Vienna, Virginia 22182 for the following purposes:
1. To elect eight directors to serve for the terms of office specified
in the accompanying proxy statement and until their successors are
duly elected and qualified;
2. To approve the Company's 2002 Stock Option Plan;
3. To approve a proposed name change of the Company to Analex
Corporation;
4. To approve a proposed change in the state of incorporation of the
Company from New York to Delaware;
5. To approve an increase in the number of authorized Common Stock to
30,000,000 and to add a class of Preferred Stock;
6. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year 2002; and
7. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Shareholders
| 1. | To elect eight (8) directors to serve for the terms of office specified in the accompanying proxy statement and until their successors are duly elected and qualified; |
| 2. | To approve certain amendments to the Company’s 2002 Stock Option Plan, including an increase in the number of shares of Common Stock reserved for issuance thereunder to 2,000,000. |
| 3. | To ratify the appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year 2003; and |
| 4. | To transact such other business as may properly come before the meeting and any adjournment thereof. |
Stockholders of record at the close of business on April 1, 20027, 2003 are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. All shareholdersstockholders are cordially invited to attend the Annual Meeting in person. However, to assure your representation at the meeting, you are urged to complete, sign and date the enclosed form of proxy and return it promptly in the envelope provided. ShareholdersStockholders attending the meeting may revoke their proxy and vote in person.
FOR THE BOARD
/s/ Karen L. Dickey
Karen L. Dickey
Vice President and Corporate Secretary
FOR THE BOARD |
/s/ RONALD B. ALEXANDER |
Ronald B. Alexander |
Senior Vice President, Chief Financial Officer and Corporate Secretary |
Alexandria, Virginia
April __, 2002
ii
HADRON, INC.
14, 2003
ANALEX CORPORATION
PROXY STATEMENT
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common Stock, par value $0.02 per share (the "Common Stock"“Common Stock”), of Hadron, Inc.,Analex Corporation, a New YorkDelaware corporation (the "Company"“Company”), in connection with the solicitation by the Board of proxies for use at the Annual Meeting of ShareholdersStockholders to be held on Tuesday, May 21, 2002,20, 2003, at 11:10:00 a.m., local time, or at any adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of Shareholders.Stockholders (the “Annual Meeting”). The purposes of the meeting and the matters to be acted upon are set forth in the accompanying Notice of Annual Meeting of Shareholders.Stockholders. The Board is not currently aware of any other matters that will come before the Annual Meeting.
Proxies for use at the Annual Meeting are being solicited by the Board. These proxy solicitation materials are first being mailed on or about April __,
200218, 2003 to all shareholdersstockholders entitled to vote at the Annual Meeting. Proxies will be solicited chiefly by mail. The Company will make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to the beneficial owners of the shares and will reimburse them for their expenses in so doing. Should it appear desirable to do so in order to ensure adequate representation of shares at the Annual Meeting, officers, agents and employees of the Company may communicate with shareholders,stockholders, banks, brokerage houses and others by telephone, facsimile or in person to request that proxies be furnished. All expenses incurred in connection with this solicitation will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting and a return envelope for the proxy are enclosed. ShareholdersStockholders may revoke the authority granted by their execution of proxies at any time before their effective exercise by filing with the Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date, or by voting in person at the Annual Meeting. Shares of the Company'sCompany’s Common Stock represented by executed and unrevoked proxies will be voted in accordance with the choice or instructions specified thereon. If no specifications are given, the proxies intend to vote the shares represented thereby in favor of each of the nominees for director listed under “Proposal No. 1—Election of DirectorsDirectors” below, to approve Proposals 2 3, 4 and 53 as set forth in the accompanying Notice of Annual Meeting of ShareholdersStockholders and, in accordance with their best judgment, on any other matters which may properly come before the Annual Meeting.
Record Date and Voting Rights
Shareholders
Stockholders of record at the close of business on April 1, 20027, 2003 are entitled to notice of and to vote at the Annual Meeting. As of the record date, ______________14,749,548 shares of Common Stock were issued and outstanding, and there are no shares of any other class.the Company’s Preferred Stock issued or outstanding. Each share of Common Stock is entitled to one vote on all matters that may properly come before the Annual Meeting. The holders of a majority of the outstanding shares of Common Stock, present in person or by proxy, will constitute a quorum at the Annual Meeting.
Under New YorkDelaware law, (i) a plurality of the votes cast at the Annual Meeting is necessary to elect directors, (ii) the affirmative vote of a majority of the votes cast in person or by proxy is required to approve the adoption ofamendments to the Company’s 2002 Stock Option Plan, (the "2002 Stock Option Plan"),and (iii) the affirmative vote of a majority of the votes cast is required to approve the name change from Hadron, Inc. to
Analex Corporation, (iv) the affirmative vote of the holders of at least
two-thirds of the shares of the Company Common Stock outstanding on the Record
Date is required for approval of the proposed reincorporation in Delaware
through the merger (the "Reincorporation"), (v) the affirmative vote of the
holders of at least a majority of the outstanding shares is required for the
change in the Common Stock and to add a class of Preferred Stock, and (vi) the
affirmative vote of a majority of the votes castperson or by proxy is required to ratify the appointment of Ernst & Young LLP as the Company'sCompany’s independent auditors for the fiscal year 2002. Broker "non-votes" and2003. With respect to the election of directors, shares asthat are entitled to which a shareholder
abstainsvote for any particular nominee may be voted for such nominee or withheld from voting for such nominee. With respect to the election of directors, votes that are included for the purposes of determining
whether a quorum of shares is present at the Annual Meeting. A broker "non-vote"
occurs when a nominee holdingwithheld and proxies relating to “street name” shares for a beneficial owner does notwhich
brokers have
discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. A broker "non-vote"owner (“Broker Non-Votes”) will be counted to determine whether a quorum is present, but will have no effect on the outcome. With respect to Proposal 2 (amendments to the 2002 Stock Option Plan), Proposal 3 (ratification of the appointment of Ernst & Young LLP) and any other proposal to come before the Annual Meeting, abstentions and Broker Non-Votes will be counted to determine whether a quorum is present. In determining whether any such proposal has received the requisite number of favorable votes, abstentions will be counted as part of the total number of votes cast on such proposal, whereas Broker Non-Votes will not be counted as part of the total number of votes cast on such proposal. Thus, abstentions will have the same effect of an AGAINST vote onas votes “against” the proposed Reincorporation and onproposal, whereas Broker Non-Votes will have no effect in determining whether any such proposal has been approved by the proposed change in
the Common Stock and Preferred Stock.
stockholders.
At the Annual Meeting, ballots will be distributed with respect to each proposedproposal to be voted upon to each shareholderstockholder (or the shareholder'sstockholder’s proxy if not the management proxy holders) who is present and did not deliver a proxy to the management proxy holders or another person. The ballots shall then be tallied, one vote for each share owned of record, the votes being in three categories: FOR, AGAINST or ABSTAIN, except in the case of the proposal to elect directors, the three categories will be, with respect to each director to be elected, FOR the director nominee, WITHHOLD AUTHORITY from voting for the director nominee or FOR another person to be elected as a director.
Votes at the Annual Meeting will be tabulated by Inspectors of Election appointed by the Company.
Name Change and Reincorporation
Pursuant to the approval of the Company’s stockholders obtained at the Company’s annual meeting held on May 21, 2002, the Company changed its name from Hadron, Inc. to Analex Corporation on July 1, 2002 by merging Hadron, Inc. into its wholly-owned subsidiary, Analex Corporation. Pursuant to the merger, the Company was reincorporated as a Delaware corporation. Hadron acquired the former Analex Corporation on November 5, 2001. The Company’s name was changed to improve marketing effectiveness and to take advantage of Analex’s broader name recognition in both the intelligence and aerospace systems engineering market segments.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Change
The following table sets forth information as of Control
April 7, 2003 regarding the beneficial ownership of the Company’s Common Stock of (i) each person known to the Company to be the beneficial owner, within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company named in the Summary Compensation Table (see “Executive Compensation”) and (iv) all executive officers and directors of the Company as a group. Unless otherwise indicated, the address of each named beneficial owner is c/o Analex Corporation, 5904 Richmond Highway, Suite 300, Alexandria, Virginia 22303. Except to the extent indicated in the footnotes, each of the beneficial owners named below has sole voting and investment power with respect to the shares listed. The percentages shown below are calculated in accordance with Securities and Exchange Commission rules and are based on 14,749,548 shares of Common Stock outstanding as of April 7, 2003.
Name and Address | Number of Shares | Percent of Class | ||
Jon M. Stout | 6,214,893(1)(2) | 37.4% | ||
Shawna L. Stout | 6,214,893(1)(3) | 37.4% | ||
Stout Dynastic Trust 13380 W. Polo Road Wellington, FL 33414 | 6,214,893(1)(4) | 37.4% | ||
Patricia W. Stout 13380 W. Polo Road Wellington, FL 33414 | 6,214,893(1)(5) | 37.4% | ||
S Co., LLC 13380 W. Polo Road Wellington, FL 33414 | 6,214,893(1)(6) | 37.4% | ||
J. Richard Knop Windsor Group One Discovery Square, Suite 700 12919 Sunset Hills Road Reston, VA 20190 | 6,214,893(1)(7) | 37.4% | ||
C.W. Gilluly, Ed.D. | 1,145,781(1)(8) | 7.5% | ||
Lese Ann Kodger P. O. Box 45515 Westlake, OH 44145 | 1,579,959 | 10.7% | ||
Peter C. Belford, Sr. | 1,108,397 | 7.5% | ||
Gerald R. McNichols, Sc.D. | 642,056(9) | 4.3% | ||
Lincoln D. Faurer | — | * | ||
Daniel R. Young | 20,000 | * | ||
Alan L. Kaplan | — | * | ||
Sterling E. Phillips, Jr. | 1,524,546(10) | 9.4% | ||
Ronald B. Alexander | 155,004(11) | 1.0% | ||
George W. Tonn | 278,641(12) | 1.9% | ||
Dr. Kenneth Alibek | 42,865(13) | * | ||
Stephen C. Dolbey | 33,334(14) | * | ||
All directors and executive officers as a group (15 persons) | 18,593,990(1)(15) | 75.2% |
| * | Less than 1% |
3
| (1) | Includes certain shares as to which voting power is shared in certain respects as a result of the Voting Agreement more fully described in “Proposal No. 1 – Election of Directors,” below. |
| (2) | Includes 166,634 shares held by Patricia W. Stout, Mr. Stout’s wife, 184,549 shares held by Mr. Stout’s children, 1,515,422 shares held by the Stout Dynastic Trust (the “Stout Trust”), and 740,605 shares held by S Co., LLC; includes 65,000 shares which may be acquired upon the exercise of options; and includes 235,161, 230,769, and 668,158 shares which may be acquired respectively by Mr. Stout, Patricia Stout, and the Stout Trust pursuant to warrants which are immediately exercisable. Includes shares, warrants and options immediately exercisable by others representing 2,213,127 shares of the Company’s Common Stock as to which Mr. Stout has shared voting power. |
| (3) | Includes 195,468 shares held by Mr. Stout, 166,634 shares held by Mrs. Stout, 89,776 shares held by Marcus Stout, Shawna Stout’s brother, 1,515,422 shares held by the Stout Trust and 740,605 shares held by S Co., LLC; includes 4,997 shares which may be acquired upon the exercise of options; and includes 235,161, 230,769, and 668,158 shares which may be acquired respectively by Mr. Stout, Patricia Stout, and the Stout Trust pursuant to warrants which are immediately exercisable. Includes shares, warrants and options exercisable by others representing 2,213,127 shares of the Company’s Common Stock as to which Mr. Stout has shared voting power. |
| (4) | Includes 195,468 shares held by Mr. Stout, who is the Trustee of the Stout Trust, 166,634 shares held by Patricia Stout, 184,549 shares held by the children of Mr. Stout and 740,605 shares held by S Co., LLC; includes 65,000 shares which may be acquired by Mr. Stout upon the exercise of options; and includes 668,158, 235,161, and 230,769 shares which may be acquired respectively by the Stout Trust, Mr. Stout, and Patricia Stout pursuant to warrants which are immediately exercisable. Includes shares, warrants and options exercisable by others representing 2,213,127 shares of the Company’s Common Stock as to which Mr. Stout has shared voting power. |
| (5) | Includes 195,468 shares held by Mr. Stout, 184,549 shares held by Mrs. Stout’s children, 1,515,422 shares held by the Stout Trust and 740,605 shares held by S Co., LLC; includes 65,000 shares which may be acquired by Mr. Stout upon the exercise of options; and includes 230,769, 235,161 and 668,158 shares which may be acquired respectively by Patricia Stout, Mr. Stout and the Stout Trust pursuant to warrants which are immediately exercisable. Includes shares, warrants and options immediately exercisable by others representing 2,213,127 shares of the Company’s Common Stock as to which Patricia Stout has shared voting power. |
| (6) | Includes 195,468 shares held by Mr. Stout, 166,634 shares held by Patricia Stout, 179,552 shares held by the children of Mr. Stout, all of whom are principals in S Co., LLC and 1,475,422 shares held by the Stout Trust; includes 65,000 shares which may be acquired by Mr. Stout upon the exercise of options; and includes 668,158, 235,161, and 230,769 shares which may be acquired respectively by the Stout Trust, Mr. Stout, and Patricia Stout pursuant to warrants which are immediately exercisable. Includes shares, warrants and options exercisable by others representing 2,213,127 shares of the Company’s Common Stock as to which Mr. Stout has shared voting power. |
| (7) | Includes warrants exercisable to purchase 223,686 shares of the Company’s Common Stock. Includes shares, warrants and options exercisable by others representing 5,199,072 shares of the Company’s Common Stock as to which Mr. Knop has shared voting power. |
| (8) | Includes warrants exercisable to purchase 400,000 shares of the Company’s Common Stock. Also includes 61,667 shares which may be acquired upon the exercise of options. Includes 122,239 shares held by AMASYS Corporation. Mr. Gilluly is the controlling stockholder of AMASYS Corporation. |
| (9) | Includes 12,497 shares which may be acquired upon the exercise of options and 48,056 shares which may be acquired pursuant to warrants. |
| (10) | Includes 1,417,779 shares which may be acquired upon the exercise of options. |
| (11) | Includes 150,004 shares which may be acquired upon the exercise of options. |
| (12) | Includes 175,000 shares which may be acquired upon the exercise of options. |
| (13) | Includes 35,000 shares which may be acquired upon the exercise of options. |
| (14) | Includes 33,334 shares which may be acquired upon the exercise of options. |
| (15) | Includes 2,038,612 shares which may be acquired upon the exercise of options and 1,805,830 shares which may be acquired pursuant to warrants. |
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Recent Events
On April 1, 2003, each of John D. Sanders, C. W. Gilluly and Gerald R. Young retired from the Board of Directors. On April 10, 2003, the Board appointed Lincoln D. Faurer, Alan L. Kaplan and Daniel R. Young as directors to fill the vacancies resulting from the resignations of Messrs. Sanders, Gilluly and Gerald R. Young. As more fully described below, each of Messrs. Faurer, Kaplan and Daniel R. Young is a nominee for election as a director at the Annual Meeting.
Voting Agreement
On March 30, 2000, a groupeach of investors led by Jon M. Stout, Patricia W. Stout, the Stout Dynastic Trust (collectively, the "Stouts"“Stouts”), J. RichardMr. Knop
("Knop") (the Stouts and Mr. Knop, being collectively, the "Investors"“Investors”) and, Dr. John D. Sanders, purchased certain of the Company's securities pursuant to a Securities
Purchase Agreement among the CompanyMr. Gilluly and the Investors (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, the Investors acquired
2,250,000 units, each consisting of one share of Common Stock and a warrant to
purchase 0.9 shares of Common Stock for a total of $877,500 in cash.
Pursuant to the Purchase Agreement, on the Closing Date, C.W. Gilluly
resigned from his position as the Company's Chief Executive Officer, and Jon M.
Stout was appointed as the Company's President and Chief Executive Officer. Dr.
Gilluly continued to serve as Chairman of the Company's Board of Directors.
Further pursuant to the Purchase Agreement, two members of the Board resigned,
Jon M. Stout was appointed a director and subsequently, Gerald R. McNichols,
Sc.D and Gerald R. Young were appointed to the Board.
On January 16, 2001, Mr. Stout resigned as President and Chief
Executive Officer of the Company and was appointed to the position of Chairman.
Mr. Stout remains a member of the Company's Board of Directors. On this same
date, Dr. Gilluly resigned as Chairman but continues to provide consulting
services and serve as a member of the Company's Board of Directors.
As further required by the Purchase Agreement, the Investors and others
designated therein also entered into a Voting Agreement dated March 30, 2000
(the "Voting Agreement"). The Voting Agreement was entered into by and among certain affiliates of Boles Knop & Company, L.L.C. (the "Affiliates"),Investors, Dr. Sanders, C.W.Mr. Gilluly and the Boles Knop affiliates, collectively, the “Voting Group”) entered into a Voting Agreement (the “Voting Agreement”) in connection with a purchase of the Company’s securities by the Investors (collectively,and Dr. Sanders. Pursuant to the "Voting Group"). Theterms of the Voting Agreement, the Voting Group agreed, for a period of five (5) years from March 30, 2000, to vote all of the voting shares of the Company over which they have voting control and to take all other actions within sucheach Voting Group'sGroup member’s control (whether in his or its capacity
as(as a stockholder, director, member of a board committee or officer of the Company or otherwise), including, without limitation, attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings so that: (1) The authorized number of members of
the Board will continue to be five unless and until such greater number is
directed or approved by the Investors; (2) Duringthat, among other things: (i) during the term of the Voting Agreement, the Investors shall be entitled to nominate a majority of the members of the Board (the "Nominees"“Nominees”) and the StockholdersVoting Group members shall vote their shares to elect such Nominees; (3) Any(ii) any Nominee elected or appointed as a director will be removed from the Board (and thereupon from all committees of the Board), with or without cause, only upon the written request or consent of the Investors; (4) Inand (iii) in the event that any Nominee designated hereunder for any reason ceases to serve as a member of the Board or any committee thereof for any reason during such representative'sNominee’s term of office, the resulting vacancy on the Board or committee will be filled by a newly designated Nominee; and (5) Upon the written direction or consent of
the
2
Investors, the Company will take such actions as mayNominee. Dr. Sanders ceased to be necessary and convenienta party to change the corporate domicile of the Company to the state of Delaware.
In addition, the Voting Agreement provides that with the exception of
transfers made: (i) pursuant to open market sales in brokers' transactions; or
(ii) sales made after the Investors declined a right of first refusal to
purchase such shareson November 1, 2002. The individuals nominated for director at the same price and terms, any attempt to transferAnnual Meeting by the Voting Group's voting shares will be of no effect unless the person(s) to whom
such sharesGroup members are being transferred agrees in writing to be bound by the terms of
the Voting Agreement.
3
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 1, 2002
regarding the beneficial ownership of the Company's Common Stock of (i) each
person known to the Company to be the beneficial owner, within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each executive officer or former executive
officer of the Company named in the Summary Compensation Table (see "Executive
Compensation") and (iv) all executive officers and directors of the Company as a
group. Unless otherwise indicated, the address of each named beneficial owner is
c/o Hadron, Inc., 5904 Richmond Highway, Suite 300, Alexandria, Virginia 22303.
Except to the extent indicated in the footnotes, each of the beneficial owners
named below has sole voting and investment power with respect to the shares
listed.
Name and Address Number of Shares Percent of Class
- ---------------- -------------------- ------------------ Jon M. Stout, 6,660,370(1)(2) 39.9%
Shawna L. Stout 6,660,370(1)(3) 39.9%
Stout Dynastic Trust 6,660,370(1)(4) 39.9%
13380 W. Polo Road
Wellington, FL 33414
Patricia W. Stout 6,660,370(1)(5) 39.9%
13380 W. Polo Road
Wellington, FL 33414
S Co., LLC 6,660,370(1)(6) 39.9%
13380 W. Polo Road
Wellington, FL 33414
J. Richard Knop 6,660,370(1)(7) 39.9%
Windsor Group
One Discovery Square, Suite 700
12919 Sunset Hills Road
Reston, VA 20190
C.W. Gilluly, Ed.D. 1,418,875(1)(8) 9.3%
RSSJ Associates 2,116,014 14.7%
3750 Centerview Drive
Chantilly, VA 20151
Lese Ann Kodger 1,596,459 11.1%
1501 Minutemen Cswy, Unit 202
Cocoa Beach, FL 32931
Peter C. Belford, Sr. 1,108,397 7.7%
John D. Sanders, Ph.D. 221,840(1)(9) 1.5%
Gerald R. McNichols, Sc.D. 634,569(10) 4.4%
Gerald R. Young 25,010(11) *
Donald J. Kellmel, Ph.D. 118,416(12) *
Sterling E. Phillips, Jr. 675,484(13) 4.5%
Dr. Kenneth Alibek 36,205(14) *
All directors and executive 12,673,090(1)(15) 72.0%
officers as a group (17 persons)
4
- ---------------------------------
* Less than 1%
(1) Includes certain shares as to which voting power is shared in certain
respects as a result of the Voting Agreement more fully described in
the preceding section entitled "Change of Control."
(2) Includes 189,806 shares held by spouse, 133,208 shares held by
children, 1,475,422 shares held by the Stout Dynastic Trust (the
"Trust"), and 740,605 shares held by S Co., LLC; includes 48,340
shares which may be acquired upon the exercise of vested options
granted under the Company's 1994 and 2000 Stock Option Plans; and
includes 235,161, 230,769, and 668,158 shares which may be acquired
respectively by self, spouse, and Stout Dynastic Trust pursuant to
warrants which are immediately exercisable. Includes shares, warrants
and options immediately exercisable by others representing 2,708,061
shares of the Company's Common Stock as to which Mr. Stout has shared
voting power.
(3) Includes 230,840 shares held by Mr. Stout, 189,806 shares held by Ms.
Stout, 66,604 shares held by Marcus Stout, 1,475,422 shares held by the
Trust and 740,605 shares held by S Co., LLC, includes 48,340 shares
which may be acquired upon the exercise of vested options granted under
the Company's 1994 and 2000 Stock Option Plans; and includes 235,161,
230,769, and 668,158 shares which may be acquired respectively by self,
spouse, and Stout Dynastic Trust pursuant to warrants which are
immediately exercisable. Includes shares, warrants and options
immediately exercisable by others representing 2,708,061 shares of the
Company's Common Stock as to which Mr. Stout has shared voting power.
(4) Includes 230,840 shares held by Mr. Stout, who is the Trustee of the
Trust, 189,806 shares held by Mrs. Stout, 133,208 shares held by the
children of Mr.Shawna Stout and 740,605 shares held by S Co., LLC; includes
48,340 shares which may be acquired by Mr. Stout upon the exercise of
vested options granted under the Company's 1994Alan L. Kaplan.
Directors and 2000 Stock Option
Plans; and includes 668,158, 235,161, and 230,769 shares which may be
acquired respectively by the Trust, Mr. Stout, and Mrs. Stout pursuant
to warrants which are immediately exercisable. Includes shares,
warrants and options immediately exercisable by others representing
2,708,061 shares of the Company's Common Stock as to which Mr. Stout
has shared voting power.
(5) Includes 230,840 shares held by spouse, 133,208 shares held by
children, 1,475,422 shares held by the Trust and 740,605 shares held by
S Co., LLC; includes 48,340 shares which may be acquired by Mr. Stout
upon the exercise of vested options granted under the Company's 1994
and 2000 Stock Option Plans; and includes 230,769, 235,161 and 668,158
shares which may be acquired respectively by self, spouse and the
Trust, pursuant to warrants which are immediately exercisable. Includes
shares, warrants and options immediately exercisable by others
representing 2,708,061 shares of the Company's Common Stock as to which
Mrs. Stout has shared voting power.
(6) Includes 230,840 shares held by Mr. Stout, 189,806 shares held by Mrs.
Stout, 133,208 shares held by the children of Mr. Stout, all of whom
are principals in S Co., LLC and 1,475,422 shares held by the Trust;
includes 48,340 shares which may be acquired by Mr. Stout upon the
exercise of vested options granted under the Company's 1994 and 2000
Stock Option Plans; and includes 668,158, 235,161, and 230,769 shares
which may be acquired respectively by the Trust, Mr. Stout, and Mrs.
Stout pursuant to warrants, which are immediately exercisable. Includes
shares, warrants and options immediately exercisable by others
representing 2,708,061 shares of the Company's Common Stock as to which
Mr. Stout has shared voting power.
(7) Includes warrants immediately exercisable to purchase 223,686 shares of
the Company's Common Stock. Includes shares, warrants and options
immediately exercisable by others representing 5,644,549 shares of the
Company's Common Stock as to which Mr. Knop has shared voting power.
5
(8) Includes warrants immediately exercisable to purchase 748,000 shares of
the Company's Common Stock. Also includes 60,000 shares, which may be
acquired upon the exercise of vested options granted under the
Company's 1994 Stock Option Plan.
(9) Includes 10,840 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans and 81,000 shares, which may be acquired pursuant to warrants.
(10) Includes 5,010 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans and 48,056 shares, which may be acquired pursuant to warrants.
(11) Includes 5,010 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans and 10,000 shares, which may be acquired pursuant to warrants.
(12) Includes 23,340 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans.
(13) Includes 583,817 shares, which may be acquired upon the exercise of
vested options granted under the Company's 2000 Stock Option Plan.
(14) Includes 28,340 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans.
(15) Includes 963,877 shares, which may be acquired upon the exercise of
vested options granted under the Company's 1994 and 2000 Stock Option
Plans and 2,240,830 shares, which may be acquired pursuant to warrants.
6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
Eight directors, constituting the entire Board, are to be elected at the Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted in favor of the persons named below to serve until the next Annual Meeting and until their successors are elected and qualified. Each person named below is nowcurrently a director of the Company. In the event any of these nominees shall be unable to serve as a director, the shares represented by the proxy will be voted for the person, if any, who is designated by the Board to replace the nominee. All nominees have consented to be named and have indicated their intent to serve if elected. The Board has no reason to believe that any of the nominees will be unable to serve or that any vacancy on the Board will occur.
5
The names of the eight directors and certain other information about them are set forth below as of April 1, 2002:
below:
Directors | Age | Director Since | Office Held with Company | |||
Jon M. Stout* | 56 | 2000 | Chairman of the Board and Director | |||
Peter C. Belford, Sr. | 56 | 2001 | Director | |||
Lincoln D. Faurer | 75 | 2003 | Director | |||
Alan L. Kaplan, CPA* | 31 | 2003 | Director | |||
Gerald R. McNichols, Sc.D.* | 59 | 2000 | Director | |||
Sterling E. Phillips, Jr. | 56 | 2001 | Director, President and Chief Executive Officer | |||
Shawna L. Stout* | 28 | 2001 | Director | |||
Daniel R. Young | 69 | 2003 | Director |
| * | This individual is nominated by the |
Jon M. Stout was appointed the Company'sCompany’s President and Chief Executive Officer and to the Board on March 31, 2000. On January 16, 2001, Mr. Stout resigned as President and Chief Executive Officer of the Company and was appointed to the position of Chairman. Mr. Stout, along with his wife, founded DPC Technologies, Inc., a military intelligence information technology company, which was sold to Northrop Grumman in 1999. Prior to that endeavor, Mr. Stout served in senior management and marketing positions with various firms, including the Harris Corporation and Perkin Elmer Corporation.
Peter C. Belford, Sr., who was appointed to the Board on November 9, 2001, has more than 30 years experience in building and operating companies in the Federal Government sector. Mr. Belford was presidentPresident of Analex Corporation from 2000 until it was acquired by the Company in November 2001. From 1997 through 2000, he held the position of Senior Vice President for Federal Data Corporation, a government information technology services provider, and from 1985 to 1997 served as President and Chief Operating Officer of NYMA, Inc., a federal contractor. Prior to these positions, Mr. Belford served thirteen years as Vice President with Computer Sciences Corporation.
C.W. Gilluly, Ed.D.Corporation, an information technology services provider.
Lincoln D. Faurer was Chairmanappointed to the Board on April 10, 2003. Mr. Faurer has more than 15 years of experience in building and operating companies in the government contracting industry and was Director of the CompanyNational Security Agency from October 1994 until1981 to 1985. Since 1992, Mr. Faurer has been the President of LDF Inc., which provides consulting services on command, control, communications, computing and intelligence (C4I) matters. In addition to being a retired Air Force officer, Mr. Faurer has held senior positions with various intelligence organizations including Defense Intelligence Agency, NATO Military Committee, HQS U.S. European Command and HQS U.S. Southern Command. Mr. Faurer serves as a director of ALPHATECH, Inc. and TSI TelSys Corp. and also serves on the advisory board of ManTech Aegis Research Corporation, a subsidiary of ManTech International Corp.
Alan L. Kaplan, CPA, was appointed to the Board on April 10, 2003. Mr. Kaplan has five years experience in public accounting and three years experience in financial management in the government contracting industry. Since July 2002, Mr. Kaplan has been a consultant and finance specialist with Triton Services, Inc. an information technology company. From January 16, 2001. He also2001 to April 2002, Mr. Kaplan served as the Vice President and Chief ExecutiveFinancial Officer of ParaGea Communications, LLC, a telecommunications services provider. From December 1999 to January 2001, Mr. Kaplan was the Company from
May 1993 to March 2000. Since June 1992, Dr. Gilluly has served as ChairmanVice President of COMTEX News Network,Finance and Administration of Emediat Solutions, Inc., a providersubsidiary of electronic newsTriton Services providing business software and business
information, for which he also served as Chief Executive Officer from June 1992
through September 1997. Dr. Gilluly has served as Chairman of the Boardservices. From December 1997 to November 1999, Mr. Kaplan was a supervisor and President of AMASYS Corporationmanager at RSM McGladrey, Inc., an accounting and its predecessor, Infotechnology, Inc. since
June 1992.
7
Gerald R. McNichols, Sc.D., who was appointed to the Board on June 12, 2000, has more than 35 years of experience in management and consulting. He has founded several companies and serves on the boards of
6
various private companies.firms.Since 1999, Mr. McNichols has been the Chief Executive Officer of McNichols & McNichols, a consulting company which “Helps Entrepreneurs Grow”. In 1977, Dr. McNichols founded Management Consulting & Research, Inc., a federal contractor, which hewas sold to GRC International, Inc. in 1999. He served on GRCI’s Board until they were sold to AT&T in 2000. Dr. McNichols was commissioned by the Air Force in 1965 and spent four years in the Air Force before joining the Office of the Secretary of Defense.
Sterling E. Phillips, Jr., was appointed the Company'sCompany’s President and Chief Executive Officer and to fill the vacancy on the Boarda director on January 16, 2001. Prior to joining the Company, Mr. Phillips held senior management positions with Federal Data Corporation in the Science and Engineering and Corporate Marketing Groups from 1996 to 2001. From 1993 to 1996, he was the Chief Operating Officer of TRI-COR Industries, Inc., an information technology company, and from 1992 to 1993 served as President of Business Development for Computer Sciences Corporation. Prior to these positions, he held senior national and international marketing positions with International Business Machines Corporation for twenty-four years.
John D. Sanders, Ph.D., who has been a member of the Board since
September 1997, serves as a business consultant to emerging technology
companies. He was Chairman and Chief Executive Officer of TechNews, Inc.,
publisher of Washington Technology newspaper, from 1988 to 1996, prior to its
sale to The Washington Post Company. In addition, Dr. Sanders has been a
registered representative of Wachtel & Co., Inc., a Washington D.C.-based stock
brokerage firm, since 1968. Dr. Sanders serves on the boards of ITC Learning
Corporation, SenSyTech, Inc. and COMTEX News Network, Inc.
Shawna L. Stout, who was appointed to the Board on November 9, 2001, has been Managing Partner for S Co., LLCof The Shawmark Group, an investment firm, since July 1999. From 1997 through 1999, Ms. Stout held the position of Director of Finance with DPC Technologies, Inc. Prior to these positions, she worked as an Assistant Trader for the Union Bank of Switzerland. She is the daughter of the Company'sCompany’s Chairman, Jon M. Stout. GeraldMs. Stout is a 1996 graduate of The Wharton School of the University of Pennsylvania.
Daniel R. Young who was appointed to the Board on June 12,April 10, 2003. In 1976, Mr. Young joined Federal Data Corporation as Executive Vice President. He was appointed President in 1985 and became Chief Executive Officer in 1995. From 1995 until Federal Data was acquired by Northrop-Grumman in 2000, he was Vice Chairman and Chief Executive Officer. Mr. Young is a graduate of the University of Texas where he earned a B.S. degree in engineering and a J.D. from the University of Texas Law School of Law. He also served as an officer in the U.S. Navy. Mr. Young serves as a management consultant to emerging companies. Mr. Young serveddirector of GTSI Corporation and Halifax Corporation, and also serves on the advisory boards of several public and private companies.
The Board of Directors Unanimously Recommends that the Stockholders
Vote FOR the Election of Jon M. Stout, Peter C. Belford, Sr., Lincoln D. Faurer,
Alan L. Kaplan, Gerald R. McNichols, Sterling E. Phillips, Jr.,
Shawna L. Stout and Daniel R. Young as a management consultant with DPC Technologies, Inc.
until 1999 when DPC was sold to Northrop Grumman Logicon. Mr. Young continues to
provide services to Logicon/DPC Technologies as a member of its Board of
Advisors.
Directors.
7
EXECUTIVE OFFICERS
The following table contains information as of April 1, 2002 as to the executive officers of the Company, who are not also directors of the Company:
Name | Age | Officer Since | Office Held With Company | |||
Ronald B. Alexander | 55 | 2001 | Senior Vice President, Chief Financial Officer and Corporate Secretary | |||
George W. Tonn | 60 | 2001 | Senior Vice President | |||
Stephen C. Dolbey | 56 | 2003 | Vice President | |||
Charles Floyd | 62 | 2003 | Vice President | |||
Heinz Wimmer | 58 | 2003 | Vice President | |||
Kenneth Alibek, M.D. | 52 | 2000 | Vice Chairman and Chief Scientist, Advanced Biosystems, Inc. (subsidiary) | |||
Julie Holt | 39 | 2003 | President, Advanced Biosystems, Inc. (subsidiary) |
Ronald B. Alexander (54) was appointed Senior Vice President and Chief Financial Officer of the Company in November 2001. Prior to2001 and Corporate Secretary in June 2002.From March 2000 until joining the Company, Mr. Alexander was the managing director of 8
firm, and since 1998firm. From 1990 forward, Mr. Alexander has served as the Chief Financial Officer of suchpublic companies doing business in market segments involving computer manufacturing, IT technology and systems’ engineering, software development, internet infrastructure development, telecommunications equipment and services, and professional servicesservices. These firms asinclude Commodore International, Ltd., a global computer manufacturing company, GRC International, a professional services government contractor and telecommunications equipment and systems developer, AppNet Systems, Inc., a provider of e-commerce solutions and TTC Inc.
Dr. Kenneth Alibek (51), a telecommunications equipment and systems manufacturer.
George W. Tonn was appointed Senior Vice President of the Company in September 2000,April 2001, and also servesis responsible for Washington operations. Prior to joining the Company, Mr. Tonn was with Raytheon, Inc., a provider of defense and other government related services and products, where he served as the Director of the Advanced Battle Management Systems organization in the Strategic Systems Division from 1998 to 2001. Mr. Tonn’s previous experience includes positions with Hughes Aircraft, Hughes Information Technology Company, SAIC, IBM Federal Systems, and service as a lieutenant colonel in the U.S. Army.
Stephen C. Dolbey was appointed Vice President of the Company'sCompany in January 2003. Mr. Dolbey is responsible for western operations, focusing on advanced software development and test using modern CASE tools and innovative testing concepts in the area of embedded real time systems. From March 1988 until November 2001, Mr. Dolbey was Vice President and Chief Information Officer of the former Analex Corporation acquired in November 2001. From 1964 to 1988, Mr. Dolbey held various management and engineering positions with Westinghouse Defense Systems
Charles Floydwas appointed Vice President of the Company in January 2003. Mr. Floyd joined Analex in 2002 as Program Manager of the Company’s ELVIS contract with NASA. He has over 36 years of experience in vehicle systems and sub-systems, systems integration and test, and flight software development and testing. Twenty years were with NASA, and the 16 most recent have been in senior and program management positions in contracts supporting NASA. From 1994 to 1999, Mr. Floyd was with Raytheon, from 1991 to 1994 with Northrop-Grumman, and from 1985 to 1991 with Lockheed Martin.
8
Heinz Wimmer was appointed Vice President of the Company in January 2003. Mr. Wimmer is responsible for mid-west operations focusing on independent verification and validation activity with the National Reconnaissance Office for their Atlas expendable launch vehicle missions. From February 2000 until November 2001, Mr. Wimmer was Vice President of the former Analex Corporation acquired in 2001. Prior to joining Analex, Mr. Wimmer concluded a 34 year career with NASA at the Glenn Research Center including 25 years experience with expendable launch vehicles.
Dr. Kenneth Alibek was appointed Vice Chairman of Advanced Biosystems, Inc. (ABS) subsidiary, a position he has held since December 1999.in September 2000. Dr. Alibek joined the Company in April 1999 as Chief Scientist and leads the Company'sCompany’s medical research and biowarfare defense initiatives. Prior to joining the Company, Dr. Alibek served as Program Manager for Battelle Memorial Institute, a technology research institute, from 1998 to 1999. From 1996 to 1998, he was Program Manager at SRS Technologies.Technologies, an information technology company. From 1992 to 1996, Dr. Alibek held various research and consulting positions at the National Institutes of Health and BDM Federal, Inc., a government services provider. Prior to coming to the United States in 1992, Dr. Alibek served as the First Deputy Chief of Biopreparat, the principal government agency for biological weapons research and development in the former Soviet Union.
Karen L. Dickey (42) was appointed Vice President and Corporate
Secretary in September 2000. Ms. Dickey is a C.P.A. who has held numerous
financial and management positions with the Company for sixteen years. From 1996
to 2000, she held the position of Corporate Controller. Ms. Dickey's previous
experience includes accounting and management positions with Presidential
Airways, Inc.
Deborah J. Hickox (38) was appointed Vice President of Finance and
Corporate Treasurer in September 2000. Ms. Hickox is a C.P.A. who joined the
Company in June 1999 as Controller of the Company's Avenue Technologies, Inc.
(ATI) subsidiary. From 1996 to 1999, Ms. Hickox served as Controller of EDO
Corporation's Technology Services and Analysis subsidiary. Ms. Hickox's previous
experience includes finance positions with The Consortium of Universities of the
Washington Metropolitan Area and The Concert Society at Maryland.
Ellen J. Hyslope (39) was appointed Vice President of Administration in
September 2000. Ms. Hyslope joined the Company in May 2000 as Director of Human
Resources. From 1996 to 2000, Ms. Hyslope served as the Human Resources Director
of Logicon DPC Technologies, a unit of Northrop Grumman. Ms. Hyslope's previous
experience includes administrative positions with the Republican National
Committee, the Community Associations Institute, Abacus Technology Corporation,
and MCI Telecommunications Corporation.
Donald E. Jewell (50)
Julie Holt was appointed Vice President of the Company in May 1996,January 2003 and also serves as President of the Sycom Services,Company’s Advanced Biosystems, Inc. (SyCom)
subsidiary, a position he has held since 2000. Mr. Jewell was also President of
Engineering & Information Services, Inc. (EISI) from 1993 through 2000, when it
was merged with Analex. Mr. Jewell has held senior management positions in the
government contracting business for over twenty years. He was Technical Director
for Kendrick & Company in 1988 and 1989, and served as Director of Information
Systems at British Aerospace from 1985 until 1988. From 1977 until 1985, he
served in various computer services management roles for Planning Research
Corporation.
Donald J. Kellmel, Ph.D. (53) was appointed Chief Technical Officer of
the Company in June 1999. Dr. Kellmel joined the Company in May 1999 when the
Company acquired ATI. Dr. Kellmel has more than twenty-four years of
professional experience in the management of corporate and systems engineering,
computer applications and signal processing. Dr. Kellmel, who has held senior
management positions with ATI since 1995, previously held senior management
positions with Kaman Sciences Corporation and Locus, Inc.
Christopher J. Pestak (42) was appointed Senior Vice President of the
Company in 2002 and also serves as President of the Company's Aerospace Group.
Since 1983 he has held various positions including Senior Vice President of
Engineering & Quality and Vice President of NASA Programs with Analex.
George W. Tonn (59) was appointed Senior Vice President of the Company
in April 2001, and also serves as President of the Homeland Security Group.(ABS) subsidiary. Prior to joining the Company, in April 2001, Mr. Tonn was with Raytheon, Inc.
where he served as the Director of the Advanced Battle Management Systems
organization in the Strategic Systems Division from 1998 to 2001. Mr. Tonn's
previous experience includes positions2002, Ms. Holt was Program Manager at Battelle Memorial Institute, where she coordinated consequence management programs with Hughes Aircraft, Hughes Information
Technology Company, SAIC, IBM Federal Systems,federal, state, and service aslocal emergency management agencies and hazardous material first responders. In addition, Ms. Holt is a lieutenant
colonel informer Foreign Service Officer with the U.S. Army.
9
Board Meetings of the Board and Committees
The Board held a total of elevenfive meetings during the year ended December 31, 2001.2002. Each director attended in person or telephonically all of the meetings held by the Board and all committees thereof on which he served during the year ended December 31, 2001.
2002. The Board has an Audit Committee and a Compensation Committee. The Board does not have a Nominating Committee or an Executive Committee.
The Audit Committee, comprised of Messrs. McNichols, Sanders,Committee’s responsibilities include: (i) selecting, overseeing, retaining and Young, recommends engagementdetermining the compensation of the Company'sCompany’s independent auditors, is primarily
responsible for(ii) approving the services performedall significant non-audit engagements by the Company'sCompany of the independent auditors and forauditor, (iii) reviewing and evaluating the Company'sCompany’s financial reporting as well as the advice and performance of the Company’s independent auditor, (iv) consulting with the Company’s independent auditor as required under applicable accounting principlesstandards, and its system of(v) receiving, evaluating and investigating complaints regarding accounting practices, internal accounting controls and auditing matters. The Board has general responsibility in
connection with related matters (See "Auditadopted a written charter for the Audit Committee, Report" below). the most recently amended version of which is attached asAppendix A to this Proxy Statement.
The Audit Committee met one timethree times during the year ended December 31, 2001.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board. The Company's management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the committee under generally accepted auditing standards. In addition, the
Committee has discussed with the independent auditors the auditors' independence
from the management and the Company including the matters in the written
disclosures required by the Independence Standards Board.
The Committee discussed with the Company's independent auditors the
overall scope and plan for their audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Annual Report on Form 10-K for2002. During the year ended December 31, 2001 for filing with2002 and until April 1, 2003, the Securities and Exchange Commission.
The material in this report is not "soliciting material," is not deemed filed
with the SEC, and is not incorporated by reference into any filingmembers of the
Company under the Securities Act of 1933, as amended, or the Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
Submitted by the Audit Committee were John D. Sanders, Ph.D., Audit Committee Chair
Gerald R. McNichols, Sc.D., Audit Committee Member
Gerald R. Young and Gerald R. McNichols. On April 10, 2003, Alan L. Kaplan and Daniel R. Young were appointed to the Audit Committee Memberto fill the vacancies resulting from the retirement of each of Dr. Sanders and Gerald R. Young from the Board. The CompensationBoard, in its business judgment, has determined that each of the current members of the Audit Committee are “independent” as defined in Section 121(A) of the listing standards of the American Stock Exchange. For additional information regarding the Audit Committee, see “Report of the Audit Committee of the Board (the "Compensation Committee")of Directors”, which held two meetings in the year ended December 31, 2001, is comprised of
Messrs. McNichols, Sanders, and Young. below.
The Compensation Committee evaluates management'smanagement’s recommendations and makes its own recommendations to the Board concerning the compensation of the Company'sCompany’s executive officers. It is also responsible for the formulation of the Company'sCompany’s executive compensation policy and the research, analysis and subsequent recommendation regarding the establishment and administration of the Company'sCompany’s stock option and
9
stock purchase plans. The Compensation Committee held two meetings in the year ended December 31, 2002. From January 31, 2002 until May 21, 2003, the members of the Compensation Committee were Gerald R. McNichols, John D. Sanders and Gerald R. Young. On May 21, 2002, Dr. Sanders and Mr. Young resigned from the Compensation Committee and Peter L. Belford and Shawna L. Stout replaced them. On April 10, 2003, Lincoln Faurer was appointed to the Compensation Committee to replace Mr. McNichols.
Compensation of Directors
As of January 1, 2003, directors receive a quarterly cash fee of $3,000 for their services. In addition, directors receive $1,000 per Board meeting attended, and $500 for each committee meeting attended (unless such meeting is combined with a full Board meeting). Under the Company’s 2002 Stock Option Plan, each non-employee director is entitled to be granted an option to purchase 5,000 shares of Common Stock on the date of such director’s initial appointment to the Board and, while such director serves on the Board, he or she is entitled to be granted an option to purchase 5,000 shares of Common Stock Purchase Plans.
Theon the date of the first Board doesmeeting held in each new fiscal year. Directors who are employees do not have a Nominating Committee or an Executive
Committee.
receive any additional compensation for their service as directors. Directors are reimbursed for out-of-pocket expenses associated with their attendance at Board meetings.
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all compensation paid by the Company during the year ended December 31, 20012002 to its Chief
Executive Officer, its former Chief Executive Officer, and each of the threefour other most highly paid executive officers:
officers (the “Named Executive Officers”):
Summary Compensation Table
Annual Compensation | Long-Term Compensation | ||||||||||||||
Name and Principal Position | Year (1) | Salary ($) | Bonus($) | Securities Underlying Options (#) (2) | All Other Compensation ($) | ||||||||||
Sterling E. Phillips, Jr., President, Chief Executive Officer and Director | FY 2002 FY 2001 6 Mos 12/31/00 6 Mos 12/31/99 FY 2000 | $ | 202,435 158,414 — — — | $ | 75,000 — — — — | 713,079 875,725 — — — | $ | 11,097 5,923 — — — | |||||||
Ronald B. Alexander, Senior Vice President, Chief Financial Officer, and Corporate Secretary | FY FY 2001 6 Mos 12/31/00 6 Mos 12/31/99 FY 2000 | $ | 163,705 16,096 — — — | $ | 40,000 — — — — | — 175,000 — — — | $ | 7,148 805 — — — | |||||||
George W. Tonn, Senior Vice President | FY 2002 FY 2001 6 Mos 12/31/00 6 Mos 12/31/99 FY 2000 | $ | 158,080 107,307 — — — | $ | 25,000 — — — — | — 175,000 — — — — | $ | 7,323 3,576 — — — | |||||||
Dr. Kenneth Alibek, Senior Vice President | FY FY 2001 6 Mos 12/31/00 6 Mos 12/31/99 FY 2000 | $ | 105,799 129,398 62,115 48,124 97,234 | $ | 20,000 — — — — | — — 20,000 15,000 15,000 | $ | 5,032 4,519 — — — | |||||||
Stephen C. Dolbey, Vice President | FY FY 2001 6 Mos 12/31/00 6 Mos 12/31/99 FY 2000 | $ | 199,471 30,600 — — — | $ | 5,000 — — — — | 25,000 — — — — | $ | 7,979 72 — — — | |||||||
| (1) | The Company changed its fiscal year during 2001 from June 30th to December 31st. Therefore, fiscal year 2002 represents compensation during the period January 31, 2002 through December 31, 2002; fiscal year 2001 represents compensation during the period January 1, 2001 through December 31, 2001; fiscal year 2000 represents compensation during the period July 1, 1999 |
| (2) | Options granted pursuant to the Company’s 2002 and 2000 Stock Option Plans. For further information of stock option grants during the year ended December 31, 2002, see “Executive Compensation – Stock Option Grants” below. |
| (3) | Contributions made by the Company under its 401(k) plan. |
11
(3) The bonuses paid in fiscal year or transition period represent the
bonuses awarded for the prior fiscal year.
(4) Options granted pursuant to the Company's 2000 and 1994 Stock Option
Plans. See "Executive Compensation - Stock Option
Grants."
(5) Contributions made by the Company under its 401(k) plan.
Stock Option Grants
The Company grants options to its executive officers under the Hadron,
Inc. 1994 and 2000its 2002 Stock Option PlansPlan and, in some cases, pursuant to stock option agreements outside any of its equity incentive plans. The following table provides details regarding all stock options granted to the named executive
officersNamed Executive Officers during the year ended December 31, 2001:
2002:
Option Grants in Last Fiscal Year
Individual Grants | ||||||||||||||
Name | Number of Securities Underlying Options Granted (#) (2) | % of Total Options Granted to Employees in 2002 | Exercise or Base Price ($/sh) | Expiration Date | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (1) | |||||||||
5% | 10% | |||||||||||||
Sterling E. Phillips, Jr. | 713,079 | 88% | 2.20 | 1/23/07 | $ | 433,409 | $ | 957,736 | ||||||
Ronald B. Alexander | — | — | — | — |
| — |
| — | ||||||
George W. Tonn | — | — | — | — |
| — |
| — | ||||||
Dr. Kenneth Alibek | — | — | — | — |
| — |
| — | ||||||
Stephen C. Dolbey | 25,000 | 3% | 2.20 | 1/23/12 | $ | 34,589 | $ | 87,655 | ||||||
| (1) | Amounts represent hypothetical gains that could be achieved if exercised at end of |
| (2) | Options vest one-third upon the date of |
Options Exercised and Year End Option Values
The following table sets forth certain information regarding options exercised during the year ended December 31, 20012002 and the value of unexercised options held as of December 31, 20012002 by the named executive officers:
Named Executive Officers:
Aggregated Options Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Name | Shares Acquired on Exercise (#) | Value Realized ($) | Number of Securities Underlying Unexercised Options at FY-End (#) | Value of Unexercised In-the-Money Options at FY-End ($) (1) | ||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
Sterling E. Phillips, Jr. | — | — | 821,510 | 1,588,804 | $ | 578,395 | $ | 47,539 | ||||||
Ronald B. Alexander | — | — | 116,670 | 58,330 | $ | 121,337 | $ | 60,663 | ||||||
George W. Tonn | — | — | 116,670 | 58,330 | $ | 151,671 | $ | 75,829 | ||||||
Dr. Kenneth Alibek | — | — | 35,000 | — | $ | 47,950 |
| — | ||||||
Stephen C. Dolbey | — | — | 8,334 | 16,666 | $ | 833 | $ | 1,667 | ||||||
| (1) | Represents the difference between the exercise price of the options and the closing bid price of the Common Stock on December 31, 2002, which was $2.30 per share. Options |
12
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
On March 30, 2000, pursuant to the Purchase Agreement, the Company
entered into a rolling two-year employment agreement with Jon M. Stout. Under
the agreement, Mr. Stout would serve as the Company's President and Chief
Executive Officer. Mr. Stout was entitled to receive an initial annual base
salary of $50,000 for the first six months of his employment and thereafter to
receive an annual base salary of $140,000. For the fiscal year ended June 30,
2000, Mr. Stout opted to forego his salary and defer any bonus. Mr. Stout's
employment agreement further provides for Mr. Stout to participate in the
Company's Stock Option and Bonus Plans. Under the Bonus Plan, Mr. Stout may
receive additional compensation based upon the Company's financial performance.
On September 12, 2000, the Board approved a $25,000 bonus based upon the
Company's financial performance in the fourth quarter of the fiscal year ended
June 30, 2000. If Mr. Stout is terminated by the Company other than for cause,
the Company must pay Mr. Stout a lump sum payment that is the sum of (1) Mr.
Stout's base salary and bonus through the date of termination; (2) any
compensation previously deferred by Mr. Stout; (3) any accrued vacation pay; and
(4) the base salary that would have been payable to Mr. Stout through the
remainder of the term of the agreement.
The Committee has, at various times, granted Mr. Stout options under
the 1994 and 2000 Stock Option Plans to purchase a total of 65,000 shares of the
Company's Common Stock at 110% of the market price on the date of grant. Under
the Plan, one-third of options granted are immediately exercisable upon the date
of grant, with one-third becoming exercisable on each of the first and second
anniversaries of the date of grant.
13
On January 16, 2001, Mr. Stout resigned as President and Chief
Executive Officer of the Company and was appointed to the position of Chairman
and his employment agreement with the Company was amended to reflect those
changes in status. Mr. Stout remains a member of the Company's Board of
Directors.
On January 16, 2001, Mr. Phillips entered into an employment agreement with the Company pursuant to which he was appointed to the positions of President and Chief Executive OfficerOfficer. The employment agreement provides for an initial term of one year, continuing on a month to month basis thereafter until terminated by either the Company.Company or Mr. Phillips was also
electedby giving thirty (30) days written notice. Pursuant to fill the vacancy and serve as a member of the Company's Board of
Directors. In connection with his appointments,employment agreement, Mr. Phillips purchased 66,667 shares of the Company'sCompany’s restricted common stock, par value $0.02,Common Stock, for $0.75 per share. In addition, under the agreement, Mr. Phillips was awarded a five-year, non-qualified stock option to purchase 875,725 shares of the Company'sCompany’s Common Stock par value
$0.02, at the exercise price equal to 100% of the fair market value of the common stock on the grant date, exercisable in one-third increments over a two-year period. Pursuant to hisThe employment agreement Mr. Phillips hasprovides for an initial annual base salary of $175,000, andsubject to subsequent determination by the Compensation Committee of the Board. Mr. Phillips’ annual salary for the year ended December 31, 2002 was $200,000. Under the agreement, Mr. Phillips is eligible for an annual bonus of up
to $125,000 upon the successful completion of annual milestones as agreed upon by Mr. Phillips and the Board of Directors.Directors at the recommendation of the Compensation Committee. The amount of the bonus is determined by the Board with the recommendation of the Compensation Committee. If the Company entered intoterminates Mr. Phillips’ employment without “Cause” (as defined in the agreement), Mr. Phillips is entitled to receive, on a rolling two-yearbi-weekly basis within 12 months after the date of termination, the sum of (i) his base salary through the date of termination to the extent not already paid, (ii) any compensation he has previously deferred, (iii) any accrued vacation pay, to the extent not already paid, and (iv) the base salary that would have been payable for the twelve month period immediately following such termination. If Mr. Phillips’ employment is terminated for “Cause” (as defined in the agreement) or he voluntarily leaves employment with the Company, he is not entitled to any remuneration past the date of termination. The employment agreement provides for reimbursement of Mr. Phillips’ reasonable expenses incurred in connection with Dr. Gilluly, to serve as Chief Executive Officer, commencing in fiscal year 1998
at an initial base annual salary of $140,000. On March 30, 2000, Dr. Gilluly
entered into an Amendment to Employment Agreementhis duties and assumed the sole position
of Chairman of the Company. Dr. Gilluly continues to provide managementmedical and strategic services to the Company on a part-time basis pursuant to his agreement
dated July 1, 2000. Pursuant to this agreement, Dr. Gilluly works up to 90 hours
per quarter and receives $11,868 per month for a period of two years. On January
16, 2001, Dr. Gilluly resigned as Chairman and continues to provide consulting
services and serve as a member of the Company's Board of Directors.
On May 23, 2000, the Company entered into an agreement with Dr.
Kellmel, pursuant to which if Dr. Kellmel is terminated other than for cause as
defined in his agreement, he will receive three months severance at his current
base pay of $154,000.
Compensation of Directors
As of January 1, 2002, directors receive a quarterly cash fee of $3,000
for their services. In addition, directors receive $1,000 per Board meeting
attended, and $500 per committee meeting attended (unless such meeting is
combined with a full Board meeting). Directors who are employees do not receive
any additional compensation for their service as directors. Directors are
reimbursed for out-of-pocket expenses associated with their attendance at Board
meetings.
customary benefits.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The responsibility of the Compensation Committee is to administer the Company'sCompany’s executive compensation programs, to monitor corporate performance and its relationship to compensation of executive officers and to make appropriate recommendations concerning matters of executive compensation. The Compensation
Committee is comprised of three independent non-employee directors. This report sets forth the major components of executive compensation and the basis by which 20012002 compensation determinations were made with respect to the executive officers of the Company.
Compensation Policy and Guidelines
The main objective of the Company is to maintain and increase the profitability of its operations and to maximize value for shareholders,stockholders, employees and clients. The goals of the Company'sCompany’s compensation policy are to align executive compensation with the Company'sCompany’s long-term business objectives and performance, to enable the Company to attract and retain high-quality executive officers and employees who will contribute to the long-term success of the Company and to reward such executive officers and employees for their successful efforts in attaining objectives beneficial to the growth and profitability of the Company.
In order to achieve the Company'sCompany’s goals, the Compensation Committee has developed the following principles that serve as guidance for compensation decisions for all employees: (i) to attract and retain the most 14
shareholderstockholder interests, (iv) to emphasize performance-related contributions as the basis of pay decisions, and (v) to provide incentive bonus awards for management based upon attaining revenue and profitability goals. To implement these policies, the Compensation Committee has pace designed a compensation program consisting of base salary, an annual incentive bonus plan, stock options and other employment benefits.
13
Compensation Program Elements
The Company'sCompany’s compensation levels and benefits are reviewed on an annual basis to determine whether they are competitive and reasonable in light of the overall performance of the Company and the Company'sCompany’s ability to attract and retain talented executives. The Company'sCompany’s focus is on growth and profitability.
Base Salary.Salary. Salary levels are primarily determined by the Compensation Committee in consideration of the performance of the individual executive, the financial performance of the Company and the prevailing industry standards for similar executives of similar companies. The Company'sCompany’s philosophy regarding base salaries is conservative, using published industry reports and surveys on executive compensation. The Company compares itself for this purpose with other technology service providers and/or government contracting firms who face similar challenges in their markets. Periodic increases in base salary relate to individual contribution evaluated against established objectives.
Stock Options.Options. The Company believes the compensation program should provide employees with an opportunity to increase their ownership and potentially gain financially from Company stock price increases. By this approach, the interests of shareholders,stockholders, executives and employees are closely aligned. Through the Company'sCompany’s 2002 Stock Option Plan, executives and employees are eligible to receive stock options, giving them the right to purchase shares of Common Stock of the Company at a specified price in the future. The Compensation Committee believes the use of stock options as the basis for long-term incentive compensation meets the Compensation Committee'sCommittee’s defined compensation strategy and the team-based operations approach that the Company has adopted.
Bonus and Incentive Program.Programs. The Company'sCompany’s executive officers and operating managers participate in an incentive compensation program which awards cash bonuses based on attaining or exceeding specific revenue and profitability goals. ForExecutive officers are entitled to additional cash bonuses based upon performance at the discretion of the Compensation Committee and/or the Chief Executive Officer. In 2001, no incentive awards were paidthe Company did not pay cash bonuses to executive officers. The Company did pay cash bonuses to executive officers in 2002 due to the increased performance of the Company and operating managers.
the individual performance of the executive officers receiving bonuses. The cash bonuses paid to the Named Executive Officers in 2002 are set forth in the “Executive Compensation—Summary Compensation Table”.
Severance Compensation.Compensation. To retain highly qualified executive officers, the Company from time to time enters into severance agreements with certain of its officers. The determination of whether the Company would benefit from a severance agreement with a particular officer is subjective, based upon such officer'sofficer’s experience and value to the Company.
Other Benefits.Benefits. The Company'sCompany’s philosophy is to provide adequate health and welfare oriented benefits to executives and employees, but to maintain a highly conservative posture relative to executive benefits.
2001
2002 Compensation for the Chairman
On March 30, 2000, pursuant to the Purchase Agreement, the Company
entered into a rolling two-year employment agreement with Mr. Stout. Under the
agreement, Mr. Stout would serve as the Company's President and Chief Executive Officer.Officer
During 2002, Mr. StoutPhillips was entitled to receive an initial annual base salary of
$50,000 for the first six months of his employment and thereafter to receivepaid an annual base salary of $140,000. For the fiscal year ended June 30, 2000, Mr.
Stout opted to forego his salary$200,000 and defer any bonus. On September 12, 2000, the
Board approvedreceived a $25,000$75,000 bonus based upon the Company's financialCompany’s performance in
the fourth quarter of the fiscal year ended June 30, 2000. Mr. Stout's
employment agreement further provides for Mr. Stout to participate in the
Company's Stock Option and Bonus Plans. Under the Bonus Plan, Mr. Stout may
receive additional compensation based upon the Company's financial performance.
If Mr. Stout is terminatedagainst annual budgetary targets established by the Company other than for cause,Board. In addition, consistent with the Company must
payCompensation Committee’s goal of increasing employee ownership of Common Stock, described above, Mr. Stout a lump sum payment that is the sum of (1) Mr. Stout's base salary
and bonus through the date of termination; (2) any compensation previously
deferred by Mr. Stout; (3) any accrued vacation
15
pay; and (4) the base salary that would have been payable to Mr. Stout through
the remainder of the term of the agreement.
The Committee has, at various times, granted Mr. StoutPhillips was awarded options under
the 1994 and 2000 Stock Option Plans to purchase a total of 65,000713,079 shares of the
Company's Common Stock at 110% of the market pricein 2002. The options vest over a two year period, with one-third vesting on the date of grant. Under
the Plan,grant and one-third of options granted are immediately exercisable upon the date
of grant, with one-third becoming exercisablevesting on each of the first and second anniversaries of the date of grant. On January 16, 2001, Mr. Stout resigned as PresidentThe options expire five years from the grant date, and Chief
Executive Officer of the Company and was appointed to the position of Chairman.
Mr. Stout remains a member of the Company's Board of Directors.
2001 Compensation for the President and Chief Executive Officer
On January 16, 2001, Mr. Phillips was appointed to the positions of
President and Chief Executive Officer of the Company. Mr. Phillips was also
elected to fill the vacancy and serve as a member of the Company's Board of
Directors. In connection with his appointments, Mr. Phillips purchased 66,667
shares of the Company's restricted common stock, par value $0.02, for $0.75 per
share. In addition, Mr. Phillips was awarded a five-year, non-qualified stock
option to purchase 875,725 shares of the Company's Common Stock, par value
$0.02, at thehave an exercise price equal to 100% of the fair market value of the common stockCommon Stock on the grant date, exercisabledate. It is the Compensation Committee’s view that the award of these stock options continues to be an effective way of tying Mr. Phillips’ financial interests to those of the Company’s stockholders, since the value of these stock options is directly linked to increases in one-third increments over a
two-year period. Pursuant to his employment agreement, Mr. Phillips has an
initial annual base salary of $175,000 and is eligible for an annual bonus of up
to $125,000 upon the successful completion of annual milestones as agreed upon
by Mr. Phillips and the Board of Directors.
stockholder value.
14
Summary
The Compensation Committee believes the total compensation program for executives of the Company, including the Chief Executive Officer, is appropriate and competitive with the total compensation programs provided by similar companies in the industry with which the Company competes. The Compensation Committee believes its compensation practices are directly tied to shareholderstockholder returns and linked to the achievement of annual and longer-term financial and operating results of the Company on behalf of the Company's shareholders. Company’s stockholders.
The material in this report is not "soliciting“soliciting material,"” is not deemed filed with the SEC, and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
Submitted by the Compensation Committee
Gerald R. McNichols, Sc.D, Compensation Committee Chair
John
Peter C. Belford
Shawna L. Stout
Lincoln D. Sanders, Ph.D., Compensation Committee Member
Gerald R. Young, Compensation Committee Member
Faurer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During
From January 31, 2002 until May 21, 2002, the fiscal year ended December 31, 2001, members of the Company's Compensation Committee were Messrs.Gerald R. McNichols, John D. Sanders and Gerald R. Young. On May 21, 2002, Dr. Sanders and Mr. Young in
August 2000. As of December 31, 2001, noneresigned from the Compensation Committee and Peter C. Belford and Shawna L. Stout replaced them. None of the members of the Compensation Committee during the year ended December 31, 2003 was, thenduring such year or had been, atprior thereto, an officer or employee of the Company or any time since formation,of its subsidiaries, except that Mr. Belford was an officer of the former Analex Corporation, until it was acquired by the Company in November 2001. During the year ended December 31, 2002, no executive officer of the Company served as a director or member of the compensation committee (or other board committee performing similar functions, or in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director or member of the Company's officers or employees.
AsCompensation Committee of September 1, 2000,the Company.
During the year ended December 31, 2002, Mr. Belford was paid $150,008 pursuant to a promissory note issued to him in connection with the November 2001 acquisition of the former Analex Corporation. In July 2002, pursuant to the terms of the merger agreement for the Analex acquisition, the Company entered intoissued a letter agreementpromissory note in the principal amount of $200,000 to Mr. Belford with Dr. Sanders to provide strategic financial consulting services. Pursuantrespect to the agreement, Dr. Sanders will be paid a monthly retaineraward of $2,500, plus
reimbursement of direct expenses authorized bythe NASA Expendable Launch Vehicle Integrated Support (ELVIS) contract to the Company. This agreement may
be terminated by either party by givingnote has a three-year term, is payable in twelve quarterly payments, and bears an interest rate equal to the other party thirty days notice in
writing.prime rate plus one percent, adjustable on an annual basis on the anniversary date of the note. In addition, should Dr. Sanders initiate and be involved with a merger
or acquisition that results in a formal agreement and transaction,2002, the Company will pay Dr. Sanders a financial advisory or finders fee of one and one-half
percent ofpaid Mr. Belford $19,542 under this note.
Ms. Stout’s father, Jon M. Stout, has an employment agreement with the total value of the transaction. Should a broker or other
intermediary be involved, Dr. Sanders' fee would be reducedCompany pursuant to one percent. This
portion
16
of the agreement survives termination if a merger situation or acquisition
company has been introduced and discussions or negotiations are continuing. In
2001, Dr. Sanderswhich he was paid $10,000 pursuant to this agreement, which represents$140,000 during the monthly retainer for those months Dr. Sanders consultedyear ended December 31, 2002. See “Certain Relationships and Related Transactions” below.
15
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company’s financial reporting process on behalf of the Company.
On June 29, 2000,Board. The Company’s management has the primary responsibility for the Company’s financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee reviewed with management the audited financial statements in the Company’s Annual Report of Form 10-K for the year ended December 31, 2002 (the “Annual Report”), including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards. The Audit Committee has received from the independent auditors written disclosures pursuant to Statement on Auditing Standards No. 61, Communication with Audit Committees, and has discussed those matters with the independent auditors. In addition, the Committee has discussed with the independent auditors the auditors’ independence from the management and the Company, entered into a letter agreementincluding the matters in the written disclosures required by the Independence Standards Board Standard No. 1.
The Committee discussed with the Company’s independent auditors the overall scope and plan for their audits. The Committee met with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in the Annual Report for filing with the Securities and Exchange Commission.
The members of the Audit Committee at the time of the matters described above in this Report, including the review of audited financial statements for the year ended December 31, 2002, the discussions with management and the Company’s independent auditors related thereto, the receipt from the independent auditors of the written disclosures described above and the recommendation to the Board that the audited financial statements be included in the Annual Report, were Gerald R. McNichols, John D. Sanders and Gerald R. Young. Dr. Sanders and Mr. Young to provide business development servicesretired from the Board and the Audit Committee on April 1, 2003.
The material in this report is not “soliciting material,” is not deemed filed with the Securities and Exchange Commission, and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, except to the extent that the Company on an as needed
basis, atspecifically incorporates it by reference into such filing.
Submitted by the rate of $1,500 per day. In 2001, $3,750 was paid to Mr.Audit Committee
Gerald R. McNichols
John D. Sanders
Gerald R. Young
pursuant to this agreement.
Performance Graph
16
COMMON STOCK PERFORMANCE GRAPH
The following graph compares the cumulative, five-year shareholderstockholder returns on the Company'sCompany’s Common Stock with the cumulative returns of the NASDAQ(i) American Stock Exchange Market Index, and(ii) the Media General'sGeneral Other Business Services Index, comprised of the Common Stockcommon stock of approximately 200 companies, excluding the Company, in diversified business service industries, and (iii) the Media General Information Technology Services Index, comprised of approximately 43 companies, excluding the Company.Company, providing computer and information technology consulting, development and implementation services. The graph assumes the value of the investment in the Company'sCompany’s Common Stock and each index was $100 on July 1, 1996.
1998.
Fiscal Year Ending (1)
Company | 1998 | 1999 | 2000 | 2001 | 2002 | |||||
Analex Corporation | 100.00 | 63.99 | 37.33 | 74.66 | 100.26 | |||||
Media General Other Business Services Index | 100.00 | 100.07 | 106.69 | 89.51 | 66.18 | |||||
AMEX Market Index | 100.00 | 98.37 | 113.11 | 100.02 | 96.03 | |||||
Medial General Information Technology Services Index | 100.00 | 106.09 | 76.82 | 79.25 | 43.08 |
| (1) | The Company |
17
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company'sCompany’s officers, directors and persons who own more than 10% of a registered class of the Company'sCompany’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholdersstockholders are required by the regulation to furnish the Company with copies of the Section 16(a) forms which they file.
To the Company'sCompany’s knowledge, based solely on a review of the copies of such reports furnished to the Company, and written representations that no other reports were required during the year ended December 31, 2001,2002, all Section 16(a) filing requirements applicable to the Company'sCompany’s officers, directors and greater than ten percent beneficial owners were complied with in a timely manner.
manner, except that Mr. Stout did not timely file Form 4s with respect to two transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 2, 2001,
During the year ended December 31, 2002, Lese Ann Kodger, a beneficial holder of more than 5% of the Company’s Common Stock, Alex Patterson, Ms. Kodger’s brother, and Peter C. Belford, a director of the Company, consummated the transactions
contemplated by the Agreementwere paid $13,500, $16,500 and Plan of Merger dated as of October 31, 2001
(the "Plan") with Analex Corporation and its equity holders$150,008 respectively, pursuant to which
Analex Corporation was mergedpromissory notes issued in connection with and into a wholly-owned subsidiarythe November 2001 acquisition of the Company.
Underformer Analex Corporation. In July 2002, pursuant to the terms of the Plan,merger agreement for the shareholders representing all of the
outstanding equity of Analex Corporation (the "Sellers") exchanged their Analex
equity on a pro rata basis for approximately $6.5 million in a combination of
cash and the satisfaction of certain liabilities of Analex as well as
approximately 3.6 million shares of the Company's Common Stock. Of the
approximately 3.6 million of the Company's Common Stock issued to the holders of
Analex equity, 857,143 shares are subject to a provision by which the Company
guarantees for a five-year
17
period to reimburse the Sellers the difference between the price at which they
sell such shares and a guaranteed sales price ranging from $1.60 to $2.20 per
share ("Guaranteed Shares"), if such shares are sold within such period and if
certain other conditions are satisfied.
Pursuant to the Plan, the Company issued 1,108,397 and 1,596,459
shares, respectively, to beneficial owners Mr. Belford and Ms. Kodger. Mr.
Belford was elected to the Company's Board of Directors on November 9, 2001.
In addition, pursuant to the Plan,acquisition, the Company issued promissory notes to certain Sellers totaling $772,085 with a five-year term, interestin the principal amounts of 6% per
annum, of which $643,850$200,000 and $57,950 were issued$700,000 to Mr. Belford and Ms. Kodger,
respectively. The Company also entered intoMr. Patterson, respectively, with respect to the award of the NASA Expendable Launch Vehicle Integrated Support (ELVIS) contract to the Company. Each of these notes has a three-year non-competition
agreements with these Sellers for totalterm, is payable in twelve quarterly payments, and bears an interest rate equal to the prime rate plus one percent, adjustable on an annual basis on the anniversary date of $540,000, of whichthe note. In 2002, the Company issued $180,000 non-competition agreements to bothpaid Mr. Belford and Ms.
Kodger. The Company offered at-will part-time employment agreements to four
officers of Analex, three of which contain incentive bonus provisions relatingMr. Patterson $19,542 and $68,396, respectively, under these notes.
Pursuant to the achievement of certain performance goals.
To finance the Merger, the Company negotiated a newCompany’s senior credit facility with Bank of America, N.A. in, the amount of $7.5 million, comprised of
(i) a term loan note in the amount of $3.5 million and (ii) a revolving line of
credit at $4 million. Bank of AmericaCompany was formerly required the Company to obtain personal guarantees in the amount of $2 million, which the Company procured from two individuals, Dr. McNichols, membera director of the BoardCompany, and Mr.J. Richard Knop, a beneficial holder of more than 5% of the Company's
investment banker,Company’s Common Stock, in exchange for an annual feefees of $60,000 and the issuance of warrants to purchase Common Stock at an exercise price of $0.02 per share, with the number of warrants to be based on the duration of the guarantees and a formula related to valuing the Company. Pursuant to the Guarantee,guarantees, the Company issued warrants to purchase 15,556 shares of the Company'sCompany’s Common Stock at an exercise price of $0.02 per share and paymentpaid a fee of $9,833 to botheach of Dr. McNichols and Mr. Knop
respectively, in 2002, relating to the two-month period ended December 31, 2001. In addition, theThe Company issued shares of common stock for aggregate
consideration of approximately $4 million through a private placement consisting
of (i) Common Stock at a price of $1.14 per shareadditional warrants to purchasers who purchased
less than $500,000 worth thereof or (ii) units consistingpurchase 99,261 shares of Common Stock and warrantsa paid an additional fee of $58,667 to purchase 0.2061 shareseach of Common Stock at an exercise price of $0.02
per share for each share purchased at a price of $1.14 per unit for purchasers
who purchased $500,000 or more of equity. Two of such purchasers are directors
or affiliates of a director. Dr. McNichols purchased 529,003 shares atand Mr. Knop as consideration for the aggregate priceguarantees for the 2002 calendar year. On December 20, 2002, each of $501,808,Dr. McNichols and S Co., LLC, a finance company owned and managed
by Board members Mr. and Mrs.Knop were released from the guarantees.
Mr. Stout purchased 740,605 shares, aggregating
$702,531. In addition, George Tonn,has an employment agreement with the Company's Senior Vice President
purchased 100,000 shares at the aggregate price of $114,000. RSSJ Associates
purchased 2,116,014 shares at the aggregate price of $2,007,233.
On November 1, 2002, Dr. Gilluly exercised warrants,Company pursuant to the
warrant agreement dated February 15, 2000, to purchase 82,000 shares of the
Company's Common Stock at $0.72 per share. On this same date,which he exercised
12,000 and 15,000 stock options at exercise prices of $0.94 and $1.99,
respectively.
On November 1, 2002, Mr. Knop exercised warrants, pursuant to the March
30, 2000 equity capital investment by a group of investors led by Jon M. Stout,
to purchase 138,888 shares of the Company's Common Stock at $0.72 per share.
On February 23, 2001,serves as Chairman. Mr. Stout purchased 40,000 shares of the
Company's restricted Common Stock in a private transaction.
As of September 1, 2000, the Company entered into a letter agreement
with Dr. Sanders to provide strategic financial consulting services. Pursuant to
the agreement, Dr. Sanders will bewas paid a monthly retainersalary of $2,500, plus
reimbursement of direct expenses authorized by$140,000 under this employment agreement during the Company. This agreement may
be terminated by either party by giving the other party thirty days notice in
writing. In addition, should Dr. Sanders initiate and be involved with a merger
or acquisition that results in a formal agreement and transaction, the Company
will pay Dr. Sanders a financial advisory or finders fee of one and one-half
percent of the total value of the transaction. Should a broker or other
intermediary be involved, Dr. Sanders' fee would be reduced to one percent. This
portion of the agreement survives termination if a merger situation or
acquisition company has been introduced and
year ended December 31, 2002.
18
discussions or negotiations are continuing. In 2001, Dr. Sanders was paid
$10,000 pursuant to this agreement, which represents the monthly retainer for
those months Dr. Sanders consulted on behalf of the Company.
On June 29, 2000, the Company entered into a letter agreement with Mr.
Young to provide business development services to the Company, on an as needed
basis, at the rate of $1,500 per day. In 2001, $3,750 was paid to Mr. Young
pursuant to this agreement.
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE HADRON, INC. 2002 STOCK OPTION PLAN
On March 20, 2002, the Board adopted subject to shareholder approval,
the Hadron, Inc. 2002 Stock Option Plan.
DescriptionPlan (the “Plan”), which was approved by the Company’s stockholders at the 2002 annual meeting of stockholders. On April 10 and 11, 2003, the Board approved certain amendments to the Plan, described below, subject to approval by the stockholders at the Annual Meeting. A copy of the Plan, as proposed to be amended, is attached as Appendix B to this Proxy Statement.
The Board adopted an amendment to the Plan to increase the number of shares authorized to be issued under the Plan from one million five hundred thousand (1,500,000) shares of Common Stock to two million (2,000,000) shares of Common Stock. This amendment is reflected in Section 4(a) of the Plan attached to this Proxy Statement. This increase is necessary in order to continue granting options in a manner consistent with past practice. The Board believes that continuing to grant options is appropriate and essential for the Company to closely align the interests of employees, officers and directors with the interests of the Company’s stockholders. Approval of this amendment by the stockholders is necessary to qualify certain options granted under the Plan for favorable tax treatment as incentive stock options under Section 422 of the Internal Revenue Code.
The Board also approved an amendment to the Plan to provide that non-employee directors will be granted an option to purchase 5,000 shares of Common Stock upon such director’s initial election or appointment to the Board and then granted 5,000 options on the date of the first Board meeting held in each new fiscal year thereafter. This amendment is reflected in Section 5(b) of the Plan attached to this Proxy Statement. The Plan currently provides that all non-employee directors will receive an option to purchase 5,000 shares of Common Stock up on the date of their initial election or appointment and then on the date of each anniversary of such election or appointment every year after. This schedule of grants has become unworkable due to accelerated reporting requirements under the securities laws. Under the amended Plan, all of the non-employee directors would receive their options on the same day, the date of the Board meeting, instead of staggered out over their various anniversaries. This grant schedule would reduce the Company’s costs associated with filing reports and the risk of non-compliance related to such grants.
Finally, the Board approved an amendment to the Plan providing that the Board shall obtain stockholder approval of any amendment to the Plan or any option granted thereunder to the extent that the Board determines that stockholder approval is necessary to qualify for exemption under Rule 16b-3 under the Securities Exchange Act of 1934, as amended. This amendment is reflected in Section 11 of the Plan attached to this Proxy Statement. The Plan formerly provided that provisions in the Plan related to the automatic grants of options to non-employee directors could be amended not more frequently than once every six months, and that no amendment to such provisions could become effective earlier than six months after Board approval, unless approved by the stockholders. These provisions were intended to comply with a legal requirement that no longer exists under the current Rule 16b-3. The proposed amendment would update the Plan to reflect the revisions made to Rule 16b-3.
The Board has also approved certain typographical and other amendments to the Plan which do not require stockholder approval, including changing the name of the Plan from the Hadron, Inc. 2002 Stock Option Plan to the Analex Corporation 2002 Stock Option Plan to reflect the Company’s name changed effected in 2002.
Summary of the Plan
The following summary of the principal features of the 2002 Stock
Option Plan is qualified in its entirety by reference to the text of the 2002
Stock Option Plan set forth inAppendix B attached hereto.
to this Proxy Statement. This summary assumes that the amendments described above have been approved by the stockholders.
The 2002 Stock Option Plan provides for the issuance of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 and non-qualified stock options to purchase an aggregate of up to 600,0002,000,000 shares of Common Stock.
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The 2002 Stock Option Plan permits the grant of options to key
employees, directors and other persons who contribute materially to the success
and profitability of the Company.
The 2002 Stock Option Plan is administered by the Compensation Committee consisting of directors McNichols, SandersMessrs. Belford and Young.Faurer and Ms. Stout. Each of the members of the Committee is a "non“non employee director"director” for purposes of Rule 16b-3.16b-3 under the Securities Exchange Act of 1934, as amended. Subject to the provisions of the 2002 Stock Option Plan, the Compensation Committee has full and final authority to select the participants to whom awards are to be granted thereunder, to grant such awards and to determine the terms and conditions of such awards, including vesting and exercise price. Any person who performs or has performed services for the Company, whether as a director, officer, employee, consultant or other independent contractor, and any person who performs services relating to the Company as an employee or independent contractor of a corporation or other entity that provides services for the Company, is eligible to receive options under the Plan. The Company currently has 8 directors and approximately 525 employees. The number of consultants, independent contractors and other persons performing services for the Company varies based upon the Company’s operations.
Each option is evidenced by a written agreement in a form approved by the Compensation Committee. Options granted under the 2002 Stock Option Plan generally are not transferable by the optionee other than by will or by the laws of descent and distribution and each option is exercisable, during the lifetime of the optionee, only beby the optionee. Key employees, including employee directors, and consultants of the Company or any of its subsidiaries are eligible to be considered for the grant of awards under the 2002 Stock Option
Plan.
Under the 2002 Stock Option Plan, the exercise price of an incentive stock option generally must be at least equal to 100% of the fair market value of the Common Stock on the grant date (110% of the fair market value in the case of options granted to employees who are 10% shareholders)stockholders). The exercise price of a non-qualified stock option generally must be not less than the parfair market value of a share of the Common Stock on the date of grant. Options granted with respect to certain acquisition transactions to which the Company is a party may have such exercise price as the Compensation Committee determines. The term of an incentive or non-qualified stock option may not exceed ten years (five years in the case of an incentive stock option granted to a 10% shareholder)stockholder).
Each non-employee director elected or appointed to the Board automatically receives, on the date of his or her first initial appointment to the Board, an option to purchase 5,000 shares of the Company's Common Stock (the
"Initial Option") at a per share exercise price equal to the fair market value of the Common Stock on the initial grant date. Furthermore, each non-employee director automatically receives, on the date of the first Board meeting held in each anniversarynew fiscal year of his initial election or
appointment to the BoardCompany, an option to purchase 5,000 shares of the Company'sCompany’s Common Stock exercisable at a per share value equal to the fair market value for the Common Stock on the applicable additional grant date to the extent that
options remain available under the 2002 Stock Option Plan.
date.
The vesting for each option holder will be set forth in the individual option agreements. Each option generally terminates, to the extent not exercised prior thereto, upon the earlier to occur of (i) the tenth anniversary of 19
optionee'soptionee’s employment or service as a member of the Board (to the extent vested upon the date of such cessation).
In the event of a change of control of the Company, the unexercised and unvested portion of each outstanding option shall become fully vested and exercisable as of the date of the change of control.
The Board may alter, amend, suspend or terminate the 2002 Stock Option Plan, provided that no such action shall deprive an optionee, without his or her consent, of any option granted to the optionee pursuant to the 2002 Stock Option
Plan or of any of his rights under such option. Provisions related to automatic
grants of options to non-employee directors may not (with limited exceptions) be
amended more frequently than once every six months and no amendment to such
provisions, unless approved by the shareholders of the Company, shall become
effective earlier than six months after Board approval. Except as provided in the 2002 Stock Option Plan, the Board shall obtain the approval of the shareholdersstockholders of any amendment to the extent the Board determines such approval is desirable or necessary under applicable law.
law, rule or regulation, including Rule 16b-3.
Federal Tax Information
Pursuant to the 2002 Stock Option Plan, the Company may grant either "incentive“incentive stock options,"” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified options.
20
An optionee who receives an incentive stock option grant will not recognize any taxable income either at the time of grant or exercise of the option, although the exercise may subject the optionee to the alternative minimum tax. Upon the sale or other disposition of the shares more than two years after the grant of the option and one year after the exercise of the option, any gain or loss will be treated as a long-term or short-term capital gain or loss, depending upon the holding period. If these holding periods are not satisfied, the optionee will recognize ordinary income at the time of sale or disposition equal to the difference between the exercise price and the lower of (a) the fair market of the shares at the date of the option exercise orand (b) the sale price of the shares. The Company will be entitled to a deduction in the same amount as the ordinary income recognized by the optionee. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income will be characterized as long-term or short-term capital gain or loss, depending on the holding period.
All options that do not qualify as incentive stock options are referred to as non-qualified options. An optionee will not recognize any taxable income at the time he or she receives a non-statutorynon-qualified option grant. However, upon exercise of the non-statutorynon-qualified option, the optionee will recognize ordinary taxable income generally measured as the excess of the fair market value of the shares purchased on the date of exercise over the purchase price. Any taxable income recognized in connection with an option exercise by an optionee who is also an employee of the Company will be subject to tax withholding by the Company. Upon the sale of such shares by the optionee, any difference between the sale price and the fair market value of the shares on the date of exercise of the option will be treated as long-term or short-term capital gain or loss, depending on the holding period. The Company will be entitled to a tax deduction in the same amount as the ordinary income recognized by the optionee with respect to shares acquired upon exercise of a non-statutorynon-qualified option.
The foregoing is only a summary of the effect of federal income taxation upon the optionee and the Company with respect to the grant and exercise of awardsoptions under the 2002 Stock Option Plan, does not purport to be complete, and does not discuss the tax consequences of the optionee'soptionee’s death or the income tax laws of any municipality, state or foreign country in which an optionee may reside.
Certain Option Holders under the Plan
The following table sets forth the number of stock options granted under the Plan held as of April 7, 2003 by (i) the Named Executive Officers, (ii) nominees for election to the Board of Directors, (iii) the Company’s current executive officers as a group, (iv) the Company’s directors who are not employees as a group, and (v) all employees of the Company who are not executive officers as a group.
Name | Options Granted | |
Sterling E. Phillips, Jr. | 913,079 | |
Ronald B. Alexander | 100,000 | |
Stephen C. Dolbey | 75,000 | |
Dr. Kenneth Alibek | — | |
George W. Tonn | — | |
Gerald R. McNichols, Sc.D. | 5,000 | |
Jon M. Stout | — | |
Shawna L. Stout | 5,000 | |
Peter C. Belford, Sr. | — | |
Lincoln D. Faurer | — | |
Alan L. Kaplan | — | |
Daniel R. Young | — | |
Current executive officers as a group | 1,263,079 | |
Directors who are not employees as a group | 10,000 | |
Employees who are not executive officers as a group | 37,000 |
21
Equity Compensation Plan Information
The Company does not have any equity compensation program that was not approved by stockholders. Set forth below is certain information, as of December 31, 2002, regarding equity compensation plans that have been approved by stockholders. This information does not take into account the increase in the number of shares eligible for issuance under the Plan subject to stockholder approval under this Proposal No. 2.
Equity compensation plans approved by stockholders | Number of securities to be issued upon exercise of outstanding options and rights | Weighted average exercise price | Number of securities remaining available for issuance under the plan(s) | |||
Stock Option Plans | 2,456,100 | $1.55 | 666,900 |
Market Value of Common Stock
The closing price per share of the Company’s Common Stock on the American Stock Exchange as of April 8, 2003 was $2.49.
The Board of Directors Unanimously Recommends that Shareholdersthe
Stockholders Vote FOR Approval of the
Amendments to the Company’s 2002 Stock Option Plan.
20
PROPOSAL NO. 3
APPROVAL OF NAME CHANGE OF HADRON TO ANALEX CORPORATION
Background to Name Change
The Board of Directors has approved, subject to shareholder approval,
an amendment to the Company's Certificate of Incorporation for the purpose of
changing the name of the Company from Hadron, Inc. to Analex Corporation. This
name change would reflect the revised strategic vision and marketing strategy of
the Company following the completion in November 2001 of its acquisition of
Analex Corporation, a Nevada corporation. The Company believes that there is a
certain degree of name recognition associated with Analex Corporation.
Accordingly, the Board of Directors believes it would be appropriate and in the
best interest of the Company and its shareholders to change the name of the
Company to "Analex Corporation."
Effects of the Name Change
If the name change is approved by the shareholders, the Company will
attempt to have the trading symbol for its common stock changed from "HDRN" to a
symbol more readily associated with the new name of the Company. The currently
outstanding stock certificates evidencing shares of the Company's Common Stock
bearing the name "Hadron, Inc." will continue to be valid and represent shares
of the Company following the name change. In the future, new shares will be
issued bearing the new name, but this in no way will affect the validity of your
current stock certificates.
The Board of Directors Unanimously Recommends
that Shareholders Vote FOR the Name Change.
PROPOSAL NO. 4
APPROVAL OF REINCORPORATION IN DELAWARE
General
The Board of Directors has approved a proposal to change the Company's
state of incorporation from New York to Delaware, subject to shareholder
approval. The Reincorporation will be effected by merging the Company with and
into Analex Corporation, a Delaware corporation ("Analex"), a corporation formed
by the Company for the purpose of the Reincorporation, in accordance with the
terms of an Agreement and Plan of Merger (the "Merger Agreement"). A copy of the
form of Merger Agreement is attached to this Proxy Statement as Appendix C, and
statements herein regarding such Agreement are qualified by reference to the
complete Merger Agreement.
Upon the effective date of the Reincorporation, each outstanding share
of the Company's Common Stock will be automatically exchanged for one share of
the common stock of Analex (the "Analex Common Stock"). The Company will cease
to exist as a New York corporation, and Analex will be the continuing or
surviving corporation of the Reincorporation. Thus, Analex will succeed to all
of the business and operations, own all of the assets and other properties and
will assume and become responsible for all of the liabilities and obligations of
the Company. The Reincorporation, therefore, will not involve any change in the
business, properties or management of the Company. The name of the surviving
company will be Analex Corporation. The persons serving as officers and
directors of the Company will serve as the officers and directors of Analex
after the Reincorporation, see Proposal 1, "Election of Directors."
Purpose of Merger and Reincorporation
The purpose of the Reincorporation is to change the state of
incorporation and legal domicile of the Company from New York to Delaware. The
Board of Directors believes that this change in the domicile would be in the
best interests of the Company and its shareholders.
21
The Company was incorporated in New York in 1964. Delaware has long
been a leading state in adopting, construing and implementing comprehensive and
flexible corporate laws that respond to the legal and business needs of
corporations. As a result, the Delaware General Corporation Law (the "DGCL") is
widely regarded to be one of the best-defined bodies of corporate law in the
United States. The Delaware legislature is particularly sensitive to corporate
law issues, and Delaware courts have developed considerable expertise in
construing Delaware's corporate law. Accordingly, the Board of Directors
believes that Delaware law would provide greater predictability in the Company's
legal affairs than is currently available under New York law.
The interests of the Company's Board of Directors, management and
affiliated shareholders in voting on the Reincorporation proposal may not be the
same as those of unaffiliated shareholders. Delaware law does not afford
minority shareholders some of the rights and protections available under New
York law. A discussion of the principal differences between New York and
Delaware law as they affect shareholders is set forth below in the section
entitled "Significant Changes Caused by the Reincorporation."
Authorized Shares of Stock
The Company's Certificate of Incorporation authorizes 20,000,000 shares
of Common Stock, par value $0.02 per share, of which ___________ shares of
Common Stock are issued and outstanding as of the Record Date. The Company's
Certificate of Incorporation does not authorize the issuance of Preferred Stock.
Analex's Certificate of Incorporation authorizes 30,000,000 shares of Common
Stock, par value $0.02 per share and 5,000,000 shares of Preferred Stock, par
value $0.02. No shares of any capital stock will be issued by Analex in
connection with the Reincorporation, other than the shares of Analex Common
Stock to be exchanged for the Company's outstanding Common Stock and the grant
of options in exchange for any options then outstanding for the purchase of the
Company's Common Stock.
Conversion of the Stock
Assuming shareholder approval of this proposal, as soon as the
Reincorporation becomes effective, each outstanding share of the Company's
Common Stock will automatically convert into and be exchanged for one share of
Analex Common Stock, and the Company shareholders will automatically become
stockholders of Analex.
In addition, each outstanding option, right or warrant to acquire
shares of the Company's Common Stock outstanding upon the Reincorporation will
be converted into an option, right or warrant to acquire the same number of
shares of Analex Common Stock. Any Company employee benefit plan in effect will
be continued by Analex following the Reincorporation.
Therefore, beginning on the effective date of the Reincorporation, each
Hadron, Inc. stock certificate which was outstanding immediately prior to the
Reincorporation will automatically represent the same number of Analex
Corporation shares. Stockholders of Hadron, Inc. need not exchange their stock
certificates for Analex Corporation stock certificates. Likewise, stockholders
should not destroy their old certificates and should not send their old
certificates to the Company, either before or after the effective date of the
Reincorporation.
Shareholders do not have any statutory appraisal rights on the
Reincorporation.
Transferability of Shares
Shareholders whose shares of the Company's Common Stock are freely
tradable before the Reincorporation will own shares of Analex that are freely
tradable after the Reincorporation. Similarly, any shareholders holding
securities with transfer restrictions before the Reincorporation will hold
shares of Analex that have the same transfer restrictions after the
Reincorporation. For purposes of computing the holding period under Rule 144 of
the Securities Act, those who hold Analex stock certificates will be deemed to
have acquired their shares on the date they originally acquired their Company
shares.
After the Reincorporation, Analex will continue to be a publicly held
company, and, like the Company's shares, shares of Analex will be quoted on the
OTC Bulletin Board, however under a different trading symbol and
22
CUSIP number. Analex will also file with the SEC and provide to its stockholders
the same types of information that the Company has previously filed and
provided.
Certain Federal Income Tax Consequences of the Reincorporation
The discussion of U.S. federal income tax consequences set forth below
is for general information only and does not purport to be a complete discussion
or analysis of all potential tax consequences that may apply to a shareholder.
Shareholders are urged to consult their tax advisors to determine the particular
tax consequences of the Reincorporation, including the applicability and effect
of federal, state, local, foreign and other tax laws.
The following discussion sets forth the principal U.S. federal income
tax consequences of the Reincorporation to the Company shareholders who hold
their shares as a capital asset. It does not address all of the federal income
tax consequences that may be relevant to a particular shareholder based upon
their individual circumstances or to shareholders who are subject to special
rules, such as financial institutions, tax-exempt organizations, insurance
companies, dealers in securities, foreign holders or holders who acquired their
shares pursuant to the exercise of employee stock options or otherwise as
compensation.
The following disclosure is based on the Code, law regulations, rulings
and decisions in effect as of the date of this Proxy Statement, all of which are
subject to change, possibly with retroactive effect, and to differing
interpretations. The following disclosure does not address the tax consequences
to our shareholders under state, local and foreign laws. The Company has neither
requested nor received a tax opinion from legal counsel with respect to the
consequences of reincorporation. No rulings have been or will be requested from
the Internal Revenue Service with to the consequences of reincorporation. There
can be no assurance that future legislation, regulations, administrative rulings
or court decisions would not alter the consequences set forth below.
The Reincorporation provided for in the Merger Agreement is intended to
be a tax-free reorganization under the Code. Assuming the Reincorporation
qualifies as a reorganization, no gain or loss will be recognized to the holders
of the Company's capital stock as a result of consummation of the
reincorporation, and no gain or loss will be recognized by the Company or
Analex. Each former holder of the Company's Common Stock will have the same
basis in the capital stock of Analex received by that holder pursuant to the
reincorporation as that holder has in the Company's Common Stock held by that
holder at the time the Reincorporation is consummated. Each shareholder's
holding period with respect to Analex's Common Stock will include the period
during which that holder held the corresponding Company Common Stock, provided
the latter was held by such holder as a capital asset at the time of
consummation of the Reincorporation was consummated.
Accounting Treatment
In accordance with accounting principles generally accepted in the
United States, the Company expects that the Reincorporation will be accounted
for as a reorganization of entities under common control and recorded at
historical cost.
Regulatory Approvals
The Reincorporation will not be consummated until after shareholder
approval. The Company will obtain all required consents of governmental
authorities, including the filing of a Certificate of Merger with the Secretary
of State of New York and the filing of a Certificate of Merger with the
Secretary of the State of Delaware.
Significant Changes Caused by the Reincorporation
Delaware law differs in certain respects from New York law. Although it
is not practical to compare all the differences between the laws of governing
corporations in New York and Delaware, the following discussion provides a
summary of the material differences which may affect the rights of shareholders.
The Company's corporate affairs are governed at present by the Business
Corporation Law of New York (the "New York Law") and by its Certificate of
Incorporation filed in New York (the "New York Certificate") and by the Bylaws
adopted pursuant to New York Law (the "New York Bylaws"). Following the
Reincorporation, the Company's corporate
23
affairs will be governed by the DGCL and by the certificate of incorporation of
Analex (the "Delaware Certificate") and by the bylaws of Analex. The discussion
below regarding Delaware Law and New York Law is current as of the date of this
Proxy Statement. There may be changes in either or both Delaware or New York Law
that could affect the analysis below. Both sets of Certificates of Incorporation
and Bylaws are available for inspection during business hours at the Company's
principal executive offices. In addition, copies may be obtained by writing to
the Company at Hadron, Inc., 5904 Richmond Highway, Alexandria, Virginia 22303,
Attention: Corporate Secretary.
Under New York Law, a person who owns stock of the Company is referred
to as a "shareholder;" while under Delaware Law, such person is known as a
"stockholder." Such terms have the same meaning and are used herein
interchangeably.
Action by Written Consent of Shareholders in lieu of a Shareholder
Vote. New York Law allows shareholders to act by written consent in lieu of a
meeting only by unanimous written consent of those shareholders who would have
been entitled to vote on a given action at a meeting, unless the certificate of
incorporation permits that action to be taken by the holders of outstanding
shares having at least the minimum number of votes required to authorize the
action at a meeting at which all shares entitled to vote thereon were present
and voted. The New York Certificate does not contain such a provision.
Conversely, Delaware Law states that unless the certificate of incorporation
provides otherwise, stockholders may act by written consent of at least the
minimum number of votes required to authorize that action at a meeting at which
all shares entitled to vote thereon were present and voted. The Delaware
Certificate does not contain any provision to the contrary so stockholders may
take action by written consent to the extent permitted by Delaware Law.
Amendment of Certificate of Incorporation. Delaware Law allows a Board
of Directors to recommend that stockholders amend the certificate of
incorporation, and a majority of the shares entitled to vote at a stockholders'
meeting are sufficient to approve that amendment. Under New York Law, except for
certain ministerial changes to the certificate of incorporation that the Board
of Directors may authorize and except as otherwise required by the certificate
of incorporation, the Board of Directors may recommend an amendment to the
certificate of incorporation, for approval by shareholders and a majority of the
shares entitled to vote at a shareholders' meeting is sufficient to approve that
amendment.
Who May Call a Special Meeting of Shareholders. Under both New York Law
and Delaware Law, the Board of Directors or anyone authorized in the certificate
of incorporation or bylaws may call a special meeting of shareholders.
Currently, the New York Bylaws provide that a special meeting can be called by
the President, the Board of Directors or shareholders holding at least 25% of
the shares entitled to vote at the meeting. The Delaware Bylaws provide that a
meeting of stockholders may be called by a majority of the Board of Directors,
the Chairman of the Board, the President or the Secretary of the Company.
Right of Shareholders to Inspect Shareholder List. Under New York Law,
a shareholder of record may inspect the list of shareholders of record at any
meeting of shareholders upon the request thereat or prior thereto. Under
Delaware Law, any stockholder may, upon making a demand under oath stating the
purpose thereof, inspect the stockholders' list for any purpose reasonably
related to that person's interest as a stockholder. In addition, for at least
ten days prior to each stockholder's meeting, as well as at the meeting, a
Delaware corporation must make available for examination a list of stockholders
entitled to vote at the meeting.
Vote Required for Certain Transactions. Until February 1998, New York
Law required the holders of at least two-thirds of the outstanding stock of a
New York corporation at a meeting of the stockholders to approve certain
mergers, consolidations or sales of all or substantially all the corporation's
assets that may occur outside the ordinary course of business. Since February
1998, a New York corporation then in existence, which would include the Company,
may provide in its certificate of incorporation that the holders of a majority
of the outstanding stock may approve such transactions. The Company has not,
however, adopted such a provision in its Certificate of Incorporation, and so
the holders of at least two-thirds of the Company's outstanding stock must
approve such transactions.
Under Delaware Law, unless the certificate of incorporation or bylaws
provide otherwise (but in no case shall a quorum consist of less than one-third
of the outstanding stock entitled to vote on such transactions), the holders of
a majority of the outstanding stock entitled to vote on such transactions have
the power to approve a
24
merger, consolidation, or sale of all or substantially all the assets. The
Delaware Certificate does not contain any provision otherwise, so the holders of
a majority of the outstanding stock entitled to vote thereon may approve a
merger, consolidation, or sale of all or substantially all of the Company's
assets. Notwithstanding the foregoing, under Delaware Law the vote of the
stockholders of the surviving corporation is not required to authorize a merger
unless the Certificate of Incorporation states otherwise, if these three
conditions are met: (1) the merger agreement does not amend the surviving
corporation's certificate of incorporation; (2) each share of stock of the
surviving corporation that is outstanding or in the treasury immediately prior
to the effective date of the merger is to be an identical outstanding or
treasury share of the surviving corporation after the effective date; and (3)
the merger results in no more than a 20% increase in its outstanding common
stock.
Special vote requirements may apply to certain business combinations
with interested shareholders. See the discussion of these requirements below
under the heading "Business Combinations with Interested Shareholders."
Limitations of Directors' Liability. Both New York Law and Delaware Law
permit a corporation to limit a director's personal liability for actions taken
in that director's official capacity. Under New York Law, a director is not
liable to the corporation for the benefit of its creditors or shareholders for
damages if the director has acted in good faith and with the same degree of care
that an ordinarily prudent person would exercise in similar circumstances. New
York Law also permits a corporation to include in its certificate of
incorporation a provision eliminating or limiting the personal liability of a
director, with certain specific exceptions, to the corporation or its
shareholders for damages for any breach of duty in that capacity. The New York
Certificate does not contain such a provision. Under Delaware Law, limits on a
director's liability must be addressed in the certificate of incorporation. The
Delaware Certificate limits directors' monetary liability to the fullest extent
permitted by Delaware Law. However, in some cases directors may be liable
despite these limitations. Delaware Law forbids any limitation of liability
where (1) a director breached the duty of loyalty to the corporation or its
stockholders, (2) a director's acts or omissions were not in good faith or
involved intentional misconduct or a knowing violation of law, (3) a director
received an improper personal benefit from a transaction involving the
corporation, or (4) a director authorized an unlawful dividend or stock
repurchase or redemption.
Indemnification of Directors and Officers. With some variations, both
New York Law and Delaware Law allow a corporation to "indemnify," that is, to
make whole, any person who is or was a director or officer of the corporation if
that person is held liable or incurs costs for something that person did or
failed to do in an official capacity.
Additionally, each of the two laws permits a corporation to purchase
insurance for its directors and officers against some or all of the costs of
such indemnification or against liabilities arising from actions and omissions
of the insured person, even though the corporation may not have power to
indemnify the person against such liabilities. New York Law, however, restricts
the types of claims that may be made under insurance purchased by the
corporation against these liabilities as well as restricts what costs may be
covered by insurance. For example, there would be no insurance coverage if the
person to be indemnified was guilty of deliberate dishonesty and that dishonesty
was material to the event that produced the claim, or if the person gained some
financial profit or other advantage to which he or she was not legally entitled.
If the Reincorporation is approved by the Company's shareholders, the
New York Law indemnification provisions will continue to apply to acts and
omissions that occurred prior to the effective date of the Reincorporation.
Transactions with Interested Directors. Both Delaware Law and New York
Law provide several methods for establishing the validity of transactions
between a corporation and interested directors, including a vote by the
uninterested directors or the shareholders, if the material facts as to the
director's interest are disclosed in good faith to the board of directors or
shareholders, respectively. However, Delaware Law also provides that a contract
between a director and the corporation may be valid if it is fair to the
corporation as of the time it is authorized by the board or shareholders, even
if the interested director's votes are counted.
Appraisal Rights. Generally, "appraisal rights" entitle dissenting
shareholders to receive the fair value of their shares in a merger or
consolidation of a corporation or in a sale of all or substantially all its
assets. New York
25
Law also extends appraisal rights to an exchange of a corporation's shares. New
York Law provides that dissenting shareholders have no appraisal rights if their
shares are listed on a national securities exchange, such as the OTC Bulletin
Board. However, in the case of shares not listed on an exchange, appraisal
rights under New York Law allow a voting and dissenting shareholder of a New
York corporation, with various exceptions, to receive fair value for its shares
in such transactions. One exception is a merger between a parent corporation and
its subsidiary when the parent owns at least 90% of the subsidiary. In this
case, a shareholder of the parent corporation has no appraisal rights. When
appraisal rights are available, the shareholder may have to request the
appraisal and follow other required procedures.
Similarly, under Delaware Law, appraisal rights are not available to a
stockholder if, among other things, the corporation's shares are listed on a
national securities exchange, such as the OTC Bulletin Board or held by more
than 2,000 stockholders of record, or if the corporation will be the surviving
corporation in a merger that does not require the approval of the surviving
corporation's stockholders. However, under Delaware Law, regardless of the
foregoing, a dissenting shareholder in a merger or consolidation has appraisal
rights unless the transaction requires the exchange of shares for something
other than one or more of the following: (1) shares of stock of the surviving
corporation or of a new corporation that results from the merger or
consolidation; (2) shares of another corporation that will be listed on a
national securities exchange, designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held by more than 2,000 stockholders of record after the
merger or consolidation occurs; or (3) cash instead of fractional shares of the
surviving corporation or another corporation.
Business Combinations with Interested Shareholders. Under New York Law,
an interested shareholder is generally prohibited from entering into certain
types of business combinations with a New York corporation for a period of five
years after becoming an "interested shareholder," unless the Board of Directors
approved either the business combination or the acquisition of stock by the
interested shareholder before the interested shareholder acquired its shares. An
"interested shareholder" under New York Law is generally a beneficial owner of
at least 20% of the corporation's outstanding voting stock or is an affiliate or
associate of a corporation who owned at least 20% of the outstanding stock
within the preceding five years. "Business combinations" under New York Law
include the following: (1) mergers and consolidations with an interested
shareholder or between corporations where the interested shareholder is an
affiliate; (2) sales, leases, mortgages, pledges, transfers or other
dispositions to an interested shareholder of assets with an aggregate market
value which either equals 10% or more of the corporation's consolidated assets
or outstanding stock, or represents 10% or more of the consolidated earning
power or net income of the corporation; (3) issues and transfers to an
interested shareholder of stock with an aggregate market value of 5% or more of
the aggregate market value of the outstanding stock of the corporation; (4)
liquidation or dissolution of the corporation proposed by or in connection with
an interested shareholder; (5) reclassification or recapitalization of
securities, merger, consolidation or other transaction with an interested
shareholder that would increase the proportionate stock ownership of an
interested shareholder; and (6) the receipt by an interested shareholder of
benefit from loans, guarantees, pledges or other financial assistance or tax
benefits provided by the corporation.
Delaware Law generally prohibits an interested stockholder from
entering into certain types of business combinations with a Delaware corporation
for three years after becoming an interested stockholder unless: (1) before the
stockholder became an interested stockholder, the Board of Directors approved
the business combination or the transaction that resulted in the stockholder
becoming an interested stockholder; (2) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding, subject to technical calculation rules; or (3) on or after the time
the interested stockholder became an interested stockholder, the board of
directors approved the business combination, and at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder also
ratified the business combination at a stockholders' meeting.
An "interested stockholder" under Delaware Law is any person other than
the corporation and its majority-owned subsidiaries who owns at least 15% of the
outstanding voting stock or is an affiliate or associate of the corporation who
owned at least 15% of the outstanding stock within the preceding three years,
and this definition includes affiliates of the corporation. Business
Combinations under Delaware Law include: (1) mergers or consolidations; (2)
sales, leases, exchanges, mortgages, pledges, transfers or other dispositions of
10% or more of the aggregate market value of all assets of the corporation or
outstanding stock of the corporation; (3) any
26
transactions resulting in the issuance or transfer by the corporation of stock
in the corporation to the interested stockholder except in limited instances;
(4) receipt by the interested stockholder of the benefit of loans, advances,
guarantees, pledges or other financial benefits provided by the corporation; and
(5) any other transaction, with certain exceptions, that increases the
proportionate share of the stock owned by the interested stockholder.
Proxies. Under New York Law, a proxy cannot be voted or acted upon
after 11 months from its date unless the proxy provides for a longer period.
Under Delaware Law a proxy cannot be voted or acted upon after three years from
its date unless the proxy provides for a longer period.
Nomination of Directors. Neither the New York Certificate nor the New
York Bylaws contain provisions regarding the nomination of directors. The
Delaware Bylaws provide that nominations of directors may be made at annual
meetings of stockholders by or at the direction of the Board of Directors, or by
any stockholder entitled to vote for the election of directors at such annual
meeting who provides timely notice to the Secretary of the Corporation.
Preemptive Rights. Preemptive rights are the right to purchase shares
or other securities to be issued by the Company with the purpose of maintaining
percentage ownership in the corporation. Under New York Law, shareholders of
corporations incorporated prior to February 22, 1998 are entitled to preemptive
rights unless specifically provided otherwise in the certificate of
incorporation. The New York Certificate specifically provides otherwise. Under
Delaware Law, preemptive rights must be specifically granted to the stockholders
in the Certificate of Incorporation. The Delaware Certificate does not grant
such rights.
Other Changes to Reflect Technical Differences Between Delaware Law and
New York Law. In addition to the changes described above, certain technical
changes have been made in the Delaware Certificate and Delaware Bylaws from the
New York Certificate and New York Bylaws to reflect differences between Delaware
Law and New York Law. Such technical changes include designation of a registered
office and registered agent in the State of Delaware for jurisdiction in certain
claims against the Corporation.
Blank Check Preferred
New York Certificate does not authorize the Board of Directors to issue
Preferred Stock. The Delaware Certificate does authorize its Board of Directors
to issue shares of Preferred Stock in series with such preferences as designated
at the time of issuance, assuming shareholder approval of Proposal 5, "Proposal
to Approve an Increase in the number of Authorized Common Stock to 30,000,000
and to add a class of Preferred Stock." The Board of Directors of Analex does
not currently intend to seek stockholder approval prior to any issuance of
shares of its Preferred Stock if the Reincorporation proposal is approved,
except as required by law or regulation. Frequently, opportunities arise that
require prompt action, and the Board of Directors believes that the delay
necessary for stockholder approval of a specific issuance would be a detriment
to Analex and its stockholders. The Board of Directors does not intend to issue
any Preferred Stock except on terms which the Board of Directors deems to be in
the best interests of Analex and its then existing stockholders.
27
It should be noted that the voting rights and other rights to be
accorded to any unissued series of Preferred Stock of Analex remain to be fixed
by the Delaware Board. Accordingly, if the Delaware Board so authorizes, the
holders of Preferred Stock may be entitled to vote separately as a class in
connection with approval of certain extraordinary corporate transactions or
might be given a disproportionately large number of votes. Such Preferred Stock
could also be convertible into a large number of shares of common stock of
Analex under certain circumstances or have other terms that might make
acquisition of a controlling interest in Analex more difficult or more costly,
including the right to elect additional directors to the Board of Directors of
Analex.
The Board of Directors Unanimously Recommends
That Shareholders Vote FOR the Reincorporation.
A Vote FOR the Reincorporation will Constitute Approval of the Merger,
the Delaware Certificate, the Delaware Bylaws, and Adoption and Assumption
by Analex of any Company Stock Options, Employee Benefit Plans and Agreements.
PROPOSAL NO. 5
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED COMMON STOCK
TO 30,000,000 AND TO ADD A CLASS OF PREFERRED STOCK
On March 20, 2002, the Board of Directors approved, subject to
stockholder approval, an Amendment to the Company's Certificate of Incorporation
to authorize an increase from 20,000,000 shares of Common Stock to 30,000,000
shares of Common Stock, par value $0.02 and to authorize up to 5,000,000 shares
of Preferred Stock, par value $0.02, the rights and preferences to be determined
by the Board of Directors. The Company proposes to amend Article 4 of the
Company's Certificate of Incorporation or adopt the Analex Corporation
Certificate of Incorporation if the Reincorporation is approved by the
shareholders to read as follows:
"4. The total number of shares of capital stock of the Corporation that
the Corporation shall have authority to issue is Thirty-Five Million
(35,000,000), of which Thirty Million (30,000,000) shares having a par value of
$0.02 per share shall be designated as Common Stock and Five Million (5,000,000)
shares having a par value of $0.02 shall be designated as Preferred Stock.
Common Stock
The shares of Common Stock shall be alike and equal in all respects and
shall have one vote for each share. After any requirements with respect
to preferential dividends, if any, on the Preferred Stock have been
met, then, and not otherwise, dividends payable in cash or in any other
medium may be declared by the Board of Directors and paid on the shares
of Common Stock. After distribution in full of the preferential amount,
if any, to be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of
the Common Stock shall be entitled to receive all of the remaining
assets of the Corporation of whatever kind available for distribution
to stockholders ratably in proportion to number of shares of Common
Stock held by them respectively.
Preferred Stock
The designations, powers, preferences, rights, qualifications,
limitations and restrictions of the Preferred Stock are as follows:
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of
Directors may determine pursuant to a resolution or resolutions
providing for such issuance duly adopted by the Board (authority to do
so being hereby expressly vested in the Board) and such resolution or
resolutions shall also set forth, with respect to each such series of
Preferred Stock, the following:
28
(1) The distinctive designation, stated value and number of shares
comprising such series, which number may (except where
otherwise provided by the Board of Directors in creating such
series) be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the
Board of Directors;
(2) The rate of dividend, if any, on the shares of that series,
whether dividends shall be cumulative and, if so, from which
date, and the relative rights of priority, if any, of payment
of dividends on shares of that series over shares of any other
series;
(3) Whether the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the
date upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount
may vary under different conditions and at different
redemption dates, or the property or rights, including
securities of any other corporation, payable in case of
redemption;
(4) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so,
the terms and amounts payable into such sinking fund;
(5) The rights to which the holders of the shares of that series
shall be entitled in the event of voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up
of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series;
(6) Whether the shares of that series shall be convertible into or
exchangeable for shares of capital stock of any class or any
other series of Preferred Stock and, if so, the terms and
conditions of such conversion or exchange including the rate
of conversion or exchange, the date upon or after which they
shall be convertible or exchangeable, the duration for which
they shall be convertible or exchangeable, the event upon or
after which they shall be convertible or exchangeable at whose
option they shall be convertible or exchangeable, and the
method of adjusting the rate of conversion or exchange in the
event of a stock split, stock dividend, combination of shares
or similar event;
(7) Whether the shares of that series shall have voting rights in
addition to the voting rights provided by law and, if
so, the terms of such voting rights;
(8) Whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to
restrictions as to issuance, or as to the powers, preferences
or rights of any such other series; and
(9) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and
qualification, limitation or restriction of such series, as
the Board of Directors may deem advisable and as shall not be
inconsistent with the provisions of this Certificate of
Incorporation and to the full extent now or hereafter
permitted by the laws of the State of Delaware."
The Board of Directors believes that it is advisable and in the best
interests of the Company to have available additional authorized but unissued
shares of Common Stock and Preferred Stock to provide for future needs.
Currently, the Company has authorized 20,000,000 shares of Common Stock with
__________ shares of Common Stock issued and outstanding and _________ shares of
Common Stock reserved for stock option grants, other benefit plans, warrants and
convertible debt. In addition, the Company is not authorized to issue Preferred
Stock. In the event shareholders do not approve the Reincorporation (see
Proposal 4), the Company will need additional authorized shares of Common Stock
and the authority to issue preferred stock. The additional but unissued shares
of Common and Preferred Stock will be available for issuance from time to time
by the Company in the discretion of the Board of Directors, normally without
further stockholder action (except as may be required for a particular
transaction by applicable law, requirements of regulatory agencies or by stock
exchange rules), for any proper corporate purpose including, among other things,
future acquisitions of property or securities of other
29
corporations, stock dividends, stock splits, stock options, convertible debt and
equity financing. The Company's Board of Directors believes that the additional
but unissued Common and Preferred Stock may be necessary for future financing
and to attract potential new equity capital to carry out the Company's business
objectives.
The Board of Directors Unanimously Recommends That Shareholders Vote
FOR the Amendment to the Certificate of Incorporation to Increase the Number
of Authorized Common Stock and to add a Class of Preferred Stock.
In the event the Reincorporation
Proposal and Amendment to Increase
the Number of Authorized Common Stock
and to Add a Class of Preferred Stock
are not approved by shareholders,
the Company will continue as a New York corporation
under its present Certificate of Incorporation but with only
20,000,000 shares of Common Stock authorized, of which
___________ is outstanding and ____________ reserved for issuance.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE COMPANY
Ernst & Young LLP, Certified Public Accountants, have been the independent auditors for the Company since 1996 and upon recommendation of the
Audit Committee of the Board of Directors, their reappointment as independent auditors for the 20022003 fiscal year has been approved by the Audit Committee of the Board of Directors, subject to ratification by the shareholders.
stockholders.
The Company has been advised by Ernst & Young LLP that neither itErnst & Young nor any of its members has had any relationship with the Company or any of its affiliates during the past three years other than as independent auditors. The Company has been advised that a representative of Ernst & Young LLP will be present at the Annual Meeting, will be available to respond to appropriate questions, and will be given an opportunity to make a statement if he or she so desires.
The following table sets forth the aggregate fees billed or to be billed by Ernst & Young LLP for the following services during fiscal 2001:
Description of Services Fees
----------------------- ----
Audit fees (1) $ 91,000
Other audit-related fees (2) $ 53,000
All other fees $ 0
--------
Total $144,000
- ---------------------
(1) Audit Fees: represents the aggregate fees billed or to be billed for
professional services rendered for the audit of our 2001 annual
financial statements and for the review of the financial statements
included in our quarterly reports during such period.
(2) Represents fees for professional services rendered in connection with
the acquisition of Analex Corporation.
2002:
Description of Services | Fees | ||
Audit fees (1) | $ | 95,100 | |
Other audit-related fees (2) | $ | 53,500 | |
All other fees | $ | 6,000 | |
Total | $ | 154,600 | |
| (1) | Represents the aggregate fees billed or to be billed for professional services rendered for the audit of the Company’s 2002 annual financial statements and for the review of the financial statements included in the Company’s quarterly reports during the year ended December 31, 2002. |
| (2) | Represents fees for professional services rendered in connection with the acquisition of the former Analex Corporation. |
22
The Audit Committee has determined that the rendering of the professional services in connection with the acquisition of former Analex Corporation by Ernst & Young LLP is compatible with maintaining the auditor'sauditor’s independence.
30
Vote Required; Recommendation of the
The Board of Directors Although not required to be submitted for shareholder approval,Unanimously Recommends that the
Board of Directors has conditioned its appointment of its independent auditors
upon receiving the affirmative vote of a majority
Stockholders Vote FOR Ratification of the shares represented, in
person or by proxy, and voting at the Annual Meeting. In the event the
shareholders do not approve the selectionAppointment of Ernst & Young, LLP
as the appointmentCompany’s Independent Auditors for 2003.
STOCKHOLDER PROPOSALS
To be eligible for inclusion in proxy materials for the Company’s 2004 annual meeting of independent auditors will be reconsidered by the Board of Directors.
SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended to be
presented at the Company's 2003 Annual Meeting of Shareholdersstockholders, stockholder proposals must be received byat the CompanyCompany’s principal executive offices no later than __________________, 2002December 2, 2003, unless such meeting is held more than 30 days before or after May 20, 2004, in orderwhich case the deadline for the receipt of such proposals will be a reasonable time prior to the date the Company prints and mails its proxy materials for such meeting. A stockholder who wishes to present a proposal at the Company’s 2004 annual meeting, but who does not request that they maythe Company solicit proxies for the proposal, must submit the proposal to the Company’s principal executive offices by March 30, 2004, unless such meeting is held more than 30 days before or after May 20, 2004, in which case the deadline for the receipt of such proposals will be included ina reasonable time before the Company mails its proxy statement and form of proxy relating to thatmaterials for such meeting.
ANNUAL REPORT
A copy of the Company'sCompany’s Annual Report for the fiscal year ended December 31, 2001,2002, including the financial statements and notes thereto is being mailed to the shareholdersstockholders of record along with this Proxy Statement. The Annual Report is not incorporated by reference in this Proxy Statement and is not considered to be part of the proxy material.
The Company will provide without charge a copy of its 20012002 Annual Report on Form 10-K, including the financial statements and the financial statement schedules required to be filed with the SEC. The Company will furnish any exhibit described in the list accompanying the 20012002 Form 10-K upon the payment, in advance, of the specified reasonable fees related to the Company'sCompany’s furnishing of such exhibit(s). Requests for copies of such report and/or exhibit(s) should be directed to the Company at its principal executive office, 5904 Richmond Highway, Suite 300, Alexandria, Virginia 22303, Attention: Corporate Secretary.
OTHER MATTERS
The Board knows of no other business matters to be acted upon at the Annual Meeting other than those referred to in this Proxy Statement. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the shares they represent as the Board may recommend.
By Order of the Board
/s/ Karen L. Dickey
Karen L. Dickey
/s/ RONALD B. ALEXANDER |
Ronald B. Alexander |
Senior Vice President, Chief Financial Officer and Corporate Secretary |
Date: April 14, 2003 |
23
APPENDIX A
AUDIT COMMITTEE CHARTER
Analex Corporation
Audit Committee Charter
Adopted January 29, 2003
The Board of Directors of Analex Corporation has long been committed to maintaining a corporate accounting and Corporate Secretary
Date: ________________ 2002
31
APPENDIX A
Hadron, Inc.financial reporting system that meets the highest ethical and regulatory standards and is free of fraud, inaccuracies, misrepresentation and obfuscation. This is a responsibility and commitment shared by every director, executive and employee of the Company. The Board has confidence in the financial systems, processes and personnel of the Company and will take all necessary steps to maintain the quality and integrity of our financial reporting.
In consideration of the Sarbanes-Oxley Act, new SEC regulations and emerging requirements from public stock exchanges, the charter for the Audit Committee of the Board of Directors of Analex Corporation is hereby revised. The revised Charter is effective immediately and until modified or revoked by the Board.
The Audit Committee Charter
Organization
This charter governsshall:
| · | Be comprised of three (3) directors meeting the test of “independence” as set forth by the SEC and/or the exchange on which Analex stock is traded. Audit committee members shall also satisfy SEC and or stock exchange requirements regarding their level of financial “literacy” or “expertise”. |
| · | Have sole authority to select and oversee the Company’s independent auditors. |
| · | Establish, in conjunction with management, a process for receiving and handling complaints from employees or others regarding Company accounting practices. |
| · | Be authorized to engage independent advisors as required to fulfill its obligations. |
| · | Be assured of adequate funding to engage any registered public accounting firm for audits, reviews or attest services or to engage any advisors employed by the Audit Committee. |
The Board of Directors recognizes that insuring the operationsintegrity of the financial reporting systems is its responsibility and the Audit Committee (the
"committee")is chartered to assist the full Board in fulfilling this obligation. In performing its duties, the Audit Committee is expected to:
| · | Meet a minimum of four (4) times per year to review and evaluate Company financial reporting as well as the advice and performance of the Company’s independent auditors. If the Committee identifies problems, issues or concerns, it is authorized to meet as frequently as necessary and take any other steps that may be required to fully investigate the matter and recommend a corrective course of action to the Board. |
| · | Receive, evaluate and investigate any complaints regarding the Company’s accounting practices. Report such complaints to the Board along with the findings, conclusions and recommendations of the Committee regarding disposition of the complaint. |
| · | Report to the Board any concerns or issues regarding Company management’s performance or cooperation related to the Audit Committee or any aspect of the Company’s financial reporting system. |
Through its independence, financial expertise and more detailed review of Company financial reporting, processes and personnel, the Audit Committee will increase the awareness, sensitivity and responsiveness of the Board of Directors ("Board") for Hadron, Inc. ("HADRON").
The committee shall:
. review and reassess this charter at least annually and obtain the
approval of the Board.
. be appointed by the Board,
. comprise at least three directors, each of whom are independent of
management and HADRON,
. include a chair of the committee to be chosen by a majority vote by
the members of the committee.
Members of the committee shall be considered independent if they have
no relationship that may interfere with the exercise of their independence from
management and HADRON. In addition, all committee members shall be financially
literate, or become so within a reasonable period of time after appointment to
the committee, and at least one member shall have accounting or related
financial management expertise.
Statement of Policy
The committee shall provide assistance to the Board in fulfilling their
oversight responsibility to the shareholders, potential shareholders, the
investment community, and others relating to HADRON's financial statements and
the financial reporting process, the systems of internal accounting and
financial controls, the annual independent audit of HADRON's financial
statements and the legal compliance and ethics programs as established, or as
may be established, by management and the Board.
In so doing, it is the responsibility of the committee to maintain free
and open communication between the committee, independent auditors and
management of HADRON. In discharging its oversight role, the committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities, and personnel of HADRON and the power to retain
outside counsel or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the committee is to oversee HADRON's
financial reporting processes on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing HADRON's
financial statements and the independent auditors are responsible for auditing
those financial statements. The committee in carrying out its responsibilities
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The committee should take the
appropriate actions to set the overall corporate culture and tone for quality
financial reporting, sound business risk practices, and ethical behavior.
A-1
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate:
. The committee shall have a clear understanding with management
and the independent auditors that the independent auditors are
ultimately accountable to the Board and the committee, as
representatives of HADRON's shareholders. The committee shall
have the ultimate authority and responsibility to evaluate
and, where appropriate, replace the independent auditors. The
committee shall discuss with the auditors their independence
from management and HADRON and the matters included in the
written disclosures required by the Independence Standards
Board. Annually, the committee shall review and recommend to
the Board the selection of HADRON's independent auditors,
subject to shareholders' approval.
. The committee shall discuss with the independent auditors the
overall scope and plans for their audit including the adequacy
of staffing and compensation. Also, the committee shall
discuss with management and the independent auditors the
adequacy and effectiveness of the accounting and financial
controls, including HADRON's system to monitor and manage
business risk, and legal and ethical compliance programs.
Further, the committee shall meet with the independent
auditors, with and without management present, to discuss the
results of their examinations.
. The committee shall review the interim financial statements
with management and the independent auditors prior to the
filing of HADRON's Quarterly Report on Form 10-Q. Also, the
committee shall discuss the results of the quarterly review
and any other matters required to be communicated to the
committee by the independent auditors under generally accepted
auditing standards. The chair of the committee may represent
the entire committee for the purposes of this review.
. The committee shall review with management and the independent
auditors the financial statements to be included in HADRON's
Annual Report on Form 10-K, including their judgment about the
quality, not just acceptability, of accounting principles, the
reasonableness of significant judgements, and the clarity of
the disclosuresweaknesses in the financial statements. Also, the
committee shall discuss the resultssystems of the annual audit and
any other matters required to be communicated to the committee
by the independent auditors under generally accepted auditing
standards.
Date: October 30, 2000
A-2
24
APPENDIX B
Hadron,
ANALEX CORPORATION
2002 STOCK OPTION PLAN
(formerly known as “Hadron, Inc. 2002 Stock Option Plan,
1. Purpose.
The purpose of this Hadron, Inc. 2002 Stock Option Plan (the "Plan") is
to further the interests of Hadron, Inc., a Delaware corporation (the
"Company"), and its shareholders by providing incentives in the form of grants
of stock options to key employees and other persons who contribute materially to
the success and profitability of the Company.
2. Definitions.
The following definitions shall apply to the Plan:
(a) "Board" means the board of directors of the Company.
(b) "Change of Control" means:
i. a determination or agreement by the Company to sell
substantially all of its assets, merge, dissolve,
liquidate or reorganize;
ii. a determination or agreement by the holders of a
majority of the Common Stock of the Company to sell a
majority of the outstanding Common Stock of the Company
to a third party; or
iii. the occurrence of any other change in control event, as
defined by the Board.
(c) "Code" means the Internal Revenue Code of 1986, ”
as amended and includes applicable Treasury regulations.
(d) "Committee" means the Compensation Committee of the Board. The
Committee shall (i) consist of not less than three (3) members
of the Board who are not employees of the Company, (ii) be
constituted to satisfy the applicable requirements of Rule
16b-3 for qualification of the transactions contemplated under
the Plan for exemption under Rule 16b-3, and (iii) be
constituted to satisfy the applicable requirements of Code
section 162(m) for qualification of the transactions
contemplated under the Plan for exemption under Code Section
162(m). The Board may from time to time remove members from,
or add members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
(e) "Common Stock" means the Common Stock, par value $0.02, of the
Company, or such other class of shares or securities to which
the Plan may apply pursuant to Section 8 of the Plan.
(f) "Company" means Hadron, Inc., a Delaware corporation.
(g) "Date of Grant" means the date on which an Option is granted.
(h) "Disability" means total and permanent inability, by reason of
illness or accident, to perform the duties of the Recipient's
occupation or position with the Company, as determined by the
Board based upon medical evidence acceptable to the Board.
(i) "Eligible Person" means any person who performs or has in the
past performed services for the Company, whether as a
director, officer, Employee, consultant or other independent
contractor,
B-1
and any person who performs services relating to the Company
as an employee or independent contractor of a corporation or
other entity that provides services for the Company.
(j) "Employee" means any person employed on an hourly or salaried
basis by the Company. In the case of a Recipient who is an
Employee of the Company, such person must be employed by the
Company at the time the Option is granted.
(k) "Fair Market Value" as of a particular date shall mean
the fair market value of the Common Stock. If the Common
Stock is admitted to trading on a national securities
exchange, fair market value of the Common Stock on any date
shall be the closing price reported for the Common Stock on
the last day preceding such date on which a sale was
reported. If the Common Stock is admitted to quotation on
the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System or other comparable quotation
system and has been designated as a National Market System
("NMS") security, fair market value of the Common Stock on
any date shall be the closing sale price reported for the
Common Stock on such system on the last date preceding such
date on which a sale was reported. If the Common Stock is
admitted to quotation on the Nasdaq System but has not been
designated as an NMS security, the fair market value of the
Common Stock on any date shall be the average of the highest
bid and lowest asked prices of such share on such system on
the last date preceding such date on which both bid and ask
prices were reported. If the Committee determines that the
value of the Common Stock determined on the basis of selling
or bid and asked prices as provided above in this Section 2(k)
does not reflect the fair market value of the Common Stock
because no actual sale prices or bona fide bid and asked
prices are available for a date within a reasonable period
before the valuation date, then the fair market value of the
Common Stock shall be determined by the Committee in its
sole discretion and in good faith as required by Section 422
of the Code.
(l) "Incentive Stock Option" means a stock option, granted
pursuant to this Plan or any other Company plan that
satisfies the requirements of Section 422 of the Code and
that entitles the Recipient to purchase stock of the
Company. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a
subsidiary corporation within the meaning of Section 424(f)
of the Code. To the extent that any Option does not qualify
as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
(m) "Non-Qualified Stock Option" means a stock option, granted
pursuant to the Plan, that is not an Incentive Stock Option
and that entitles the Recipient to purchase stock of the
Company.
(n) "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option.
(o) "Option Agreement" means a written agreement, between the
Company and a Recipient that sets out the terms and
restrictions of an Option.
(p) "Option Shareholder" means a Recipient who has acquired Shares
upon exercise of an Option.
(q) "Option Shares" means Shares that a Recipient receives upon
exercise of an Option.
(r) "Plan" means this Hadron, Inc. 2002 Stock Option Plan, as
amended from time to time.
(s) "Recipient" means an individual who receives an Option.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor to Rule
16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 8 of the Plan.
B-2
3. Administration.
The Committee shall administer the Plan. The Committee has the
exclusive power to select the Recipients of Options pursuant to the Plan, to
establish the terms of the Options granted to each Recipient, and to make all
other determinations necessary or advisable. The Committee has the sole
discretion to determine whether the performance of an Eligible Person warrants
the grant of an Option, and to determine the size and type of the Option. The
Committee has full and exclusive power to construe and interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to the Plan, and to
take all actions necessary or advisable for the Plan's administration. The
Committee, in the exercise of its powers, may correct any defect or supply any
omission, or reconcile any inconsistency in the Plan, or in any Agreement, in
the manner and to the extent it deems necessary or expedient to make the Plan
fully effective. In exercising this power, the Committee may retain counsel at
the expense of the Company. The Committee also has the power to determine the
duration and purposes of leaves of absence, which may be granted to a Recipient
without constituting a termination of the Recipient's employment for purposes of
the Plan. Any of the Committee's determinations shall be final and binding on
all persons. A member of the Committee shall not be liable for performing any
act or making any determination in good faith.
4. Shares Subject to Plan; Substitution Awards.
(a) Subject to the provisions of Section 8 of the Plan and
the authority granted to the Committee pursuant to Section 3
above, the maximum aggregate number of Shares that may be
subject to Options is one million, five hundred thousand
(1,500,000). The Shares may be authorized but unissued
Shares, or may be treasury stock of the Company. If an
unexercised Option expires or becomes unexercisable, the
unpurchased Shares subject to such Option shall be available
for other Options. If any Shares (whether subject to or
received pursuant to an Option granted under the Plan,
purchased on the open market, or otherwise obtained, and
including Shares that are deemed (by attestation or
otherwise) to have been delivered to the Company as payment
for all or any portion of the exercise price of an Option)
are withheld or applied as payment by the Company in
connection with the exercise of an Option or the withholding
of taxes related thereto, such Shares, to the extent of any
such withholding or payment, shall again be available or
shall increase the number of Shares available, as
applicable, for future Options under the Plan. The Board may
from time to time determine the appropriate methodology for
calculating the number of Shares issued pursuant to the
Plan.
(b) The Committee may grant Options under the Plan in
substitution for stock and stock based awards held by
employees, directors or other key persons of another
corporation in connection with a merger or other
consolidation of the employing corporation with and into the
Company or a subsidiary of the Company or the acquisition by
the Company or a subsidiary of the Company of the property
or stock of the employing corporation. The Committee may
direct that the substitute awards be granted on such terms
and conditions as they deem appropriate under the
circumstances. Any substitute awards granted under this
provision shall not count against the share limitation set
forth in Section 4(a) above.
5. Eligibility; Non-Employee Director Grants.
(a) Any Eligible Person that the Committee in its sole discretion
designates is eligible to receive an Option. However, only an
Employee may receive an Incentive Stock Option. The
Committee's grant of an Option to a Recipient in any year does
not entitle the Recipient to an Option in any other year.
Furthermore, the Committee may grant Options on different
terms to different Recipients and/or to the same Recipient if
the Recipient is awarded more than one Option. The Committee
may consider such factors as it deems pertinent in selecting
Recipients and in determining the types and sizes of their
Options. Recipients may include persons who previously
received stock, stock options, stock appreciation rights, or
other benefits under the Plan or another plan of the Company,
whether or not the previously granted benefits have been fully
exercised or vested. Nothing in the Plan or any Option, or in
any agreement entered into pursuant to the Plan shall confer
upon any Employee, director or outside consultant the right
to continue in the employ or service of the Company or effect
any right which the Company may have to terminate the
B-3
employment or service of such Employee, director, or outside
consultant regardless of the effect of such termination of
employment or service on the rights of the Employee, director
or outside consultant under the Plan or any Option. Any Option
granted by the Committee to a non-employee director elected or
appointed to the Board must be ratified by the Board.
(b) Each non-employee director elected or appointed to the Board
shall automatically receive, on the date of his or her first
initial appointment to the Board, an Option to purchase 5,000
shares of Common Stock (the "Initial Option") at a per share
exercise price equal to the Fair Market Value of the Common
Stock on the initial grant date. In addition, each
non-employee director shall automatically receive on each
anniversary of his initial election or appointment to the
Board an option to purchase 5,000 shares of the company's
Common Stock exercisable at a per share value equal to the
Fair Market Value for the Common Stock on the applicable
additional grant date to the extent that options remain
available under the Plan. Each Option granted under this
Section 5(b) shall terminate, to the extent not exercised
prior thereto, upon the earlier to occur of (i) the tenth
anniversary of grant and (ii) 90 days after the cessation of
the Recipient's service as a member of the Board (to the
extent vested upon the date of such cessation).
6. Options.
The Committee may grant Options to purchase Common Stock to Recipients
in such amounts as the Committee determines in its sole discretion. Except as
otherwise limited herein, an Option may be in the form of an Incentive Stock
Option or a Non-Qualified Stock Option. The Committee may grant an Option alone
or in addition to another Option. Each Option shall satisfy the following
requirements:
(a) Written Agreement. Each Option granted to a Recipient shall be
evidenced by an Option Agreement. The terms of the Option
Agreement need not be identical for different Recipients or
for the same Recipient if awarded more than one Option. The
Option Agreement shall contain such provisions as the
Committee deems appropriate and shall include a description of
the substance of each of the requirements in this Section 6.
(b) Designation of Type of Option. Each Option Agreement shall
state on its face whether the Option is intended to be a "tax
qualified," incentive stock option under Code Section 422, or
a "nonqualified," stock option subject to Code Section 83.
(c) Number of Shares. Each Option Agreement shall specify the
number of Shares that the Recipient may purchase upon exercise
of the Option. No Recipient shall be granted, in any calendar
year, Options to purchase more than 1,000,000 Shares. The
limitation described in this Section 6(c) shall be adjusted
proportionately in accordance with Section 8 of the Plan. If
an Option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a
transaction described in Section 8 of the Plan), the canceled
Option will be counted against the limitation described in
this Section 6(c).
(d) Exercise Price.
(i) Incentive Stock Options. Except as otherwise provided
in subsection 6(d)(iii) or subsection 6(m) of the
Plan, the exercise price of each Share subject to an
Incentive Stock Option shall equal the exercise price
designated by the Committee, but shall not be less
than the Fair Market Value of the Share on the Date
of Grant.
(ii) Non-Qualified Stock Options. Except as otherwise
provided in subsection 6(d)(iii) of the Plan or in
this subsection 6(d)(ii), in the case of Options
intended to be "nonqualified" stock options issued to
Employees, the exercise price shall be at least one
hundred percent (100%) of the fair market value of a
Share of Common Stock on the Grant Date, such that
the amount of compensation such Recipient/Employee
shall realize on exercise shall be based solely on
the increase in the value of the Shares of Common
Stock
B-4
subsequent to the Grant Date, as required by
Regulation Section 1.162-27. Notwithstanding the
foregoing, such exercise price may be less than one
hundred percent (100%) of the fair market value of a
Share of Common Stock on the Grant Date if the amount
below fair market value is attributable to the
attainment of a performance goal that satisfies the
requirements of Regulation Section 1.162-27 and Code
Section 162(m), or any successor statute or
Regulation regarding the same subject matter. The
exercise price of "Non-Qualified Stock Options"
issued to non-Employees shall equal the exercise
price designated by the Committee. Notwithstanding
the foregoing, in no event will the exercise price of
a Non-Qualified Stock Option be less than the par
value of the Common Stock on the Grant Date.
(iii) Exceptions. Any Option that is (1) granted to a
Recipient in connection with the acquisition
("Acquisition"), however effected, by the Company of
another corporation or entity ("Acquired Entity") or
the assets thereof, (2) associated with an option to
purchase shares of stock or other equity interest of
the Acquired Entity or an affiliate thereof
("Acquired Entity Option") held by such Recipient
immediately prior to such Acquisition, and (3)
intended to preserve for the Recipient the economic
value of all or a portion of such Acquired Entity
Option, may be granted with such exercise price as
the Committee determines to be necessary to achieve
such preservation of economic value. Any
Non-Qualified Option that is granted to a Recipient
not previously employed by the Company, or a parent
or subsidiary of the Company, as a material
inducement to the Recipient's commencing employment
with the Company may be granted with such exercise
price as the Committee determines to be necessary to
provide such material inducement.
(e) Duration of Option.
(i) Incentive Stock Option. Except as otherwise provided
in Section 6, an Incentive Stock Option shall expire
on the earlier of the tenth anniversary of the Date
of Grant or the date set by the Committee on the Date
of Grant.
(ii) Non-Qualified Stock Option. Except as otherwise
provided in this Section 6, a Non-Qualified Stock
Option shall expire on the tenth anniversary of its
Date of Grant or, at such earlier or later date set
by the Committee on the Date of Grant.
(f) Vesting of Option. Each Option Agreement shall specify the
vesting schedule applicable to the Option. The Committee, in
its sole discretion, may accelerate the vesting of any Option
at any time.
(g) Death. If a Recipient dies, an Option granted to the Recipient
shall expire on the earlier of the one-year anniversary of the
date of the Recipient's death or the date specified in Section
6(e) of the Plan. During the one-year period following the
Recipient's death, the Option may be exercised by the
beneficiary or the estate of the Recipient to the extent it
could have been exercised at the time the Recipient died,
subject to any adjustment under Section 8 of the Plan.
(h) Disability. If the Recipient terminates employment with the
Company because of his Disability, an Option granted to the
Recipient shall expire on the earlier of the one-year
anniversary of the Recipient's last day of employment with the
Company or the date specified in subsection 6(e) of the Plan.
During the one-year period following the Recipient's
termination of employment by reason of Disability, the Option
may be exercised as to the number of Shares for which it could
have been exercised at the time the Recipient became disabled,
subject to any adjustments under Section 8 of the Plan.
(i) Retirement. If the Recipient terminates employment with the
Company by reason of normal retirement under the Company's
retirement policies, an Option granted to the Recipient shall
expire on the earlier of 90 days after the Recipient's last
day of employment or the date specified
B-5
in subsection 6(e) of the Plan. During the 90 day period
following the Recipient's normal retirement, the Option may be
exercised as to the number of Shares for which the Option
would have been exercisable on the retirement date, subject to
any adjustment under Section 8 of the Plan.
(j) Termination of Service. Subject to Section 6(e) of the Plan,
if the Recipient's employment with the Company terminates for
any reason other than death, Disability or retirement, an
Option granted to the Recipient shall expire 30 days after the
Recipient's last day of employment, unless the Committee sets
a later expiration date on the Date of Grant. The Committee
may not delay the expiration of an Incentive Stock Option more
than 90 days after termination of the Recipient's employment.
During any delay of the expiration date, the Option shall be
exercisable only to the extent it is exercisable on the date
the Recipient's employment terminates, subject to any
adjustment under Section 8 of the Plan.
(k) Cause. Notwithstanding any provisions set forth in the Plan,
if the Recipient (i) commits any act of malfeasance or
wrongdoing affecting the Company or any parent or subsidiary,
(ii) breaches any covenant not to compete or employment
agreement with the Company, or (iii) willfully and
continuously fails to perform substantially his duties with
the Company (other than any failure due to the Recipient's
death or Disability), any unexercised portion of the Option
shall expire immediately upon the earlier of the occurrence of
such event or the last day the Recipient is employed by the
Company. No act or failure to act shall be deemed willful
unless the Recipient acts or fails to act not in good faith
and without reasonable belief that his action or failure is in
the best interest of the Company.
(l) Conditions Required for Exercise. An Option is exercisable
only to the extent it is vested according to the terms of the
Option Agreement. Furthermore, an Option is exercisable only
if the issuance of Shares upon exercise would comply with
applicable securities laws. Each Option Agreement shall
specify any additional conditions required for the exercise of
the Option, such as the execution of a Stock Restriction
Agreement by the Recipient in a form specified by the Company.
(m) Ten Percent Shareholders. An Incentive Stock Option granted to
an individual who, on the Date of Grant, owns stock possessing
more than 10 percent of the total combined voting power of all
classes of stock of the Company, shall have an exercise price
of 110 percent of Fair Market Value on the Date of Grant and
shall be exercisable only during the five-year period
immediately following the Date of Grant. For purposes of
calculating stock ownership of any person, the attribution
rules of Code Section 424(d) shall apply, and any stock that
such person may purchase under outstanding options shall not
be considered.
(n) Maximum Option Grants. The aggregate Fair Market Value,
determined on the Date of Grant, of Shares with respect to
which any Incentive Stock Options under the Plan and all other
plans of the Company become exercisable by any individual for
the first time in any calendar year shall not exceed $100,000.
To the extent that any Stock Option exceeds this limit, it
shall be deemed a Non-Qualified Stock Option.
(o) Method of Exercise. An Option shall be deemed exercised when
the person entitled to exercise the Option (i) delivers
written notice to the Secretary of the Company (or his
delegate, in his absence) of the decision to exercise, (ii)
concurrently tenders to the Company full payment for the
Shares to be purchased pursuant to the exercise, and (iii)
complies with any other requirements in the Recipient's Option
Agreement and such other reasonable requirements as the
Committee establishes pursuant to Section 7 of the Plan. The
Committee shall determine the acceptable form of consideration
for exercising an Option, including the method of payment. The
acceptable form of consideration may consist of any
combination of cash, certified check in an amount equal to the
full exercise price, wire transfer or, subject to the approval
of the Committee: (i) pursuant to subsection 6(p) of
the Plan, promissory note; (ii) Shares for which the holder
thereof has good title, free and clear of all liens and
encumbrances, and that such holder either has held for at
least six
B-6
months or has purchased on the open market; (iii) pursuant to
procedures approved by the Committee,restated, through the sale of the
Shares acquired on exercise of the Option through a
broker-dealer to whom the Recipient has submitted an
irrevocable notice of exercise and irrevocable instructions to
deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay the exercise price, together with,
if requested by the Company, the amount of federal, state,
local or foreign withholding taxes payable by the Recipient by
reason of such exercise, or through simultaneous sale through
a broker of Shares acquired upon exercise. No person shall
have the rights of a shareholder with respect to Shares
subject to an Option until a certificate or certificates for
the Shares have been delivered to him. A partial exercise of
an Option shall not affect the holder's right to exercise the
remainder of the Option from time to time in accordance with
the Plan.
(p) Loan from Company to Exercise Option. The Committee may, in
its discretion and subject to the requirements of applicable
law, recommend to the Company that it lend the Recipient the
funds needed by the Recipient to exercise an Option. The
Recipient shall apply to the Company for the loan, completing
the forms and providing the information required by the
Company. The loan shall be secured by such collateral as the
Company may require, subject to its underwriting requirements
and the requirements of applicable law. The Recipient shall
execute a promissory note and any other documents deemed
necessary by the Company.
(q) Designation of Beneficiary. Each Recipient may file with the
Company a written designation of a beneficiary to receive the
Recipient's Options in the event of the Recipient's death
prior to full exercise of such Options. If the Recipient does
not designate a beneficiary, or if the designated beneficiary
does not survive the Recipient, the Recipient's estate shall
be his beneficiary. Recipients may, by written notice to the
Company, change a beneficiary designation.
(r) Nontransferability of Option.
(i) Except as provided in subsection 6(r)(iii) below,
each Option shall be exercisable only by the
Recipient during the Recipient's lifetime, or, if
permissible under applicable law, by the Recipient's
guardian or legal representative.
(ii) Except as provided in subsection 6(r)(iii) below, no
Option (prior to the time, if applicable, Shares are
issued in respect of such Option), and no right under
any Option, may be assigned, alienated, pledged,
attached, sold or otherwise transferred to encumbered
by a Recipient otherwise than by will or by the laws
of descent and distribution and any such purported
assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and
unenforceable against the Company; provided, that the
designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale,
transfer or encumbrance.
(iii) To the extent and in the manner permitted by
applicable law, and to the extent and in the manner
permitted by the Committee, and subject to such terms
and conditions as may be prescribed by the Committee,
a Recipient may transfer a Non-Qualified Stock Option
to:
(A) a child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or
sister-in-law of the Recipient (including
adoptive relationships);
(B) any person sharing the Recipient's household
(other than a tenant or employee);
(C) a trust in which persons described in (A)
and (B) have more than 50 percent of the
beneficial interest;
B-7
(D) a foundation in which persons described in
(A) or (B) or the Recipient control the
management of assets; or
(E) any other entity in which the persons
described in (A) or (B) or the Recipient own
more than 50 percent of the voting
interests;
May 20, 2003)
| 1. | Purpose. The purpose of this Analex Corporation 2002 Stock Option Plan (the “Plan”) is to further the interests of Analex Corporation, a Delaware corporation and successor by merger to Hadron, Inc. (the “Company”), and its shareholders by providing incentives in the form of grants of stock options to key employees and other persons who contribute materially to the success and profitability of the Company. |
| 2. | Definitions. The following definitions shall apply to the Plan: |
| (a) | “Board” means the board of directors of the Company. |
| (b) | “Change of Control” means: |
| i. | a determination or agreement by the Company to sell substantially all of its assets, merge, dissolve, liquidate or reorganize; |
| ii. | a determination or agreement by the holders of a majority of the Common Stock of the Company to sell a majority of the outstanding Common Stock of the Company to a third party; or |
| iii. | the occurrence of any other change in control event, as defined by the Board. |
| (c) | “Code” means the Internal Revenue Code of 1986, as amended, and includes applicable Treasury regulations. |
| (d) | “Committee” means the Compensation Committee of the Board. The Committee shall (i) consist of not less than three (3) members of the Board who are not employees of the Company, (ii) be constituted to satisfy the applicable requirements of Rule 16b-3 for qualification of the transactions contemplated under the Plan for exemption under Rule 16b-3, and (iii) be constituted to satisfy the applicable requirements of Code Section 162(m) for qualification of the transactions contemplated under the Plan for exemption under Code Section 162(m). The Board may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board. |
| (e) | “Common Stock” means the Common Stock, par value $0.02, of the Company, or such other class of shares or securities to which the Plan may apply pursuant to Section 8 of the Plan. |
| (f) | “Company” means Analex Corporation, a Delaware corporation and successor by merger to Hadron, Inc. |
| (g) | “Date of Grant” means the date on which an Option is granted. |
| (h) | “Disability” means total and permanent inability, by reason of illness or accident, to perform the duties of the Recipient’s occupation or position with the Company, as determined by the Board based upon medical evidence acceptable to the Board. |
| (i) | “Eligible Person” means any person who performs or has in the past performed services for the Company, whether as a director, officer, Employee, consultant or other independent contractor, and any person who performs services relating to the Company as an employee or independent contractor of a corporation or other entity that provides services for the Company. |
| (j) | “Employee” means any person employed on an hourly or salaried basis by the Company. In the case of a Recipient who is an Employee of the Company, such person must be employed by the Company at the time the Option is granted. |
25
| (k) | “Fair Market Value” as of a particular date shall mean the fair market value of the Common Stock. If the Common Stock is admitted to trading on a national securities exchange, fair market value of the Common Stock on any date shall be the closing price reported for the Common Stock on the last day preceding such date on which a sale was reported. If the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation (“Nasdaq”) System or other comparable quotation system and has been designated as a National Market System (“NMS”) security, fair market value of the Common Stock on any date shall be the closing sale price reported for the Common Stock on such system on the last date preceding such date on which a sale was reported. If the Common Stock is admitted to quotation on the Nasdaq System but has not been designated as an NMS security, the fair market value of the Common Stock on any date shall be the average of the highest bid and lowest asked prices of such Common Stock on such system on the last date preceding such date on which both bid and ask prices were reported. If the Board determines that the value of the Common Stock determined on the basis of selling or bid and asked prices as provided above in this Section 2(k) does not reflect the fair market value of the Common Stock, then the fair market value of the Common Stock shall be determined by the Board in its sole discretion and in good faith as required by Section 422 of the Code. If the Common Stock is not admitted to trading on a national securities exchange or to quotation on the Nasdaq System or other comparable quotation system, then the fair market value of the Common Stock shall be determined by the Board in its sole discretion and in good faith as required by Section 422 of the Code. |
| (l) | “Incentive Stock Option” means a stock option, granted pursuant to this Plan or any other Company plan, that satisfies the requirements of Section 422 of the Code and that entitles the Recipient to purchase stock of the Company. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a subsidiary corporation within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option. |
| (m) | “Non-Qualified Stock Option” means a stock option, granted pursuant to the Plan, that is not an Incentive Stock Option and that entitles the Recipient to purchase stock of the Company. |
| (n) | “Option” means an Incentive Stock Option or a Non-Qualified Stock Option. |
| (o) | “Option Agreement” means a written agreement, between the Company and a Recipient, that sets out the terms and restrictions of an Option. |
| (p) | “Option Shareholder” means a Recipient who has acquired Shares upon exercise of an Option. |
| (q) | “Option Shares” means Shares that a Recipient receives upon exercise of an Option. |
| (r) | “Plan” means this Analex Corporation 2002 Stock Option Plan (formerly known as “Hadron, Inc. 2002 Stock Option Plan”) as amended and restated, through May 20, 2003, and as further amended from time to time. |
| (s) | “Recipient” means an individual who receives an Option. |
| (t) | “Rule 16b-3” means Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. |
| (u) | “Share” means a share of the Common Stock, as adjusted in accordance with Section 8 of the Plan. |
| 3. | Administration. The Committee shall administer the Plan. The Committee has the exclusive power to select the Recipients of Options pursuant to the Plan, to establish the terms of the Options granted to each Recipient, to modify or amend any Option, and to make all other determinations necessary or advisable. The Committee has the sole discretion to determine whether the performance of an Eligible Person warrants the grant of an Option, and to determine the size and type of the Option. The Committee has full and exclusive power to construe and interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, and to take all actions necessary or advisable for the Plan’s administration. The Committee, in the exercise of its powers, may correct any defect or supply any omission, or reconcile any inconsistency in the |
26
Plan, or in any Agreement, in the manner and to the extent it deems necessary or expedient to make the Plan fully effective. In exercising this power, the Committee may retain counsel at the expense of the Company. The Committee also has the power to determine the duration and purposes of leaves of absence which may be granted to a Recipient without constituting a termination of the Recipient’s employment for purposes of the Plan. Any of the Committee’s determinations shall be final and binding on all persons. A member of the Committee shall not be liable for performing any act or making any determination in good faith. |
| 4. | Shares Subject to Plan; Substitution Awards. |
| (a) | Subject to the provisions of Section 8 of the Plan and the authority granted to the Committee pursuant to Section 3 above, the maximum aggregate number of Shares that may be subject to Options is two million (2,000,000). The Shares may be authorized but unissued Shares, or may be treasury stock of the Company. If an unexercised Option expires or becomes unexercisable, the unpurchased Shares subject to such Option shall be available for other Options. If any Shares (whether subject to or received pursuant to an Option granted under the Plan, purchased on the open market, or otherwise obtained, and including Shares that are deemed (by attestation or otherwise) to have been delivered to the Company as payment for all or any portion of the exercise price of an Option) are withheld or applied as payment by the Company in connection with the exercise of an Option or the withholding of taxes related thereto, such Shares, to the extent of any such withholding or payment, shall again be available or shall increase the number of Shares available, as applicable, for future Options under the Plan. The Board may from time to time determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan. |
| (b) | The Committee may grant Options under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with a merger or other consolidation of the employing corporation with and into the Company or a subsidiary of the Company or the acquisition by the Company or a subsidiary of the Company of the property or stock of the employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as they deem appropriate under the circumstances. Any substitute awards granted under this provision shall not count against the share limitation set forth in Section 4(a) above. |
| 5. | Eligibility; Non-Employee Director Grants. |
| (a) | Any Eligible Person that the Committee in its sole discretion designates is eligible to receive an Option. However, only an Employee may receive an Incentive Stock Option. The Committee’s grant of an Option to a Recipient in any year does not entitle the Recipient to an Option in any other year. Furthermore, the Committee may grant Options on different terms to different Recipients and/or to the same Recipient if the Recipient is awarded more than one Option. The Committee may consider such factors as it deems pertinent in selecting Recipients and in determining the types and sizes of their Options. Recipients may include persons who previously received stock, stock options, stock appreciation rights, or other benefits under the Plan or another plan of the Company, whether or not the previously granted benefits have been fully exercised or vested. Nothing in the Plan or any Option, or in any agreement entered into pursuant to the Plan shall confer upon any Employee, director or outside consultant the right to continue in the employ or service of the Company or effect any right which the Company may have to terminate the employment or service of such Employee, director, or outside consultant regardless of the effect of such termination of employment or service on the rights of the Employee, director or outside consultant under the Plan or any Option. Any Option granted by the Committee to a non-employee director elected or appointed to the Board must be ratified by the Board. |
| (b) | Each non-employee director elected or appointed to the Board shall automatically receive, on the date of his or her first initial appointment to the Board, an Option to purchase 5,000 shares of Common Stock (the “Initial Option”) at a per share exercise price equal to the Fair Market Value of the Common Stock on the initial grant date. In addition, each non-employee director shall automatically receive on the date of the first Board meeting held in each new fiscal year an option to purchase 5,000 shares of the Company’s Common Stock exercisable at a per share value equal to the Fair Market Value for the |
27
Common Stock on the applicable additional grant date to the extent that options remain available under the Plan. Each Option granted under this Section 5(b) shall terminate, to the extent not exercised prior thereto, upon the earlier to occur of (i) the tenth anniversary of grant and (ii) 90 days after the cessation of the Recipient’s service as a member of the Board (to the extent vested upon the date of such cessation), unless the Committee or the Board sets an earlier or later expiration date in establishing the terms of the Option at grant or a later expiration date subsequent to the Date of Grant but prior to the end of the 90-day period following the Recipient’s cessation as a member of the Board. |
| 6. | Options. The Committee may grant Options to purchase Common Stock to Recipients in such amounts as the Committee determines in its sole discretion. Except as otherwise limited herein, an Option may be in the form of an Incentive Stock Option or a Non-Qualified Stock Option. The Committee may grant an Option alone or in addition to another Option. Each Option shall satisfy the following requirements: |
| (a) | Written Agreement. Each Option granted to a Recipient shall be evidenced by an Option Agreement. The terms of the Option Agreement need not be identical for different Recipients or for the same Recipient if awarded more than one Option. The Option Agreement shall contain such provisions as the Committee deems appropriate and shall include a description of the substance of each of the requirements in this Section 6. |
| (b) | Designation of Type of Option. Each Option Agreement shall state on its face whether the Option is intended to be a “tax qualified,” incentive stock option under Code Section 422, or a “nonqualified,” stock option subject to Code Section 83. |
| (c) | Number of Shares. Each Option Agreement shall specify the number of Shares that the Recipient may purchase upon exercise of the Option. No Recipient shall be granted, in any calendar year, Options to purchase more than 1,000,000 Shares. The limitation described in this Section 6(c) shall be adjusted proportionately in accordance with Section 8 of the Plan. If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 8 of the Plan), the canceled Option will be counted against the limitation described in this Section 6(c). |
| (d) | Exercise Price. |
| (i) | Incentive Stock Options. Except as otherwise provided in subsection 6(d)(iii) or subsection 6(m) of the Plan, the exercise price of each Share subject to an Incentive Stock Option shall equal the exercise price designated by the Committee, but shall not be less than the Fair Market Value of the Share on the Date of Grant. |
| (ii) | Non-Qualified Stock Options. Except as otherwise provided in subsection 6(d)(iii) of the Plan or in this subsection 6(d)(ii), in the case of Options intended to be “nonqualified” stock options issued to Employees, the exercise price shall be at least one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date, such that the amount of compensation such Recipient/Employee shall realize on exercise shall be based solely on the increase in the value of the Shares subsequent to the Grant Date, as required by Regulation Section 1.162-27. Notwithstanding the foregoing, such exercise price may be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date if the amount below Fair Market Value is attributable to the attainment of a performance goal that satisfies the requirements of Regulation Section 1.162-27 and Code Section 162(m), or any successor statute or Regulation regarding the same subject matter. The exercise price of “Non-Qualified Stock Options” issued to non-employees shall equal the exercise price designated by the Committee. Notwithstanding the foregoing, in no event will the exercise price of a Non-Qualified Stock Option be less than the par value of the Common Stock on the Grant Date. |
| (iii) | Exceptions. Any Option that is (1) granted to a Recipient in connection with an acquisition (“Acquisition”), however effected, by the Company of another corporation or entity (“Acquired Entity”) or the assets thereof, (2) associated with an option to purchase shares of stock or other |
28
equity interest of the Acquired Entity or an affiliate thereof (“Acquired Entity Option”) held by such Recipient immediately prior to such Acquisition, and (3) intended to preserve for the Recipient the economic value of all or a portion of such Acquired Entity Option, may be granted with such exercise price as the Committee determines to be necessary to achieve such preservation of economic value. Any Non-Qualified Option that is granted to a Recipient not previously employed by the Company, or a parent or subsidiary of the Company, as a material inducement to the Recipient’s commencing employment with the Company may be granted with such exercise price as the Committee determines to be necessary to provide such material inducement. |
| (e) | Duration of Option. |
| (i) | Incentive Stock Option. Except as otherwise provided in Section 6, an Incentive Stock Option shall expire on the earlier of the tenth anniversary of the Date of Grant or the date set by the Committee on the Date of Grant. |
| (ii) | Non-Qualified Stock Option. Except as otherwise provided in this Section 6, a Non-Qualified Stock Option shall expire on the tenth anniversary of its Date of Grant or, at such earlier or later date set by the Committee on the Date of Grant. |
| (f) | Vesting of Option. Each Option Agreement shall specify the vesting schedule applicable to the Option. The Committee, in its sole discretion, may accelerate the vesting of any Option at any time. |
| (g) | Death. If a Recipient dies, an Option granted to the Recipient shall expire on the earlier of the one-year anniversary of the date of the Recipient’s death or the date specified in Section 6(e) of the Plan. During the one-year period following the Recipient’s death, the Option may be exercised by the beneficiary or the estate of the Recipient to the extent it could have been exercised at the time the Recipient died, subject to any adjustment under Section 8 of the Plan. |
| (h) | Disability. If the Recipient terminates employment with the Company because of his Disability, an Option granted to the Recipient shall expire on the earlier of the one-year anniversary of the Recipient’s last day of employment with the Company or the date specified in Section 6(e) of the Plan. During the one-year period following the Recipient’s termination of employment by reason of Disability, the Option may be exercised as to the number of Shares for which it could have been exercised at the time the Recipient became disabled, subject to any adjustments under Section 8 of the Plan. |
| (i) | Retirement. If the Recipient terminates employment with the Company by reason of normal retirement under the Company’s retirement policies, an Option granted to the Recipient shall expire on the earlier of 90 days after the Recipient’s last day of employment or the date specified in Section 6(e) of the Plan. During the 90 day period following the Recipient’s normal retirement, the Option may be exercised as to the number of Shares for which the Option would have been exercisable on the retirement date, subject to any adjustment under Section 8 of the Plan. |
| (j) | Termination of Service. Subject to Section 6(e) of the Plan, if the Recipient’s employment with the Company terminates for any reason other than death, Disability or retirement, an Option granted to the Recipient shall expire 30 days after the Recipient’s last day of employment, unless the Committee sets a later expiration date on the Date of Grant. The Committee may not delay the expiration of an Incentive Stock Option more than 90 days after termination of the Recipient’s employment. During any delay of the expiration date, the Option shall be exercisable only to the extent it is exercisable on the date the Recipient’s employment terminates, subject to any adjustment under Section 8 of the Plan. |
| (k) | Cause. Notwithstanding any provisions set forth in the Plan, if the Recipient (i) commits any act of malfeasance or wrongdoing affecting the Company or any parent or subsidiary, (ii) breaches any covenant not to compete or employment agreement with the Company, or (iii) willfully and continuously fails to perform substantially his duties with the Company (other than any failure due to the Recipient’s death or Disability), any unexercised portion of the Option shall expire immediately upon the earlier of the occurrence of such event or the last day the Recipient is employed by the |
29
Company. No act or failure to act shall be deemed willful unless the Recipient acts or fails to act not in good faith and without reasonable belief that his action or failure is in the best interest of the Company. |
| (l) | Conditions Required for Exercise. An Option is exercisable only to the extent it is vested according to the terms of the Option Agreement. Furthermore, an Option is exercisable only if the issuance of Shares upon exercise would comply with applicable securities laws. Each Option Agreement shall specify any additional conditions required for the exercise of the Option, such as the execution of a Stock Restriction Agreement by the Recipient in a form specified by the Company. |
| (m) | Ten Percent Shareholders. An Incentive Stock Option granted to an individual who, on the Date of Grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, shall have an exercise price of 110 percent of Fair Market Value on the Date of Grant and shall be exercisable only during the five-year period immediately following the Date of Grant. For purposes of calculating stock ownership of any person, the attribution rules of Code Section 424(d) shall apply, and any stock that such person may purchase under outstanding options shall not be considered. |
| (n) | Maximum Option Grants. The aggregate Fair Market Value, determined on the Date of Grant, of Shares with respect to which any Incentive Stock Options under the Plan and all other plans of the Company become exercisable by any individual for the first time in any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall be deemed a Non-Qualified Stock Option. |
| (o) | Method of Exercise. An Option shall be deemed exercised when the person entitled to exercise the Option (i) delivers written notice to the Secretary of the Company (or his delegate, in his absence) of the decision to exercise, (ii) concurrently tenders to the Company full payment for the Shares to be purchased pursuant to the exercise, and (iii) complies with any other requirements in the Recipient’s Option Agreement and such other reasonable requirements as the Committee establishes pursuant to Section 7 of the Plan. The Committee shall determine the acceptable form of consideration for exercising an Option, including the method of payment. The acceptable form of consideration may consist of any combination of cash, certified check in an amount equal to the full exercise price, wire transfer or, subject to the approval of the Committee: (i) pursuant to Section 6(p) of the Plan, promissory note; (ii) Shares for which the holder thereof has good title, free and clear of all liens and encumbrances, and that such holder either has held for at least six months or has purchased on the open market; (iii) pursuant to procedures approved by the Committee, through the sale of the Shares acquired on exercise of the Option through a broker-dealer to whom the Recipient has submitted an irrevocable notice of exercise and irrevocable instructions to deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay the exercise price, together with, if requested by the Company, the amount of federal, state, local or foreign withholding taxes payable by the Recipient by reason of such exercise, or through simultaneous sale through a broker of Shares acquired upon exercise. No person shall have the rights of a shareholder with respect to Shares subject to an Option until a certificate or certificates for the Shares have been delivered to him. A partial exercise of an Option shall not affect the holder’s right to exercise the remainder of the Option from time to time in accordance with the Plan. |
| (p) | Loan from Company to Exercise Option. The Committee may, in its discretion and subject to the requirements of applicable law, recommend to the Company that it lend the Recipient the funds needed by the Recipient to exercise an Option. The Recipient shall apply to the Company for the loan, completing the forms and providing the information required by the Company. The loan shall be secured by such collateral as the Company may require, subject to its underwriting requirements and the requirements of applicable law. The Recipient shall execute a promissory note and any other documents deemed necessary by the Company. |
| (q) | Designation of Beneficiary. Each Recipient may file with the Company a written designation of a beneficiary to receive the Recipient’s Options in the event of the Recipient’s death prior to full exercise |
30
of such Options. If the Recipient does not designate a beneficiary, or if the designated beneficiary does not survive the Recipient, the Recipient’s estate shall be his beneficiary. Recipients may, by written notice to the Company, change a beneficiary designation. |
| (r) | Nontransferability of Option. |
| (i) | Except as provided in subsection 6(r)(iii) below, each Option shall be exercisable only by the Recipient during the Recipient’s lifetime, or, if permissible under applicable law, by the Recipient’s guardian or legal representative. |
| (ii) | Except as provided in subsection 6(r)(iii) below, no Option (prior to the time, if applicable, Shares are issued in respect of such Option), and no right under any Option, may be assigned, alienated, pledged, attached, sold or otherwise transferred to encumbered by a Recipient otherwise than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. |
| (iii) | To the extent and in the manner permitted by applicable law, and to the extent and in the manner permitted by the Committee, and subject to such terms and conditions as may be prescribed by the Committee, a Recipient may transfer a Non-Qualified Stock Option to: |
| (A) | a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Recipient (including adoptive relationships); |
| (B) | any person sharing the Recipient’s household (other than a tenant or employee); |
| (C) | a trust in which persons described in (A) and (B) have more than 50 percent of the beneficial interest; |
| (D) | a foundation in which persons described in (A) or (B) or the Recipient control the management of assets; or |
| (E) | any other entity in which the persons described in (A) or (B) or the Recipient own more than 50 percent of the voting interests; |
provided such transfer is not for value. The following shall not be considered transfers for value: a transfer under a domestic relations order in settlement of marital property rights, and a transfer to an entity in which more than 50 percent of the voting interests are owned by persons described in (A) above or the Recipient, in exchange for an interest in such entity.
(s) Change of Control. In the event of a Change of Control, the
portion of an outstanding Option that is not then vested
and/or exercisable shall become fully vested and exercisable
as of the date of such Change of Control. If a Change of
Control occurs, the Committee in its discretion may, at the
time an Option is awarded or at any time thereafter, take
one or more of the following actions: (i) provide for
payment to the Recipient of cash or other property with a
Fair Market Value equal to the amount that would have been
received upon the exercise of the Option had the Option been
exercised or paid upon the Change in Control, (ii) adjust
the terms of the Option in a manner determined by the
Committee to reflect the Change in Control, (iii) cause the
Option to be assumed, or new rights substituted therefor, by
another entity, (iv) make such other provision as the
Committee may consider equitable to Recipients and in the
best interests of the Company, or (v) designate a date when
each outstanding Option, if not exercised, shall terminate;
provided however, that such a date shall not be so
designated unless the Committee provides at least 30 days
advance written notice of the date of termination to each
Recipient. In any such event, all other provisions, terms
and conditions of this Plan shall remain in full force and
effect and the Committee is expressly authorized to take the
action described in the preceding sentence and to amend this
Plan or take such other actions as may be necessary,
appropriate or incidental to the actions described above.
7. Taxes; Compliance with Law; Approval of Regulatory Bodies; Legends.
The Company shall have the right to withhold from payments otherwise
due and owing to the Recipient or his beneficiary or to require the Recipient or
his beneficiary to remit to the Company in cash upon demand an amount sufficient
to satisfy any federal (including FICA and FUTA amounts), state, and/or local
withholding tax requirements at the time the Recipient or his beneficiary
recognizes income for federal, state, and/or local tax purposes with respect to
any Option.
| (s) | Change of Control. In the event of a Change of Control, the portion of an outstanding Option that is not then vested and/or exercisable shall become fully vested and exercisable as of the date of such Change of Control. If a Change of Control occurs, the Committee in its discretion may, at the time an Option is awarded or at any time thereafter, take one or more of the following actions: (i) provide for payment to the Recipient of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise of the Option had the Option been exercised or paid upon the Change in Control, (ii) adjust the terms of the Option in a manner determined by the Committee to reflect the Change in Control, (iii) cause the Option to be assumed, or new rights substituted therefor, by another entity, (iv) make such other provision as the Committee may consider equitable to Recipients and in the best interests of the Company, or (v) designate a date when each outstanding Option, if not exercised, shall terminate; provided however, that such a date shall not be so designated unless the Committee provides at least 30 days advance written notice of the date of termination to each Recipient. In any such event, all other provisions, terms and conditions of this Plan shall remain in full force and effect and the Committee is expressly authorized to take the action described in the preceding sentence and to amend this Plan or take such other actions as may be necessary, appropriate or incidental to the actions described above. |
31
| 7. | Taxes; Compliance with Law; Approval of Regulatory Bodies; Legends. The Company shall have the right to withhold from payments otherwise due and owing to the Recipient or his beneficiary or to require the Recipient or his beneficiary to remit to the Company in cash upon demand an amount sufficient to satisfy any federal (including FICA and FUTA amounts), state, and/or local withholding tax requirements at the time the Recipient or his beneficiary recognizes income for federal, state, and/or local tax purposes with respect to any Option. |
The Board may grant Options and the Company may deliver Shares under the Plan only in compliance with all applicable federal and state laws and regulations and the rules of all stock exchanges on which the Company'sCompany’s stock is listed at any time. An Option is exercisable only if either (i) a registration statement pertaining to the Shares to be issued upon exercise of the Option has been filed with and declared effective by the Securities and Exchange Commission and remains effective on the date of exercise, or (ii) an exemption from the registration requirements of applicable securities laws is available. The Plan does not require the Company, however, to file such a registration statement or to assure the availability of such exemptions. Any certificate issued to evidence Shares issued under the Plan may bear such legends and statements, and shall be subject to such transfer restrictions, as the Board deems advisable to assure compliance with federal and state laws and regulations and with the requirements of this Section 7. No Option may be exercised, and Shares may not be issued under the Plan, until the Company has obtained the consent or approval of every regulatory body, federal or state, having jurisdiction over such matters as the Board deems advisable.
Each person who acquires the right to exercise an Option or to ownership of Shares by bequest or inheritance may be required by the Board to furnish reasonable evidence of ownership of the Option as a condition to his exercise of the Option or receipt of Shares. In addition, the Board may require such consents and releases of taxing authorities as the Board deems advisable.
B-8
With respect to persons subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 under the 1934 Act, as such Rule may be amended from time to time, or its successor under the 1934 Act. To the extent any provision of the Plan or action by the Board or the Company fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board.
8. Adjustments.
(a) If a stock dividend, stock split, share combination, exchange
of shares, recapitalization, consolidation, spin-off,
reorganization, or liquidation of or by the Company shall
occur, the Board shall adjust the number and class of Shares
for which Options are authorized to be granted, the number and
class of Shares then subject to Options previously granted,
and the price per Share payable upon exercise of each Option
to the extent the Board deems appropriate to reflect the
applicable transaction.
(b) The Board or the Committee may also adjust the number of
shares subject to outstanding Awards and the exercise price
and the terms of outstanding Awards to take into consideration
material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock
or property or any other event if it is determined by the
Board of the Committee that such adjustment is appropriate to
avoid distortion in the operation of the Plan, provided that
no such adjustment shall be made in the case of an Incentive
Stock Option, without the consent of the Recipient, if it
would constitute a modification, extension or renewal of the
Option within the meaning of Section 424(h) of the Code.
9. Liability of the Company.
The Company shall not be liable to any person for any tax consequences
incurred by a Recipient or other person with respect to an Option.
10. Indemnity of Board or Committee.
The Company hereby indemnifies and holds harmless the members of the
Board or the Committee against all liability and expenses (including reasonable
attorney, paralegal, and professional fees and court costs) arising from any
threatened, pending or completed action, suit, proceeding (including
administrative proceedings or investigations) or appeal, incurred by reason of
the fact that such individual is or was a member of the Board (for the purposes
of administration of the Plan) or the Committee, provided that such individual
(i) acted, in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the Company as well as the Employees,
directors, outside consultants and Recipients, or (ii) with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
11. Amendment and Termination of Plan.
The Board may alter, amend, suspend or terminate the Plan, provided
that no such action shall deprive a Recipient, without his consent, of any
Option granted to the Recipient pursuant to the Plan or of any of his/her rights
under such Option. Notwithstanding the foregoing, no provision herein (including
Section 5(b)) related to automatic grants of Options to non-employee directors
may be amended more frequently than once every six months and no amendment to
such provisions, unless approved by the shareholders of the Company, shall
become effective earlier than six months after Board approval. Except as
provided otherwise in this Section 11, the Board shall obtain shareholder
approval of any amendment of the Plan or any Option to the extent the Board
determines that it is desirable to obtain approval of the Company's
shareholders, to retain eligibility for exemption from the limitations of Code
Section 162(m), to have available the ability for Options to qualify under Code
Section 422 as Incentive Stock Options, to comply with the requirements of any
exchange or quotation system on which the Common Stock is listed or quoted, or
for any other purpose the Board deems appropriate.
B-9
12. Trading Policy Restrictions.
Option exercises under the Plan shall be subject at all times to the
Company's insider trading policy related restrictions, terms and conditions as
may be established by the Board, or any committee thereof, from time to time.
13. Expenses of Plan.
The Company shall bear the expenses of administering the Plan.
14. Duration of Plan.
Options may be granted only during the 10 years immediately following
the original effective date of the Plan.
15. Notices.
All notices to the Company shall be in writing and shall be delivered
to the Secretary of the Company. All notices to a Recipient shall be delivered
personally or mailed to the Recipient at his address appearing in the Company's
personnel records. The address of any person may be changed at any time by
written notice given in accordance with this Section 15.
16. Applicable Law.
The validity, interpretation, and enforcement of the Plan are governed
in all respects by the laws of Delaware and the United States of America.
17. Effective Date.
The effective date of the Plan shall be the earlier of (i) the date on
which the Board adopts the Plan or (ii) the date on which the shareholders
approve the Plan.
Date Plan adopted by Board of Directors: March 20, 2002
(subject to shareholder approval)
Date Plan adopted by Shareholders: _________________________, 2002
-----------------------------------------
Karen Dickey
Secretary
B-10
APPENDIX C
FORM OF
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is effective as of
___________________, 2002 by and between Analex Corporation, a Delaware
corporation ("Analex" or the "Surviving Company"), and Hadron, Inc., a New York
corporation ("Hadron" or the "Non-Surviving Company"). Each are sometimes
hereinafter referred to as the "Constituent Companies."
W I T N E S S E T H :
WHEREAS, pursuant to Section 252 of the Delaware General Corporation
Law ("DGCL") and Section 904 of the New York Business Corporation Law ("NYBCL")
the Constituent Companies' respective Bylaws, the Board Directors and
Shareholders of Hadron and the Shareholders and Board of Directors of Analex
have each approved the Merger (as hereinafter defined), whereby Hadron will
merge with and into Analex, upon the terms and subject to the conditions set
forth herein, as evidenced by Minutes of a Meeting of the Board of Directors of
Analex dated __________________, 2002, Minutes of a Meeting of the Stockholders
of Analex dated __________________, Minutes of a Meeting of the Board of
Directors of Hadron and Minutes of a Meeting of the Stockholders of Hadron dated
___________________, 2002;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto have agreed as follows:
ARTICLE I
THE MERGER
1.01 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at
the Effective Time (as such term is defined in Section 1.01(b) hereof), Hadron
shall be merged with and into Analex (the "Merger") in accordance with Section
252 of the DGCL and Section 904 of the NYBCL, and the separate corporate
existence of Hadron shall cease to exist and Analex shall continue as the
Surviving Company under the laws of the State of Delaware under the name "Analex
Corporation."
(b) The Surviving Company shall file a duly executed
Certificate of Merger with the Delaware Secretary of State ("DE Certificate of
Merger"). The Non-Surviving Company shall file duly executed Certificate of
Merger with the New York Secretary of State ("NY Certificate of Merger"). The
"Effective Time" of the Merger shall be the later of: (i) the date and time of
acceptance for filing with the Delaware Secretary of State the DE Certificate of
Merger, and (ii) the date and time of acceptance for filing with the New York
Secretary of State the NY Certificate of Merger.
(c) At the Effective Time, the Surviving Company shall
thereupon and thereafter possess all of the rights, privileges, powers and
franchises, both of a public and private nature, of each of the Constituent
Companies, and shall be subject to all of the restrictions, disabilities and
duties of each of the Constituent Companies; and all of the rights, privileges,
powers and franchises of each of the Constituent Companies, and all property
(real, personal and mixed), and all debts due to either of the Constituent
Companies on whatever account, for stock subscriptions as well as all other
things in action or belonging to each of the Constituent Companies, shall be
vested in the Surviving Company; and all property, rights, privileges, powers
and franchises and all and every other interest shall thereafter be the property
of the Surviving Company as they were of the several and respective Constituent
Companies; but all rights of creditors and all liens upon any property of either
of the Constituent
C-1
Companies shall be preserved unimpaired, and all debts, liabilities and duties
of each of the Constituent Companies shall thenceforth attach to the Surviving
Company, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by the Surviving Company.
1.02 Conversion of Shares of Common Stock. Immediately at the Effective
------------------------------------
Time, each of the issued and outstanding shares of Common Stock of the
Non-Surviving Company shall be converted into the same number of shares of
Common Stock of the Surviving Company pursuant to the Merger.
1.03 Certificate of Incorporation of the Surviving Company. The
-----------------------------------------------------
Certificate of Incorporation of the Surviving Company in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Company and the Non-Surviving Company until otherwise amended or
repealed.
1.04 Bylaws of the Surviving Company. The Bylaws of the Surviving
-------------------------------
Company shall be the Bylaws of the Surviving and Non-Surviving Company until
otherwise amended or repealed.
1.05 Board of Directors of the Non-Surviving Company. The Board of
-----------------------------------------------
Directors of the Non-Surviving Company in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the Board of Directors of the Surviving Company from and
after the Effective Time in accordance with the Bylaws of the Surviving Company.
1.06 Tax Treatment of the Merger. It is intended by the parties hereto
---------------------------
that the Merger shall constitute a reorganization of the Surviving and the
Non-Surviving Company within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended.
ARTICLE II
SHARES OF STOCK
2.01 Authorized Shares of Hadron and Analex. The authorized capital
--------------------------------------
stock of Hadron consists of Twenty Million (20,000,000) shares of common stock
with a par value of $0.02 per share, and no shares of preferred stock. The
authorized capital stock of Analex consists of Thirty-Five Million (35,000,000)
shares consisting of Thirty Million (30,000,000) shares of common stock with a
par value of $0.02 per share, and Five Million (5,000,000) shares of preferred
stock with a par value of $0.02 per share.
2.02 Conversion of Shares of Stock. At the Effective Time, pursuant to
-----------------------------
the Merger, each stockholder of the Non-Surviving Company shall automatically
become a stockholder of the Surviving Company and each share of common stock in
the Non-Surviving Company shall be converted into the same number of shares of
common stock in the Surviving Company.
ARTICLE III
MISCELLANEOUS
3.01 Fees and Expenses. Whether or not the Merger is consummated, the
-----------------
Surviving Company shall pay the costs and expenses incident to the preparation
of this Agreement, the consummation of the Merger, and the performance of and
compliance with all of the agreements and conditions contained herein.
3.02 Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed by overnight delivery service or by first class mail postage prepaid,
or sent by telecopier, to the parties at the following addresses (or at such
other address of a party as shall be specified by like notice) as follows:
C-2
(a) if to the Non-Surviving Company at:
Hadron, Inc.
5904 Richmond Highway
Suite 300
Alexandria, VA 22303
Attention: President
(b) if to the Surviving Company at:
Analex Corporation
5904 Richmond Highway
Suite 300
Alexandria, VA 22303
Attention: President
3.03 Binding Effect; Benefit. This Agreement shall inure to the benefit
-----------------------
of and be binding upon the parties hereto and their respective successors and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
3.04 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented in any and all respects by
written agreement of the directors and shareholders of the Surviving Company and
the directors and shareholders of the Non-Surviving Company at any time prior to
the Effective Time with respect to any of the terms contained herein.
3.05 Section Headings. The Section headings contained in this
----------------
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
3.06 Applicable Law. This Agreement and the legal relations among the
--------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to the conflict of laws principles or rules
thereof.
3.07 Integration. This Agreement sets forth and is intended to be an
-----------
integration of all of the promises, agreements, conditions, understandings,
covenants, warranties and representations among the parties with respect to the
Merger and there are no promises, agreements, conditions, understandings,
covenants, warranties or representations, oral or written, express or implied,
among the parties with respect to the transactions contemplated other than as
set forth herein. Any and all prior agreements among the parties with respect to
the Merger are hereby revoked.
IN WITNESS WHEREOF, the parties hereto have executed this Merger
Agreement effective as of the date first written.
HADRON, INC.
a New York Corporation
By:
----------------------------------
Sterling E. Phillips, Jr.
Chairman and Chief Executive Officer
C-3
ANALEX CORPORATION
a Delaware Corporation
By:
------------------------------------
Sterling E. Phillips, Jr.
Chairman and Chief Executive Officer
C-4
| 8. | Adjustments. |
| (a) | If a stock dividend, stock split, share combination, exchange of shares, recapitalization, consolidation, spin-off, reorganization, or liquidation of or by the Company shall occur, the Board shall adjust the number and class of Shares for which Options are authorized to be granted, the number and class of Shares then subject to Options previously granted, and the price per Share payable upon exercise of each Option to the extent the Board deems appropriate to reflect the applicable transaction. |
| (b) | The Board or the Committee may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Board of the Committee that such adjustment is appropriate to avoid distortion in the operation of the Plan,providedthat no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the Recipient, if it would constitute a modification, extension or renewal of the Option within the meaning of Section 424(h) of the Code. |
| 9. | Liability of the Company. The Company shall not be liable to any person for any tax consequences incurred by a Recipient or other person with respect to an Option. |
| 10. | Indemnity of Board or Committee. The Company hereby indemnifies and holds harmless the members of the Board or the Committee against all liability and expenses (including reasonable attorney, paralegal, |
32
and professional fees and court costs) arising from any threatened, pending or completed action, suit, proceeding (including administrative proceedings or investigations) or appeal, incurred by reason of the fact that such individual is or was a member of the Board (for the purposes of administration of the Plan) or the Committee, provided that such individual (i) acted, in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company as well as the Employees, directors, outside consultants and Recipients, or (ii) with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. |
| 11. | Amendment and Termination of Plan. The Board may alter, amend, suspend or terminate the Plan, provided that no such action shall deprive a Recipient, without his consent, of any Option granted to the Recipient pursuant to the Plan or of any of his/her rights under such Option. The Board shall obtain shareholder approval of any amendment of the Plan or any Option to the extent the Board determines that it is desirable to obtain approval of the Company’s shareholders, to qualify for exemption under Rule 16b-3, to retain eligibility for exemption from the limitations of Code Section 162(m), to have available the ability for Options to qualify under Code Section 422 as Incentive Stock Options, to comply with the requirements of any exchange or quotation system on which the Common Stock is listed or quoted, or for any other purpose the Board deems appropriate. |
| 12. | Trading Policy Restrictions. Option exercises under the Plan shall be subject at all times to the Company’s insider trading policy related restrictions, terms and conditions as may be established by the Board, or any committee thereof, from time to time. |
| 13. | Expenses of Plan. The Company shall bear the expenses of administering the Plan. |
| 14. | Duration of Plan. Options may be granted only during the 10 years immediately following the original effective date of the Plan. |
| 15. | Notices. All notices to the Company shall be in writing and shall be delivered to the Secretary of the Company. All notices to a Recipient shall be delivered personally or mailed to the Recipient at his address appearing in the Company’s personnel records. The address of any person may be changed at any time by written notice given in accordance with this Section 15. |
| 16. | Applicable Law. The validity, interpretation, and enforcement of the Plan are governed in all respects by the laws of Delaware and the United States of America. |
| 17. | Effective Date. The effective date of the Plan shall be the earlier of (i) the date on which the Board adopts the Plan or (ii) the date on which the shareholders approve the Plan. |
Date Plan adopted by Board of Directors: | March 20, 2002 (subject to shareholder approval) | |||
Date Plan adopted by Shareholders: | May 21, 2002 | |||
Date Plan amended and restated by the Board of Directors: | April 11, 2003 (subject to shareholder approval) |
33
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HADRON, INC.
ANALEX CORPORATION
FOR THE ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS TO BE HELD MAY 21, 2002
20, 2003
The undersigned appoints Sterling E. Phillips, Jr. and Karen L. Dickey,Ronald B. Alexander, or either of them, with full power of substitution, to attend the Annual Meeting of ShareholdersStockholders of Hadron, Inc.Analex Corporation on May 21, 2002,20, 2003, and any adjournments thereof, and to vote all shares which the undersigned would be entitled to vote if personally present upon the following matters set forth in the Notice of Annual Meeting and Proxy Statement:
| 1. | ELECTION OF DIRECTORS |
¨ FOR the EIGHT nominees listed below (except as marked to the contrary below)
¨ WITHHOLD AUTHORITY to vote for the EIGHT nominees listed below
Jon M. Stout, Peter C. Belford, Sr., Lincoln D. Faurer,
Alan L. Kaplan, Gerald R. McNichols,
Sterling E. Phillips, Jr., Shawna Stout,
and Daniel R. Young
INSTRUCTION: To withhold authority for any individual nominee, write that nominee’s name in the space provided below:
| 2. | Proposal to approve amendments to the |
¨ FOR this proposal
¨ AGAINST this proposal
¨ ABSTAIN
| 3. | Proposal to ratify the appointment of Ernst & Young LLP as the |
¨ FOR this proposal
¨ AGAINST this proposal
¨ ABSTAIN
| 4. | In their discretion, upon such other business as may properly come before the meeting and any adjournments thereof. |
This Proxy when properly executed will be voted as directed. If no direction is indicated, this Proxy will be voted FOR the election of the eight named individuals as directors, FOR the amendments to the 2002 Stock Option Plan, FOR the proposed
name change, FOR the Reincorporation, FOR the increase in the Common Stock and
to add a class of Preferred Stock, and FOR the ratification of Ernst & Young LLP as the Company'sCompany’s independent auditors for the fiscal year 2002.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
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Shareholder's Signature
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Joint Holder's Signature (If applicable)
Date:
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