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[A & T Logo]
July 1, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Analysis & Technology, Inc. which will be held at 10:00 a.m., Tuesday, August 5,
1997, at The Mystic Hilton, Coogan Boulevard, Mystic, Connecticut.
The formal Notice of the Annual Meeting of Shareholders and Proxy Statement
accompanying this letter provide detailed information concerning matters to be
considered and acted upon at the meeting.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date, and return the enclosed proxy at your earliest convenience. If you later
attend the meeting and wish to vote in person, you may withdraw your proxy and
so vote at that time.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Gary P. Bennett
Gary P. Bennett
Chairman, President and CEO
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NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
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To the Shareholders of Analysis & Technology, Inc.:
The 1997 Annual Meeting of Shareholders of Analysis & Technology, Inc. will
be held at 10:00 a.m., E.D.T., at The Mystic Hilton, Coogan Boulevard, Mystic,
Connecticut on August 5, 1997 to consider and act on the following matters:
1. Election of directors;
2. Ratification of the appointment of independent public accountants for
fiscal year 1998;
3. Approval of the 1997 Stock Option Plan; and
4. Any other matters which may properly come before the meeting.
Shareholders of record at the close of business on June 6, 1997 are entitled to
notice of and to vote at the meeting and any adjournment thereof.
/s/ David M. Nolf
David M. Nolf
Executive Vice President and Secretary
July 1, 1997
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YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING YOU MAY VOTE IN
PERSON OR BY PROXY.
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ANALYSIS & TECHNOLOGY, INC.
ROUTE 2
P.O. BOX 220
NORTH STONINGTON, CONNECTICUT 06359
PROXY STATEMENT
GENERAL
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Analysis & Technology, Inc. (the
"Company") for use at the 1997 Annual Meeting of Shareholders to be held at The
Mystic Hilton, Coogan Boulevard, Mystic, Connecticut on August 5, 1997 at 10:00
a.m., E.D.T., and all postponements or adjournments thereof (the "Annual
Meeting"). This proxy statement and the accompanying proxy card and Annual
Report are being mailed to shareholders on or about July 1, 1997. Shareholders
are requested to mark, sign, date and return the enclosed proxy card. Execution
of the proxy card will not affect the shareholder's right to attend the meeting
and vote in person.
PROXIES AND VOTING
It is important that all shareholders' votes be represented at the Annual
Meeting either in person or by proxy. Each proxy will be voted as directed by
the shareholder. Unless specifically directed otherwise, however, proxies will
be voted in favor of each of the nominees and in favor of each of the proposals
indicated in the meeting notice.
A proxy may be revoked by delivering a written notice of revocation to the
Secretary of the Company, by delivering an executed proxy card bearing a later
date to the Secretary of the Company, or by appearing at the Annual Meeting and
voting in person.
Each share of the Company's common stock entitles the holder thereof to one
vote upon any business properly presented at the Annual Meeting. At the close of
business on June 6, 1997, the record date, there were 2,320,021 shares of common
stock issued and outstanding. Unless otherwise noted in this proxy statement,
all matters listed on the Notice of Meeting require the affirmative vote of a
majority of those shares present and voting in person or by proxy at the Annual
Meeting to be adopted. This assumes that a quorum is present.
A majority of the outstanding shares entitled to vote must be present in
person or represented by proxy at the Annual Meeting to constitute a quorum.
Under Connecticut corporation law, the approval of any corporate action taken at
a shareholder meeting is based on votes cast. "Votes cast" means votes actually
cast "for" or "against" a particular proposal, whether by proxy or in person.
Abstentions and broker nonvotes are not considered "votes cast." Broker nonvotes
occur when a broker nominee, which has voted on one or more matters at the
meeting, does not vote on one or more other matters at the meeting because it
has not received instructions from the beneficial owner to so vote, and does not
have discretionary authority to do so. Accordingly, abstentions and broker
non-votes will be treated as shares which are present and entitled to vote for
purposes of determining a quorum, but those shares will not be treated as having
been voted for purposes of determining the approval of any matter submitted to
shareholders for a vote.
Participants in the Company's Employee Stock Ownership Plan and in its
Savings and Investment Plan are receiving instruction forms with this proxy
statement rather than a proxy card. The instruction form is to be used by such
participants to direct voting instructions to the trustees. Shares allocated to
a participant's account cannot be voted unless the instruction form is signed
and returned.
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ANNUAL REPORT
The Company's 1997 Annual Report to Shareholders is being mailed with this
proxy statement and should be referred to with regard to the Company's
performance in fiscal year 1997.
ITEM 1. ELECTION OF DIRECTORS
GENERAL
Under the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes whose terms are staggered to expire in different
years. The term of office of one class of directors expires each year in
rotation so that one class is elected at each Annual Meeting of Shareholders for
a full three-year term. There are at present seven directorships, the number
having been set by the Board of Directors in accordance with the Company's
by-laws.
The terms of two directors, Mrs. Nelda S. Nardone and Mr. Thurman F.
Naylor, expire at the Annual Meeting. The Board of Directors will nominate these
two directors for re-election for terms expiring in 2000. Unless otherwise
indicated on any proxy card, the proxy will be voted to re-elect these
directors.
The Board of Directors knows of no reason why either nominee for director
would be unable to continue to serve as a director. However, if either nominee
should for any reason be unable to serve, the shares represented by all valid
proxies not containing contrary instructions may be voted for the election of
such other person as the Board may recommend in his or her place, or the Board
may reduce the number of directorships to eliminate the vacancy.
BACKGROUND INFORMATION ABOUT CURRENT DIRECTORS
Set forth below, in alphabetical order, as of May 1, 1997, are the names
and ages of all current directors, including the two directors whose terms
expire in 1997 and who will be nominated for re-election. The information set
forth includes, as to each person, the positions and offices held with the
Company, the period of service to the Company in such capacities, and a brief
account of the person's business experience. Family relationships among the
Board are summarized at the conclusion of this section.
Gary P. Bennett
Gary P. Bennett, 55, is Chairman of the Board, President and Chief
Executive Officer of the Company. He joined the Company in 1972, became an
Executive Vice President in 1978, was named Chief Operating Officer in 1984,
became President in 1991, and Chief Executive Officer in November 1992. Mr.
Bennett was elected Chairman of the Board of the Company in February 1997. He is
also an officer and director of various wholly owned subsidiaries of the
Company. In addition, he is chairman of the board of directors of Automation
Software Incorporated, the Company's joint venture with Brown & Sharpe
Manufacturing Company and is a director of Washington Trust Bancorp, Inc. Mr.
Bennett has served as a director of the Company since 1979. His present term of
office expires in 1999.
James B. Fox
James B. Fox, 69, has been a director of the Company since 1972. He served
as Chairman of the Board from November 1992 to February 1997. In 1986, Mr. Fox
retired from his position as president of Mobil Oil Credit Corporation, a wholly
owned subsidiary of Mobil Oil Corporation that handles its credit functions. He
had been an employee of Mobil Oil Corporation since 1949. His present term of
office expires in 1999.
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Larry M. Fox
Larry M. Fox, 44, has been a director of the Company since 1978. He was
elected Vice-Chairman of the Board of the Company in February 1997. Mr. Fox is
programs manager for VTEL Corporation, a manufacturer of video teleconferencing
systems. He has been with VTEL Corporation since 1991. His present term of
office expires in 1998.
Nelda S. Nardone
Nelda S. Nardone, 58, has been a director of the Company since 1977. She
was the Company's Corporate Secretary from 1976 until 1985. Her present term of
office expires in 1997, and she will be nominated for re-election.
Thurman F. Naylor
Thurman F. Naylor, 77, has been a director of the Company since 1989. Mr.
Naylor has been president and sole stockholder of Cameras and Images
International, Inc., a company involved in the purchase and sale of photographic
materials, since 1984. Prior to 1984, Mr. Naylor was chairman and president of
Standard Thomson Corporation and Thomson International Corporation,
manufacturers of temperature, pressure, and electronic controls. He has also
been a director of Benthos, Inc., a fabricator of oceanographic equipment since
1987 and a director of CREME de la CREME, which buys, sells and exhibits cameras
and images since October, 1994. His present term of office expires in 1997, and
he will be nominated for re-election.
David M. Nolf
David M. Nolf, 54, is Executive Vice President, Chief Financial and
Administrative Officer and Secretary of the Company. Mr. Nolf has served in
these capacities since 1985. He joined the Company in 1971 and became a Senior
Vice President in 1979. He has been a Company director since 1976 and served as
Chairman of the Board from 1978 to May 1985. He is also an officer and director
of various wholly owned subsidiaries of the Company. In addition, he is a
director of Automation Software Incorporated, the Company's joint venture with
Brown & Sharpe Manufacturing Company. Mr. Nolf also serves as a trustee of The
Westerly Hospital and as a director for The New London Day newspaper. His
present term of office expires in 1998.
Dennis G. Punches
Dennis G. Punches, 61, has been a director of the Company since May 1992.
He is chairman of Payco American Corporation, the accounts receivable management
company he founded in 1959. Mr. Punches serves as a trustee of Carroll College
and as a director of Intrum Justitia-Netherlands. His present term of office
expires in 1998.
Family Relationships
Nelda S. Nardone is the widow of Maurice W. Fox, a co-founder of the
Company who died in 1978. James B. Fox, Maurice W. Fox's brother, is the father
of Larry M. Fox.
NOMINATING PROCESS
Pursuant to the Company's by-laws, nominations for the election of
directors may be made by the Board of Directors or by a nominating committee
appointed by the Board of Directors. The directors named above for re-election
will be nominated at the Annual Meeting by the Board of Directors. Any
shareholder entitled to vote in the election of directors may nominate one or
more persons for election as directors at an Annual
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Meeting if written notice of such shareholder's intention to make such
nomination or nominations has been given in the manner provided in the Company's
by-laws at least 90 days in advance of the Annual Meeting. Any such notice must
set forth the information required by the by-laws concerning identification and
standing of the shareholder and the nominee(s), their relationship, information
about the nominee(s) and consent of the nominee(s). As no such notices were
received, no nominations from shareholders will be accepted at the Annual
Meeting.
COMMITTEES OF THE BOARD AND MEETINGS OF THE BOARD AND COMMITTEES
The standing committees of the Board of Directors are as follows: an Audit
Committee comprised of Larry M. Fox and Nelda S. Nardone; a Compensation
Committee comprised of James B. Fox, Larry M. Fox and Thurman F. Naylor; a Stock
Option Committee comprised of James B. Fox, Nelda S. Nardone and Dennis G.
Punches; and two newly appointed committees, the Corporate Governance Committee
comprised of Larry M. Fox, Chairman; James B. Fox, Nelda S. Nardone, Thurman F.
Naylor and Dennis G. Punches; and a Nominating Committee comprised of Gary P.
Bennett and Larry M. Fox. In fiscal 1997 the Board of Directors met seven times
with two of the seven meetings conducted via teleconference. During the period,
all incumbent directors attended 100% of the meetings of the Board of Directors
and of the committees of the Board of Directors of which they were members,
except for Mr. Punches who attended 71% of these meetings. In addition, Board of
Directors' action was taken by unanimous written consent four times during the
year in lieu of meetings. The Audit Committee met three times with two of the
three meetings conducted via teleconferences; the Compensation Committee acted
once by unanimous written consent; and the Stock Option Committee acted seven
times by unanimous written consent. The Corporate Governance Committee and the
Nominating Committee were formed after the end of the fiscal year.
The Audit Committee monitors and approves all services provided by the
Company's independent public accountants, consults with the accountants on the
scope of the audit and the adequacy of internal controls, reviews audit reports
and accompanying management letters and advises the Board on the annual
selection of the Company's independent public accounting firm.
The Compensation Committee reviews and recommends to the Board all forms of
remuneration and perquisites for the Company's officers at the level of senior
vice president and higher and monitors the Company's compliance with all
applicable executive compensation rules.
The Stock Option Committee administers the Company's various stock option
plans and is responsible for awarding stock option grants to key employees.
The Corporate Governance Committee, which is composed entirely of outside
directors, has been formed to establish the structure and procedures to govern
the Board's work, conduct periodic evaluations of the Company's Chief Executive
Officer, assess the Board's effectiveness, coordinate and provide for the
orientation of new directors and ongoing education for incumbent directors,
establish selection criteria for new directors, and assist in the creation and
implementation of management and Board succession plans. This committee was
established in May 1997.
The Nominating Committee has been formed to make recommendations to the
Board on director nominees and to develop a set of criteria and qualifications
for the selection of director nominees. It is anticipated that the selection
criteria will include the relevance of the candidate's experience to the
business of the Company and the ability of the candidate to attend Board
meetings regularly and devote an appropriate amount of time to meeting
preparation. This committee was established in May 1997.
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COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not also full-time employees of
the Company receive a retainer of $19,000 per year, a meeting fee of $1,600 for
each Board or committee meeting they attend in person and a teleconference
meeting fee, which is 50% of the meeting fee, for each Board or committee
meeting in which they participate. In addition to the directors' retainer and
meeting fees, Mr. Larry M. Fox, Vice-Chairman of the Board, receives an annual
retainer of $60,000. All directors are reimbursed for their travel and lodging
expenses.
The Company maintains a deferred compensation plan, pursuant to which the
Vice-Chairman of the Board and any director of the Company, who is not also an
employee of the Company or an employee of an affiliate of the Company, may elect
annually to defer from 10% to 100% of his or her annual compensation from the
Company. Officers may elect to defer up to 25% of their total compensation from
the Company. A deferred income account is established in the name of each
participant with a Committee, comprised of at least three individuals, who
invest the plan assets. The Committee may solicit information from the
participants to determine the investments for which investment returns will be
allocated to their deferred income accounts. However, no such indication of
preference is binding upon the Committee. While the right of the participant to
receive deferred compensation equal to the amount in such account is always 100%
vested, such right is that of a general, unsecured creditor of the Company.
Benefits are payable under the plan when a director retires or an officer
reaches age 55, upon either a director's or officer's death, or in the event of
financial hardship.
SECURITY OWNERSHIP OF MANAGEMENT AND 5% SHAREHOLDERS
To the best knowledge of the Company based on information provided to it in
connection with filings made with the Securities and Exchange Commission and the
Company's stock records, the following table sets forth the beneficial ownership
of the Company's common stock as of June 1, 1997 by beneficial owners of more
than 5% of the Company's outstanding common stock, of each director and
executive officer named in the Summary Compensation Table and of all executive
officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) CLASS
- -------------------------------------------------------------- ------------------------ ----------
<S> <C> <C>
A&T Employee Stock Ownership Trust 380,879(3) 16.5%
Dimensional Fund Advisors, Inc. 142,500(4) 6.2
Nelda S. Nardone (current Director and Nominee) 109,795(5) 4.7
Gary P. Bennett (current Director and named executive) 90,135(6) 3.8
David M. Nolf (current Director and named executive) 85,525(7) 3.6
James B. Fox (current Director) 51,658(8) 2.2
Jay W. Ryerson (named executive) 38,232(9) 1.6
Larry M. Fox (current Director) 34,323(10) 1.5
James R. Lavoie (named executive) 21,569(11) *
Joseph M. Marino (named executive) 17,854(12) *
Dennis G. Punches (current Director) 3,000(13) *
Thurman F. Naylor (current Director and Nominee) 1,000 *
Executive Officers and Directors as a Group 563,097(14) 22.3
</TABLE>
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(*) Indicates less than 1.0%
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(1) The address for Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. The address for the individual shareholders
and the Company's Employee Stock Ownership Trust is c/o Analysis & Technology,
Inc., Route 2, P.O. Box 220, North Stonington, Connecticut 06359.
(2) Beneficial ownership of a security consists of sole or shared power to
vote, invest, or dispose of a security, whether through any contract,
arrangement, understanding, relationship or otherwise. Except as set forth
below, the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by each of
them. With respect to shares of common stock held by the Company's Employee
Stock Ownership Trust, such persons have voting power and shared dispositive
power.
(3) Includes 47,691 shares which are also reported as being beneficially
owned by other parties named in the table and by all executive officers and
directors as a group who are among the beneficiaries of the trust. The Trustees
of this trust only have a limited right to dispose of the shares held in the
trust. The right to vote the allocated shares belongs to the employee
beneficiaries in accordance with the number of shares credited to their accounts
in the trust. The Trustees of this trust have the right to vote any shares not
allocated to the accounts of employee beneficiaries.
(4) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 142,500 shares of
Analysis & Technology, Inc. stock as of December 31, 1996, all of which shares
are held in portfolios of DFA Investment Dimensions Group, Inc., a registered
open-end investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.
(5) Includes 1,700 shares held by Mrs. Nardone's husband for which she may
be said to have shared voting and investment powers.
(6) Includes 3,200 shares held by Mr. Bennett's wife for which Mr. Bennett
may be said to have shared voting and investment powers; 4,926 shares held in
the Analysis & Technology, Inc. 401(k) Plan; and includes 43,100 shares subject
to options which are exercisable within 60 days of June 1, 1997.
(7) Includes 4,000 shares held by Mr. Nolf's wife and 17,600 shares held
jointly by Mr. and Mrs. Nolf, for all of which Mr. Nolf may be said to have
shared voting and investment powers; and includes 32,883 shares subject to
options which are exercisable within 60 days of June 1, 1997.
(8) Includes 4,298 shares held by Mr. Fox's wife and 1,000 shares held
jointly by Mr. and Mrs. Fox, for all of which Mr. Fox may be said to have shared
voting and investment powers; 14,360 shares held in the Analysis & Technology,
Inc. Deferred Compensation Plan; and includes 1,000 shares subject to options
which are exercisable within 60 days of June 1, 1997.
(9) Includes 200 shares held by Mr. Ryerson's wife for which Mr. Ryerson
may be said to have shared voting and investment powers and includes 31,717
shares subject to options which are exercisable within 60 days of June 1, 1997.
(10) Includes 2,823 shares held by Mr. Fox's wife; 7,477 shares held by Mr.
Fox for a minor child; 5,400 shares held by Mr. Fox for a second minor child;
and 400 shares held jointly by Mr. and Mrs. Fox, for all of which Mr. Fox may be
said to have shared voting and investment powers; 4,319 shares held in the
Analysis & Technology, Inc. Deferred Compensation Plan; and includes 2,000
shares subject to options which are exercisable within 60 days of June 1, 1997.
(11) Includes 15,786 shares subject to options which are exercisable within
60 days of June 1, 1997.
(12) Includes 50 shares held jointly by Mr. and Mrs. Marino for which Mr.
Marino may be said to have shared voting and investment powers; 400 shares held
in the Analysis & Technology, Inc. 401(k) Plan; and includes 14,946 shares
subject to options which are exercisable within 60 days of June 1, 1997.
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(13) Includes 2,000 shares subject to options which are exercisable within
60 days of June 1, 1997.
(14) Represents the aggregate of the shares listed in notes (5)-(13) above
and includes 209,742 shares subject to options which are exercisable within 60
days of June 1, 1997.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The Company has no employment agreements with any of its officers. In 1997,
the Board of Directors entered into Change In Control Agreements with the
Company's executive officers. These agreements were the result of a
determination by the Board of Directors that it was important and in the best
interests of the Company and its shareholders to ensure that, in the event of a
possible change in control (as defined) of the Company, the stability and
continuity of management would continue unimpaired, free of the distractions
incident to any such change in control.
Benefits are payable under the Change in Control Agreements if a change in
control occurs, and within two years thereafter the officer's employment is
terminated involuntarily other than for cause or disability or voluntarily by
the officer for reasons such as demotion, relocation, loss of benefits or other
changes. The principal benefits to be provided to officers under the Change in
Control Agreements are (i) a lump sum payment equal to either 24 or 18 months'
compensation (base salary and target cash incentive bonus), (ii) continued
participation in the Company's employee benefit programs or equivalent benefits
for 24 or 18 months following termination, (iii) all previously granted stock
options which have not yet vested would become vested and immediately
exercisable, and (iv) outplacement services until the earlier of the officer's
re-employment or 24 or 18 months.
The Change in Control Agreements are not employment agreements, and do not
generally impair the right of the Company to terminate the employment of the
officer with or without cause prior to a change in control or the right of the
officer to voluntarily terminate his or her employment.
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REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION
COMMITTEE ON EXECUTIVE COMPENSATION
Introduction
This report is provided by the Company's Compensation Committee and the
Stock Option Committee to assist shareholders in understanding the objectives
and procedures used in establishing the compensation of the Company's Chairman,
President and Chief Executive Officer ("CEO") and other senior Company
executives for the Company's fiscal year ended March 31, 1997.
The Compensation Committee reviewed and recommended to the Board of
Directors the overall remuneration and perquisites for the Company's CEO and
other officers at the level of senior vice president and higher. Based on the
recommendations of the Compensation Committee, the Board of Directors determined
the compensation to be paid to the CEO and officers at the level of senior vice
president and higher for the Company's fiscal year ended March 31, 1997. The
Stock Option Committee is responsible for administering the Company's stock
option plans. The Compensation Committee and the Stock Option Committee are
composed solely of non-employee directors.
Compensation Philosophy and Principles
The design of the Company's executive compensation program is based on four
fundamental principles. First, compensation awards are directly related to the
financial results of the Company or a business unit and to individual
contributions and accomplishments. The second principle underlying the program
is that it should offer compensation opportunities comparable to those provided
by other companies with which the Company competes both for business and for
employees. It is essential that the Company be able to retain and reward
talented executives who are critical to its long-term success in its competitive
marketplace. The third principle is that an appropriate balance between base
salary and short- and long-term incentive opportunities should be maintained.
The final principle is that the compensation program must provide a long-term
incentive for executives to continue providing service to the Company by
directly linking the long-term success and prosperity of executives to the
long-term success and prosperity of the Company.
Independent Compensation Consultant Review
In carrying out its compensation philosophy and principles, the Company has
periodically utilized the services of an independent compensation consultant to
review the Company's executive compensation program. These reviews have focused
on (i) the competitiveness and appropriateness of annual total compensation,
defined as salary and cash incentive bonus under the Performance Incentive
Compensation Plan; (ii) the design and performance goals of the Performance
Incentive Compensation Plan; and (iii) an analysis of the total compensation of
the CEO and other senior executive positions compared with the comparable
compensation as determined by reference to both published and proprietary
surveys and a review of seven peer companies as reported in their proxy
statements.
Although the Compensation Committee did not retain an independent
compensation consultant in fiscal 1997, the Committee intends to periodically
use the services of an independent consultant to assess both the appropriate
components to be included in the total compensation package of the CEO and the
senior executives and the competitive status of the Company's compensation
program.
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Key Elements of Executive Compensation
The Company's executive compensation program consists of three basic
elements: base salary, annual performance incentives, and long-term incentives.
* Base Salary
The Compensation Committee recommends base salaries for the Company's
senior executives, working with advice submitted by the CEO and the Company's
Senior Vice President of Human Resources. The base salary is established after
reviewing industry, peer group and national compensation data, focusing on the
median percentile of compensation for comparable positions. While some of the
companies used as a basis for comparison are selected from the companies
comprising the index of SIC Code 8711 used for the Performance Graph which
appears on page 14 of this proxy statement, other companies are included in
order to concentrate on companies of a comparable size and to include companies
with product lines which are similar to those of the Company.
* Annual Performance Incentives
Under the Performance Incentive Compensation Plan, key employees of the
Company may be awarded annual bonuses in amounts determined by the Compensation
Committee. Executive officers and senior managers throughout the Company are
eligible for participation in the Performance Incentive Compensation Plan. The
purpose of the Performance Incentive Compensation Plan is to deliver competitive
levels of compensation for the attainment of financial and non-financial
objectives which the Compensation Committee believes are primary determinants of
the success of the Company. The Compensation Committee reviews the
administration of the overall plan, approves and recommends to the Board of
Directors the annual bonuses for senior officers reporting to the CEO, and
determines the appropriate award to be recommended to the Board of Directors for
the CEO.
The factors considered by the Compensation Committee in recommending fiscal
1997 incentive compensation payments for executive officers and senior managers
included the degree to which certain overall corporate and individual
performance objectives were achieved. In determining the level of fiscal 1997
annual incentive compensation for the executive officers and senior managers,
the Compensation Committee evaluated performance relative to two key corporate
financial objectives: growth in both earnings per share and revenue. In fiscal
1997, the Company exceeded or fully achieved both of the objectives. Individual
awards were also based on the Compensation Committee's assessment of each
executive officer's and senior manager's performance against non-financial
objectives that reflect their specific responsibilities.
Compensation under the Performance Incentive Compensation Plan is paid in
cash during the first quarter of each fiscal year for services rendered during
the previous fiscal year. Based on survey data, the Compensation Committee
believes that incentive awards for senior executives under the Performance
Incentive Compensation Plan for the last fiscal year are at the low end of the
competitive range.
* Long-Term Incentives
The fourth principle of the Company's executive compensation program, the
provision of long-term incentives to its executives, is realized through the
Company's various stock option plans. The Stock Option Committee determines at
its discretion the key employees of the Company to whom options are awarded, the
number of shares of the Company's common stock for which options are granted,
and whether the options granted are incentive or non-qualified options. Stock
options are granted under these plans at fair market value at the time of the
option grant. Incentive stock options have a term of seven years and
non-qualified stock options have a term of ten years. Options are exercisable in
cumulative annual installments of 20% of the total
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number of shares covered. The potential gain to the recipients will depend on
the Company's future stock price.
In fiscal 1997, stock options were granted to selected key employees. In
setting the size of grants for executives, the Stock Option Committee took into
consideration an employee's position, individual performance, number and terms
of stock options presently held and the total number of shares available for
issuance under the various stock option plans.
Compensation of the CEO
As reported in the Summary Compensation Table on page 11 of this Proxy
Statement, Mr. Bennett's salary of $242,410 for fiscal year 1997 represented an
approximate 5.1% increase over his fiscal year 1996 salary. In determining this
amount, the Committee took into account his performance and the fact that Mr.
Bennett's fiscal year 1996 salary was in the first quartile of compensation paid
to chief executive officers at the surveyed companies.
Mr. Bennett's fiscal year 1997 annual incentive award of $48,000 reflects
the Committee's assessment of Mr. Bennett's performance against his objectives.
Specifically, the Committee determined that Mr. Bennett exceeded or fully
achieved the key financial objectives in the Company's plan: growth in both
earnings per share and revenue. Mr. Bennett's non-financial objectives consisted
of: (1) putting emphasis on growth through acquisitions, (2) growth in the
Company's commercial multimedia training business, and (3) substantially
increasing proposal backlog. The first two of the non-financial objectives were
fully achieved, while the third was partially met.
A stock option to acquire 3,500 shares was granted to Mr. Bennett during
fiscal year 1997. This award was consistent with the total compensation
strategy, approved by the Compensation Committee, whereby stock options serve as
an important piece of Mr. Bennett's total compensation package.
Omnibus Budget Reconciliation Act Implications for Executive Compensation
It is the responsibility of the Compensation and Stock Option Committees to
address the issues raised by changes in federal tax laws which make certain
non-performance-based compensation to executives of public companies in excess
of $1,000,000 non-deductible to the Company beginning in 1996. In this regard,
the Committees must determine whether any actions with respect to this new limit
should be taken by the Company. At this time, it is not anticipated that any
Company executive officer will receive compensation in excess of this limit
during 1997. Therefore, the Compensation Committee has not taken any action to
comply with the new limit. The Compensation Committee will continue to monitor
this situation and will take appropriate action if it is warranted in the
future.
The Compensation and Stock Option Committees believe that executive
compensation for fiscal 1997 adequately reflects their policies, which are to
align executive compensation with the Company's overall business strategy, and
to ensure that the Company's goals and performance are consistent with the
interests of its shareholders.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
- ---------------------- ----------------------
<S> <C>
James B. Fox James B. Fox
Larry M. Fox Nelda S. Nardone
Thurman F. Naylor Dennis G. Punches
</TABLE>
Page 10
<PAGE> 13
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes all the compensation paid to the Company's
CEO and to each of the Company's four most highly compensated executive officers
other than the CEO for services rendered in all capacities to the Company for
the fiscal years ended March 31, 1997, 1996 and 1995, respectively.
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
NAME AND PRINCIPAL FISCAL ------------------------ ------------ ALL OTHER
POSITION YEAR SALARY (1) BONUS (2) OPTIONS (3) COMPENSATION (4)
- -------------------------------- ------ ----------- ---------- ------------ ----------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
G.P. Bennett 1997 $ 242,410 $ 48,000 3,500 $ 8,868
Chairman, President and Chief 1996 230,584 30,000 6,000 8,316
Executive Officer 1995 210,372 40,000 5,000 10,133
D.M. Nolf 1997 $ 215,330 $ 39,000 3,000 $ 8,849
Executive Vice President, Chief 1996 207,704 27,500 5,000 8,130
Financial and Administrative 1995 191,492 35,500 4,000 10,371
Officer
J.W. Ryerson 1997 $ 197,748 $ 39,000 3,000 $ 6,583
Executive Vice President, Chief 1996 186,854 27,500 5,000 6,661
Operating Officer 1995 170,833 40,000 4,000 7,734
J.R. Lavoie 1997 $ 141,237 $ 24,000 2,500 $ 25,135(5)
Senior Vice President 1996 133,597 50,000 1,800 6,449(5)
1995 130,936 22,500 2,000 11,935(5)
J.M. Marino 1997 $ 152,207 $ 25,000 2,500 $ 5,562
Senior Vice President 1996 129,827 25,000 7,650 4,865
1995 124,146 23,500 4,500 5,003
</TABLE>
- ---------------
(1) Includes salary amounts paid and deferred, including the value of benefits
paid and deferred, pursuant to the Company's Managers' Benefit Options Plan,
the Officers' Benefit Options Plan and the Deferred Compensation Plan.
(2) Includes bonus amounts paid and deferred pursuant to the Company's
Performance Incentive Compensation Plan and the Deferred Compensation Plan.
Amounts represent bonus awards determined for the performance year indicated
and paid in the following year.
(3) Options were granted pursuant to the Company's various stock option plans.
(4) Represents Company contributions to the Company's Savings and Investment
Plan and Employee Stock Ownership Plan on behalf of each named officer.
(5) Includes cash payments in lieu of vacation.
Page 11
<PAGE> 14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options pursuant to the various Company stock option plans during the fiscal
year ended March 31, 1997 to the executive officers identified in the Summary
Compensation Table. Under all of the stock option plans, other than the 1994 and
1995 Stock Option Plans, an optionee may elect to relinquish up to 30% of an
option being exercised and receive a cash payment equal to the number of shares
covered by the portion of the option relinquished multiplied by the difference
between the option price per share and the fair market value of a share of the
Company's common stock at the time of election. With respect to the executive
officers named in the Summary Compensation Table, this right is subject to the
discretionary consent of the Stock Option Committee. (See Table II)
TABLE II
OPTION/SAR GRANTS IN LAST FISCAL YEAR
4/1/96 TO 3/31/97
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL
NUMBER OF % OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS/SARS AT ASSUMED ANNUAL
UNDERLYING GRANTED TO EXERCISE RATES OF STOCK
OPTIONS/SARS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION
NAME GRANTED (#) FISCAL YEAR (1) SHARE (2) DATE (3) FOR OPTION TERM (4)
- ----------------- ------------ --------------- --------- ---------- --------------------------
0% (5) 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
G.P. Bennett 3,500 7.4 $ 14.50 1/31/04 $0 $20,660 $48,147
D.M. Nolf 3,000 6.3 $ 14.50 1/31/04 $0 $17,709 $41,269
J.W. Ryerson 3,000 6.3 $ 14.50 1/31/04 $0 $17,709 $41,269
J.R. Lavoie 2,500 5.3 $ 14.50 1/31/04 $0 $14,757 $34,391
J.M. Marino 2,500 5.3 $ 14.50 1/31/04 $0 $14,757 $34,391
</TABLE>
- ---------------
(1) 47,400 stock options were granted to all employees of the Company as a group
during the fiscal year ended March 31, 1997.
(2) The exercise price is the average of the high and low market prices on the
date of grant. The exercise price may be paid in cash, by delivery of shares
of common stock of the Company at fair market value, or by a combination of
cash and shares.
(3) Incentive stock options generally have a seven-year term and non-qualified
stock options have a term of up to ten years and one day as determined by
the Stock Option Committee. Options are exercisable over their respective
periods from the date of grant in cumulative annual installments of 20% of
the total number of shares covered. To the extent not already exercisable,
the options become fully exercisable in the event of a "change in control"
as defined in the Company's various stock option plans.
(4) The dollar amounts under the potential realizable values columns use the 0%,
5% and 10% rates of appreciation as permitted by the SEC, and are not
intended to forecast actual future appreciation in the stock price. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Company's stock. There can be no assurance that the
amounts reflected in this table will be achieved. The assumed rates are
compounded annually to the full seven-year term of the options.
(5) No gain to the optionee is possible without an increase in stock price
appreciation, which will benefit all shareholders commensurately. A zero
percent gain in stock price appreciation will result in zero dollars for the
optionee.
Page 12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning each option exercised
during the fiscal year ended March 31, 1997 by each of the executive officers
named in the Summary Compensation Table and the fiscal year-end value of
unexercised options held by such executive officer. (See Table III)
TABLE III
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
4/1/96 TO 3/31/97
ENDING FAIR MARKET VALUE: $14.1875
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END (1)
ACQUIRED ON -------------------------- --------------------------
EXERCISE VALUE
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G.P. Bennett 0 $0 64,667 8,400 $ 173,568 $ 225
D.M. Nolf 0 $0 32,883 7,000 $ 112,738 $ 188
J.W. Ryerson 0 $0 31,717 7,000 $ 104,637 $ 188
J.R. Lavoie 0 $0 15,786 5,480 $ 27,309 $ 68
J.M. Marino 0 $0 14,946 8,790 $ 28,449 $ 287
</TABLE>
- ---------------
(1) Values stated are based on the closing price of $14.1875 per share of the
Company's Common Stock on The Nasdaq Stock Market, Inc. on March 31, 1997,
the last trading day of the fiscal year.
Page 13
<PAGE> 16
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ MARKET ANALYSIS &
(FISCAL YEAR COVERED) INDEX PEER GROUP INDEX TECHNOLOGY
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 115.00 84.81 104.63
1994 124.10 75.91 150.87
1995 138.00 65.03 126.09
1996 187.40 79.80 130.67
1997 208.50 83.52 149.85
</TABLE>
<TABLE>
<CAPTION>
31-MAR- 31-MAR- 31-MAR- 31-MAR- 31-MAR- 31-MAR-
92 93 94 95 96 97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ANALYSIS & TECHNOLOGY.................... $ 100 $104.63 $150.87 $126.09 $130.67 $149.85
PEER GROUP INDEX......................... $ 100 $ 84.81 $ 75.91 $ 65.03 $ 79.80 $ 83.52
NASDAQ MARKET INDEX...................... $ 100 $115.00 $124.10 $138.00 $187.40 $208.50
</TABLE>
The above line graph is a comparison of the five-year cumulative total
return of the Company's common stock with (a) a performance index for the broad
market in which the Company's stock is traded and (b) a published industry peer
group index. The Company's stock is traded on the NASDAQ National Market, and
the Company's four-digit industry SIC Code is 8711, Engineering Services.
Accordingly, the performance graph compares the cumulative total return for
Company stock with (a) the NASDAQ Market Index and (b) a published industry peer
group index comprised of the SIC Code 8711 companies.
Page 14
<PAGE> 17
The graph assumes $100 was invested on March 31, 1992 in the stock of
companies in the NASDAQ Market Index, a published industry peer group index, and
in Company stock, and that all dividends were reinvested.
Total shareholder return is calculated using the closing price of the last
trade date of the stock for such fiscal year. The stock price performance shown
is not intended to forecast or be indicative of the possible future performance
of the Company's stock.
ITEM 2. RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has audited the financial statements of the Company
since fiscal year 1980. The selection of KPMG Peat Marwick LLP to audit the
Company's financial statements for its fiscal year ending March 31, 1998, has
been recommended by the Audit Committee of the Board of Directors and approved
by the Board of Directors. In addition to its audit services, KPMG Peat Marwick
LLP provides certain non-audit services to the Company, including the
preparation of federal and state income tax returns and assistance with
government contract procedures. A representative of KPMG Peat Marwick LLP is
expected to be in attendance at the Annual Meeting. The representative will be
given the opportunity to make a statement if he desires to do so and will be
available to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote in favor of
the following resolution at the Annual Meeting:
RESOLVED: That the appointment of KPMG Peat Marwick LLP by the Board of
Directors of the Company to audit the Company's financial statements for its
fiscal year ending March 31, 1998 be, and it hereby is, ratified, confirmed and
approved.
ITEM 3. PROPOSED 1997 STOCK OPTION PLAN
Other than in fiscal years 1991, 1993 and 1996, the Company has adopted
employee stock option plans annually since 1978. The Board of Directors has
adopted, subject to shareholder approval, a 1997 Stock Option Plan (the "1997
Plan"), which provides for options to be granted to key employees of the Company
and its affiliate corporations, similar to previous stock option plans of the
Company. It also provides for the grant of options to directors of the Company
who are not employees ("Non-Employee Directors"). The 1997 Plan, if approved by
the shareholders at the Annual Meeting by a majority vote of the shares
represented in person or by proxy, will cover 230,000 shares of the Company's
common stock. No options will be granted under the 1997 Plan until shareholder
approval of the 1997 Plan has been obtained. A copy of the 1997 Plan is attached
to this proxy statement as Exhibit A.
The Board of Directors believes that the Company's stock option plans have,
to date, successfully assisted the Company in attracting and retaining quality
employees and in stimulating their performance. The 1997 Plan is intended to
continue those goals. In addition, the 1997 Plan is intended to increase the
Non-Employee Directors' proprietary interest in the Company and to align more
closely their interests with the interests of the Company's shareholders by
providing further opportunity for ownership of common stock, thereby giving the
Non-Employee Directors of the Company additional incentive to promote the best
interests of the Company. The Board of Directors recommends that the
shareholders approve the 1997 Plan at the Annual Meeting by adopting the
following resolution:
RESOLVED: That the Analysis & Technology, Inc. 1997 Stock Option Plan
covering 230,000 shares of the Company's common stock, substantially in the form
delivered to shareholders with the proxy statement for this meeting be, and
hereby is, approved, ratified and confirmed.
Page 15
<PAGE> 18
A summary of the terms of the 1997 Plan is provided below but is qualified
in its entirety by reference to the full text of the 1997 Plan.
The 1997 Plan provides for awards in the form of stock options. Either
incentive or non-qualified options can be granted under the 1997 Plan. To date,
no awards have been made under the 1997 Plan. The total number of shares of the
Company's common stock available for issuance under the 1997 Plan is 230,000. If
any options are forfeited or if options terminate for any other reason prior to
exercise, then the underlying shares of common stock again become available for
awards under the 1997 Plan.
The 1997 Plan is administered by a committee (the "Stock Option Committee")
of at least three directors, none of whom is, or has been, eligible to receive
options under the 1997 Plan other than Options granted to a Non-Employee
Director automatically upon his or her election, re-election, or continuance in
office, as the case may be, as a Director in accordance with the terms of the
1997 Plan. With respect to options granted to key employees, the Stock Option
Committee designates the key employees of the Company or any affiliate
corporation to whom options are awarded and determines the number of shares of
the Company's common stock issuable pursuant to the exercise of options granted
under the 1997 Plan. The Stock Option Committee determines whether the options
granted to key employees of the Company will be incentive or non-qualified
options.
Under the 1997 Plan, options to purchase 2,000 shares of the Company's
common stock will be granted to each Non-Employee Director automatically upon
his or her election, re-election, or continuance as a director of the Company in
years 1997, 1998 and 1999. All such options granted to Non-Employee Directors
are non-qualified options. If the 1997 Plan is approved and if there continue to
be five Non-Employee Directors, in the aggregate, options to purchase 30,000
shares of the Company's common stock will have been granted to Non-Employee
Directors through 1999.
The Company estimates that approximately 100 key employees will be eligible
to participate in the 1997 Plan as well as five Non-Employee Directors. No
employee may receive options under the 1997 Plan covering more than 10% of the
shares which may be issued under the 1997 Plan. The 1997 Plan has a seven-year
term and, if approved by the shareholders at the Annual Meeting, will expire on
December 31, 2004.
The 1997 Plan provides for the granting of incentive and non-qualified
stock options, as discussed above. Incentive stock options granted under the
1997 Plan have a seven-year term unless the grant is to a 10% shareholder of the
Company, in which case the term is five years. Non-qualified stock options
granted under the 1997 Plan may have a term of up to ten years and one day as
determined by the Stock Option Committee; provided, however, that non-qualified
stock options granted to Non-Employee Directors have a seven-year term.
Options granted to employees of the Company terminate in connection with
the termination of employment pursuant to the terms of the 1997 Plan. Options
granted to Non-Employee Directors terminate in connection with the termination
of directorship pursuant to the terms of the 1997 Plan. In the event of death,
the option holder's estate (whether such option holder was an employee or a
Non-Employee Director) has either 180 days from the date of death or until the
expiration date of the option, whichever is earlier, to exercise such option
holder's rights to the extent such rights were exercisable at the date of death.
Options are exercisable over their respective periods from the date of grant in
cumulative annual installments of 20% of the total number of shares covered. The
1997 Plan provides for the immediate exercisability of all options upon a
"change in control" (as defined in the 1997 Plan) of the Company.
The options under the 1997 Plan allow an option holder to pay for shares
purchased upon exercise of an option by cash, by delivery of shares of common
stock of the Company at fair market value, or by a combination of cash and
shares.
Page 16
<PAGE> 19
Option exercise prices are set at the fair market value of the Company's
shares on the date of the grant, which is based on the average of the high and
low sales prices of the Company's common stock as reported on the NASDAQ
National Market ("NASDAQ") on the day such fair market value is to be
determined. The average of the high and low sales prices per share of the
Company's common stock as reported on NASDAQ on May 30, 1997 was $14.75. As of
that date, the aggregate market value of the shares reserved pursuant to the
1997 Plan was $3,392,500.
The grant of an incentive stock option has no immediate federal income tax
consequences to the Company or the optionee. For federal income tax purposes, an
optionee will not realize ordinary income upon exercise of an incentive stock
option. The subsequent sale of stock received on such exercise will generate a
long-term capital gain or loss provided the stock is held for the requisite
holding periods, which are two years from the date of grant and one year from
the date of exercise. A disposition of stock received on such exercise before
the requisite holding periods expire produces ordinary income in the year of
disposition equal to the difference between the option price and the fair market
value of the stock on the date of exercise. The balance of the optionee's gain,
if any, on such disposition will be recognized as long-term capital gain if the
rules applicable to the holding period for long-term capital assets are
satisfied. Special rules apply to disqualifying dispositions of such stock where
a loss would be recognized.
Long-term capital gains are currently taxed at a maximum rate of 28%. If
incentive stock option shares are purchased for cash, the optionee's income tax
basis will be the amount paid. If the optionee pays with previously acquired
shares, the optionee's aggregate income tax basis in the new shares will be the
same as the aggregate basis of the old shares transferred in the exchange
increased by any gain realized and cash paid.
The Company is not allowed a tax deduction for the benefits conferred upon
employees by incentive stock options unless optionees dispose of stock acquired
under circumstances which cause recognition of ordinary income. In such
circumstances, the Company can take a deduction in an amount equal to the
ordinary income realized by the employee.
Special rules apply to holders of incentive stock options who may be
subject to the alternative minimum tax on "tax preferences."
The grant of a non-qualified stock option would have no immediate federal
income tax consequences to the Company or the optionee. Upon exercise of a
non-qualified option, in contrast to an exercise of an incentive stock option,
the option holder will recognize ordinary income to the extent of the excess of
the fair market value of the stock on the date of exercise (or the date of the
lapse of the Section 16(b) restrictions, if applicable) over the option price.
The Company is entitled to a tax deduction in an amount equal to the ordinary
income realized by the employee.
If non-qualified stock options are exercised using cash, the optionee's tax
basis will be the amount paid plus the amount of income recognized. If the
optionee pays with previously acquired shares, the tax basis in the shares
acquired will be the same as the basis of the shares transferred in the
exchange. The tax basis of the additional shares acquired will be their fair
market value at the time of exercise.
To the extent that the exercisability of an option is accelerated as a
result of a "change in control," the value of the acceleration (the value of the
right to exercise the option sooner than would otherwise have been the case)
could be subject to an excise tax imposed on the optionee under Section 4999 of
the Code and nondeductible by the employer under Code Section 280G. Such
consequences would only follow, however, if the total of the payments contingent
on the change in control (including the value of the acceleration) exceeded
three times the optionee's base compensation as described in the Code.
The preceding paragraphs briefly summarize the applicable federal income
tax laws applicable to the 1997 Plan and should not be considered as a complete
statement thereof.
Page 17
<PAGE> 20
ITEM 4. OTHER BUSINESS
The Board of Directors knows of no other business which is likely to be
brought before the Annual Meeting. However, the persons named in the enclosed
proxy card will, at their discretion, vote the shares they represent upon any
other business which may properly come before the Annual Meeting.
OTHER MATTERS
The cost of solicitation of the proxies will be borne by the Company.
Proxies may be solicited by directors, officers and employees by mail,
telephone, facsimile or in person without additional compensation. Copies of
this proxy statement and of the 1997 Annual Report to Shareholders will be
delivered by the Company, through the services of ADP Proxy Services, to
brokers, dealers, banks, and voting trustees, or their nominees, for the purpose
of having these materials forwarded to beneficial owners. The Company will pay
ADP Proxy Services a service charge anticipated to be $2,000 and will reimburse
ADP Proxy Services for out-of-pocket expenses associated with each delivery,
such expenses to include reimbursement of record holders for their reasonable
expenses in connection with forwarding materials to beneficial owners. Returned
proxies will be processed and tabulated under the supervision of independent
Inspectors of Election.
COMPLIANCE WITH SECTION 16(A) FILINGS
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and NASDAQ. Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) reports they file. Based solely on a review of the
copies of such reports furnished to the Company, or written representations that
no Forms 5 were required, the Company believes that during the fiscal year, its
officers, directors and greater than ten-percent beneficial owners complied with
all applicable Section 16(a) filing requirements.
1998 SHAREHOLDER PROPOSALS
In order for shareholder proposals to be eligible for inclusion in the
Company's proxy statement for the 1998 Annual Meeting of Shareholders, they must
be received by the Company at its principal office, Route 2, P.O. Box 220, North
Stonington, Connecticut 06359, by March 3, 1998.
Page 18
<PAGE> 21
EXHIBIT A
ANALYSIS & TECHNOLOGY, INC.
1997 STOCK OPTION PLAN
1. Definitions: as used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
1.1. "Affiliated Corporation" shall mean any corporation which
controls, is controlled by or is under common control with the Corporation
and any predecessor corporation.
1.2. "Board of Directors" shall mean the Board of Directors of the
Corporation.
1.3. "Committee" shall mean the Committee of Directors of the
Corporation to be appointed from time to time by the Corporation's Board of
Directors to administer this Plan.
1.4. "Corporation" shall mean Analysis & Technology, Inc.
1.5. "Fair Market Value" of the Shares shall be deemed to be the
average of the high and low sales price per Share as reported by the NASDAQ
National Market System, or by the national securities exchange on which the
Shares are traded if they are no longer traded on the NASDAQ National
Market System, on the day on which Fair Market Value is to be determined.
If there was no trading activity on such date, the average of the high and
low sales price per share on the most recent date on which a trade occurred
shall be deemed to be the Fair Market Value of a Share on the date in
question. If the Shares are not traded on the NASDAQ National Market System
or a national securities exchange, Fair Market Value of the Shares shall be
determined by the Committee in an equitable manner.
1.6. "Incentive Stock Options" shall mean those Options granted
hereunder or under other plans of the Corporation or any Affiliated
Corporation as Incentive Stock Options as defined in, and which by their
terms comply with the requirements of such options set out in, Section 422
of the Internal Revenue Code of 1986 and Treasury Regulations issued
pursuant thereto.
1.7. "Non-Employee Director" shall mean a director of the Corporation
who is not an employee of the Corporation or an Affiliated Corporation.
1.8. "Non-Qualified Stock Options" shall mean those Options granted
hereunder or otherwise by the Corporation or any Affiliated Corporation
which are not designated as Incentive Stock Options as described in Section
1.6 or, pursuant to Section 6.2, are not treated as Incentive Stock
Options.
1.9. "Option" shall mean an option to purchase Shares granted pursuant
to the provisions of Section 7 of this Plan.
1.10. "Optionee" shall mean an employee or Non-Employee Director to
whom an Option has been granted under this Plan.
1.11. "Plan" shall mean the Analysis & Technology, Inc. 1997 Stock
Option Plan.
1.12. "Shares" shall mean shares of the no par value common stock of
the Corporation.
1.13. "Stock Option Agreement" shall mean the agreement between the
Corporation and the Optionee under which the Optionee may purchase Shares
under this Plan.
1.14. "Ten Percent Shareholder" shall mean an individual who owns
shares of stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or subsidiary corporation, if any.
Page 19
<PAGE> 22
2. Purpose of Plan: The purpose of this Plan is to attract and retain
outstanding key employees, to furnish existing key employees with further
inducement to continue their employment with the Corporation and to encourage
such employees and Non-Employee Directors to acquire a greater stake in the
Corporation's success and, thus, provide an additional incentive for them to
promote its best interests. Options granted pursuant to the Plan may be
Incentive Stock Options or Non-Qualified Stock Options or both with respect to
employees and Non-Qualified Stock Options only with respect to Non-Employee
Directors.
3. Effective Date: The effective date of this Plan is the date on which
this Plan is approved by the shareholders of the Corporation subsequent to its
adoption by the Board of Directors of the Corporation.
4. Shares Reserved for Plan: Subject to adjustment as provided in Section
12 hereof, a total of Two Hundred Thirty Thousand (230,000) Shares of the
Corporation shall be subject to this Plan; and such amount of Shares shall be,
and is hereby, reserved for sale for such purpose. The Shares subject to this
Plan shall consist of authorized but unissued Shares or previously issued Shares
reacquired and held by the Corporation as treasury shares. Any of such Shares
which may remain unsold and which are not subject to outstanding options at the
termination of this Plan shall cease to be reserved for the purpose of this
Plan, but until termination of this Plan the Corporation shall at all times
reserve a sufficient number of Shares to meet the requirements of this Plan. If
any Option granted under this Plan shall expire or terminate for any reason
without having been exercised in full, the Shares subject to such Option but not
purchased thereunder shall again be available for Options to be granted under
this Plan.
5. Administration of the Plan:
5.1. The Plan shall be administered by the Committee. The Committee
shall consist of not less than three members of the Corporation's Board of
Directors. Each member of the Committee shall be a "disinterested person"
as such term is defined in Rule 16b-3 under the Securities Exchange Act of
1934. Any member of the Committee who ceases to qualify as a "disinterested
person" for any reason shall, simultaneously with such disqualification,
cease to be a member of the Committee.
5.2. Subject to the terms of this Plan, including, without limitation,
Section 7.2 hereof relating to Options granted to Non-Employee directors
upon their election or re-election as such, the Committee shall have full
and final authority to determine the persons who are to be granted Options
under this Plan and the number of Shares subject to each Option.
5.3. Subject to the terms of this Plan, the Committee shall also have
complete authority to interpret this Plan, to prescribe, amend, and rescind
rules and regulations relating to it, to determine the details and
provisions of each Stock Option Agreement, to determine whether Options to
be granted hereunder shall be Incentive Stock Options or Non-Qualified
Stock Options, and to make all other determinations necessary or desirable
in the administration of this Plan.
6. Eligibility:
6.1. The individuals who shall be eligible to participate in this Plan
and to receive Options hereunder shall be such key employees of the
Corporation and its Affiliated Corporations as the Committee shall, in its
sole discretion, determine and Non-Employee Directors in accordance with
Section 7.2 hereof. In determining the employees to whom Options shall be
granted and the number of Shares to be covered by each Option, the
Committee may take into account the nature of the services rendered by the
respective employees, their present and potential contributions to the
success of the Corporation and its Affiliated Corporations and such other
factors as the Committee, in its discretion, may deem relevant. Options may
be granted to key employees who hold or have held options under previous
plans.
6.2. No employee may receive Options under this Plan covering more
than ten percent (10%) of the total number of Shares reserved under Section
4 of this Plan. In addition, the aggregate Fair Market Value (determined as
of the time the Option is granted) of Shares with respect to which
Incentive Stock Options are exercisable for the first time by any employee
in any one calendar year (under all stock
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option plans of the Corporation or any Affiliated Corporation) shall not
exceed $100,000. In the event any Option or Options intended as Incentive
Stock Options become exercisable (including by reason of acceleration of
exercisability as provided in Section 12(b) hereof or otherwise) in such a
way that the foregoing limitation would be exceeded in any year, such
Option or Options shall be exercisable in such year; but to the extent such
exercisability would cause such limitation to be exceeded, the value of the
shares in excess of $100,000 shall be treated as Non-Qualified Stock
Options when exercised rather than treated as Incentive Stock Options.
7. Option Grant:
7.1. Each Option granted under this Plan to an employee of the
Corporation shall be evidenced by minutes of a meeting of the Committee or
the unanimous written consent of all members of the Committee and by a
written Stock Option Agreement effective as of the date of the grant and
executed by the Corporation and the employee, which Stock Option Agreement
shall set forth such terms and conditions as may be determined by the
Committee to be consistent with this Plan.
7.2. Immediately following the Corporation's annual meeting of
shareholders held in the years 1997, 1998, and 1999 each Non-Employee
Director elected, re-elected, or continuing in office, as the case may be,
shall automatically, without need for any further action, be granted an
option to acquire 2,000 Shares. Each Option granted pursuant to this
Section 7.2 shall be evidenced by a written Stock Option Agreement
effective as of the date of the grant and executed by the Corporation and
the director, which Stock Option Agreement shall set forth such terms and
conditions as may be determined by the Committee to be consistent with this
Plan. The provisions of this Section 7.2 shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, the Employee Retirement Income Security Act, or the
rules thereunder.
8. Term of Option:
8.1. Each Incentive Stock Option shall commence on the date as of
which the Stock Option Agreement is effective between the Corporation and
the Optionee and shall terminate seven (7) years thereafter; provided,
however, that if at the time the Option is granted the Optionee is a Ten
Percent Shareholder the Option shall terminate five (5) years thereafter.
Each Non-Qualified Option shall commence on the date as of which the Stock
Option Agreement is effective between the Corporation and the Optionee and
shall terminate, in the case of a Non-Qualified Option granted other than
to a Non-Employee Director, at such time as is provided in the relevant
Stock Option Agreement, up to ten (10) years and one (1) day after the date
of the grant and, in the case of a Non-Qualified Option granted to a
Non-Employee Director, seven (7) years after the date of the grant. In any
case, if the Optionee shall cease to be a regular full-time employee of the
Corporation, or an Affiliated Corporation, for any reason other than a
termination for cause or a termination by reason of death, or, with respect
to Non-Employee Directors, if the Optionee shall cease to be a director of
the Corporation for any reason other than removal by the shareholders of
the Corporation for cause or by reason of death, any unexercised portion of
said Option shall terminate sixty (60) days after the date of the
termination of employment or directorship, as the case may be, or upon the
expiration of the Option, whichever shall first occur.
8.2. In the event that the Optionee's employment is terminated for
cause or with respect to a Non-Employee Director, the Optionee is removed
as a director of the Corporation by the shareholders for cause, the
unexercised portion of the Option shall terminate immediately upon the
giving of the notice of such termination or removal. Nothing in this Plan
or in any Option granted pursuant to this Plan shall confer on any Optionee
the right to continue in the service of the Corporation or any of its
Affiliated Corporations, or interfere in any way with the right of the
Corporation or any of its subsidiaries or
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affiliates to terminate the Optionee's employment at any time or the right
of the shareholders of the Corporation to remove or to fail to re-elect any
director of the Corporation.
8.3. In the event of the death of the Optionee, the Optionee's estate
shall have the privilege of exercising any rights not theretofore exercised
by the Optionee, to the extent that the Optionee was entitled to exercise
such rights on the date of the Optionee's death; but in such event, the
period of time within which the purchase may be made shall be the earlier
of (a) 180 days next succeeding the death of the Optionee or (b) the
expiration of the term of the Option.
9. Exercise of Option: An Option granted under this Plan shall become
exercisable in installments as follows: to the extent of twenty percent (20%) of
the number of Shares originally covered thereby at any time after the
commencement of the Option; and, to the extent of an additional 20% of such
number of Shares per year at any time after the commencement of the second,
third, fourth and fifth years of the term of the Option; and such installments
shall be cumulative. The Option to purchase such Shares may be exercised in
whole or in part as to any Shares which have become purchasable under the
provisions of the Option at any time during the term of the Option by written
notice delivered to the Corporation. Such notice shall state the number of
Shares with respect to which the Option is being exercised and shall be
accompanied by payment in full of the purchase price of such Shares. Payment
shall be made to the Corporation either: (a) in cash (including certified check,
bank draft, or money order); or (b) by delivering Shares already owned by the
Optionee, which shall be valued at their Fair Market Value on the day on which
notice of exercise is received by the Corporation; or (c) a combination of such
Shares and cash. Delivery of Shares pursuant to alternative (b) or (c) above
shall be accomplished by the Optionee's delivery of one or more stock
certificates representing at least the number of Shares to be used to pay for
the option exercise, duly endorsed for transfer or accompanied by one or more
properly executed stock powers, together with written instructions to the
Corporation as to the number of Shares to be used for payment. Unless the Shares
to be purchased have been registered under the applicable securities laws, a
notice of exercise hereunder shall be accompanied by an investment letter
indicating nondistributive intent in a form approved by the Committee.
10. Option Price: The purchase price per Share shall be the Fair Market
Value of a Share as of the effective date of the Stock Option Agreement entered
into between the Corporation and the Optionee. Provided, however, with respect
to Incentive Stock Options, if at the time the Option is granted the Optionee is
a Ten Percent Shareholder, the purchase price per Share for said Optionee shall
be one hundred ten percent (110%) of the Fair Market Value of a Share as of the
effective date of the Stock Option Agreement entered into between the
Corporation and the Optionee.
11. Non-assignability of Option: The Option to purchase shall not be
transferable by the Optionee and shall be exercisable, during the Optionee's
lifetime, only by the Optionee.
12. Adjustment Upon Fundamental Corporate Change:
(a) Notwithstanding any other provisions of this Plan, each Stock Option
Agreement shall contain such provisions as the Committee shall determine to be
appropriate for the adjustment of the number, kind, class or issuer of Shares
subject to such Option, the option price and/or such other provisions as the
Committee shall deem advisable or necessary in connection with fundamental
corporate changes of the Corporation by reason of any stock dividend, stock
split, recapitalization, combination or exchange of Shares, merger,
consolidation, acquisition of property or stock, the sale of substantially all
corporate assets, separation, reorganization or liquidation and the like.
(b) Notwithstanding any other provision of this Plan or any Option granted
hereunder, each Option granted under this Plan and still outstanding shall
become immediately exercisable in the event that there is a "Change in Control"
of the Corporation; provided, however, that in the case of an Incentive Stock
Option,
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such acceleration of exercisability shall be subject to the limitations of
Section 6.2 of this Plan. For purposes of this Plan, the term "Change in
Control" shall mean any of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") except that a Person shall not include any employee benefit plan
maintained by the Corporation) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding Voting
Securities;
(ii) The individuals who, as of the date of this Agreement are
members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the members of the Board; provided,
however, that if the election, or nomination for election by the
Company's common shareholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board, such new director
shall, for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) Approval by shareholders of the Company of: (1) A merger,
consolidation or reorganization involving the Company, unless such
merger, consolidation or reorganization is a "Non-Control Transaction."
A "Non-Control Transaction" shall mean a merger, consolidation or
reorganization of the Company where: (A) the shareholders of the
Company, immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately following such
merger, consolidation or reorganization, at least sixty percent (60%) of
the combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization, (B) the individuals
who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the members of the
board of directors of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority of the Voting
Securities of the Surviving Corporation, and (C) no Person other than
(i) the Company, (ii) any subsidiary, (iii) any employee benefit plan
(or any trust forming a part thereof) maintained by the Company, the
Surviving Corporation, or any subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of forty percent (40%) or more of the then
outstanding Voting Securities), has Beneficial Ownership of forty
percent (40%) or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities; (2) A complete
liquidation or dissolution of the Company; or (3) An agreement for the
sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a Subsidiary).
13. Compliance with Laws: Notwithstanding any other provisions of this
Plan, each Stock Option Agreement shall contain such provisions as the Committee
shall determine to be appropriate to ensure that the Optionee agrees for the
Optionee and the Optionee's legal representatives, that the Option shall not be
exercisable by the Optionee or the Optionee's legal representatives, and that
the Corporation shall not be
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<PAGE> 26
obligated to issue any Shares, during a time period in which such exercise would
adversely affect the Corporation under applicable state or federal securities
laws. The Corporation shall, however, provide Optionee with an opportunity to
elect to exercise the Options, within the limits specified in this Plan, at a
minimum of approximately once a year and, if not sooner terminated, at the
termination of the Option's term. If an Option is terminated early pursuant to
Section 8.1 or 8.3 of this Plan, and if the Optionee attempts to exercise the
Option, in accordance with its terms, within the period specified in Sections
8.1 or 8.3, as applicable, and if the Corporation determines that it should
defer the exercise for the securities laws compliance reasons previously
referenced in this Section, then the Corporation may extend the period of time
during which an Optionee may exercise the Option. Any such extension shall last
only until the next time the Corporation provides the Optionees with an
opportunity to exercise Options granted under this Plan.
The Corporation shall have the right to require the payment (through
withholding from the participant's salary, or otherwise as the Corporation shall
determine) of any federal and state taxes required to be withheld from any
transfer of Shares hereunder (including a transfer of Shares on exercise of an
Option granted hereunder).
14. No Rights in Option Stock: No Optionee shall have any rights as a
shareholder with respect to Shares as to which the Option shall not have been
exercised and payment made as herein provided, and an Optionee shall have no
rights with respect to such Shares not expressly conferred by this Plan.
15. Effect on Changes in Capital Structure: The existence of the Option
to purchase shall not affect in any way the right or power of the Corporation or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or prior preference stocks ahead of or affecting
the capital stock or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceedings, whether of a similar
character or otherwise.
16. Successors: This Plan shall be binding upon any successors of the
Corporation.
17. Amendment and Termination: Unless this Plan shall theretofore have
been terminated as hereinafter provided, it shall terminate on December 31,
2004, except as to Options previously granted and outstanding under this Plan at
that date, and no Option shall be granted hereunder after that date. This Plan
may be terminated, modified, or amended by the shareholders of the Corporation.
The Board of Directors may terminate this Plan or make such modifications or
amendments thereof as it shall deem advisable, or in order to conform to any
change in any law or regulation applicable thereto; provided, however, that the
Board of Directors may not, without further approval by the shareholders of the
Corporation, in the manner required by Connecticut law, (a) increase the maximum
number of Shares as to which Options may be granted under this Plan, except as
may be needed to make necessary adjustments pursuant to Section 12 of this Plan,
(b) change the class of Persons eligible to be granted Options, (c) increase the
periods during which Options may be granted or exercised, except as provided in
Section 13 of this Plan, or (d) provide for the administration of this Plan
otherwise than by the Committee. No termination, modification, or amendment of
this Plan may, without the consent of an Optionee to whom any Option shall
theretofore have been granted, adversely affect the rights of such Optionee
under such Option.
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3.
Please Mark
Your Votes as X
Indicated in
This Example
1. Election of Directors (terms to expire in 2000) Nelda S. Nardone,
Thurman F. Nayor
FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority
listed above (except AUTHORITY to vote for any individual nominee,
as marked to the to vote for all write that nominee's name in the
contrary). nominees listed space provided below.)
above.
------------------------------------
2. Proposal to ratify the selection of KPMG Peak Marwick LLP as the independent
public accountants of the Company for the fiscal year ending March 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of the 1997 Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
The Undersigned Acknowledges Receipt of the Notice
of Annual Meeting and Proxy Statement.
Each person named to the left is asked to sign
this Proxy exactly as his or her name appears,
including the title "Executor," "Trustee," etc.,
if the same is indicated. If more than one person's
name is set forth, all should sign. If stock is
held in the name of a corporation or partnership,
this Proxy should be executed by a properly
authorized person.
Dated: , 1997
---------------------------------------
--------------------------------------------------
Signature
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Signature, if held jointly
Shareholders planning to attend the Annual Meeting
in person are asked to check this block / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
-- FOLD AND DETACH HERE --
<PAGE> 28
PROXY PROXY
ANALYSIS & TECHNOLOGY, INC.
ROUTE 2, P.O. BOX 220
NORTH STONINGTON, CONNECTICUT 06359
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints David M. Nolf and Gary P. Bennett as
proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all the shares of common stock of Analysis & Technology, Inc. (the "Company")
held of record by the undersigned on June 6, 1997, at the Annual Meeting of
Shareholders to be held on August 5, 1997 or any adjournment thereof.
(Continued on reverse side)
-- FOLD AND DETACH HERE --
