SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
File No. 0-10772
/X/ Filed by the Registrant
/ / Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
ESSEX CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
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): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
/ / 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: N/A
2) Form, Schedule or Registration No.: N/A
3) Filing party: N/A
4) Date filed: N/A
<PAGE>
ESSEX CORPORATION
Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
of Essex Corporation to be held at the main Essex office, 9150 Guilford Road,
Columbia, Maryland on Monday, November 9, 1998 at 10:00 a.m.
As discussed in this Proxy Statement, the matters to be acted on at the
Annual Meeting are: the election of directors; the ratification of the Company's
1998 stock option plan; and the ratification of the appointment of independent
auditors. Additionally, there will be a presentation reviewing the Company's
performance in 1997 and 1998 and prospects for 1999. There will also be an
opportunity for Stockholders to present questions to management and to a
representative of the Company's independent auditors. Discussions of the
Company's business at past annual meetings have generally been interesting and
useful. We hope you will be able to attend.
The Company's Annual Report on Form 10-KSB/A No. 1 for the year ended
December 28, 1997, including the financial statements, is enclosed. Such report
and financial statements are not a part of this Proxy Statement.
Whether or not you plan to attend, we hope that your shares of stock
will be represented and voted at the Annual Meeting. You can accomplish this by
completing, signing, dating and promptly returning your proxy in the enclosed
envelope. PLEASE MARK YOUR PROXY CARD CAREFULLY.
YOUR STOCK WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS YOU HAVE
GIVEN IN YOUR PROXY. IF YOU ARE A STOCKHOLDER OF RECORD AND ARE PRESENT AT THE
ANNUAL MEETING, YOU MAY WITHDRAW YOUR BALLOT IN PERSON AND YOU MAY CAST YOUR
BALLOT AT THAT TIME IF YOU SO DESIRE.
Respectfully yours,
Harry Letaw, Jr.
CHAIRMAN & CHIEF EXECUTIVE OFFICER
Columbia, Maryland
October 12, 1998
<PAGE>
ESSEX CORPORATION
9150 Guilford Road
Columbia, Maryland 21046-1891
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Essex
Corporation (the "Company"), a Virginia corporation, will be held at 10:00 a.m.,
Monday, November 9, 1998, and thereafter as it may from time-to-time be
adjourned, at the Company's Corporate office, 9150 Guilford Road, Columbia,
Maryland, for the following purposes:
1. To elect seven (7) directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
2. To approve the adoption of the Essex Corporation 1998 Stock Option and
Appreciation Rights Plan;
3. To ratify the appointment of independent auditors; and
4. To transact such other business as may properly come before the Annual
Meeting.
Your attention is directed to the accompanying Proxy Statement for
further information with respect to the matters to be acted upon at the Annual
Meeting.
The Board of Directors fixed the close of business on September 21,
1998, as the record date for the determination of Stockholders entitled to
notice of, and to vote at, the Annual Meeting. The stock transfer books will not
be closed.
The approximate date on which the Proxy Statement and form of Proxy was
first sent or given to shareholders is October 12, 1998.
Please indicate your vote, date and sign the enclosed proxy card and
promptly return it in the enclosed addressed envelope, which requires no postage
if mailed in the United States. The prompt return of proxies will assure a
quorum and reduce solicitation expenses. If you are a stockholder of record and
are personally present at the Annual Meeting and wish to vote your shares in
person, even after returning your proxy, you still may do so.
BY ORDER OF THE BOARD OF DIRECTORS
KIMBERLY J. DECHELLO
SECRETARY
Columbia, Maryland
October 12, 1998
<PAGE>
ESSEX CORPORATION
9150 Guilford Road
Columbia, Maryland 21046-1891
------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 9, 1998
------------------------------------
The enclosed proxy is furnished to the holders of common stock, $0.10
par value (the "Common Stock") of Essex Corporation (the "Company") and is
solicited by the Board of Directors of the Company for use at the Annual Meeting
of Stockholders to be held on November 9, 1998 and at any adjournments thereof
(the "Annual Meeting"). The approximate date on which the Notice of Annual
Meeting, Proxy Statement and proxy card are first sent or given to Stockholders
is October 12, 1998.
The shares represented by all properly executed proxies will be voted
at the Annual Meeting in accordance with instructions thereon. If no
instructions are indicated, the proxy will be voted FOR the nominees for
director listed on the proxy and also listed under the caption "Proposal 1"
herein; FOR approval of the 1998 Stock Option Plan; and FOR ratification of
appointment of independent auditors. The Company's Board of Directors has taken
unanimous affirmative action with respect to each of the foregoing proposals and
recommends that the Stockholders vote in favor of each of the proposals. All
valid proxies obtained will be voted at the discretion of the Board of Directors
with respect to any other business that may come before the Annual Meeting.
The Board of Directors has fixed the close of business on September 21,
1998 as the record date (the "Record Date") for the determination of
Stockholders entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof, notwithstanding any subsequent transfers of stock. The
stock transfer books will not be closed.
As of the Record Date, there were outstanding 4,397,861 shares of the
Common Stock. Only holders of shares of Common Stock of record as of the close
of business on the Record Date will be entitled to vote at the Annual Meeting,
such holders being entitled to one vote on all matters presented at the meeting
for each share held of record. The presence in person or by proxy of holders of
record of at least one-third of the shares of Common Stock outstanding as of the
Record Date shall be required for a quorum to transact business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
until a quorum is obtained. The nominees to be selected as directors named in
Proposal 1 must receive a plurality of the eligible votes cast at the Annual
Meeting with respect to Proposal 1. The approval of all other matters to be
considered at the Annual Meeting requires the affirmative vote of a majority of
the eligible votes cast at the Annual Meeting on such matter. Abstentions and
broker non-votes will be counted only for the purpose of determining the
existence of a quorum.
1
<PAGE>
Proxies may be revoked before they are voted at the Annual Meeting by
giving written notice of revocation to the Secretary, by submission of a proxy
bearing a later date, or by attending the Annual Meeting in person and voting by
ballot.
The cost of preparing and mailing this Proxy Statement and the
accompanying proxy card will be borne by the Company and the Company will pay
the cost of soliciting proxies. In addition to solicitation by mail, certain
officers and regular employees of the Company may solicit the return of proxies
by telephone, telegram or in person. The Company will also reimburse brokers,
nominees and other fiduciaries for their expenses in forwarding solicitation
materials to the beneficial owners of Common Stock and soliciting them to
execute proxies.
Any document referenced in this Proxy Statement is available without
charge to any stockholder of record upon request. All requests shall be made
either in writing, and directed to the Company at its main office address, 9150
Guilford Road, Columbia, MD 21046-1891, or orally and directed to the Secretary
at 301-939-7000.
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
The voting securities of the Company which were outstanding on the
record date consisted of 4,397,861 shares of Common Stock with a par value of
ten cents ($0.10) per share. Each share of Common Stock is entitled to one vote
on each matter to be acted upon at the Annual Meeting.
The following table and accompanying notes set forth as of September
21, 1998, information with respect to the beneficial ownership of the Company's
Common Stock by (i) each person or group who beneficially own more than 5% of
the Common Stock, (ii) each of the directors of the Company, (iii) each of the
officers of the Company named in the Summary Compensation Table, and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature Percentage of Outstanding
Name and Address of Beneficial Shares of Common Stock
OF BENEFICIAL OWNER* OWNERSHIP (1) BENEFICIALLY OWNED
<S> <C> <C> <C>
Harry Letaw, Jr. (2) 994,809 21.08
Terry M. Turpin (3) 321,193 7.23
Leonard E. Moodispaw (4) 145,150 3.24
Frank E. Manning (5) 129,275 2.92
Joseph R. Kurry, Jr. (6) 79,309 1.79
Matthew S. Bechta (7) 75,698 1.71
Harold P. Hanson (8) 69,344 1.57
Robert W. Hicks (9) 59,200 1.34
Craig H. Price (10) 44,842 1.01
Ray M. Keeler (11) 33,250 **
All Directors and Executive Officers
as a Group (12 persons) (12) 1,978,696 39.01
- ------------------------------------
<FN>
* All beneficial owners are directors and/or officers of the Company and
can be reached c/o Essex Corporation, 9150 Guilford Road, Columbia, MD
21046-1891.
** Less than 1%
(1) The shares listed above include options and rights to acquire shares
within sixty (60) days and shares held of record by the Essex
Corporation Retirement Trust as to which shares the respective
participant has disposition and voting rights. The percentage ownership
is computed based upon the number of shares which would be outstanding
if such options and rights were exercised.
(2) Dr. Harry Letaw, Jr. is Chairman of the Board and Chief Executive
Officer of the Company. Of the 994,809 shares beneficially shown as
owned by Dr. Letaw, 321,250 shares represent presently exercisable
rights to acquire Common Stock through stock options and warrants.
(3) Terry M. Turpin is a Director, Senior Vice President and Chief
Technical Officer of the Company. Of the shares shown as beneficially
owned, 42,500 represent presently exercisable rights to acquire common
stock through stock options and warrants.
3
<PAGE>
(4) Leonard E. Moodispaw is President, Chief Operating Officer and a
Director of the Company. Of the shares shown as beneficially owned,
88,000 represent presently exercisable rights to acquire common stock
through stock options.
(5) Frank E. Manning is the record and beneficial owner of approximately
2.92% of the outstanding shares of the Company (129,275 shares),
including presently exercisable options to purchase 31,500 shares. Mr.
Manning is the Chairman Emeritus and a Director of the Company. Does
not include 40,000 shares of the Company's Common Stock owned of record
and beneficially by Mrs. Eva L. Manning, wife of Mr. Frank E. Manning.
Also does not include 157,500 shares beneficially owned by six separate
family trusts of which Mrs. Manning is the sole trustee and over which
trusts she has exclusive voting and dispositive power.
(6) Joseph R. Kurry, Jr. is Senior Vice President, Treasurer and Chief
Financial Officer of the Company. Of the shares shown as beneficially
owned, 42,950 represent presently exercisable rights to acquire common
stock through stock options and warrants.
(7) Matthew S. Bechta is Vice President of the Company. Of the shares shown
as beneficially owned, 36,500 represent presently exercisable rights to
acquire common stock through stock options and warrants.
(8) Harold P. Hanson is a Director of the Company. Of the shares shown as
beneficially owned, 20,500 represent presently exercisable rights to
acquire common stock through stock options and warrants.
(9) Robert W. Hicks is a Director of the Company. Of the shares shown as
beneficially owned, 19,000 represent presently exercisable rights to
acquire common stock through stock options and warrants.
(10)Craig H. Price is Vice President of the Company. Of the shares shown as
beneficially owned, 30,500 represent presently exercisable rights to
acquire common stock through stock options and warrants.
(11)Ray M. Keeler is a Director of the Company. Of the shares shown as
beneficially owned, 18,250 represent presently exercisable rights to
acquire common stock through stock options and warrants.
(12)Of the shares shown as beneficially owned, 674,000 represent presently
exercisable rights to acquire common stock through stock options and
warrants.
</FN>
</TABLE>
- ------------------------------------
4
<PAGE>
THE BOARD OF DIRECTORS AND COMMITTEES
The Company's directors generally meet quarterly. Additionally, the
By-Laws provide for special meetings and, as also permitted by Virginia law,
Board action may be taken without a meeting upon unanimous written consent of
all directors. Board members not employed by the Company receive a maximum of
$1,500 for each Board or Board Committee Meeting attended. In 1997 the Board
held seven meetings; the entire membership of the Board was present at all but
two meetings where one director was absent. Outside directors received
compensation for two of seven meetings attended.
The Board of Directors has three standing Committees: the Audit
Committee, the Ethics Committee and the Compensation Committee. The Audit
Committee, established by resolution of the Board, is vested with the following
duties and powers: (1) to recommend to the Board the independent public
accountants to audit the books and records of the Company; (2) to review the
recommendations of the independent public accountants with respect to accounting
methods and internal controls, and to advise the Board with respect thereto; (3)
to examine the scope and extent of the audit conducted by the independent public
accountants and to advise the Board with respect thereto; and (4) such other
functions and responsibilities as may be assigned by the Board. Mr. A. William
Perkins and Mr. Robert W. Hicks were members of the Audit Committee and attended
all three meetings of the Committee held in 1997. Ray M. Keeler replaced Mr.
Perkins upon his retirement in 1998. The Audit Committee met and reviewed all
interim statements and reports prior to issuance to shareholders and filing with
the Securities and Exchange Commission. In addition, Directors Hicks and Keeler
have made frequent visits during 1998 to meet with Company management and
operating personnel to assess and monitor operations and report such status to
the Board.
The Board of Directors has an established Ethics Committee. Its purpose
is to advise Essex management of means of ensuring that Essex adheres to the
highest ethical standards in its operations. A. William Perkins and Harold
Hanson served on the Ethics Committee in 1997. Ray M. Keeler replaced Mr.
Perkins upon his retirement in 1998.
The Compensation Committee recommends to the Board of Directors
compensation, including incentive compensation, for principal executives of the
Company. Membership is comprised of outside directors and consisted of Samuel
Hopkins until his retirement and Ray M. Keeler during 1997. Frank E. Manning was
appointed to the Committee in November 1997. The Committee was consulted on
several matters; however, all issues concerning compensation were discussed by
the Board as a whole.
5
<PAGE>
The following table sets forth the aggregate cash compensation paid for
services rendered to the Company during the last three fiscal years by the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers who served as such at the end of the last fiscal
year and whose total compensation exceeds $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
- ---------------------------------------------------------------------------------------------------------------------------------
Other Securities
Annual Underlying
Name and Compensation Options/SARs
Principal Position Year Salary($)(1) Bonus ($) ($)(2) (#)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Harry Letaw, Jr. 1997 135,200 0 0 0
Chairman and CEO 1996 135,200 35,000 0 0
1995 113,920 10,000 0 0
Terry M. Turpin 1997 122,720 0 3,682 35,000
Senior Vice President 1996 115,120 15,000 3,465 8,000
and Director 1995 102,848 7,500 3,095 8,000
Joseph R. Kurry, Jr. 1997 114,400 0 3,432 30,000
Treasurer, Senior Vice 1996 114,400 25,000 3,439 23,500
President and CFO 1995 106,400 7,500 3,198 5,000
Craig H. Price 1997 102,960 0 3,089 29,000
Vice President 1996 102,960 15,000 3,094 8,500
1995 95,760 5,000 2,878 5,000
Matthew S. Bechta 1997 102,960 0 3,089 25,500
Vice President 1996 102,960 15,000 3,089 8,500
1995 95,760 5,000 2,876 8,500
- ------------------------------------
<FN>
(1) Includes amounts deferred at the election of the named executive officer
pursuant to Section 401(k) of the Internal Revenue Code ("401(k)").
(2) Represents matching 401(k) contributions made on behalf of the respective
named executive officer pursuant to the Company's Retirement Plan and
Trust. Excludes other perquisites and benefits not exceeding the lesser of
$50,000 or 10% of the named executive officer's total annual salary and
bonus.
</FN>
</TABLE>
6
<PAGE>
DEFINED CONTRIBUTION RETIREMENT PLAN
The Company has a qualified defined contribution retirement plan, the Essex
Corporation Retirement Plan and Trust, which includes a 401(k) salary reduction
feature for its employees. The Plan calls for a discretionary contribution as
determined by the Board of Directors, and an employer matching contribution of
up to 3% of eligible employee compensation under the salary reduction feature.
Discretionary contributions are determined annually by the Board of Directors.
No discretionary contribution was made by the Company to the Retirement Plan for
1997. The total authorized contribution under the matching contribution feature
of the Plan was approximately $122,500 in 1997. All employee contributions are
100% vested at all times and Company contributions vest based on length of
service. Vested contributions are distributable and benefits are payable only
upon death, disability, retirement or break in service. Participants may request
that their accrued benefits under the Section 401(k) portion of the Plan be
allocated among various investment options established by the Plan
administrator.
The Company contributions under the Retirement Plan for the persons
referred to in the Summary Compensation Table are included in that Table.
EMPLOYEE INCENTIVE PERFORMANCE AWARD PLAN
The Company has an Employee Incentive Performance Award Plan under which
bonuses are distributed to employees. All employees are eligible to receive such
awards under flexible criteria designed to compensate for superior division and
individual performance during each fiscal year. Awards are generally recommended
annually by management and approved by the Board of Directors. Such awards may
be constrained by overall Company performances. There were no awards in 1997 to
persons employed in the continuing operations of the Company. The incentive
awards under the Performance Award Plan for the persons referred to in the
Summary Compensation Table are included in that Table.
EMPLOYMENT AGREEMENTS
Since 1988, the Company has had an Agreement of Employment with Harry
Letaw, Jr., Chairman of the Board and Chief Executive Officer. Dr. Letaw's
annual compensation was originally established at $120,000 but was reduced, at
his recommendation, to the annual amounts shown in the Summary Compensation
Table. Dr. Letaw's annual compensation was increased to $135,200 effective
October 2, 1995. The term of this Agreement is extended on a month-to-month
basis by mutual agreement.
The Company has an Agreement of Employment with Frank E. Manning, Chairman
Emeritus and Member of the Essex Board of Directors, whereby Mr. Manning is a
part-time employee of the Company with duties to provide advice and counsel to
the management of Essex. The Agreement may be terminated by either party with 60
days advance notice. Mr. Manning also receives reimbursement of medical costs
not covered by Medicare. Mr. Manning received compensation of $5,800 in fiscal
year 1997 for his services as an employee of the Company and medical
reimbursement of $1,431 in 1997.
7
<PAGE>
The above agreements restrict the individuals' rights to compete with the
Company and prohibit misappropriation of proprietary rights of the Company, both
during and after the term of employment.
OPTIONS TO PURCHASE SECURITIES
The Company has a 1996 Stock Option and Appreciation Rights Plan (the "1996
Plan"). The 1996 Plan as presently in effect provides for the grant of tax
qualified Incentive Stock Options ("ISOs") and options that are not tax
qualified ("NSOs") and Stock Appreciation Rights ("SARs") which rights may be
related to, but not necessarily be granted in tandem with, options granted under
the 1996 Plan. Persons eligible to receive awards of options and SARs under the
1996 Plan include officers, directors, key employees and other persons who
provide valuable services to the Company. SARs entitle the holder to cash or
Company Common Stock measured by the increase in market value of the Company's
Common Stock from the date of grant to the date of exercise. The exercise price
of an ISO under the 1996 Plan may not be less than the fair market value of the
Company stock on the date of grant; the exercise price of NSOs and the
appreciation base price of SARs are determined at the discretion of the Board of
Directors except that the SAR appreciation base price may not be less than 50%
of the fair market value of a share of Common Stock on the grant date with
respect to awards to persons who are officers or directors of the Company. The
1996 Plan reserves 300,000 shares of the Company's Common Stock for issuance.
There are options for 260,700 shares outstanding at prices ranging from $1.00 -
$3.00, including options for 112,000 shares held by officers or directors
(options for 160,125 shares are exercisable, including exercisable options held
by officers and directors of 63,400). As of August 31, 1998, there remain 39,300
shares available for future grants of options or SARs.
The Company had an Option and Stock Appreciation Rights Plan ("OSAR Plan ")
which expired on January 31, 1997 with no shares available for future grants. As
of August 31, 1998, options for 657,250 shares of the Company's Common Stock
remain outstanding under this Plan. Of this amount, options for 599,820 shares
are exercisable at prices ranging from $2.50 - $3.08 including options held by
officers and directors to purchase 545,000 shares (of which options for 504,400
shares are exercisable).
8
<PAGE>
The following Table shows for the fiscal year ended December 28, 1997 for
the persons named in the Summary Compensation Table, information with respect to
options to purchase Common Stock granted during 1997 under the OSAR Plan and the
1996 Plan. No options granted under the stock plans were exercised by the
persons listed below in 1997.
<TABLE>
STOCK OPTIONS GRANTS TABLE
FOR FISCAL YEAR ENDED DECEMBER 28, 1997
<CAPTION>
Number of
Securities
Underlying % Of Total Options/
Options SARs Granted to Exercise or
Granted Employees in Base Price Expiration
NAME (#)(1) Fiscal Year ($/Sh) Date
================================================================================================
<S> <C> <C> <C> <C>
Harry Letaw, Jr. --- --- --- ---
Terry M. Turpin 20,000 5.1 3.00 01/30/07
15,000 3.8 1.00 11/16/07
Joseph R. Kurry, Jr. 22,000 5.6 3.00 01/30/07
8,000 2.0 1.00 11/16/07
Craig H. Price 21,500 5.4 3.00 01/30/07
7,500 1.9 1.00 11/16/07
Matthew S. Bechta 18,000 4.6 3.00 01/30/07
7,500 1.9 1.00 11/16/07
- ------------------------------------
<FN>
(1) Such options became exercisable beginning June 30, 1997.
</FN>
</TABLE>
9
<PAGE>
The following Table shows for the fiscal year ended December 28, 1997 for the
persons named in the Summary Compensation Table, information with respect to
option/SAR exercises and fiscal year-end values for unexercised options/SARs.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FY-END OPTION/SAR VALUES TABLE
FOR FISCAL YEAR ENDED DECEMBER 28, 1997
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
NAME Exercise (#) ($) Unexercisable Unexercisable
===============================================================================================
<S> <C> <C> <C> <C> <C>
Harry Letaw, Jr. --- --- 290,000/0 0/0
Terry M. Turpin --- --- 21,400/29,600 0/0
Joseph R. Kurry, Jr. --- --- 22,100/36,400 0/0
Craig H. Price --- --- 15,900/26,600 0/0
Matthew S. Bechta --- --- 17,170/25,330 0/0
</TABLE>
- -----------------------------------------------------------------------
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, seven (7) directors of the Company will be
elected, each to hold office until the next Annual Meeting of Stockholders or
until their respective successors shall have been duly elected and qualified.
Each of the nominees named below has consented to serve if elected. In case any
of the nominees is not a candidate for director at the Annual Meeting, an event
which management does not anticipate, it is intended that the enclosed proxy
will be voted for substitute nominee, if any, designated by the Board of
Directors and nominated by a person named in the proxy, unless the authority to
vote for the management nominee(s) is withheld in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE ELECTION OF EACH OF THE NOMINEES
FOR DIRECTOR.
10
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
HARRY LETAW, JR., age 72, was elected a Director of the Company in June
1988. He is Chairman of the Board and Chief Executive Officer. Dr. Letaw is
President and founder of Intellinet Corporation, a motor control system
manufacturer, based in Maryland. He previously served in senior management and
marketing positions with Raytheon, Martin Marietta and Bunker Ramo. Dr. Letaw
performed military service during World War II, received a Bachelor of Science
degree in Chemistry in 1949, a Master of Science degree in Chemistry in 1951 and
a Doctor of Philosophy degree in Physical Chemistry in 1952, all from the
University of Florida. He was Research Assistant Professor of Electrical
Engineering at the University of Illinois, 1952 to 1955. Dr. Letaw devotes his
full business time to the business of the Company and his affiliations with
other corporations do not involve any substantial expenditures of time nor do
these positions involve any real or potential conflicts of interest.
LEONARD E. MOODISPAW, age 55, President, Chief Operating Officer and
Director of the Company, rejoined Essex in 1998. Mr. Moodispaw was an employee
and consultant with Essex during 1988 to 1993. From 1988 to 1993, he was
President of the former Essex subsidiary, System Engineering and Development
Corporation (SEDC), and later served as Essex Chief Administrative Officer. Mr.
Moodispaw was Secretary of the Company and has currently been Corporate Counsel.
From April 1994 to April 1998, Mr. Moodispaw was President of ManTech Advanced
Systems International, Inc. (MASI), a subsidiary of ManTech International
Corporation. Mr. Moodispaw will continue his relationship with ManTech as a
member of its Advisory Board and will serve as a consultant to MASI and to MASI
UK Limited where he serves on the board of its joint venture with
Vosper-Thornycroft. Early in his career, Mr. Moodispaw was engaged in a private
practice of law, and from 1965 to 1978 was a senior manager in the National
Security Agency (NSA). He is the Founder of the Security Affairs Support
Association (SASA) that brings government and industry together to solve
problems of mutual interest. Mr. Moodispaw's affiliations with other
corporations and associations do not involve any real or potential conflicts of
interest.
TERRY M. TURPIN, age 55, was elected a Director of the Company in January
1997. He is Senior Vice President and Chief Technical Officer for the Company.
He joined Essex through merger with SEDC where he was Vice President and Chief
Scientist from September 1984 through June 1989. From December 1983 to September
1984 he was an independent consultant. From 1963 through December 1983, Mr.
Turpin was employed by NSA. He was Chief of the Advanced Processing Technologies
Division for ten years. He holds patents for optical computers and adaptive
optical components. Mr. Turpin represented NSA on the Tri-Service Optical
Processing Committee organized by the Under Secretary of Defense for Research
and Engineering. He received a Bachelor of Science degree in Electrical
Engineering from the University of Akron in 1966 and a Master of Science degree
in Electrical Engineering from Catholic University in Washington, D.C. in 1970.
JOSEPH R. KURRY, JR., age 48, joined Essex Corporation in March 1985. He is
Treasurer, Chief Financial Officer and Senior Vice President. Mr. Kurry was
controller of ManTech International Corporation from December 1979 to March
1985. Mr. Kurry received a Bachelor of Science degree in Business Administration
in 1972 from Georgetown University, in Washington, D.C. and is a Certified
Public Accountant.
11
<PAGE>
MATTHEW S. BECHTA, age 45, was elected Vice President in October 1993. As
Director of Programs, Mr. Bechta is responsible for technical operations and
business development for Optoelectronics and Signal Processing. Mr. Bechta
joined Essex in 1989 with the merger of Essex and SEDC. As one of the founders
of SEDC, he served in various technical and management capacities since
incorporation in 1980. From 1975-1980, Mr. Bechta was employed by NSA as a
systems engineer. Mr. Bechta holds a Bachelor of Science degree in Electrical
Engineering from Spring Garden College, Pennsylvania and a Master of Science
degree in Computer Science from the Johns Hopkins University.
CRAIG H. PRICE, age 49, was elected Vice President in October, 1993. Dr.
Price, Director of Engineering, is now responsible for Essex satellite support
activities. Dr. Price joined Essex in 1989 as a result of the merger of Essex
and SEDC. Dr. Price had joined SEDC in 1985, with varied assignments in
engineering, analysis and advanced technologies. Previously, he served in
numerous technical and project positions in the U.S. Air Force during the period
1974 - 1985, and he was awarded the Distinguished Service Medal. Dr. Price holds
a Bachelor of Science degree in Electrical Engineering from Kansas State
University, a Master of Science degree in Electrical Engineering from Purdue
University and a Doctor of Philosophy degree in Electrical Engineering, from
Stanford University.
GERALD J. DAVIEAU, age 42, joined Essex as a result of the merger of Essex
with SEDC, which he joined in 1987, and was elected Vice President in November
1997. As technical director of satellite systems engineering operations, Mr.
Davieau is responsible for design and analysis of wireless satellite
applications. He is listed on more than 20 Motorola patent disclosures from work
on Iridium and Celestri satellite programs. Mr. Davieau was employed by SPACECOM
in Gaithersburg, Maryland, 1982-1987. He served in the U.S. Army, 1978 - 1982.
Mr. Davieau holds a Bachelor of Science degree in Electrical Engineering from
Lehigh University and a Master of Science degree in Electrical Engineering from
the University of Maryland.
KIMBERLY J. DECHELLO, age 37, joined Essex in May 1987 and has served in
various administrative and management capacities. She was appointed Chief
Administrative Officer in November 1997 and Corporate Secretary in January 1998.
Ms. DeChello is responsible for administration, human resources, investor
relations and industrial insurance. Ms. DeChello holds an Associate of Arts
degree in Accounting and a Bachelor of Science degree in Criminal
Justice/Criminology from the University of Maryland. She is currently a Master
of Science Degree Candidate at the University of Maryland.
FRANK E. MANNING, age 79, Chairman Emeritus, is the founder of the Company.
Mr. Manning has served as a Director of the Company since its organization in
1969. Mr. Manning received a Bachelor of Science degree in Economics from
Franklin and Marshall College in 1942, and a Masters of Letters degree in
Industrial Relations from the University of Pittsburgh in 1946.
HAROLD P. HANSON, age 76, formerly executive director of the Committee on
Science, Space and Technology of the U.S. House of Representatives from
1980-1982 and 1984-1990, was elected a Director of the Company in June 1990. Dr.
Hanson is now adjunct professor of physics, University of Florida, Gainesville
and the editor and publisher of DELOS, a non-profit journal of translation. He
is a member of the Essex Scientific Advisory Board, and a Fellow
12
<PAGE>
of the American Physical Society and a National Science Foundation Franklin
medalist. Dr. Hanson was previously provost of Wayne State University and Boston
University. He was an executive vice president, vice president for academic
affairs, dean of the Graduate School and professor of physics of the University
of Florida, Gainesville. He was also chairman of the Department of Physics and
director, Center for Structural Studies, University of Texas, Austin. A naval
officer during World War II, Dr. Hanson served as research physicist at the
Naval Ordnance Laboratory and was later a Fulbright research fellow in
1961-1962. Dr. Hanson earned graduate degrees at the University of Wisconsin.
ROBERT W. HICKS, age 61, was elected a Director of the Company in August
1988. He has been an independent consultant since 1986. During this period he
was engaged for three and one-half years by the State of Maryland Deposit
Insurance Fund Corporation, Receiver of several savings and loan associations,
first as an Agent and then as a Special Representative (both court-approved
positions). He was a principal officer and stockholder in Asset Management &
Recovery, Inc., a consulting firm which primarily provided services, directly
and as a subcontractor, to the Resolution Trust Corporation and law firms
engaged by the Resolution Trust Corporation. Mr. Hicks is also a Director and
the Corporate Secretary of the Kirby Lithographic Company, Inc.
RAY M. KEELER, age 67, was elected a Director of the Company in July 1989.
Since 1986, he has been an independent consultant to both industry and
government organizations in areas related to national and tactical intelligence
programs. Mr. Keeler served on the Board of Directors of SEDC from December 1987
through April 1989. From 1988 to November 1995, he was President of CRYTEC,
Inc., a service company providing management, business development and technical
support to companies involved in classified cryptologic projects. Since December
1995, he has been a consultant to companies involved in national technical
intelligence programs. From 1982 to 1986, Mr. Keeler was Director of Program and
Budget for the NSA. He received a Bachelor of Arts degree from the University of
Wisconsin-Madison in 1957.
13
<PAGE>
PROPOSAL 2 -- RATIFICATION OF THE ESSEX CORPORATION
1998 STOCK OPTION AND APPRECIATION RIGHTS PLAN
The Board of Directors established the Essex Corporation 1998 Stock Option
and Appreciation Rights Plan (the "1998 Plan"), which plan provides for the
issuance of incentive options, non-qualified options and stock appreciation
rights. Pursuant to the resolution, the Board of Directors has declared it to be
advisable and in the best interests of the Company and its Stockholders that the
Company adopt such plan and has directed that the 1998 Plan, as set forth
herein, be submitted to the Stockholders of the Company for ratification at the
Annual Meeting. Stockholder ratification means that Incentive Options awarded in
accordance with the 1998 Plan will receive favorable treatment, as noted below,
under Section 422 of the Internal Revenue Code of 1986.
The following summary of the material provisions of the 1998 Plan set forth
herein is not intended to be complete and is qualified in its entirety by
reference to the 1998 Plan, a copy of which is attached hereto as Exhibit A to
this Proxy Statement.
GENERAL
The purpose of the 1998 Plan is to induce officers, directors, employees
and consultants of the Company (or any of its subsidiaries) who are in a
position to contribute materially to the Company's prosperity to remain with the
Company, to offer such persons incentives and rewards in recognition of their
contributions to the Company's progress and to encourage such persons to
continue to promote the best interests of the Company. The 1998 Plan provides
for the grant to officers, directors, employees and consultants of stock options
which qualify as incentive stock options ("Incentive Options") under Section 422
of the Internal Revenue Code of 1986 (the "Code"), as well as options which do
not so qualify ("Non-Qualified Options"). In addition, stock appreciation rights
("SARs") may be granted in conjunction with the grant of Incentive Options and
Non-Qualified Options.
The 1998 Plan provides for the granting of Incentive Options, Non-Qualified
Options and SARs with respect to, in the aggregate, up to 300,000 shares of
Common Stock (which number is subject to adjustment in the event of stock
dividends, stock splits, and other similar events). To the extent that an
Incentive Option or Non-Qualified Option is not exercised within the period of
exercisability specified therein, it will expire as to the then unexercised
portion. If any Incentive Option, Non-Qualified Option or SAR terminates prior
to exercise thereof and during the duration of the 1998 Plan, the shares of
Common Stock as to which such option or right was not exercised will become
available under the 1998 Plan for the grant of additional options or rights to
any eligible officer, director, employee and consultant. The shares of Common
Stock subject to the 1998 Plan may be made available from either authorized but
unissued shares, treasury shares, or both. The 1998 Plan became effective upon
adoption by the Board of Directors, subject to its approval by the affirmative
vote of the holders of a majority of the company's outstanding voting stock
entitled to vote thereon. In the event that the 1998 Plan is not approved by the
Stockholders, the 1998 Plan shall remain in force; however, all options granted
thereunder shall automatically be deemed to be Non-Qualified Options.
14
<PAGE>
As of the date hereof: (a) there have been no options or rights granted
under the 1998 Plan, and (b) an aggregate of 57 persons are eligible to
participate in the 1998 Plan including 53 employees (including 12 executive
officers and directors) of the Company entitled to receive Incentive Options
under the 1998 Plan and 4 persons (all directors) who may receive Non- Qualified
Options under the 1998 Plan. Consultants engaged by the Company from time to
time are also expected to be eligible to receive Non-Qualified Options under the
1998 Plan.
ADMINISTRATION
The 1998 Plan will be administered by: (a) the Board of Directors or (b) in
the discretion of the Board of Directors, by a committee (the "Committee") of
the Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee" director as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b- 3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Board of Directors or
the Committee generally has the authority to determine the individuals to whom
and the date on which options and rights are to be granted, the number of shares
of stock to be subject to each option and right, the exercise price of shares of
stock subject to options and rights, the terms of any vesting or forfeiture
schedule and the other terms and provisions of each option and right.
SECTION 16(B) COMPLIANCE
It is intended that transactions pursuant to the 1998 Plan will satisfy the
conditions of Rule 16b-3, as amended, promulgated under Section 16 of the
Exchange Act. Section 16(b) of the Exchange Act provides that any so-called
"short swing profits," that is, a profit realized by an officer, director, or
owner of 10 percent or more of the outstanding securities on a purchase and a
sale of stock within a six-month period, are recoverable by the issuer of the
securities. Although the application of Section 16(b) (and the rules promulgated
thereunder) is complex, Rule 16b-3 generally mitigates the impact of Section
16(b) by providing an exemption from the liability provisions for transactions
which satisfy the conditions of Rule 16b-3.
ELIGIBILITY AND EXTENT OF PARTICIPATION
Incentive Options may be granted pursuant to the 1998 Plan only to
employees of the Company (or any subsidiary). Non-Qualified Options and SARs may
be granted pursuant to the 1998 Plan to officers, directors, employees or
consultants of the Company or any subsidiary.
There is no minimum number of shares of Common Stock with respect to which
an option or right may be granted. However, if the aggregate fair market value
of shares with respect to which Incentive Options are exercisable for the first
time by any employee during any calendar year (under all stock option plans of
the Company) exceeds $100,000, such excess options shall be treated as
Non-Qualified Options. For the purpose of the foregoing limitation, the fair
market value of shares subject to an Incentive Option is to be determined as of
the time the option is granted.
15
<PAGE>
The Board of Directors or the Committee may require, as a condition of
granting any option or right, that the optionee enter into a stock option
agreement which shall require, among other things, the agreement by the employee
with the Company that the employee not sell or otherwise dispose of shares
acquired pursuant to the exercise of an Incentive Option for a minimum of two
years from the date of grant of the Incentive Option and one year from the date
of transfer of the Common Stock, absent the written approval, consent or waiver
of the Board of Directors or Committee.
PURCHASE PRICE AND EXERCISE OF OPTIONS
The price at which shares of Common Stock covered by an option may be
purchased shall be determined by the Board of Directors or the Committee;
however, the purchase price of shares of Common Stock issuable upon exercise of
an Incentive Option must not be less than 100 percent of the fair market value
of such shares on the date the Incentive Option is granted. Any cash proceeds
received by the Company from the exercise of the options will be used for
general corporate purposes.
EXPIRATION AND TRANSFER OF OPTIONS
The Board of Directors or the Committee has the sole discretion to fix the
period within which any Incentive or Non-Qualified Option may be exercised. Any
Incentive Option granted under the 1998 Plan to a 10 percent or less stockholder
and any Non-Qualified Option shall be exercised during a period not more than
ten years from the date of grant and any Incentive Option granted to a greater
than 10 percent stockholder shall be exercised within five years from the date
of grant. No Incentive Options may be granted under the 1998 Plan more than ten
years after the date of adoption of the 1998 Plan.
Options granted under the 1998 Plan are not transferable except upon death.
Incentive options generally may be exercised only while the option holder is
employed by the Company, or in some cases, within three months of termination of
employment. In the event of disability of an option holder, incentive options
may be exercised to the extent of the accrued right to purchase the option
within one year of termination of employment due to disability. In the event of
death of an option holder, incentive options may be exercised prior to
expiration of the option within three years after the date of death, whichever
period of time is shorter. In the event of retirement of an optionholder,
options may be exercised at any time within the remaining term of such option.
Upon a reorganization, merger or consolidation of the Company as a result
of which the outstanding Common Stock is changed into or exchanged for cash or
property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company, the 1998 Plan will terminate and
all outstanding options previously granted thereunder shall terminate, unless
provision is made in connection with such transaction for the continuance of the
1998 Plan or for the assumption of options therefore granted. If the 1998 Plan
and unexercised options are to terminate pursuant to such transaction, persons
owning any unexercised portions of options then outstanding will have the right,
prior to the consummation of the transaction, to exercise the unexercised
portions of their options, including the portions thereof which would, but for
such transaction, not yet be exercisable.
16
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
In case of Incentive Options, no taxable gain will be realized by an option
holder upon grant or exercise of the option, and the Company will not be
entitled to a tax deduction at the time any such option is granted or exercised.
However, the excess of the fair market value of any stock received over the
option price will constitute an adjustment in computing alternative minimum
taxable income at the time of the transfer of stock pursuant to the exercise of
the option, or if later, at the earlier of the time that the stock is
transferable or is not subject to a substantial risk of forfeiture.
The treatment for federal income tax purposes of Non-Qualified Options
depends on whether the option has a readily ascertainable fair market value at
the time it is granted. Because the Non-Qualified Options are not actively
traded on an established market and because it is likely that the Non-Qualified
Options will be nontransferable by the optionee or will not be immediately
exercisable, it is expected that the Non-Qualified Options will not have a
readily ascertainable fair market value. If a Non-Qualified Option does not have
a readily ascertainable fair market value at the time of the grant, there is no
taxable event at grant; rather, the excess of (i) the fair market value of the
Common Stock on the date it is acquired pursuant to exercise of the option over
(ii) the exercise price, plus the amount, if any, paid for the option must be
included in the optionee's gross income at the time of the receipt of stock
pursuant to exercise of the option, or if later, at the earlier of the time that
the stock is transferable or is not subject to a substantial risk of forfeiture.
If stock received pursuant to the exercise of a Non-Qualified Option is not
taxable at receipt because the stock is nontransferable and subject to a
substantial risk of forfeiture, the optionee may nevertheless elect to include
such amount in gross income when the stock is received pursuant to exercise of
the option.
Under Section 280G of the Code, certain persons who receive compensation
payments in connection with a change in control of a company may be subject to a
20 percent excise tax and the issuer may lose its tax deduction with respect to
such payments. These rules may apply to options and rights granted under the
1998 Plan. The determination of the application of these rules will depend upon
a number of factual matters not determinable at this time. It should be
realized, however, that these rules may affect the ability of the Company to
secure a tax deduction on the exercise of certain Non-Qualified Options granted
under the 1998 Plan.
The tax consequences summarized above may change in the event of amendment
to the Code or the regulations adopted thereunder.
EXERCISE OF OPTIONS; SARS
Generally, an option will be exercised by the tender in cash of the total
exercise price for the shares of stock which the option is being exercised. The
Board of Directors or the Committee may, however permit an optionee to pay all
or a portion of the exercise price by delivering to the Company shares of Common
Stock having an aggregate fair market value at least equal to such total
exercise price. An option may also be exercised by tender to the Company of a
written notice of exercise together with advice of the delivery of an order to a
broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company sufficient proceeds from the sale of such shares to pay the exercise
price and any withholding taxes (a "cashless exercise") provided
17
<PAGE>
all documentation and procedures are approved in advance by the Board or the
Committee. The Company has the authority under the 1998 Plan to assist any
employee of the Company with the payment of the purchase price of the Common
Stock by lending the amount of the purchase price to the employee, on terms,
including rate of interest and security for the loan, as the Board of Directors
shall authorize.
The Board of Directors or the Committee may, in its discretion, at any time
prior to the exercise of any option, grant in connection with such option the
right to surrender part or all of such option to the extent the option is
exercisable, and receive an amount (payable in cash, shares of the Company's
Common Stock or combination thereof as determined by the Board of Directors or
the Committee) equal to the difference between the then fair market value of the
shares issuable upon the exercise of the option (or portions thereof
surrendered) and the exercise price of the option or portion thereof
surrendered.
AMENDMENTS TO THE 1998 PLAN
The Board of Directors may at any time terminate the 1998 Plan or make such
arrangements thereto as it deems advisable and in the best interests of the
Company, without action on the part of the Company's stockholders, unless such
approval is required pursuant to Section 422 of the Code or other federal or
state law. Such amendments may include, without limitation, changes in the
number of shares reserved for issuance under the plan, the class or classes of
individuals eligible to participate therein and the manner of administration and
duration of the plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE ESSEX CORPORATION 1998 STOCK OPTION AND APPRECIATION RIGHTS PLAN. UNLESS
MARKED TO THE CONTRARY, SHARES OF COMMON STOCK REPRESENTED BY PROXY CARDS
RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 2.
PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has, upon recommendation of the Audit Committee,
selected Stegman & Company as independent auditors of the Company for the fiscal
year ending December 27, 1998, and has further directed that the selection of
such auditors be submitted for ratification by the stockholders at the Annual
Meeting. Effective June 22, 1998, Stegman & Company replaced Arthur Andersen LLP
as the Company's principal accountants. Arthur Andersen LLP had been the
Company's auditors since 1992.
The Company had no disagreement with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, internal
controls, or auditing scope or procedure, in connection with the audits of the
1995 or 1996 fiscal years or subsequent to December 29, 1996 through June 22,
1998, the date of dismissal. The Company's financial statements for each of the
1995 and 1996 fiscal years did not contain an adverse opinion or disclaimer of
opinion, and were not qualified as to uncertainty, audit scope or accounting
principles.
18
<PAGE>
The decision to change accountants was recommended unanimously by the Audit
Committee of the Company's Board of Directors.
Stegman & Company representatives will be present at the Annual Meeting to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS AND, UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF SUCH
RATIFICATION.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matter requiring a vote of the Stockholders is properly
brought before the Annual Meeting, it is the intention of the persons appointed
as proxies to vote with respect to any such matter in accordance with their best
judgment.
It is important that proxies be returned promptly. Stockholders, whether or
not they expect to attend the Annual Meeting in person, are urged to complete,
sign and return the accompanying proxy in the enclosed envelope which requires
no postage if mailed in the United States.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any proposal which a Stockholder wishes to have presented at the next
Annual Meeting of Stockholders, expected to be held during September 1999, must
be received at the office of the Company at 9150 Guilford Road, Columbia,
Maryland 21046-1891 no later than March 31, 1999. In order for a Stockholder
proposal submitted outside Rule 14a-8 to be considered "timely" within the
meaning of Rule 14a-4(c), such proposals must be received by the Company no
later than August 28, 1999.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report on Form 10-KSB/A No. 1 for the year
ended December 28, 1997 accompanies this Proxy Statement. Additional copies of
this report may be obtained by written request to the Secretary at the address
indicated below. Such report is not part of the proxy solicitation materials.
19
<PAGE>
REFERENCE DOCUMENTS
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB/A No. 1 FOR THE YEAR ENDED DECEMBER 28, 1997 AND THE EXHIBITS THERETO
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO THE
SECRETARY, ESSEX CORPORATION, 9150 GUILFORD ROAD, COLUMBIA, MARYLAND 21046-1891.
THE FORM 10-KSB/A No. 1 IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
BY ORDER OF THE BOARD OF DIRECTORS
KIMBERLY J. DECHELLO
SECRETARY
20
<PAGE>
EXHIBIT A
ESSEX CORPORATION
1998 STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1. Essex Corporation (the "Company"), a Virginia corporation,
hereby establishes a stock option and appreciation rights plan to be named the
Essex Corporation 1998 Stock Option and Appreciation Rights Plan (the "1998
Plan").
Section 1.2. The purpose of this 1998 Plan is to induce persons who are
officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This 1998 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value $.10 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to persons who are
employees, as well as options which do not so qualify ("Non-Qualified Options")
to be issued to persons or consultants, including those who are not employees.
This 1998 Plan also provides for grants of stock appreciation rights ("SARs") in
connection with the grant of options under this 1998 Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require.
Section 1.3. All options and other rights previously granted by the
Company under any other plan previously adopted by the Company shall continue to
be governed by such plan. All Options granted hereunder on or after the date
that this 1998 Plan has been approved and adopted by the Company's board of
directors (the "Board of Directors") shall be governed by the terms and
conditions of this 1998 Plan unless the terms of such Option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section 2.1. All determinations under this 1998 Plan concerning the
selection of persons eligible to receive awards under this 1998 Plan and with
respect to the timing, pricing and amount of an award under this 1998 Plan shall
be made by the administrator (the "Administrator") of this 1998 Plan. The
Administrator shall be either: (a) the Board of Directors or (b) in the
discretion of the Board of Directors by a committee (the "Committee") of the
Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee director" as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In such case, a majority
of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at
any meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee shall be necessary to constitute action
by the Committee.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this 1998 Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
that any provision of this 1998 Plan or action by the Administrator fails to so
comply, it shall be deemed to be null and void, to the extent permitted by law
and deemed advisable by the Administrator.
Section 2.2. The provisions of this 1998 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code
("Section 422") and the regulations promulgated thereunder. In the event that
any future statute or regulation shall modify Section 422, this 1998 Plan shall
be deemed to incorporate by reference such modification. Any stock option
agreement relating to the grant of any Incentive Option pursuant to this 1998
Plan, which option is outstanding and unexercised at the time that any modifying
statute or regulation becomes effective, shall also be deemed to incorporate by
reference such modification, and no notice of such modification need be given to
the Optionee (as hereinafter defined). Any stock option agreement relating to an
Incentive Option shall provide that the Optionee (as hereinafter defined) hold
the stock received upon exercise of
i
<PAGE>
such Incentive Option for a minimum of two years from the date of grant of the
Incentive Option and one year from the date of exercise of such Incentive
Option, absent the written approval, consent or waiver of the Administrator.
Section 2.3. If any provision of this 1998 Plan is determined to
disqualify the shares of Common Stock purchasable upon exercise of an Incentive
Option granted under this 1998 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify such shares of Common Stock for said tax
treatment.
Section 2.4. The Company shall grant Options under this 1998 Plan in
accordance with determinations made by the Administrator pursuant to the
provisions of this 1998 Plan. All Options granted pursuant to this 1998 Plan
shall be clearly identified as Incentive Options or Non-Qualified Options. The
Administrator may from time to time adopt (and thereafter amend or rescind) such
rules and regulations for carrying out this 1998 Plan and take such action in
the administration of this 1998 Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The Board of Directors or, subject to the
supervision of the Board of Directors, the Committee, as the Administrator,
shall have plenary discretion, subject to the express provisions of this 1998
Plan, to determine which officers, directors, employees and consultants shall be
granted Options, the number of shares subject to each Option, the time or times
when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of
the respective option agreements (which need not be identical), including such
terms and provisions which may be amended from time to time as shall be
required, in the judgment of the Administrator, to conform to any change in any
law or regulation applicable hereto, and to make all other determinations deemed
necessary or advisable for the administration of this 1998 Plan. The
interpretation and construction of any provision of this 1998 Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be
final, conclusive and binding upon all persons.
Section 2.5. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to administration of
this 1998 Plan or the Options granted hereunder. A member of the Administrator
shall be indemnified by the Company, pursuant to the Company's bylaws, for any
expenses, judgments or other costs incurred as a result of a lawsuit filed
against such member claiming any rights or remedies arising out of such member's
participation in the administration of this 1998 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1. There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 1998 Plan an
aggregate of 300,000 shares of Common Stock of the Company (subject to
adjustment as provided in Article VIII hereof). The shares issued upon exercise
of any Options granted under this 1998 Plan may be shares of Common Stock
previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section 3.2. In the event that any Options outstanding under this 1998
Plan for any reason expire or are terminated without having been exercised in
full or shares of Common Stock subject to Options are surrendered in whole or in
part pursuant to Rights granted under Section 7.6 hereof (except to the extent
that shares of Common Stock are issued as payment to the holder of the Option
upon such surrender) the unpurchased shares of Common Stock subject to such
Option and any such surrendered shares of Common Stock may again be available
for transfer under this 1998 Plan.
Section 3.3. No Options shall be granted pursuant to this 1998 Plan to
any Optionee after the tenth anniversary of the date that this 1998 Plan is
adopted by the Board of Directors.
ARTICLE IV
ELIGIBILITY
Section 4.1. Non-Qualified Options may be granted pursuant to this 1998
Plan to officers, directors, employees and consultants of the Company (or any of
its subsidiaries) selected by the Administrator, and Incentive Options may be
granted pursuant to this 1998 Plan only to employees (including officers and
directors who are also employees) of the Company (or any of its subsidiaries)
selected by the Administrator. Persons granted Options pursuant to this 1998
Plan are referred to herein as "Optionees." For purposes of determining who is
an employee
ii
<PAGE>
with respect to eligibility for Incentive Options, Section 422 shall govern. The
Administrator may determine (in its sole discretion) that any person who would
otherwise be eligible to be granted Options shall, nonetheless, be ineligible to
receive any award under this 1998 Plan.
Section 4.2. The Administrator will (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; PROVIDED,
HOWEVER, no Option will be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant in accomplishing the purpose of
this 1998 Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1. Each Option granted under this 1998 Plan shall be
evidenced by a stock option certificate and agreement (the "Stock Option
Certificate and Agreement") in a form consistent with this 1998 Plan, provided
that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Stock Option Certificate and
Agreement and shall be determined by the Administrator, provided that the option
price for any Incentive Option shall not be less than the "fair market value" of
the shares of Common Stock at the time of grant determined in accordance with
Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1998 Plan to an
Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the fair market value
shall be based upon the following: (i) if the shares of Common Stock are not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the shares of Common Stock published by a
recognized stock quotation service, on the basis of the recent purchases and
sales of the shares of Common Stock in arms-length transactions; or (ii) if the
shares of Common Stock are not then listed and traded upon a recognized
securities exchange or quoted on the NASDAQ Stock Market, and there are reports
of stock prices by a recognized quotation service, upon the basis of the last
reported sale or transaction price of such stock on the date of grant as
reported by a recognized quotation service, or, if there is no last reported
sale or transaction price on that day, then upon the basis of the mean of the
last reported closing bid and closing asked prices for such stock on that day or
on the date nearest preceding that day; or (iii) if the shares of Common Stock
shall then be listed and traded upon a recognized securities exchange or quoted
on the NASDAQ Stock Market, upon the basis of the last reported sale or
transaction price at which shares of Common Stock were traded on such recognized
securities exchange on the date of grant or, if the shares of Common Stock were
not traded on such date, upon the basis of the last reported sale or transaction
price on the date nearest preceding that date. The Administrator shall also
consider such other factors relating to the fair market value of the shares of
Common Stock as it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee is considered to own those shares which are owned directly or
indirectly through brothers and sisters (including half-blooded siblings),
spouse, ancestors and lineal descendants; and proportionately as a shareholder
of a corporation, a partner of a partnership, and/or a beneficiary of a trust or
an estate that owns shares of the Company.
(d) Notwithstanding any other provision of this 1998 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the extent that
the aggregate fair market value (determined at the time the Option
iii
<PAGE>
is granted) of the shares of Common Stock of the Company with respect to which
Incentive Options (without reference to this provision) are exercisable for the
first time by any individual in any calendar year under any and all stock option
plans of the Company, its subsidiary corporations and its parent (if any)
exceeds $100,000, such Options shall be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more
than one Incentive Option or Non-Qualified Option during the duration of this
1998 Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; PROVIDED, HOWEVER, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option and any Right related thereto shall be
within the sole discretion of the Administrator; PROVIDED, HOWEVER, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any
Non-Qualified Option shall, by its terms, be exercised within ten years after
the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five
years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable
by the Optionee other than by will, or by the laws of descent and distribution.
An Option may be exercised during the Optionee's lifetime only by the Optionee.
(h) The Administrator may impose such other or further conditions on
any transaction under the 1998 Plan, including without limitation, the grant or
award of any Option or the exercise or other disposition thereof, as it, in its
discretion, may deem necessary or advisable in order to exempt the transaction
from Section 16(b) of the Exchange Act, including without limitation thereto,
the approval or ratification of the transaction by shareholders or a six-month
restriction on disposition of the Option or the Common Stock issuable upon
exercise thereof.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1. If the employment or service of an Optionee is terminated
for cause, the option rights of such Optionee, both accrued and future, under
any then outstanding Non-Qualified or Incentive Option shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties,
disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of patents,
processes or trade secrets of the Company, individually or as an employee,
partner, associate, officer or director of any organization. The determination
of the existence and the proof of "cause" shall be made by the Administrator
and, subject to the review of any determination made by the Administrator, such
determination shall be binding on the Optionee and the Company.
Section 6.2. If the employment or service of the Optionee is terminated
by either the Optionee or the Company for any reason other than for cause,
death, retirement or for disability, as defined in Section 22(e)(3) of the Code,
the option rights of such Optionee under any then outstanding Incentive Option
shall, subject to the provisions of Section 5.1(h) hereof, be exercisable by
such Optionee at any time prior to the expiration of the Option or within three
months after the date of such termination, whichever period of time is shorter,
but only to the extent of the accrued right to exercise the Option at the date
of such termination.
Section 6.3. In the case of an Optionee who becomes disabled, as
defined by Section 22(e)(3) of the Code, the option rights of such Optionee
under any then outstanding Incentive Option shall, subject to the provisions of
Section 5.1(h) hereof, be exercisable by such Optionee at any time prior to the
expiration of the Option or within one year after the date of termination of
employment or service due to disability, whichever period of time is shorter,
but only to the extent of the accrued right to exercise the Option at the date
of such termination.
Section 6.4. In the event of the death of an Optionee, the option
rights of such Optionee under any then outstanding Incentive Option shall be
exercisable by the person or persons to whom these rights pass by will or by the
laws of descent and distribution, at any time prior to the expiration of the
Option or within three years after the date of death, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of death. If a person or estate acquires the right to exercise an
Incentive Option by bequest or inheritance, the Administrator may require
reasonable evidence as to the ownership of such Option, and may require such
consents and releases of taxing authorities as the Administrator may deem
advisable.
iv
<PAGE>
Section 6.5. If an Optionee to whom an Option has been granted under
this 1998 Plan retires from his employment or service with the Company or any of
the Subsidiaries under a retirement plan or policy of the Company and its
Subsidiaries or at his or her normal retirement date or earlier with the
approval or consent of the Company or such Subsidiary, or as a result of the
Disability as defined in Section 22(e)(3) of the Code, such Option shall
continue to be exercisable in whole or in part, to the extent not therefore
exercised, by the Optionee to whom granted in the manner set forth in this 1998
Plan, at any time within the remaining term of such Option.
Section 6.6. The Administrator may also provide that an employee must
be continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section 6.7. Except in the event of termination for cause,
Non-Qualified Options shall be exercisable during such term as determined at the
time of grant by the Administrator.
Section 6.8. Options granted under this 1998 Plan shall not be affected
by any change of duties or position, so long as the Optionee continues in the
service of the Company.
Section 6.9. Nothing contained in this 1998 Plan, or in any Option
granted pursuant to this 1998 Plan, shall confer upon any Optionee any right
with respect to continuance of employment or service by the Company nor
interfere in any way with the right of the Company to terminate the Optionee's
employment or service or change the Optionee's compensation at any time.
ARTICLE VII
PURCHASE OF SHARES
Section 7.1. Except as provided in this Article VII, an Option shall be
exercised by tender to the Company of the full exercise price of the shares of
Common Stock with respect to which the Option is exercised and written notice of
the exercise. The right to purchase shares of Common Stock shall be cumulative
so that, once the right to purchase any shares of Common Stock has accrued, such
shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. A partial exercise of an Option shall
not affect the right of the Optionee to exercise the Option from time to time,
in accordance with this 1998 Plan, as to the remaining number of shares of
Common Stock subject to the Option. The purchase price of the shares shall be in
United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the
approval of the Administrator, exercise his or her Option by tendering to the
Company shares of Common Stock of the Company owned by him or her and having an
aggregate fair market value at least equal to the full exercise price. The fair
market value of any shares of Common Stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof.
Section 7.2. Except as provided in Article VI above, an Option may not
be exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section 7.3. No Optionee, or Optionee's executor, administrator,
legatee, or distributee or other permitted transferee, shall be deemed to be a
holder of any shares of Common Stock subject to an Option for any purpose
whatsoever unless and until a stock certificate or certificates for such shares
are issued to such person under the terms of this 1998 Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article VIII hereof.
Section 7.4. If: (i) the listing, registration or qualification of the
Options issued hereunder, or of any securities issuable upon exercise of such
Options (the "Subject Securities") upon any securities exchange or quotation
system or under federal or state law is necessary as a condition of or in
connection with the issuance or exercise of the Options, or (ii) the consent or
approval of any governmental regulatory body is necessary as a condition of or
in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such
v
<PAGE>
listing, registration, qualification, consent or approval shall have been
effected or obtained. The Company will take reasonable action to so list,
register, or qualify the Options and the Subject Securities, or effect or obtain
such consent or approval, so as to allow for their issuance.
Section 7.5. An Optionee may be required to represent to the Company as
a condition of his or her exercise of Options issued under this 1998 Plan that:
(i) the Subject Securities acquired upon exercise of his or her Option are being
acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act or the rules and regulations thereunder.
Optionees may also be required to provide (as a condition precedent to exercise
of an Option) such documentation as may be reasonably requested by the Company
to assure compliance with applicable law and the terms and conditions of this
1996 Plan and the subject Option.
Section 7.6. The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the right
(previously defined as an "SAR" or collectively, the "SARs") to surrender all or
part of the Option to the extent that such Option is exercisable and receive in
exchange an amount (payable in cash, shares of Common Stock valued at the then
fair market value, or a combination thereof as determined by the Administrator)
equal to the difference (the "Spread") between the then fair market value of the
shares of Common Stock issuable upon the exercise of the Option (or portions
thereof surrendered) and the option price payable upon the exercise of the
Option (or portions thereof surrendered). Such SARs may be included in an Option
only under the following conditions: (a) the SARs will expire no later than the
expiration of the underlying Option; (b) the SARs may be for no more than one
hundred percent (100%) of the Spread; (c) the SARs are transferable only when
the underlying Option is transferable and under the same conditions; (d) the
SARs may be exercised only when the underlying Option is eligible to be
exercised; and (e) the SARs may be exercised only when the Spread is positive,
i.e., when the market price of the stock subject to the Option exceeds the
exercise price of the Option.
Section 7.7. An Option may also be exercised by tender to the Company
of a written notice of exercise together with advice of the delivery of an order
to a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section 8.1. In the event that the outstanding shares of Common Stock
of the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this 1998 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding
adjustment in the option price per share. Any such adjustment made by the
Administrator shall be conclusive.
Section 8.2. The grant of an Option pursuant to this 1998 Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
vi
<PAGE>
Section 8.3. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to Options hereunder
are changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this 1998 Plan shall
terminate, and all outstanding Options theretofore granted hereunder shall
terminate, unless provision be made in writing in connection with such
transaction for the continuance of this 1998 Plan and/or for the assumption of
Options theretofore granted, or the substitution for such Options of options
covering the stock of a successor employer corporation, or a parent or a
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in which event this 1998 Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If this 1998 Plan
and unexercised Options shall terminate pursuant to the foregoing sentence, all
persons owning any unexercised portions of Options then outstanding shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of their Options, including the portions thereof which would, but for
this Section 8.3 not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1. The Board of Directors may at any time terminate this 1998
Plan or make such amendments hereto as it shall deem advisable and in the best
interests of the Company, without action on the part of the stockholders of the
Company unless such approval is required pursuant to Section 422 of the Code or
the regulations thereunder or other federal or state law; PROVIDED, HOWEVER,
that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, materially
adversely affect or impair the rights of such individual under such Option.
Pursuant to Section 422(b) of the Code, no Incentive Option may be granted
pursuant to this 1998 Plan after ten years from the date this 1998 Plan is
adopted or the date this 1998 Plan is approved by the stockholders of the
Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section 10.1. Any Options and shares of Common Stock issued pursuant to
this 1998 Plan shall be subject to such restrictions on transfer and limitations
as shall, in the opinion of the Administrator, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. In addition, the Administrator
may in any Stock Option Certificate and Agreement impose such other restrictions
upon the disposition or exercise of an Option or upon the sale or other
disposition of the shares of Common Stock deliverable upon exercise thereof as
the Administrator may, in its sole discretion, determine. By accepting an award
pursuant to this 1998 Plan, each Optionee shall thereby agree to any such
restrictions.
Section 10.2. Any certificate issued to evidence shares of Common Stock
issued pursuant to an Option shall bear such legends and statements as the
Committee, the Board of Directors or counsel to the Company shall deem advisable
to assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. No shares of Common Stock will
be delivered pursuant to exercise of the Options granted under this 1998 Plan
until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as
the Committee, the Board of Directors or counsel to the Company deems necessary
or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section 11.1. The Company is vested with authority under this 1998 Plan
to assist any employee to whom an Option is granted hereunder (including any
officer or director of the Company or any of its subsidiaries who is also an
employee) in the payment of the purchase price payable on exercise of such
Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as
shall have been authorized by or under authority of the Board of Directors. Any
such assistance
vii
<PAGE>
shall comply with the requirements of Regulation G promulgated by the Board of
the Federal Reserve System, as amended from time to time, and any other
applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section 12.1. The proceeds received by the Company from the issuance
and sale of Common Stock upon exercise of Options granted pursuant to this 1998
Plan are to be added to the general funds of the Company and used for its
corporate purposes as determined by the Board of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section 13.1. This 1998 Plan shall become effective upon adoption by
the Board of Directors, and Options may be issued hereunder from and after that
date subject to the provisions of Section 3.3 above. This 1998 Plan must be
approved by the Company's stockholders in accordance with the applicable
provisions (relating to the issuance of stock or options) of the Company's
governing documents and state law or, if no such approval is prescribed therein,
by the affirmative vote of the holders of a majority of the votes cast at a duly
held stockholders meeting at which a quorum representing a majority of all the
Company's outstanding voting stock is present and voting (in person or by proxy)
or, without regard to any required time period for approval, by any other method
permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this
1998 Plan by the Board of Directors or within such other time period required
under Section 422 of the Code and the regulations thereunder, this 1998 Plan
shall remain in force, provided however, that all Options issued and issuable
hereunder shall automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this 1998 Plan by the
Board of Directors, this 1998 Plan is executed and adopted as of the 7th day of
August, 1998.
ESSEX CORPORATION
viii
<PAGE>
ESSEX CORPORATION, 9150 GUILFORD ROAD, COLUMBIA, MARYLAND 21046
Management Proxy for the Annual Meeting of Stockholders
The undersigned hereby appoints Joseph R. Kurry, Jr., Leonard E.
Moodispaw, and Terry M. Turpin proxies with full power of substitution in them
to vote all shares of common stock which the undersigned may be entitled to vote
at the Annual Meeting of Stockholders of Essex Corporation to be held on
November 9, 1998 at the Company's Corporate office, 9150 Guilford Road,
Columbia, Maryland, at 10:00 a.m., and at any adjournment or adjournments of
such meeting, with all powers which the undersigned would possess if personally
present. Without limiting the generality of the foregoing, said proxies are
authorized to vote as follows:
1. Election of Directors
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
HAROLD P. HANSON
ROBERT W. HICKS
RAY M. KEELER
HARRY LETAW, JR.
FRANK E. MANNING
LEONARD E. MOODISPAW
TERRY M. TURPIN
2. Ratification of the Essex Corporation 1998 Stock Option and Appreciation
Rights Plan. (Management Favors a Vote For Approval.)
APPROVE |_| DISAPPROVE |_| ABSTAIN |_|
3. Confirm Stegman & Company as independent auditors for the company.
(Management Favors a Vote For Approval.)
APPROVE |_| DISAPPROVE |_| ABSTAIN |_|
4. Act upon such other business as may properly come before the meeting.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION
MADE THEREON. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL DIRECTOR NOMINEES AND TO APPROVE THE ABOVE STATED PROPOSALS.
Receipt is hereby acknowledged of the Notice of Meeting and Proxy Statement of
Essex Corporation dated October 12, 1998.
I will attend |_| I will NOT attend the Meeting |_|
------------------------------------------------
Signature of Stockholder Date
------------------------------------------------
Signature of Stockholder Date
Please sign exactly as your name appears on the envelope in
which this card was mailed. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE POSTAGE-PREPAID
ENVELOPE THIS PROXY IS SOLICITED BY THE MANAGEMENT OF ESSEX CORPORATION
ix
