Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SECTION 240.14a-11(c) or
SECTION240.14a-12
HADRON, INC.
(Name of Registrant as Specified In Its Charter)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box) :
[X] $125 per Exchange Act Rule 0-11(c) (1) (ii), 14a-6(i) (1),
14-a-6(i) (2) or Item 22 (a) (2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i) (3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and 0-11
1) Title of each class of securities to which transaction
applies:
___________________________________________________________
2) Aggregate number of securities to which transaction
apples:
___________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
___________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________
<PAGE>
5) Total fee paid:
___________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a) (2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________
2) Form, Schedule or Registration Statement No. :
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
<PAGE>
[HADRON LOGO]
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
November 1, 1996
Dear Shareholder:
You are cordially invited to attend Hadron, Inc.'s Annual
Meeting of Shareholders to be held on December 6, 1996, at 1:00
p.m. local time at the Turf Valley Conference Center at 2700 Turf
Valley Road, Ellicott City, Maryland.
This year, in addition to electing the Company's Board of
Directors, you are also being asked to approve an amendment to
the Company's 1994 Stock Option Plan to increase the number of
shares reserved for issuance by an additional 55,000 shares of
Common Stock, to approve a proposed amendment of the Company's
Certificate of Incorporation to eliminate the personal liability
of directors of the Company under certain circumstances and to
ratify the appointment of Ernst & Young L.L.P as accountants. We
also will be pleased to report on the business of the Company and
a discussion period will be provided for questions and comments
of general interest to shareholders.
Whether or not you are able to attend, it is important that
your shares be represented and voted at this meeting.
Accordingly, please complete, sign and date the enclosed proxy
and mail it in the envelope provided at your earliest
convenience. If a second mailing were required in order to
obtain sufficient votes, it would be quite costly to the Company.
Your prompt response is very important and would be greatly
appreciated.
Sincerely,
C.W. Gilluly, Ed.D.
Chairman and
Chief Executive Officer
George E. Fowler
President and
Chief Operating Officer
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting, please complete,
sign, and return promptly the enclosed proxy in the envelope
provided to ensure that your vote will be counted. You may vote
in person if you so desire even if you have previously sent in
your proxy.
If your shares are held in the name of a bank, brokerage
firm or other nominee, please contact the party responsible for
your account and direct him or her to vote your shares on the
enclosed card.<PAGE>
HADRON, INC.
Notice of Annual Meeting of Shareholders
December 6, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Hadron, Inc., a New York corporation (the
"Company"), is scheduled to be held on December 6, 1996 at 1:00
p.m., local time, at the Turf Valley Conference Center, located
at 2700 Turf Valley Road, Ellicott City, Maryland for the
following purposes:
1. To elect three directors to serve for the terms of
office specified in the accompanying proxy statement
and until their successors are duly elected and
qualified;
2. To approve an amendment to the Company's 1994 Stock
Option Plan to increase the number of shares of Common
Stock reserved for issuance by an additional 55,000
shares of Common Stock;
3. To consider and vote on a proposed amendment of the
Company's Certificate of Incorporation to eliminate the
personal liability of directors of the Company under
certain circumstances;
4. To ratify the selection of Ernst & Young L.L.P. as
independent accountants for the Company for fiscal year
1997; and
5. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on
October 24, 1996 are entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. All shareholders are
cordially invited to attend the Annual Meeting in person.
However, to assure your representation at the meeting, you are
urged to complete, sign and date the enclosed form of proxy and
return it promptly in the envelope provided. Shareholders
attending the meeting may revoke their proxy and vote in person.
FOR THE BOARD OF DIRECTORS
S. Amber Gordon
Secretary
Alexandria, Virginia
November 1, 1996 <PAGE>
HADRON, INC.
PROXY STATEMENT
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, par value $.02 per share (the "Common Stock"), of Hadron,
Inc., a New York corporation (the "Company") in connection with
the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Shareholders to be held
on Friday, December 6, 1996, or at any adjournment thereof,
pursuant to the accompanying Notice of Annual Meeting of
Shareholders. The purposes of the meeting and the matters to be
acted upon are set forth in the accompanying Notice of Annual
Meeting of Shareholders. The Board of Directors is not currently
aware of any other matters that will come before the Annual
Meeting.
Proxies for use at the Annual Meeting are being solicited by
the Board of Directors of the Company. These proxy solicitation
materials are first being mailed on or about November 1, 1996 to
all shareholders entitled to vote at the Annual Meeting. Proxies
will be solicited chiefly by mail. The Company will make
arrangements with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their
expenses in so doing. Should it appear desirable to do so in
order to ensure adequate representation of shares at the Annual
Meeting, officers, agents and employees of the Company may
communicate with shareholders, banks, brokerage houses and others
by telephone, facsimile or in person to request that proxies be
furnished. All expenses incurred in connection with this
solicitation will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting and a return
envelope for the proxy are enclosed. Shareholders may revoke the
authority granted by their execution of proxies at any time
before their effective exercise by filing with the Secretary of
the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by voting in person at the Annual
Meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with
the choice or instructions specified thereon. If no
specifications are given, the proxies intend to vote the shares
represented thereby to approve Proposals No. 1, 2, 3 and 4 as set
forth in the accompanying Notice of Annual Meeting of
Shareholders and in accordance with their best judgment on any
other matters which may properly come before the Annual Meeting.
<PAGE>
Record Date and Voting Rights
Only shareholders of record at the close of business on
October 24, 1996 are entitled to notice of and to vote at the
Annual Meeting. As of the record date, 1,503,685 shares of
Common Stock were issued and outstanding. Each share of Common
Stock is entitled to one vote on all matters that may properly
come before the Annual Meeting. The holders of a majority of
the outstanding shares of Common Stock, present in person or by
proxy, will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum. "Broker non-
votes" are shares held by brokers or nominees which are present
in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received
from the beneficial owner.
Directors will be elected by a plurality of the votes cast
at the Annual Meeting. Accordingly, abstentions or non-votes
will not affect the election of candidates receiving the
plurality of votes.
Proposals Number 2 and 4, proposed amendment of the
Company's 1994 Stock Option Plan and consideration of
ratification of Ernst & Young L.L.P. as independent accountants
requires the approval of the holders of a majority of the votes
cast at the Annual Meeting. For this purpose, abstentions and
non-votes will be deemed shares not voted on such matters, will
not count as votes for or against the proposals, and will not be
included in calculating the number of votes necessary for the
approval of such matters.
Proposal Number 3, consideration of a proposed amendment of
the Company's Certificate of Incorporation to eliminate the
personal liability of directors of the Company under certain
circumstances, requires the approval of the holders of a majority
of the shares entitled to vote at the Annual Meeting. For this
purpose, abstentions and non-votes will be deemed shares voted
against such matters.
All other matters to come before the Annual Meeting require
the approval of the holders of a majority of the votes cast at
the Annual Meeting. For this purpose, abstentions and non-votes
will be deemed shares not voted on such matters, will not count
as votes for or against the proposals, and will not be included
in calculating the number of votes necessary for the approval of
such matters.
Votes at the Annual Meeting will be tabulated by Inspectors
of Election appointed by the Company.
2<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October 24,
1996 regarding the beneficial ownership of the Company's Common
Stock of (i) each person known to the Company to be the
beneficial owner, within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
of more than 5% of the outstanding shares of Common Stock, (ii)
each director of the Company, (iii) each executive officer or
former executive officer of the Company named in the Summary
Compensation Table (see "Executive Compensation") and (iv) all
executive officers and directors of the Company as a group.
Unless otherwise indicated, the address of each named beneficial
owner is c/o Hadron, Inc., 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311. Except to the extent indicated in the footnotes,
each of the beneficial owners named below has sole voting and
investment power with respect to the shares listed.
<TABLE>
<CAPTION>
Number of Percent
Name and Address Shares of Class
<S> <C> <C>
AMASYS Corporation <F1> 202,739<F1> 13.5%
4900 Seminary Road, St. 800
Alexandria, VA 22311
C.W. Gilluly, Ed.D. 1,250,000<F2> 45.5
William J. Howard 10,660<F3> *
Robert J. Lynch, Jr. 12,500<F3> *
George E. Fowler 45,000<F4> 2.9%
Donald E. Jewell 23,333<F5> 1.5%
J. Anthony Vidal 25,000<F6> 1.6%
All directors and executive
officers as a group
(7 persons) 1,411,493<F7> 48.9%
_____________________________
* Less than 1%
3<PAGE>
<F1> Pursuant to the Third Plan of Reorganization Under Chapter
11 of the Bankruptcy Code for Infotechnology, Inc. and its
affiliated Debtor, Questech Capital Corporation, effective
as of June 21, 1996, AMASYS Corporation has succeeded to the
assets and liabilities of Infotechnology, Inc., including
152,739 shares held directly and 50,000 shares held
indirectly by Infotechnology, Inc ("Infotech").
<F2> Includes 1,200,000 shares of Common Stock which Dr. Gilluly
has the right to acquire pursuant to a convertible
promissory note. Exercise of the conversion rights at a
subsequent date may result in a change in control of the
Company. See "Certain Relationships and Related
Transactions." Also includes 45,000 shares which may be
acquired upon the exercise of vested options granted under
the Company's 1994 Stock Option Plan; options with respect
to 5,000 of such shares are subject to shareholder approval
of the proposed amendment to the Company's 1994 Stock Option
Plan. See "Proposal No. 2 - Amendment to 1994 Stock Option
Plan."
<F3> Includes 5,000 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
<F4> Includes 45,000 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan; options with respect to 5,000 of such
shares are subject to shareholder approval of the proposed
amendment to the Company's 1994 Stock Option Plan. See
"Proposal No. 2 - Amendment to 1994 Stock Option Plan."
<F5> Includes 23,333 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan; options with respect to 3,333 of such
shares are subject to shareholder approval of the proposed
amendment to the Company's 1994 Stock Option Plan. See
"Proposal No. 2 - Amendment to 1994 Stock Option Plan."
<F6> Includes 25,000 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan; options with respect to 3,333 of such
shares are subject to shareholder approval of the proposed
amendment to the Company's 1994 Stock Option Plan. See
"Proposal No. 2 - Amendment to 1994 Stock Option Plan."
<F7> Includes shares referred to in Notes 2 through 6, above.
</TABLE>
4<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Three directors, constituting the entire Board of Directors,
are to be elected at the Annual Meeting. Unless otherwise
specified, the enclosed proxy will be voted in favor of the
persons named below to serve until the next Annual Meeting and
until their successors are elected and qualified. Each person
named below is now a director of the Company. In the event any
of these nominees shall be unable to serve as a director, the
shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the
nominee. All nominees have consented to be named and have
indicated their intent to serve if elected. The Board of
Directors has no reason to believe that any of the nominees will
be unable to serve or that any vacancy on the Board of Directors
will occur.
The names of the nominees and certain other information
about them are set forth below:
<TABLE>
<CAPTION>
Nominee Age Director Since Office Held with
Company
<S> <C> <C> <C>
C.W. Gilluly, Ed.D. 50 1992 Chairman of the
Board
and Chief
Executive
Officer
William J. Howard 49 1989 Director
Robert J. Lynch, Jr. 63 1991 Director
</TABLE>
C.W. GILLULY, Ed.D. was appointed Chief Executive Officer of
the Company in October 1994, having served as Acting President
and Acting Chief Executive Officer of the Company since May 1993.
Since February 1992, Dr. Gilluly has served as Chairman and
Chief Executive Officer of Comtex Scientific Corporation, a
provider of electronic news and business information. Dr.
Gilluly has served as President of Infotechnology, Inc.
("Infotech") since June 1992.
WILLIAM J. HOWARD since 1973, has served as President of
Howard Equities Co., Inc., a real estate development company, and
since 1986, has been a majority shareholder thereof. Since 1988,
5<PAGE>
Mr. Howard has been the managing partner of Asbury General
Partnership, a real estate partnership focusing on the
development of waterfront land located in Caroline County,
Maryland. Mr. Howard is also a realtor for Meredith Real Estate,
Inc., a real estate brokerage firm. Mr. Howard was appointed by
the Governor of Maryland, and approved by the Maryland Senate, in
1993 to serve on the three member Subsequent Injury Fund Board
which supervises the $12 million dollar fund.
ROBERT J. LYNCH, Jr. is the President, Chief Executive
Officer and a director of American and Foreign Enterprises, Inc.,
a company with which he has been associated for 28 years.
American and Foreign Enterprises is engaged in industrial and
real estate acquisitions for domestic and international
investors. He also serves as a director of Infotech and Data
Broadcasting Corporation, a provider of stock market quotation
and other specialized market data services.
Executive Officers
The following table contains information as of October 24,
1996 as to the executive officers of the Company who are not also
directors of the Company:
<TABLE>
<CAPTION>
Officer Office Held
Name Since With Company
<S> <C> <C>
George E. Fowler 1993 President and Chief
Operating Officer
S. Amber Gordon 1991 Executive Vice
President, Secretary
and Treasurer
Donald E. Jewell 1996 Vice President
J. Anthony Vidal 1995 Vice President
</TABLE>
GEORGE E. FOWLER (57) was appointed President and Chief
Operating Officer of the Company in October 1994. Mr. Fowler
joined the Company as Vice President and President of its
Aerospace Sciences subsidiary in October 1993. And also
served as Acting President of the Company's subsidiary,
Acumenics Research & Technology, Inc. ("Acumenics").
6<PAGE>
Mr. Fowler has held senior management positions within the
government contracting industry for more than a decade. Between
May 1992 and September 1993, he was Senior Vice President of
Business Operations for Ellsworth Associates, Inc. From January
1991 until May 1992, he was Director of Operations for McDonald
Bradley, Inc. From August 1987 until December 1990, he was a
Vice President of the Orkand Corporation. He was Vice President
of Computer Data Systems, Inc. from 1983 until 1987. Mr. Fowler
served as an officer in the U.S. Navy from 1962 until 1983.
S. AMBER GORDON (42) was appointed Executive Vice President
of the Company in July 1995. Ms. Gordon was named Treasurer in
April 1994, Corporate Secretary in December 1993, and served as
Vice President responsible for Corporate Relations and Strategic
Planning, since May 1991. She served as Chairman of the Quest
Business Agency, Inc., a Houston-based marketing communications
firm and advertising agency, from 1985 to 1991. Ms. Gordon has
served as President of S.A. Gordon Enterprises, Inc., a
consulting firm specializing in financial and corporate
relations, since 1985.
DONALD E. JEWELL (45) was appointed Vice President of the
Company in May 1996, and continues to serve as President of the
Company s Engineering & Information Services, Inc. (EISI)
subsidiary, a position he has held since 1993. From 1989 to 1993
Mr. Jewell was a Program Manager for EISI, with responsibility
for most operations. Mr. Jewell has held senior management
positions in the government contracting business for nearly
eighteen years. He was Technical Director for Kendrick & Company
in 1988 and 1989, and served as Director of Information Systems
at British Aerospace from 1985 until 1988. From 1977 until 1985,
he served in various computer services management roles for
Planning Research Corporation.
J. ANTHONY VIDAL (36) was appointed Vice President of the
Company in September 1995, and continues to serve as President of
the Company's SyCom Services, Inc. subsidiary, a position he has
held since 1993. Mr. Vidal joined the Company in 1992 as Program
Manager for the Company's Engineering and Information Services,
Inc. subsidiary. From 1983 until 1992, Mr. Vidal held various
engineering positions at Westinghouse Electric Corporation, where
his last title was manager of the Equipment Design Engineering
Support Software group.
There are no family relationships among the directors or
executive officers of the Company.
7<PAGE>
Meetings of the Board of Directors and Committees
The Board of Directors held a total of five meetings during
the Company's fiscal year ended June 30, 1996. Each director
attended in person or telephonically at least 75% of the meetings
held by the Board of Directors and all committees thereof on
which he served.
During fiscal year 1996, the Board of Directors' Audit
Committee was comprised of Messrs. Howard and Lynch, as well as
Joseph S. Bracewell, a director of the Company who resigned
effective March 5, 1996. The Audit Committee recommends
engagement of the Company's independent auditors, is primarily
responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the
Company's accounting principles and its system of internal
accounting controls and has general responsibility in connection
with related matters. The Audit Committee met one time during
fiscal year 1996.
The Compensation and Employee Benefits Committee of the
Board of Directors (the "Compensation Committee"), which held two
meetings in fiscal year 1996, is comprised of Messrs. Howard and
Lynch. The Compensation Committee evaluates management's
recommendations and makes its own recommendations to the Board of
Directors concerning the compensation of the Company's executive
officers. It is also responsible for the formulation of the
Company's executive compensation policy and the research,
analysis and subsequent recommendation regarding the
establishment and administration of the Company's 1994 Stock
Option Plan.
The Board of Directors does not have a Nominating Committee
or an Executive Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
THE DIRECTORS NAMED ON THE ENCLOSED PROXY.
PROPOSAL NO. 2
AMENDMENT TO THE 1994 STOCK OPTION PLAN
In September 1996, the Board of Directors adopted, subject
to shareholder approval, an amendment to the Hadron, Inc. 1994
Stock Option Plan to increase the number of shares reserved for
issuance thereunder from 290,000 to 345,000. At the Annual
Meeting, the shareholders are being asked to approve this
amendment to the 1994 Stock Option Plan.
8<PAGE>
Description of the 1994 Stock Option Plan
The 1994 Stock Option Plan provides for the issuance of
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended and non-qualified stock
options, to purchase (as proposed to be amended) an aggregate of
up to 345,000 shares of Common Stock. The 1994 Stock Option Plan
permits the grant of options to key employees, consultants and
directors of the Company.
The 1994 Stock Option Plan is administered by the
Compensation Committee consisting of directors Howard and Lynch.
Each of the members of the Committee is a "disinterested" person
for purposes of Rule 16b-3. Subject to the provisions of the
1994 Stock Option Plan, the Compensation Committee has full and
final authority to select the participants to whom awards are to
be granted thereunder, to grant such awards and to determine the
terms and conditions of such awards, including vesting and
exercise price. The 1994 Stock Option Plan also provides that
the Compensation Committee may accelerate the time at which all
or a portion of an optionee's options may be exercised in the
event of a change in control of the Company.
Each option is evidenced by a written agreement in a form
approved by the Compensation Committee. Options granted under
the 1994 Stock Option Plan generally are not transferable by the
optionee other than by will or by the laws of descent and
distribution and each option is exercisable, during the lifetime
of the optionee, only by the optionee. Key employees, including
employee directors, and consultants of the Company or any of its
subsidiaries are eligible to be considered for the grant of
awards under the 1994 Stock Option Plan.
Under the 1994 Stock Option Plan, the exercise price of an
incentive stock option must be at least equal to 100% of the fair
market value of the Common Stock on the date of grant (110% of
the fair market value in the case of options granted to employees
who are 10% shareholders). The exercise price of a non-qualified
stock option must be not less than the par value of a share of
the Common Stock on the date of grant. The term of an incentive
or non-qualified stock option may not exceed ten years (five
years in the case of an incentive stock option granted to a 10%
shareholder).
Each non-employee director elected or appointed to the Board
of Directors automatically receives on the date of his or her
first initial appointment to the Company's Board of Directors, an
option to purchase 2,500 shares of the Company's Common Stock
(the "Initial Option") at a per share exercise price equal to the
fair market value of the Common Stock on the initial grant date.
Furthermore, each non-employee Director automatically receives on
each anniversary of his initial election or appointment to the
9<PAGE>
Company's Board of Directors or, in the case of current directors
each anniversary of the date the 1994 Stock Option Plan was
adopted by the Board of Directors, an option to purchase 2,500
shares of the Company's Common Stock exercisable at a per share
value equal to the fair market value for the Common Stock on the
applicable additional grant date to the extent that options
remain available under the 1994 Stock Option Plan. Subject to
acceleration upon the occurrence of certain prescribed events,
such options become exercisable as to one-third upon the date of
grant, one-third upon the first anniversary of the date of grant
and one-third upon the second anniversary of the date of grant.
Each option terminates, to the extent not exercised prior
thereto, upon the earlier to occur of (i) the tenth anniversary
of grant and (ii) ninety days after the cessation of the
optionee's service as a member of the Board of Directors (to the
extent vested upon the date of such cessation).
The Board of Directors may alter, amend, suspend or
terminate the 1994 Stock Option Plan, provided that no such
action shall deprive an optionee, without his consent, of any
option granted to the optionee pursuant to the 1994 Stock Option
Plan or of any of his rights under such option. Provisions
related to automatic grants of options to non-employee directors
may not (with limited exceptions) be amended more frequently than
once every six months and no amendment to such provisions, unless
approved by the shareholders of the Company, shall become
effective earlier than six months after Board of Directors'
approval. Except as provided in the 1994 Stock Option Plan, no
amendment by the Board of Directors, unless taken with the
approval of the shareholders may (i) materially increase the
benefits accruing to participants under the 1994 Stock Option
Plan, (ii) materially increase the number of securities which may
be issued under the 1994 Stock Option Plan or (iii) materially
modify the requirements as to eligibility for participation in
the 1994 Stock Option Plan.
As all of the directors and executive officers of the
Company are eligible for grants of options under the 1994 Stock
Option Plan, each such person has a personal interest in the
approval of the proposed amendment. On September 17, 1996, the
Compensation Committee approved the grant, to 12 employees of the
Company, of options to acquire up to 112,500 shares of Common
Stock; included in these awards were grants, to Dr. Gilluly and
Mr. Fowler, of options to acquire 15,000 shares, and to Messrs.
Jewell and Vidal of options to acquire 10,000 shares, at an
exercise price of $.69 per share. All of such grants were made
subject to shareholder approval of the amendment proposed hereby;
in the event the shareholders do not approve the proposed
amendment, all such grants will be void.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
HADRON, INC. 1994 STOCK OPTION PLAN.
10<PAGE>
PROPOSAL NO. 3
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO ADD A NEW
ARTICLE ELIMINATING PERSONAL LIABILITY OF DIRECTORS UNDER CERTAIN
CIRCUMSTANCES
The Board of Directors has approved and recommends that a
new Article be added to the Certificate of Incorporation of the
Company limiting the extent to which the directors of the Company
may be liable for damages to the Company or its stockholders.
Reasons for Proposal
The proposed amendment to the Company's Certificate of
Incorporation is intended to implement an amendment to the New
York Business Corporation Law (the "NYBCL") enacted in July 1987
in response to increased concern about the legal exposure of
directors, the changed market for directors' and officers'
liability insurance, and the potential cost to New York
corporations (and therefore their stockholders) of their
indemnification obligations. Since the early 1980s,
investigations, claims, actions, suits or proceedings (including
stockholder derivative actions) ("Proceedings") seeking to impose
liability on directors of publicly held corporations, have become
increasingly common. Such Proceedings typically are extremely
expensive, whatever their eventual outcome. In view of the costs
and uncertainties of litigation in general, it is often prudent
to settle Proceedings in which claims against a director are
made. Settlement amounts, even if immaterial to the corporation
involved and minor compared to the enormous amounts frequently
claimed, often exceed the financial resources of most individual
director defendants. As a result, an individual may conclude
that potential exposure to the costs and risks of Proceedings in
which he or she may become involved may exceed any benefit to him
or her from serving as a director of a public corporation. This
is particularly true for directors who are not also officers or
employees of the corporation concerned.
11<PAGE>
Description of Proposed Amendment.
The 1987 amendment to the NYBCL, among other things, permits
a corporation, upon receipt of stockholder approval, to add a
provision to its certificate of incorporation eliminating the
personal liability of its directors to the corporation or its
stockholders for damages for breach of duty in such capacity.
Such a provision, however, may not eliminate the liability of any
director (i) if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law, or
that he personally gained, in fact, a financial profit or other
advantage to which he was not legally entitled, or that his acts
violated Section 719 of the NYBCL (imposing certain requirement
with respect to dividends, distributions, stock repurchases and
loans to directors) or (ii) for any act or omission prior to the
adoption of a provision authorized by the amendment to the NYBCL.
The proposed amendment to the Company's Certificate of
Incorporation, following the provisions of the 1987 amendment to
the NYBCL, eliminates director liability for acts occurring after
the proposed amendment becomes effective to the fullest extent
from time to time permitted by the NYBCL, thus automatically
incorporating any future statutory revisions with respect to
director liability. The Board of Directors believes the
proposed amendment is desirable so that the Company can continue
to attract and retain responsible individuals to serve as its
directors, in light of the present difficult environment in which
directors must serve, and in order to reduce the Company's
monetary exposure under its indemnification obligations.
The text of the proposed amendment is as follows:
The liability of the Corporation's directors to the
Corporation or its stockholders for any breach of duty in
such capacity shall be eliminated to the fullest extent
permitted by the Business Corporation Law of the State of
New York, as it exists on the date hereof or as it may
hereafter be amended. No amendment to or repeal of this
Article shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for
or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
Effect of Proposal
If the stockholders approve the proposed amendment, the
Company's directors will not be liable for monetary damages even
if they should fail, through negligence or gross negligence, to
satisfy their duty of care. However, the charter amendment will
not affect the right of stockholders to pursue equitable
remedies, such as an action to enjoin or rescind a transaction
12<PAGE>
involving a breach of a director's duty of care (although such
remedies may not always be available), and the amendment in no
way affects a director's liability under the Federal securities
laws. The potential outcome of any litigation arising under the
statute cannot be predicted with certainty. Although the
amendment will eliminate the liability of directors who are also
officers of the Company for actions taken in their capacity as
directors, it will not affect their liability for actions taken
in their capacity as officers. If approved by the stockholders,
the amendment will be delivered promptly to the New York
Department of State for filing and will be effective when filed.
The Company has not received notice of any Proceeding to
which the proposed amendment might apply. In fact, no
stockholder's derivative action has ever been brought against a
Company director as such. In addition, the amendment is not
being proposed in response to any specific resignation, threat of
resignation or refusal to serve by any director or potential
director.
The Board of Directors and management recognize that if the
proposed amendment is adopted, its principal effect would be that
the stockholders of the Company will be giving up potential
future causes of action for damages against directors for breach
of fiduciary duty. It should be noted that the Board of
Directors has a personal interest in having the stockholders
approve the proposed amendment, at the potential expense of the
Company and its stockholders. However, given the difficult
environment and potential for incurring liabilities currently
facing directors of publicly held corporations, the Company
believes the proposed amendment is in the best interests of
the Company and its stockholders since it should protect the
Company's ability to attract and retain qualified directors and
will reduce the Company's monetary exposure under its
indemnification obligations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION TO ELIMINATE THE
PERSONAL LIABILITY OF DIRECTORS UNDER CERTAIN CIRCUMSTANCES.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst &
Young L.L.P. ("Ernst & Young") as the Company's independent
accountants for fiscal year 1997. Although action by the
shareholders in this matter is not required, the Board of
Directors believes it is appropriate to seek shareholder
ratification of this appointment in light of the critical
role played by independent accountants in maintaining the
integrity of Company financial controls and reporting.
13<PAGE>
A representative of Ernst & Young is expected to
attend the Annual Meeting. The representative will have the
opportunity to make a statement, if he or she so desires, and
will be available to respond to appropriate questions from
shareholders.
On July 18, 1996, Coopers & Lybrand L.L.P. ("Coopers &
Lybrand") resigned as the Registrant's principal accountant.
During the two fiscal years ended June 30, 1995 and 1994 and
the subsequent interim period, there were no disagreements with
Coopers & Lybrand on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure or any reportable events.
Coopers & Lybrand Report of Independent Accountants on the
consolidated financial statements for the two most recent fiscal
years ended June 30, 1995 and 1994 contained no adverse opinion
or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except that
such report contained an uncertainty paragraph that stated that
such financial statements "have been prepared assuming that the
[Registrant] will continue as a going concern." The report
further stated that "the [Registrant] has suffered recurring
losses from operations and has a net capital deficiency that
raise substantial doubt about its ability to continue as a going
concern," and that such financial statements "do not include any
adjustment that might result from the outcome of this
uncertainty."
On August 16, 1996, the Company engaged Ernst & Young
as the Company's independent accountants to audit the Company's
financial statements for its fiscal year ended June 30, 1996.
The determination to engage Ernst & Young was approved by
the Audit Committee of the Board of Directors and by the Board of
Directors. The Company did not contact Ernst & Young
during the Company's two most recent fiscal years, or any
subsequent interim period, regarding (i) any disagreement with
Coopers & Lybrand or (ii) the application of accounting
principles to a specified transaction or the type of audit
opinion that might be rendered on the Company's financial
statements. Prior to its engagement, Ernst & Young was
neither asked for, nor has it expressed any opinion of any
accounting issues concerning the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
ERNST & YOUNG L.L.P. AS INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR
1997.
14<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation paid by the Company to its Chief Executive Officer
and each of the three other executive officers of the Company who
received total salary and bonus in excess of $100,000 during the
fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Name and Fiscal
Principal Position Year Salary($) Bonus($)
<S> <C> <C> <C>
C.W. Gilluly, 1996 $81,643 $8,000<F1><F2>
Chairman and Chief Executive 1995 80,009 0
Officer 1994 84,112 0
George E. Fowler, 1996 118,761 $16,000<F1><F2>
President and Chief Operat- 1995 115,003 0
ing Officer 1994 70,931 0
Donald E. Jewell, 1996 79,558 $48,488<F1><F2>
Vice President
J. Anthony Vidal, 1996 79,911 $48,396<F1><F2>
Vice President
<CAPTION>
Long-Term Compensation
Awards
Name and Fiscal Stock Options All Other
Principal Position Year Granted Compensation
<S> <C> <C> <C>
15<PAGE>
C.W. Gilluly, 1996 15,000<F3> $125<F4>
Chairman and Chief 1995 30,000<F3> 125<F4>
Executive Officer 1994 0 125<F4>
George E. Fowler, 1996 15,000<F3> $125<F4>
President and Chief 1995 30,000<F3> 125<F4>
Operating Officer 1994 0 0
Donald E. Jewell, 1996 7,500<F3> $125<F4>
Vice President
J. Anthony Vidal, 1996 10,000<F3> $125<F4>
Vice President
____________________________
<F1> The Company paid, in fiscal year 1996, the bonuses awarded
in fiscal year 1995.
<F2> The Company has awarded the following fiscal year 1996
bonuses to be paid in fiscal year 1997: C.W. Gilluly
$10,000; George E. Fowler-$28,750; Donald E. Jewell-
$44,622 and J. Anthony Vidal-$43,405.
<F3> Options granted pursuant to the Company's 1994 Stock
Option Plan. See "Executive Compensation - Stock Option
Grants."
<F4> Contributions made by the Company under its 401(k) plan.
</TABLE>
16<PAGE>
Stock Option Grants
The following table provides details regarding all stock
options granted to the named executive officers during the fiscal
year ended June 30, 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal Year 1996
Number of % of Total
Shares Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted (#) in Fiscal YearPrice Date
<S> <C> <C>
C.W. Gilluly 15,000<F2> 14.7% $.50 9/18/2005
George E. Fowler 15,000<F2> 14.7% $.50 9/18/2005
Donald E. Jewell 7,500<F2> 7.4% $.50 9/18/2005
J. Anthony Vidal 10,000<F2> 9.8% $.50 9/18/2005
<CAPTION>
Potential
Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation for Option Term<F1>
Name 5% 10%
<S> <C> <C>
C.W. Gilluly $4,717 $11,953
George E. Fowler $4,717 $11,953
Donald E. Jewell $2,358 $5,977
J. Anthony Vidal $3,144 $7,969
________________________________
<F1> Amounts represent hypothetical gains that could be
achieved if exercised at end of the option term. The
dollar amounts under these columns assume 5% and 10%
17<PAGE>
compounded annual appreciation in the Common Stock from
the date the respective options were granted. These
calculations and assumed realizable values are required to
be disclosed under Securities and Exchange Commission
rules and, therefore, are not intended to forecast
possible future appreciation of Common Stock or amounts
that may be ultimately realized upon exercise. The
Company does not believe this method accurately
illustrates the potential value of a stock option.
<F2> Options vest one-third upon the date of grant, and one-
third each on the first and second anniversaries of the
date of grant, and expire 10 years after the grant date.
The option exercise price is 100% of the fair market value
on the date of grant. Options are exercisable for a
period of 90 days after a voluntary termination of
employment to the extent vested at that time.
</TABLE>
On September 17, 1996, the Compensation Committee approved the
grant, to 12 employees of the Company, of options to acquire up
to 112,500 shares of Common Stock. All of such grants were made
subject to shareholder approval of the amendment to the 1994
Stock Option Plan proposed hereby; in the event the shareholders
do not approve the proposed amendment, all such grants will be
void. See "Proposal No. 2 - Amendment to the 1994 Stock Option
Plan."
18<PAGE>
Year-End Option Values
The following table sets forth certain information regarding
the value of unexercised options held by the named executive
officers as of June 30, 1996.
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of Shares
Underlying Unexercised
Options at June 30, 1996
Name Exercisable Unexercisable
<S> <C> <C>
C.W. Gilluly 25,000 20,000
George E. Fowler 25,000 20,000
Donald E. Jewell 12,500 10,000
J. Anthony Vidal 13,333 11,667
<CAPTION>
Value of Unexercised
In-the-Money Options
at June 30, 1996 <F1>
Name Exercisable Unexercisable
<S> <C> <C>
C.W. Gilluly $ 12,812 $ 8,750
George E. Fowler $ 8,750 $ 8,750
Donald E. Jewell $ 6,406 $ 4,375
J. Anthony Vidal $ 6,667 $ 4,896
__________________________
<F1> Represents the difference between the exercise price of
the outstanding options and the closing bid price of the
Common Stock on June 30, 1996, which was $0.81 per share.
Options that have an exercise price greater than the
fiscal year-end market value are not included in the value
calculation.
</TABLE>
19<PAGE>
Employment Agreements, Termination of Employment and Change of
Control Arrangements
The Company renewed its agreement with Mr. Fowler, to serve
as President and Chief Operating Officer, on October 1, 1996 at a
base salary of $123,500. His employment agreement with the
Company further provides for the grant to Mr. Fowler of options
to purchase Common Stock of the Company. Mr. Fowler's employment
agreement provides for bonus compensation of up to 50% of his
base salary based upon his performance and the Company's
financial performance. If Mr. Fowler is constructively
discharged, the Company must continue to pay his base salary for
six months after the term of the agreement. In no case, however,
will the Company pay Mr. Fowler severance benefits if he is
terminated for cause, as defined in the employment agreement, or
if he leaves the employ of the Company voluntarily.
The Company entered into an agreement with Mr. Jewell, to
serve as Vice President of the Company and as President of its
EISI subsidiary, on October 1, 1996, at a base salary of $85,000.
His employment agreement with the Company further provides for
the grant to Mr. Jewell of options to purchase Common Stock of
the Company. Mr. Jewell's employment agreement provides for
bonus compensation of up to 50% of his base salary based upon the
financial performance of EISI. If Mr. Jewell is constructively
discharged, the Company must continue to pay his base salary for
six months after the term of the agreement. In no case, however,
will the Company pay Mr. Jewell severance benefits if he is
terminated for cause, as defined in the employment agreement, or
if he leaves the employ of the Company voluntarily.
The Company renewed its agreement with Mr. Vidal, to serve
as Vice President of the Company and as President of its SyCom
subsidiary, on October 1, 1996, at a base salary of $85,000. His
employment agreement with the Company further provides for the
grant to Mr. Vidal of options to purchase Common Stock of the
Company. Mr. Vidal's employment agreement provides for bonus
compensation of up to 50% of his base salary based upon the
financial performance of SyCom. If Mr. Vidal is constructively
discharged, the Company must continue to pay his base salary for
six months after the term of the agreement. In no case, however,
will the Company pay Mr. Vidal severance benefits if he is
terminated for cause, as defined in the employment agreement, or
if he leaves the employ of the Company voluntarily.
Dr. Gilluly has the right to acquire beneficial ownership of
1,200,000 shares of Common Stock pursuant to a convertible
promissory note which gives rise to such acquisition rights.
Exercise of the conversion rights at a subsequent date may result
in a change in control of the Company. See "Certain
Relationships and Related Transactions."
20<PAGE>
Compensation of Directors
Directors receive a quarterly cash fee of $1,250 for their
services. In addition, directors receive $500 per Board of
Directors' meeting attended, and $250 per committee meeting
attended in person (unless such meeting is combined with a full
Board of Directors' meeting), or $125 per committee meeting
attended telephonically. Directors who are employees do not
receive any additional compensation for their service as
directors. Directors are reimbursed for out-of-pocket expenses
associated with their attendance at Board of Directors' meetings.
As of June 30, 1996, payments of directors' fees were $24,000 in
arrears.
In addition to the amounts described above, the Company paid
to Joseph S. Bracewell, a member of the Board of Directors who
resigned effective March 5, 1996, $13,500 for the fiscal year
ended June 30, 1996, for financial consulting services.
Compensation and Employee Benefits Committee Report on Executive
Compensation
The responsibility of the Compensation Committee is to
administer the Company's executive compensation programs, to
monitor corporate performance and its relationship to
compensation of executive officers and to make appropriate
recommendations concerning matters of executive compensation.
The Compensation Committee is comprised of two independent non-
employee directors. This report sets forth the major components
of executive compensation and the basis by which fiscal year 1996
compensation determinations were made with respect to the
executive officers of the Company.
Compensation Policy and Guidelines
The main objective of the Company is to maintain and
increase the profitability of its operations and to maximize
value for shareholders, employees and clients. The goals of the
Company's compensation policy are to align executive compensation
with the Company's long-term business objectives and performance,
to enable the Company to attract and retain high-quality
executive officers and employees who will contribute to the long-
term success of the Company and to reward such executive officers
and employees for their successful efforts in attaining
objectives beneficial to the growth and profitability of the
Company.
In order to achieve the Company's goals, the Compensation
Committee has developed the following principles that serve as
guidance for compensation decisions for all employees: (i) to
attract and retain the most highly qualified management and
employee team, (ii) to pay competitively with prevailing industry
21<PAGE>
standards, (iii) to emphasize sustained performance by aligning
monetary rewards with shareholder interests, (iv) to emphasize
performance-related contributions as the basis of pay decisions,
and (v) to provide incentive bonus awards for management based
upon increased revenue and profitability. To implement these
policies, the Compensation Committee has designed a compensation
program consisting of base salary, an annual incentive plan,
stock options and other employment benefits.
Compensation Program Elements
The Company's compensation levels and benefits are reviewed
on an annual basis to determine whether they are competitive and
reasonable in light of the overall performance of the Company and
the Company's ability to attract and retain talented executives.
Due to the Company's historical lack of profitability, the
initial focus has been on the Company's progress in achieving
milestones in its turnaround plan. Going forward, the Company's
focus is on growth.
Base Salary. Salary levels are primarily determined by the
Compensation Committee in consideration of the performance
of the individual executive, the financial performance of
the Company and the prevailing industry standards for
similar executives of similar companies. The Company's
philosophy regarding base salaries is conservative, using
published industry reports and surveys on executive
compensation. The Company compares itself for this purpose
with other technological service providers and/or government
contracting firms that face similar challenges in their
market. Periodic increases in base salary relate to
individual contribution evaluated against established
objectives and length of service.
Stock Options. The Company believes the compensation
program should provide employees with an opportunity to
increase their ownership and potentially gain financially
from Company stock price increases. By this approach, the
best interests of shareholders, executives and employees are
closely aligned. Through the Company's Stock Option Plan,
executives and employees are eligible to receive stock
options, giving them the right to purchase shares of Common
Stock of the Company at a specified price in the future.
The Compensation Committee believes the use of stock
options as the basis for long-term incentive compensation
meets the Compensation Committee's defined compensation
strategy and the team-based operations approach that the
Company has adopted.
Incentive Program. The Company's executive officers and
operating managers participate in an incentive compensation
program which awards cash bonuses based on attaining
22<PAGE>
significant growth in revenue and profitability, as well as
divisional and individual performance objectives. For 1996,
certain incentive awards were paid to executive officers and
operating managers based upon meeting or exceeding revenue
and profitability goals.
Severance Compensation. To retain highly qualified executive
officers, the Company from time to time enters into
severance agreements with certain of its officers. The
determination of whether the Company would benefit from a
severance agreement with a particular officer is subjective,
based upon such officer's experience and value to the
Company.
Other Benefits. The Company's philosophy is to provide
adequate health and welfare oriented benefits to executives
and employees, but to maintain a highly conservative posture
relative to executive benefits.
1996 Compensation for the Chairman and Chief Executive
Officer
Dr. Gilluly s salary, annual incentive and stock option
grants reflect the Committee s evaluation of his overall
leadership of the Company and contribution to shareholder value.
In May 1996, the Committee reviewed Dr. Gilluly s salary,
considering the Company s interim financial results, his
performance, his salary relative to those for comparable
positions and taking into consideration the low salary he
initially took based upon the poor overall financial condition of
the Company when he was retained in 1993. Based on this review,
the Committee increased Dr. Gilluly s annualized salary from
$80,000 to $130,000, effective June 1, 1996, and awarded him a
bonus of $10,000, which will be paid during fiscal year 1997.
See "Executive Compensation - Compensation of Directors." Dr.
Gilluly's salary is based upon his management skills,
particularly in the areas of turnaround, refinancing and
diversification. Dr. Gilluly does not have an employment
agreement or severance agreement with the Company.
Under the Company's executive compensation philosophy and
program, the total compensation mix for senior executives
emphasizes longer-term rewards in the form of stock options. The
Committee has, at various times, granted Dr. Gilluly options
under the 1994 Stock Option Plan to purchase a total of 60,000
shares of the Company s common stock at the market price on the
date of grant. These options become fully exercisable over a
period of three years, with one-third being immediately
exercisable upon the date of grant, and one-third becoming
exercisable on each of the second and third anniversaries of the
date of grant.
23<PAGE>
Summary
The Compensation Committee believes the total
compensation program for executives of the Company is appropriate
and competitive with the total compensation programs provided by
similar companies in the industry with which the Company
competes. The Compensation Committee believes its compensation
practices are directly tied to shareholder returns and linked to
the achievement of annual and longer-term financial and operating
results of the Company on behalf of the Company's shareholders.
Submitted by the Compensation and Employee Benefits
Committee
William J. Howard
Robert J. Lynch, Jr.
Performance Graph
The following graph compares the cumulative, five-year
shareholder returns on the Company's Common Stock with the
cumulative returns of the NASDAQ Market Index and Media General's
Other Business Services Index, comprised of the common stock of
approximately 200 companies in diversified business service
industries, excluding the Company. The graph assumes the
value of the investment in the Company's Common Stock and each
index was $100 on June 30, 1991.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Hadron, Inc. 100.00 88.00 76.00 11.20 14.80 32.40
MG-Bus Serv Index 100.00 112.03 111.95 123.15 136.65 195.69
NASDAQ Market Index 100.00 107.75 132.27 145.04 170.11 214.14
</TABLE>
24<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's
officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than
10% shareholders are required by the regulation to furnish the
Company with copies of the Section 16(a) forms which they file.
To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company, and written
representations that no other reports were required during the
fiscal year beginning July 1, 1995 and ended June 30, 1996, all
Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial
owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1996, Infotech (which
transferred its interests to AMASYS as of October 11, 1996),
owner of approximately 13.5% of the Common Stock of the Company,
charged the Company approximately $600 for legal consulting
services. Also during the fiscal year ended June 30, 1996, the
Company charged Infotech $3,700 for corporate relations and
administrative services provided by the Company to Infotech. At
June 30, 1996, the Company had a net payable balance to Infotech
of approximately $51,000. The Company believes its
contractual relationships with Infotech are on terms
substantially equivalent to terms which could have been obtained
from non-affiliated parties. Dr. Gilluly, Chairman of the Board
and Chief Executive Officer of the Company, is Chairman of the
Board and a principal shareholder of Infotech. Mr. Lynch, a
director of the Company, is also a director of Infotech.
The Company, in October 1993, settled a dispute with its
landlord, Equitable Variable Life Insurance Company
("Equitable"), concerning the Company's then principal executive
offices in Fairfax, Virginia. One of the conditions of the
Company's settlement with Equitable was that the Company provide
Equitable with an irrevocable letter of credit ("Letter of
Credit") in the amount of $320,000 to collateralize certain
payments due Equitable pursuant to a lease amendment entered into
at that time. The Company was not able to fully satisfy this
condition using internally generated or bank-borrowed funds. Dr.
Gilluly agreed personally to make a loan in the principal amount
of $300,000 (the "Gilluly Loan") to collateralize the Letter of
Credit.
25<PAGE>
The Gilluly Loan is evidenced by a Convertible Promissory
Note (the "Note") dated October 21, 1993, executed by Engineering
and Information Services, Inc. ("EISI") and SyCom Services, Inc.
("SyCom"), two wholly owned subsidiaries of the Company, and
payable to the order of Dr. Gilluly. Interest at the rate of
three percent per annum over the prime rate per annum published
from time to time in The Wall Street Journal accrues and is
payable quarterly. The entire principal balance of the Note,
originally due and payable on October 21, 1996, is now due and
payable October 21, 1997, pursuant to an amendment to the Note
dated September 27, 1996. At the option of Dr. Gilluly, the
Note may be converted into restricted shares ("Hadron Shares") of
the Company's common stock at any time prior to maturity of the
Note. The Conversion Price for Hadron Shares under the terms of
the Note is $.25 per share and the option to convert expires on
October 21, 1998.
The Note is prepayable at any time. In the event the Note
is prepaid in full or in part, Dr. Gilluly is entitled to receive
a warrant. Each warrant so issued expires on October 21, 1999,
entitles Dr. Gilluly to purchase Hadron Shares equal to the
principal amount of the Note together with all interest thereon
which is prepaid divided by the Conversion Price of $.25 per
share. As a result of the $25,000 prepayment of principal during
fiscal year 1996, Dr. Gilluly will be issued a warrant to
acquire 100,000 shares of the Company's common stock. Similarly,
an additional warrant to acquire a further 100,000 shares of the
Company's common stock will be issued to Dr. Gilluly for the
additional $25,000 in principal prepayments through September 20,
1996.
The Note is collateralized by an Assignment and Security
Agreement assigning and granting a security interest in the
accounts receivable, contract rights and certain other assets of
EISI and Sycom in favor of Dr. Gilluly. The Note also includes
an Indemnity Agreement under which the Company agreed to
indemnify Dr. Gilluly with respect to all claims, demands,
losses, damages, liabilities, costs and expenses that he may
sustain or incur by reason of the Gilluly Loan.
SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended
to be presented at the Company's 1997 Annual Meeting of
Shareholders must be received by the Company no later than July
8, 1997 in order that they may be included in the proxy statement
and form of proxy relating to that meeting.
26<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996, including the financial
statements and notes thereto is being mailed to the shareholders
of record along with this Proxy Statement. The Annual Report on
Form 10-K is not incorporated by reference in this Proxy
Statement and is not considered to be part of the proxy material.
The Company will furnish any exhibit described in the list
accompanying the 1996 Form 10-K upon the payment, in advance, of
the specified reasonable fees related to the Company's furnishing
of such exhibit(s). Requests for copies of such report and/or
exhibit(s) should be directed to the Company at its principal
executive offices, 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, attention Corporate Secretary.
OTHER MATTERS
The Board of Directors knows of no other business matters to
be acted upon at the Annual Meeting other than those referred to
in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote the shares they represent as
the Board of Directors may recommend.
By Order of the Board of
Directors
S. Amber Gordon
Secretary
Date: November 1, 1996
27<PAGE>
APPENDIX A
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HADRON, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 6, 1996
The undersigned appoints George E. Fowler and S. Amber
Gordon, or either of them, with full power of substitution, to
attend the Annual Meeting of Shareholders of Hadron, Inc. on
December 6, 1996, and any adjournments thereof, and to vote all
shares which the undersigned would be entitled to vote if
personally present upon the following matters set forth in the
Notice of Annual Meeting and Proxy Statement:
1. ELECTION OF DIRECTORS
[ ] FOR the THREE nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the THREE nominees
listed below
C.W. Gilluly, William J. Howard
and Robert J. Lynch, Jr.
INSTRUCTION: To withhold authority for any individual nominee,
write that nominee's name in the space provided below:
_____________________________________________________________
2. Proposal to amend the Hadron, Inc. 1994 Stock Option Plan to
increase the number of shares reserved for issuance
thereunder.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. Proposal to amend the Company's Certificate of Incorporation
to eliminate the personal liability of directors of the
Company under certain circumstances.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
28<PAGE>
4. Proposal to ratify the selection of Ernst & Young, L.L.P. as
independent accountants for the Company for fiscal year
1997.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
5. In their discretion, upon such other business as may
properly come before the meeting and any adjournments
thereof.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
Shareholder's Signature
Joint Holder's Signature (If applicable)
Date:
When properly executed, this proxy will be voted in the
manner directed herein. If no direction is made, this proxy will
be voted FOR proposals 2, 4 and 5 and FOR the election of the
nominees of the Board of Directors in the election of directors
and in accordance with the judgment of the person(s) voting the
proxy upon such other matters properly coming before the meeting
and any adjournments thereof. Please sign exactly as name(s)
appear above.
29<PAGE>
