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 S 240.14a-11(c) or S 240.14a- 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and 0-11
1) Title of each class of securities to which transaction
applies:
___________________________________________________________
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:
___________________________________________________________
5) Total fee paid:
___________________________________________________________
<PAGE>
[ ] 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, Inc.
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
October 28, 1997
Dear Fellow Shareholders:
You are cordially invited to attend Hadron, Inc.'s Annual
Meeting of Shareholders to be held on December 5, 1997, at 1:00
p.m. local time at the Turf Valley Conference Center at 2700 Turf
Valley Road, Ellicott City, Maryland.
At this meeting, you will be asked to vote, in person or by
proxy, on the following matters: (i) election of the Company's
Board of Directors; (ii) approval of an amendment to the
Company's 1994 Stock Option Plan; (iii) approval of the adoption
of the Company's Employee Stock Purchase Plan; (iv) ratification
of the appointment of Ernst & Young LLP as the Company's
independent accountants; and (v) any other business as may
properly come before the meeting. We also will be pleased to
report on the business of the Company and a discussion period
will be provided for questions and comments of general interest
to shareholders.
Whether or not you are able to attend, it is important that
your shares be represented and voted at this meeting.
Accordingly, please complete, sign and date the enclosed proxy
and mail it in the envelope provided at your earliest
convenience. Your prompt response is very important and would be
greatly appreciated.
Sincerely,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D.
Chairman and
Chief Executive Officer
/S/ GEORGE E. FOWLER
George E. Fowler
President and
Chief Operating Officer
<PAGE>
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 5, 1997
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 5, 1997 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 four 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 300,000
shares of Common Stock, as adopted by the Company's
Board of Directors (the "Board") on September 17, 1997;
3. To consider and vote upon a proposal to approve the
Company's 1997 Employee Stock Purchase Plan, as adopted
by the Board on September 17, 1997;
4. To ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal
1998; and
5. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Shareholders of record at the close of business on October
21, 1997 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/ S. AMBER GORDON
S. Amber Gordon
Executive Vice President and
Corporate Secretary
Alexandria, Virginia
October 28, 1997
<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 5, 1997, at 1:00 p.m., local time, 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 3, 1997 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 in favor of each of the nominees for director
listed under Election of Directors below and to approve Proposals
No. 2, 3 and 4 as set forth in the accompanying Notice of Annual
<PAGE>
Meeting of Shareholders and in accordance with their best
judgment on any other matters which may properly come before the
Annual Meeting.
Record Date and Voting Rights
Shareholders of record at the close of business on October
21, 1997 are entitled to notice of and to vote at the Annual
Meeting. As of the record date, 1,686,684 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, 3 and 4, proposed amendment of the
Company's 1994 Stock Option Plan, consideration of a proposal to
approve the Company's Employee Stock Purchase Plan and
ratification of Ernst & Young LLP as the Company's independent
accountants, 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.
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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October 21,
1997 regarding the beneficial ownership of the Company's Common
Stock of (i) each person known to the Company to be the
<PAGE>
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>
Number of Percent
Name and Address Shares of Class
<S> <C> <C>
AMASYS Corporation (1)
4900 Seminary Road, St. 800
Alexandria, VA 22311 202,739<F1> 12.0 %
C.W. Gilluly, Ed.D. 1,160,875<F2> 42.0 %
William J. Howard 13,159<F3> *
Robert J. Lynch, Jr. 52,499<F4> 3.0 %
John D. Sanders, Ph.D. 26,833<F5> 1.6 %
George E. Fowler 119,000<F6> 6.7 %
S. Amber Gordon 119,000<F6> 6.7 %
Donald E. Jewell 91,832<F7> 5.1 %
J. Anthony Vidal <F8> 51,666<F8> 3.0 %
All directors and executive
officers as a group
(9 persons) 1,707,197<F9> 53.8 %
_____________________________
* Less than 1%
<FN>
<F1> AMASYS Corporation ("AMASYS") succeeded to the assets and
liabilities of Infotechnology, Inc., effective January 2,
1997, which assets included 152,739 shares held directly
and 50,000 shares held indirectly.
<F2> Includes 1,020,000 shares of Common Stock which Dr. Gilluly
has the right to acquire pursuant to warrants. Exercise of
the warrants at a subsequent date may result in a change in
control of the Company. See "Certain Relationships and
Related Transactions." Also includes 59, 000 shares which
may be acquired upon the exercise of vested options granted
<PAGE>
under the Company's 1994 Stock Option Plan; options with
respect to 4,000 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 7,499 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
<F4> Includes 7,499 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan and 40,000 shares of Common Stock which
Mr. Lynch has the right to acquire pursuant to warrants.
See "Certain Relationships and Related Transactions."
<F5> Includes 833 shares which may be acquired upon the exercise
of vested options granted under the Company's 1994 Stock
Option Plan.
<F6> Includes 59,000 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan; options with respect to 4,000 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."
Also includes 40,000 shares of Common Stock which each
Mr. Fowler and Ms. Gordon has the right to acquire pursuant
to warrants. See "Certain Relationships and Related
Transactions."
<F7> Includes 31,832 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan; options with respect to 2,666 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."
Also includes 40,000 shares of Common Stock which Mr.
Jewell has the right to acquire pursuant to warrants. See
"Certain Relationships and Related Transactions."
<F8> Includes 31,666 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan. Mr. Vidal resigned as an officer of the
Company on June 30, 1997.
<F9> Includes 71,333 shares not reported in Notes 2 through 8
above, which may be acquired upon the exercise of vested
options granted under the Company's 1994 Stock Option Plan;
options with respect to 8,000 of such shares are subject to
shareholder approval of the proposed amendment to the
<PAGE>
Company's 1994 Stock Option Plan. See "Proposal No. 2 -
Amendment to 1994 Stock Option Plan." Also includes 80,000
shares of Common Stock which may be acquired pursuant to
warrants. See "Certain Relationships and Related
Transactions."
</TABLE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Four 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.
<TABLE>
The names of the nominees and certain other information
about them are set forth below:
<CAPTION>
Nominee Age Director Since Office Held with Company
<S> <C> <C> <C>
C.W. Gilluly, Ed.D. 51 1992 Chairman of the Board
and Chief Executive Officer
William J. Howard 50 1989 Director
Robert J. Lynch, Jr. 64 1991 Director
John D. Sanders, Ph.D. 59 1997 Director
</TABLE>
C.W. GILLULY, Ed.D. was appointed Chief Executive Officer
of the Company in October 1994, having served as Acting President
and Chief Executive Officer of the Company since May 1993.
Since June 1992, Dr. Gilluly has served as Chairman of Comtex
Scientific Corporation, a provider of electronic news and
business information, for which he also served as Chief Executive
Officer from June 1992 through September 1997.
Dr. Gilluly has served as Chairman of the Board and President of
AMASYS and its predecessor, Infotechnology, Inc. since June 1992.
<PAGE>
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,
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.
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 AMASYS.
JOHN D. SANDERS, Ph.D., is an investment banking and
strategic business consultant, who was Chairman and CEO of
TechNews, Inc., publisher of Washington Technology newspaper,
prior to its acquisition by the Washington Post Company in 1996.
Dr. Sanders continues to serve as the Founding Publisher of
Technology Business magazine, developed by TechNews, Inc. and
sold in 1995. Dr. Sanders has been an investment banker for more
than twenty years, specializing in the financing and promotion of
emerging technology companies. He is also a member of the Board
of Directors of Deadalus Enterprises, Inc., Information Analysis,
Inc. and ITC Learning Corporation.
Executive Officers
<TABLE>
The following table contains information as of October 21,
1997 as to the executive officers of the Company who are not also
directors of the Company:
<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
and Secretary
Donald E. Ziegler 1996 Senior Vice
President,
Chief Financial
Officer
and Treasurer
<PAGE>
Donald E. Jewell 1996 Vice President
</TABLE>
GEORGE E. FOWLER (58) 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, Inc. subsidiary in October 1993. 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 (43) was appointed Executive Vice President
of the Company in July 1995. Ms. Gordon was named Corporate
Secretary in December 1993. She also served as Treasurer from
1994 through 1996, and served as Vice President responsible for
Corporate Relations and Strategic Planning from 1991 through
1995. 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. ZIEGLER (48) was appointed Senior Vice President,
Chief Financial Officer and Treasurer of the Company in December
1996. From 1982 through 1996, Mr. Ziegler was an executive
officer of Computer Data Systems, Inc. Most recently he served
as Treasurer and Secretary, where he directed corporate finance,
bank relations, insurance and risk management, financial analysis
and tax planning. Mr. Ziegler is a certified public accountant,
and prior to 1982, was with the public accounting firm of Price
Waterhouse LLP.
DONALD E. JEWELL (46) 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
twenty years. He was Technical Director for Kendrick & Company
in 1988 and 1989, and served as Director of Information Systems
at British Aerospace from 1985 until 1988. From 1977 until 1985,
he served in various computer services management roles for
Planning Research Corporation.
There are no family relationships among the directors or
executive officers of the Company.
<PAGE>
Meetings of the Board of Directors and Committees
The Board of Directors held a total of seven meetings during
the Company's fiscal year ended June 30, 1997. 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 1997, the Board of Directors' Audit
Committee was comprised of Messrs. Howard and Lynch. 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 1997.
The Compensation and Employee Benefits Committee of the
Board of Directors (the "Compensation Committee"), which held two
meetings in fiscal 1997, 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
On September 17, 1997, 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 345,000 to 645,000. At the Annual
Meeting, the shareholders are being asked to approve this
amendment to the 1994 Stock Option Plan.
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
<PAGE>
options, to purchase (as proposed to be amended) an aggregate of
up to 645,000 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
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
<PAGE>
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, 1997, the
Compensation Committee approved the grant, to 11 employees of the
Company, of options to acquire up to 76,000 shares of Common
Stock; included in these awards were grants, to Dr. Gilluly and
Mr. Fowler, of options for each to acquire 12,000 shares, and to
Mr. Jewell of options to acquire 8,000 shares, at an exercise
price of $.94 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.
PROPOSAL NO. 3
APPROVAL OF THE HADRON, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN
Introduction
The board believes it is desirable that the employees of the
Company and its designated subsidiaries have a financial interest
<PAGE>
in the Company's performance. As a result, on September 17,
1997, the Board adopted the Hadron, Inc. 1997 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), subject to the
approval of holders of a majority of the outstanding Common Stock
represented at the Annual Shareholders' Meeting. The Stock
Purchase Plan is intended to provide a means through which the
Company can encourage and assist employees of the Company and its
subsidiaries in acquiring a stock ownership interest in the
Company in order to assist the Company and its subsidiaries in
retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such
employees to exert maximum efforts for the success of the
Company.
The following summary of the Stock Purchase Plan is
qualified in its entirety by the full text of the Stock Purchase
Plan, which is attached to this Proxy Statement as Exhibit I.
Capitalized terms used in this proposal but not defined herein
shall have the meanings assigned to them in Exhibit I.
Purpose
The purpose of the Stock Purchase Plan is to provide a means
by which employees of the Company and its subsidiaries can be
given an opportunity to purchase the Company's Common Stock
through payroll deductions. The Stock Purchase Plan is an
employee stock purchase plan under Internal Revenue Code (the
"Code") Section 423. That section provides certain tax benefits
to employees, as explained below. The Stock Purchase Plan
authorizes the reservation of 250,000 shares of Common Stock for
issuance under the Stock Purchase Plan.
Administration
The Stock Purchase Plan is administered by the Compensation
and Employee Benefits Committee of the Board (the "Compensation
Committee"). The Compensation Committee has the full power,
discretion and authority to interpret and administer the Stock
Purchase Plan and the rights granted under it. The Compensation
Committee may delegate administrative functions to employees of
the Company.
Eligibility
Once the Stock Purchase Plan becomes effective, any person
who is employed by the Company or its subsidiaries is eligible to
participate in the Stock Purchase Plan on the first day of any
January or July following the employee's commencement of
employment with the Company. An employee is not eligible for the
grant of any rights under the Stock Purchase Plan if, immediately
after such grant, the employee would own, directly or indirectly,
stock possessing 5% or more of the total combined voting power or
<PAGE>
value of all classes of stock of the Company or of any parent or
subsidiary of the Company, including any stock that the employee
may purchase under all outstanding options.
Participation in the Plan
Eligible employees become participants in the Stock Purchase
Plan by electing payroll deductions in increments of not less
than $10 per pay period.
Periods of Plan Operations
The Plan will be operated over two semi-annual purchase
periods each year. One period will begin on the first trading
day of January and end on the last trading day of June. The
second period will begin on the first trading day of July and end
on the last trading day of December. The first trading days of
January and July are each a "Grant Date" and the last trading
days of June and December are each an "Investment Date".
Purchase Price
The purchase price per share for the semi-annual period at
which shares are sold under the Stock Purchase Plan equals the
lower of (a) 85% of the fair market value of a share of Common
Stock on the Grant Date for the semi-annual period, or (b) 85% of
the fair market value of a share of Common Stock on the
Investment Date for that semi-annual period. The Compensation
Committee, at its discretion, may increase the percentage above
85%.
Payroll Deductions
Payroll deductions are accumulated during each semi-annual
period and applied towards the purchase of Common Stock of the
Company on the Investment Date for that semi-annual period. An
employee may terminate his participation in the Stock Purchase
Plan at any time, but may not participate again until the next
Grant Date. An participant may decrease his payroll deduction
one time in each semi-annual period. However, an election to
decrease may not be revoked for the remainder of the semi-annual
period.
Purchase of Stock
By executing an election to participate in the Stock
Purchase Plan, the employee is entitled to purchase shares under
such plan. On each Investment Date, the Company will apply the
funds in the participant's account to the purchase of shares of
its Common Stock in full and fractional shares. If the aggregate
number of shares to be purchased on any Investment Date would
<PAGE>
exceed the maximum aggregate number available under the Stock
Purchase Plan, the shares available will be allocated among such
participants in proportion to their contributions during the
semi-annual period. The shares may be purchased from the Company
or on the open market, at the discretion of the Company. If
shares are purchased on the open market, the Company pays any
brokerage and other costs and discount below the market price.
Termination of Employment
An employee's participation in the Stock Purchase Plan will
be terminated when the employee retires, terminates active
employment, or dies. The employee will receive a certificate for
the shares in his Investment Account and a cash refund of his
Payroll Deduction Account.
Restrictions on Transfer
Rights granted under the Stock Purchase Plan are not
transferable and may be exercised only by the person to whom such
rights are granted, except: (a) to the extent that an employee is
permitted to designate a beneficiary as provided in the Stock
Purchase Plan, (b) to the extent permitted by will or the laws of
descent and distribution if no such beneficiary has been
designated, and (c) pursuant to a qualified domestic relations
order.
Duration, Amendment and Termination
The Compensation Committee or the Board may suspend or
terminate the Stock Purchase Plan at any time. Unless earlier
terminated by action of the Board or the Compensation Committee,
the Stock Purchase Plan will remain in effect until such time as
no shares of Common Stock remain available for issuance under the
Stock Purchase Plan and the Company and employees have no further
rights or obligations under the Stock Purchase Plan.
The Compensation Committee or the Board may amend the Stock
Purchase Plan at any time. Any amendment of the Stock Purchase
Plan must be approved by the shareholders within twelve (12)
months of its adoption by the Board if the amendment would: (a)
increase the number of shares of Common Stock reserved for
issuance under the Stock Purchase Plan (other than for
appropriate adjustments for stock dividend, stock split, reverse
stock split, recapitalization, reorganization, merger,
consolidation, acquisition, separation or like change in the
capital structure of the Company), (b) modify the requirements
relating to eligibility for participation in the Stock Purchase
Plan, or (c) modify any other provision of the Stock Purchase
Plan in a manner that would materially increase the benefits
accruing to participants under the Stock Purchase Plan, if such
approval is required in order to comply with the requirements of
Code Section 423.
<PAGE>
Federal Income Tax Information
Rights granted under the Stock Purchase Plan are intended to
qualify under the provisions of Code Sections 421 and 423. Under
these provisions, a participant will be taxed on amounts withheld
for the purchase of shares as if such amounts were actually
received. Other than this tax, no income will be taxable to a
participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the
purchased shares.
If the stock is disposed of at least two years after the
Grant Date and more than one year after the stock is acquired by
the participant on an Investment Date, then the lesser of (a) the
excess of the fair market value of the stock at the time of such
disposition over the purchase price, or (b) the excess of the
fair market value of the stock as of the Grant Date over the
purchase price (determined as of the Grant Date) will be treated
as ordinary income. Any further gain or any loss will be taxed
as a mid-term capital gain or loss if held 18 months or less from
the Investment Date or long-term capital gain or loss if held
more than 18 months from the Investment Date.
If the stock is sold or disposed of before the expiration of
either of the holding periods described above, then the excess of
the fair market value of the stock on the Investment Date over
the purchase price will be treated as ordinary income at the time
of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance
of any gain will be treated as capital gain. Even if the stock is
later disposed of for less than its fair market value on the date
of purchase, the same amount of ordinary income is attributed to
the participant, and a capital loss will be recognized equal to
the difference between the sales price and the fair market value
of the stock on such purchase date. Any capital gain or loss
will be long-term if the stock is held for more than 18 months,
mid-term if held more than one year, or short-term if held one
year or less.
There are no federal income tax consequences to the Company
by reason of the grant or exercise of rights under the Stock
Purchase Plan. The Company generally is entitled to a deduction
to the extent amounts are taxed as ordinary income to a
participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
HADRON, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN.
<PAGE>
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst &
Young LLP ("Ernst & Young") as the Company's independent
accountants for the fiscal year ending June 30, 1998. 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.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR
FISCAL YEAR 1998.
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 $100,000 during the
fiscal year ended June 30, 1997:
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Stock
Options All Other
Name and Fiscal Bonus($) Granted Compensation
Principal Position Year Salary ($) <F1><F2> <F3> <F4>
<S> <C> <C> <C> <C> <C>
C.W. Gilluly, 1997 $ 131,600 $ 10,000 15,000 $125
Chairman and
Chief Executive Officer 1996 81,643 8,000 15,000 125
1995 80,009 - 30,000 125
George E. Fowler, 1997 $ 122,759 $ 28,750 15,000 $125
President and
Chief Operating Officer 1996 118,761 16,000 15,000 125
1995 115,003 - 30,000 125
Donald E. Jewell, 1997 $ 81,995 $ 44,622 10,000 $125
Vice President 1996 79,558 48,488 7,500 125
J. Anthony Vidal, 1997 $ 81,645 $ 43,405 10,000 $125
Vice President <F5> 1996 79,911 48,396 10,000 125
- ----------------------------
<PAGE>
<FN>
<F1> The Company paid, in fiscal year 1997, the bonuses awarded
for fiscal year 1996.
<F2> The Company has awarded the following fiscal 1997 bonuses
to be paid in fiscal 1998: C.W. Gilluly-$8,000; George E.
Fowler-$26,749; and Donald E. Jewell-$56,829.
<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.
<F5> Mr. Vidal resigned as an officer of the Company on June 30,
1997.
</TABLE>
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, 1997.
<TABLE>
Option Grants in Fiscal Year 1997
<CAPTION>
% of
Total
Number of Options
Shares Granted to Potential
Underlying Employees Realizable Value at Assumed
Options In Annual Rates of Stock Price
Granted Fiscal Exercise Expiration Appreciation for Option Term <F1>
Name <F2> Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
C.W. Gilluly 15,000 13.3% $.69 9/17/2006 $ 6,509 $ 16,495
George E. Fowler 15,000 13.3% .69 9/17/2006 6,509 16,495
Donald E. Jewell 10,000 8.9% .69 9/17/2006 4,339 10,997
J. Anthony Vidal <F3> 10,000 8.9% .69 9/17/2006 4,339 10,997
________________________________
<FN>
<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% 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
<PAGE>
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
termination of employment to the extent vested at that time.
<F3> Mr. Vidal resigned as an officer of the Company on June
30, 1997.
</TABLE>
On September 17, 1997, the Compensation Committee approved
the grant, to 11 employees of the Company, of options to acquire
up to 76,000 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."
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, 1997.
<TABLE>
Fiscal Year-End Option Values
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1997 at June 30, 1997 <F1>
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
C.W. Gilluly 45,000 15,000 $ 23,425 $ 3,725
George E. Fowler 45,000 15,000 23,425 3,725
Donald E. Jewell 23,333 9,167 11,866 2,171
J. Anthony Vidal <F2> 24,999 10,001 12,491 2,484
__________________________
<FN>
<F1> Represents the difference between the exercise price of the
outstanding options and the closing bid price of the Common Stock
on June 30, 1997, which was $.875 per share. Options that have
<PAGE>
an exercise price greater than the fiscal year-end market value
are not included in the value calculation.
<F2> Mr. Vidal resigned as an officer of the Company on June
30, 1997.
</TABLE>
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, 1997, at
a base salary of $135,000. 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 20% 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, 1997, at a base salary of $90,000.
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 the Company. 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.
Dr. Gilluly holds warrants to acquire 1,020,000 shares of
Common Stock. Exercise of the warrants at a subsequent date may
result in a change in control of the Company. See "Certain
Relationships and Related Transactions."
Compensation of Directors
Directors receive a quarterly cash fee of $1,250 for their
services. In addition, directors receive $500 per Board of
<PAGE>
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.
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 1997
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
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.
<PAGE> 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
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
significant growth in revenue and profitability, as well as
divisional and individual performance objectives. For 1997,
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.
<PAGE>
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.
1997 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 1997, the Committee reviewed Dr. Gilluly's salary, taking
into consideration the Company's financial results, his
performance and his salary relative to those for comparable
positions. Based on this review, the Committee determined to
continue Dr. Gilluly's annual salary at $130,000. 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 72,000
shares of the Company's Common Stock at the market price on the
date of grant. Under the Plan, one third of options granted are
immediately exercisable upon the date of grant, with one-third
becoming exercisable on each of the first and second
anniversaries of the date of grant.
1997 Compensation for the President and Chief Operating Officer
Mr. Fowler was appointed President and Chief Operating
Officer of the Company in October 1994, at which time the Company
and Mr. Fowler entered into an employment agreement which has
been renewed annually since that time. Mr. Fowler's compensation
during fiscal year 1997 was determined by the terms of his
employment agreement dated October 1, 1996, which included an
annual base salary of $123,500 and provided a formula for earning
a performance-based bonus, which totaled $28,750. Mr. Fowler's
continuing compensation is based on his current employment
agreement as described in "Executive Compensation Employment
Agreements," above. The Committee has, at various times, granted
<PAGE>
Mr. Fowler options under the 1994 Stock Option Plan to purchase a
total of 72,000 shares of the Company's Common Stock at the
market price on the date of grant. Under the Plan, one third of
options granted are immediately exercisable upon the date of
grant, with one-third becoming exercisable on each of the first
and second anniversaries of the date of grant.
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, 1992.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Hadron, Inc. 100.00 86.35 12.72 16.81 36.81 39.54
MG-Bus Serv Index 100.00 99.93 109.92 121.97 174.67 184.11
NASDAQ Market Index 100.00 122.76 134.61 157.88 198.73 239.40
</TABLE>
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
<PAGE>
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, 1996 and ended June 30, 1997, all
Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial
owners were complied with in a timely manner.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1997, AMASYS, owner
of approximately 12% of the outstanding Common Stock of the
Company, was charged $6,300 for corporate relations and
administrative services provided by the Company to AMASYS. At
June 30, 1997, the Company had a net payable balance to AMASYS of
approximately $29,400. Dr. Gilluly, Chairman of the Board and
Chief Executive Officer of the Company, is Chairman of the Board
and a principal shareholder of AMASYS. Mr. Lynch, an independent
outside director of the Company, is also a director of AMASYS.
During fiscal year 1997, the Company prepaid $25,000 of a
$275,000 Convertible Promissory Note due from the Company to Dr.
C.W. Gilluly, (the "Note") and pursuant to its terms and
conditions, issued warrants to Dr. Gilluly to acquire 100,000
shares of the Company's Common Stock at $.25 per share.
On April 21, 1997, Dr. Gilluly sold $25,000 of the then
$250,000 Note to five officers of the Company. Concurrently, the
Company elected to prepay the $25,000 of Notes held by the
officers, and in accordance with terms of the Notes, issued
warrants to the officers to acquire 100,000 shares of the
Company's Common Stock. The officers exercised the warrants and
acquired the 100,000 shares at the Conversion Price of $.25 per
share.
In June 1997, the Company entered into a Line of Credit
Agreement with Century National Bank pursuant to which Century
National Bank provided the Company with a $800,000 line of credit
facility through November 30, 1998, replacing a $300,000 facility
set to expire in December 1997. Borrowings under the facility
are personally guaranteed by Dr. Gilluly and his wife. Century
National Bank and the Company agreed that, in addition to
providing working capital, the line of credit would be used to
fund the Company's prepayment on June 2, 1997 of its remaining
$225,000 Note to Dr. Gilluly. Under the terms of the Note, the
Company issued warrants, which expire on October 21, 2003, to Dr.
Gilluly to acquire 900,000 shares of the Company's $.02 par value
Common Stock ("Common Stock") at $.25 per share.
<PAGE>
The Company was indebted in the approximate amount of
$288,000 to a vendor under the terms of a November 1, 1996
promissory note secured by certain assets. In order to
facilitate the bank line of credit, the vendor agreed to accept
$250,000 in full satisfaction of the promissory note. Such
payment was made in June 1997.
Century National Bank and the Company determined that
payment of such amount to the vendor would reduce the Company's
available working capital to a level below that which each
contemplated the Company would have as a result of the line of
credit. As a consequence, certain members of the Company's
management or Board of Directors (the "Investors"), each agreed
to invest $24,000 in the Company in the form of five separate
two-year promissory notes, the principal of which is convertible
at $.60 per share at each of his or her respective option, into
restricted shares of the Company's Common Stock. Such notes also
provide that upon prepayment by the Company of principal
outstanding under the notes, the Company shall issue to the note
holder a warrant to acquire Common Stock at $.60 per share. The
number of shares each warrant shall entitle the holder thereof to
acquire shall equal the principal prepaid giving rise to the
warrant divided by $.60. The Company and each of the Investors
entered into an Investment Agreement dated June 20, 1997 setting
forth the terms of his or her investment in the Company.
SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended
to be presented at the Company's 1998 Annual Meeting of
Shareholders must be received by the Company no later than July
10, 1998 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year
ended June 30, 1997, including the financial statements and notes
thereto is being mailed to the shareholders of record along with
this Proxy Statement. The Annual Report is not incorporated by
reference in this Proxy Statement and is not considered to be
part of the proxy material.
The Company will provide without charge a copy of its 1997
Annual Report on Form 10-K, including the financial statements
and the financial statement schedules required to be filed with
the SEC. The Company will furnish any exhibit described in the
list accompanying the 1997 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
<PAGE>
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/ S. AMBER GORDON
S. Amber Gordon
Executive Vice President and
Corporate Secretary
Date: October 28, 1997
<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 5, 1997
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 5, 1997, 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 FOUR nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the FOUR nominees
listed below
C.W. Gilluly, William J. Howard,
Robert J. Lynch, Jr. and John D. Sanders
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 approve the Hadron, Inc. 1997 Employee Stock
Purchase Plan.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
<PAGE>
4. Proposal to ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal year
1998.
[ ] 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, 3 and 4 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(s) above.
<PAGE>
EXHIBIT I
HADRON, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
<PAGE> TABLE OF CONTENTS
Page
1. Purpose and Effect of Plan. . . . . . . . . . . . . . . . .1
2. Shares Reserved for the Plan. . . . . . . . . . . . . . . .1
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
4. Administration of the Plan. . . . . . . . . . . . . . . . .3
5. Eligible Employees. . . . . . . . . . . . . . . . . . . . .3
6. Election to Participate . . . . . . . . . . . . . . . . . .4
7. Method of Purchase and Investment Accounts. . . . . . . . .4
8. Stock Purchases . . . . . . . . . . . . . . . . . . . . . .5
9. Limitation on Purchases . . . . . . . . . . . . . . . . . .5
10. Title of Accounts . . . . . . . . . . . . . . . . . . . . .5
11. Rights as a Shareholder . . . . . . . . . . . . . . . . . .5
12. Rights Not Transferable . . . . . . . . . . . . . . . . . .6
13. Change in Capital Structure . . . . . . . . . . . . . . . .6
14. Retirement, Termination and Death . . . . . . . . . . . . .6
15. Amendment of the Plan . . . . . . . . . . . . . . . . . . .7
16. Termination of the Plan . . . . . . . . . . . . . . . . . .7
17. Effective Date of Plan. . . . . . . . . . . . . . . . . . .7
18. Government and Other Regulations. . . . . . . . . . . . . .7
19. Indemnification of Committee. . . . . . . . . . . . . . . .7
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
HADRON, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose and Effect of Plan
The purpose of the Plan is to secure for the Company and
its shareholders the benefits of the incentive inherent in the
ownership of Common Stock by present and future employees of the
Company and its Subsidiaries. The Plan is intended to comply
with the terms of Code section 423 and Rule 16b-3 of the Act.
2. Shares Reserved for the Plan
There shall be reserved for issuance and purchase by
employees under the Plan an aggregate of Two Hundred Fifty
Thousand (250,000) shares of Common Stock, subject to adjustment
as provided in Section 13. Shares subject to the Plan shall be
authorized but unissued shares acquired. Shares needed to
satisfy the needs of the Plan may be newly issued by the Company
or acquired by purchases at the expense of the Company on the
open market or in private transactions, at the discretion of the
Company.
3. Definitions
Where indicated by initial capital letters, the following
terms shall have the following meanings:
(a) Act: The Securities Exchange Act of 1934.
(b) Board: The Board of Directors of the Company.
(c) Code: The Internal Revenue Code of 1986, as amended,
or any subsequently enacted federal revenue law. A reference to
a particular section of the Code shall include a reference to any
regulations issued under the section and to the corresponding
section of any subsequently enacted federal revenue law.
(d) Committee: The committee established pursuant to
Section 4 to be responsible for the general administration of the
Plan.
(e) Common Stock: The Company's Common Stock, $0.02 par
value.
(f) Company: Hadron, Inc., a New York corporation, and
any successor by merger, consolidation or otherwise.
(g) Compensation: The total earnings, prior to
withholding, paid to an Eligible Employee during the applicable
pay period, including bonuses, overtime and salary reduction
contributions pursuant to a Code section 125 or 401(k) plan.
<PAGE>
(h) Custodian: A financial institution or other corporate
entity selected by the Company from time to time to act as
custodian for the Plan.
(i) Eligible Employee: Any employee of the Company or its
Subsidiaries who meets the eligibility requirements of Section 5
and Section 9.
(j) Enrollment Form: The form filed by a Participant with
the Committee authorizing payroll deductions pursuant to Section
6.
(k) Fair Market Value: The closing trading price of the
Common Stock on the NASD OTC Electronic Bulletin Board on the
date in question, or, if the Common Stock was not quoted on such
date, the closing trading price on the last day prior thereto on
which the Common Stock was quoted.
(l) Grant Date: The first business day of each January or
July on which shares of Common Stock are or could be traded on
the NASD OTC Electronic Bulletin Board.
(m) Investment Account: The account established for each
Participant to hold Common Stock purchased under the Plan
pursuant to Section 7.
(n) Investment Date: The last business day of each June
or December on which shares of Common Stock are or could be
traded on the NASD OTC Electronic Bulletin Board.
(o) Parent: Any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, as of
an Investment Date, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
(p) Participant: An Eligible Employee who elects to
participate in the Plan by filing an Enrollment Form pursuant to
Section 6.
(q) Payroll Deduction Account: The account established
for a Participant to hold payroll deductions pursuant to Section
6.
(r) Plan: The "Hadron, Inc. 1997 Employee Stock Purchase
Plan," as set forth herein and as amended from time to time.
(s) Purchase Price: A percentage of the lower of the Fair
Market Value of a share of Common Stock on the Grant Date or on
the Investment Date. The percentage shall be eighty-five percent
(85%) unless the Committee, in its sole discretion, increases the
percentage at any time. After any such increase, the Committee,
in its sole discretion, may decrease the percentage, but not
below eighty-five percent (85%), at any time. Any increase or
decrease shall be communicated to Eligible Employees not less
<PAGE>
than thirty (30) days prior to the first Grant Date affected by
the change.
(t) Subsidiary or Subsidiaries: Any corporation (other
than the Company) in an unbroken chain of corporations beginning
with the Company if, as of an Investment Date, each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
4. Administration of the Plan
The Plan shall be administered by the Committee, consisting
of not less than two members appointed by the Board. The
Committee shall be the Compensation and Employee Benefits
Committee of the Board unless the Board shall appoint another
committee to administer the Plan. The Board from time to time
may appoint members previously appointed and may fill vacancies,
however caused, in the Committee.
Subject to the express provisions of the Plan, the
Committee shall have the authority to take any and all actions
(including directing the Custodian as to the acquisition of
shares) necessary to implement the Plan and to interpret the
Plan, to prescribe, amend and rescind rules and regulations
relating to it, and to make all other determinations necessary or
advisable in administering the Plan. All of such determinations
shall be final and binding upon all persons. A quorum of the
Committee shall consist of a majority of its members and the
Committee may act by vote of a majority of its members at a
meeting at which a quorum is present, or without a meeting by a
written consent to their action taken signed by all members of
the Committee. The Committee may request advice or assistance or
employ such other persons as are necessary for proper
administration of the Plan. The Committee may delegate
administration of the Plan to one or more employees of the
Company or any Subsidiary.
5. Eligible Employees
All employees of the Company or its Subsidiaries shall be
eligible to participate in the Plan as of the first Grant Date
coincident with or following commencement of employment, or as
soon as administratively practicable thereafter. Eligibility to
participate is also subject to the provisions of Section 9.
No director of the Company or of any Subsidiary who is not
an employee shall be eligible to participate in the Plan. No
independent contractor who is not an employee shall be eligible
to participate in the Plan.
<PAGE>
6. Election to Participate
Each Eligible Employee may become a Participant by filing
with the Committee an Enrollment Form authorizing specified
regular payroll deductions from his or her Compensation. Such
regular payroll deductions shall be in increments of Ten Dollars
($10.00) subject to a minimum deduction of Ten Dollars ($10.00)
per pay period. All regular payroll deductions shall be credited
to the Payroll Deduction Account that the Company has established
in the name of the Participant. The Board may establish limits
on the amounts of payroll deductions and may change those limits
from time to time.
Original Enrollment Forms for the six month period must be
filed before the Grant Date as prescribed by the Committee.
Failure to file an Enrollment Form within the prescribed filing
period shall preclude the Eligible Employee from participation
until the next Grant Date.
A Participant may cease his or her participation in the
Plan at any time. An Eligible Employee who has ceased to be a
Participant may not again become a Participant until the next
Grant Date. Not more than one (1) time during any semi-annual
period, a Participant may decrease his or her payroll deduction
by filing a new Enrollment Form. The change will be effective as
of the payroll period following the date of the Participant's
election change through the remainder of the semi-annual period.
7. Method of Purchase and Investment Accounts
Each Participant having eligible funds in his Payroll
Deduction Account on an Investment Date shall be deemed, without
any further action, to have purchased the number of shares
(excluding fractional shares unless otherwise determined by the
Committee) which the eligible funds in his Payroll Deduction
Account could purchase at the Purchase Price on that Investment
Date. All shares purchased shall be maintained by the Custodian
in a separate Investment Account for each Participant. All cash
dividends paid with respect to shares of the Common Stock shall
be added to a Participant's Payroll Deduction Account and shall
be used to purchase shares of Common Stock for the Participant's
Investment Account. Expenses incurred in the purchase of such
shares shall be paid by the Company.
All dividends of Common Stock distributed in-kind shall be
added to the shares held for a Participant in his Investment
Account. Any distribution of shares with respect to shares of
Common Stock held for a Participant, other than a dividend of
Common Stock, shall be distributed to the Participant as soon as
practicable. Certificates for full shares will be issued and
fractional shares will be sold and the proceeds of sale, less
selling expenses, distributed to the Participant.
<PAGE>
8. Stock Purchases
The Custodian shall acquire shares of Company Stock for
Participants as of each Investment Date from the Company or, if
directed by the Committee, by purchases on the open market or in
private transactions using total payroll deduction amounts
received by the Custodian. If shares are purchased in one or
more transactions on the open market or in private transactions
at the direction of the Committee, the Company will pay the
Custodian the difference between the Purchase Price and the price
at which such shares are purchased for Participants.
9. Limitation on Purchases
No Participant may purchase during any one calendar year
under the Plan (or combined with any other plan qualified under
Code section 423) shares of Common Stock having a Fair Market
Value (determined by reference to the Fair Market Value on each
date of purchase) in excess of $25,000. This limitation shall be
interpreted to comply with Code section 423(b)(8).
A Participant's Payroll Deduction Account may not be used
to purchase Common Stock on any Investment Date to the extent
that after such purchase the Participant would own (or be
considered as owning within the meaning of Code section 424(d))
stock possessing 5 percent or more of the total combined voting
power of the Company or its Parent or Subsidiary. For this
purpose, stock which the Participant may purchase under any
outstanding option shall be treated as owned by such Participant.
As of the first Investment Date on which this paragraph limits a
Participant's ability to purchase Common Stock, the employee
shall cease to be a Participant.
10. Title of Accounts
The Custodian shall maintain an Investment Account for each
Participant. Each Investment Account shall be in the name of the
Participant or, if he so indicates on his Enrollment Form, in his
name jointly with a member of his family, with right of
survivorship. A Participant who is a resident of a jurisdiction
which does not recognize such a joint tenancy may have an
Investment Account in his name as tenant in common with a member
of his family, without right of survivorship.
11. Rights as a Shareholder
A Participant shall have the right at any time to obtain a
certificate for the full shares of Common Stock credited to his
Investment Account. A Participant shall have the right at any
time to direct that any full shares in his Investment Account be
sold and that the proceeds, less expenses of sale, be remitted to
him. When a Participant ceases to be a Participant, the
Participant may elect to have his shares sold by the Custodian
and the proceeds, after selling expenses, remitted to him or the
Participant may elect to have a certificate for the full shares
<PAGE>
of Common Stock credited to his Investment Account forwarded to
him. In either event, the Custodian will sell any fractional
shares held in his Investment Account to the Company and remit
the proceeds of such sale, less selling expenses, and the balance
in his Payroll Deduction Account to him.
As a condition of participation in the Plan, each
Participant agrees to notify the Company if he sells or otherwise
disposes of any of his shares of Common Stock within two years of
the Grant Date on which such shares were purchased.
12. Rights Not Transferable
Rights under the Plan are not transferable by a
Participant, except by will or by the laws of descent and
distribution.
13. Change in Capital Structure
In the event of a stock dividend, spinoff, stock split or
combination of shares, recapitalization or merger in which the
Company is the surviving corporation or other change in the
Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options
or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or
securities of the Company to be subject to the Plan, the maximum
number of shares or securities which may be delivered under the
Plan, the selling price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination
shall be binding on all persons.
If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction
that results in the acquisition of substantially all of the
Company's outstanding stock by a single person or entity, or a
sale or transfer of substantially all of the Company's assets,
the Committee may take such actions with respect to the Plan as
the Committee deems appropriate.
Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of
any Participant, and the Committee's determination shall be
conclusive and binding on all persons for all purposes.
14. Retirement, Termination and Death
In the event of a Participant's retirement, termination of
active employment, or death, the amount in his Payroll Deduction
Account shall be refunded to him, and certificates will be issued
for full shares held in his Investment Account. In the event of
his death, the amount in his Payroll Deduction Account and all
shares in his Investment Account shall be delivered to the
beneficiary designated by the Participant in a writing filed with
the Company. If no beneficiary has been designated, or if the
<PAGE>
designated beneficiary does not survive the Participant, such
amount and all shares shall be delivered to his estate.
15. Amendment of the Plan
The Board of Directors may at any time, or from time to
time, amend the Plan in any respect; provided, however, that the
shareholders of the Company must approve any amendment that would
materially (i) increase the benefits accruing to Participants
under the Plan, (ii) increase the number of securities that may
be issued under the Plan, or (iii) modify the requirements as to
eligibility for participation in the Plan.
16. Termination of the Plan
The Plan and all rights of employees hereunder shall
terminate:
(a) on the Investment Date that Participants become
entitled to purchase a number of shares greater than the number
of reserved shares remaining available for purchase; or
(b) at any prior date at the discretion of the Board
of Directors.
In the event that the Plan terminates under circumstances
described in (a) above, reserved shares remaining as of the
termination date shall be issued to Participants on a prorata
basis. Upon termination of the Plan, all amounts in an
employee's Payroll Deduction Account that are not used to
purchase Common Stock will be refunded.
17. Effective Date of Plan
The Plan was approved by the Board of Directors on
September 17, 1997 subject to approval by the Company's
shareholders, and, if approved by the Company's shareholders, the
Plan shall become effective on the date designated by the
Committee subsequent to such approval.
18. Government and Other Regulations
The Plan, and the grant and exercise of the rights to
purchase shares hereunder, and the Company's obligation to sell
and deliver shares upon the exercise of rights to purchase
shares, shall be subject to all applicable federal, state and
foreign laws, rules and regulations, and to such approvals by any
regulatory or government agency as may, in the opinion of counsel
for the Company, be required.
<PAGE>
19. Indemnification of Committee
Service on the Committee shall constitute service as a
director of the Company so that members of the Committee shall be
entitled to indemnification and reimbursement as directors of the
Company pursuant to its Articles of Incorporation and Bylaws.
20. Governing Law
The Plan shall be construed and administered in accordance
with the laws of the Commonwealth of Virginia.
