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 S240.14a-11(c) or S240.14a-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:
___________________________________________________________
[ ] 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, 1998
Dear Fellow Shareholders:
You are cordially invited to attend Hadron, Inc.'s Annual
Meeting of Shareholders to be held on December 4, 1998, at 11:00
a.m. local time at the Radisson Hotel, 5000 Seminary Road,
Alexandria, Virginia.
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) ratification of the appointment of Ernst
& Young LLP as the Company's independent accountants; and (iii)
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 important and would be
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 4, 1998
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 4, 1998 at 11:00
a.m., local time, at the Radisson Hotel located at 5000 Seminary
Road, Alexandria, Virginia 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 ratify the selection of Ernst & Young, LLP as
independent accountants for the Company for fiscal
1999; and
3. 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, 1998 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, 1998
<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 4, 1998, at 11:00 a.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 4, 1998 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, to approve Proposal No.
2 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
Shareholders of record at the close of business on October
21, 1998 are entitled to notice of and to vote at the Annual
Meeting. As of the record date, 1,736,530 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.
Proposal Number 2, ratification of Ernst & Young, LLP as the
Company's independent accountants and 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,
1998 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.
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Percent
Shares of Class
<S> <C> <C>
AMASYS Corporation <F1>
4900 Seminary Road, St. 800
Alexandria, VA 22311 202,739<F1> 11.7 %
C.W. Gilluly, Ed.D. 1,174,875<F2> 41.5 %
William J. Howard 14,911<F3> *
Robert J. Lynch, Jr. 55,001<F4> 3.1 %
John D. Sanders, Ph.D. 33,501<F5> 1.9 %
George E. Fowler 133,815<F6> 7.2 %
S. Amber Gordon 133,407<F6> 7.2 %
Donald E. Ziegler 95,941<F7> 5.3 %
Donald E. Jewell 101,983<F8> 5.6 %
All directors and executive
officers as a group
(8 persons) 1,743,434 53.3 %
_____________________________
* Less than 1%
<PAGE>
<FN>
<F1> AMASYS Corporation ("AMASYS") succeeded to the assets and liabilities of Infotechnology, Inc.,
effective January 2, 1997, which assets included 202,739 shares of the Company's common stock.
<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 73,000 shares
which may be acquired upon the exercise of vested options granted under the Company's 1994 Stock
Option Plan.
<F3> Includes 10,001 shares which may be acquired upon the exercise of vested options granted under the
Company's 1994 Stock Option Plan.
<F4> Includes 10,001 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 2,501 shares which may be acquired upon the exercise of vested options granted under the
Company's 1994 Stock Option Plan.
<F6> Includes 73,000 shares which may be acquired upon the exercise of vested options granted under the
Company's 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 29,667 shares which may be acquired upon the exercise of vested options granted under the
Company's 1994 Stock Option Plan. Also includes 40,000 shares of Common Stock which Mr. Ziegler
has the right to acquire pursuant to warrants. See "Certain Relationships and Related
Transactions."
<F8> Includes 41,168 shares which may be acquired upon the exercise of vested options granted under the
Company's 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."
</TABLE>
<PAGE> 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.
The names of the nominees and certain other information
about them are set forth below:
<TABLE>
Nominee Age Director Since Office Held with Company
<CAPTION>
<S> <C> <C> <C>
C.W. Gilluly, Ed.D. 52 1992 Chairman of the Board and
Chief Executive Officer
William J. Howard 51 1989 Director
Robert J. Lynch, Jr. 65 1991 Director
John D. Sanders, Ph.D. 60 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.
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 1977,
Mr. Howard has been the Chief Executive Officer of Discovery
Tours, LLC, a video production company which produces tourism
videos in the Mid-Atlantic and Southeast United States.
<PAGE>
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., serves as a business consultant to
emerging technology companies. He was Chairman and Chief
Executive Officer of TechNews, Inc., publisher of Washington
Technology newspaper, from 1988 to 1996, prior to its sale to The
Washington Post Company. In addition, Dr. Sanders has been a
Registered Representative of Wachtel & Co., Inc., a Washington
D.C.-based stock brokerage firm, since 1968. Dr. Sanders serves
on the boards of ITC Learning Corporation and Sensys
Technologies, Inc.
Executive Officers
The following table contains information as of October 21,
1998 as to the executive officers of the Company who are not also
directors of the Company:
<TABLE>
Officer Office Held
Name Since With Company
<CAPTION>
<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
Donald E. Jewell 1996 Vice President
</TABLE>
<PAGE> GEORGE E. FOWLER (59) 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 (44) 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 (49) 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 Coopers LLP.
DONALD E. JEWELL (47) 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 six meetings during
the Company's fiscal year ended June 30, 1998. Each director
attended in person or telephonically all of the meetings held by
the Board of Directors and all committees thereof on which he
served.
During fiscal year 1998, the Board of Directors' Audit
Committee was comprised of Dr. Sanders and 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
1998.
The Compensation and Employee Benefits Committee of the
Board of Directors (the "Compensation Committee"), which held two
meetings in fiscal 1998, 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 Stock Option
and Stock Purchase Plans.
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.
<PAGE> PROPOSAL NO. 2
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, 1999. 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 1999.
<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 two other executive officers of the Company who
received total salary and bonus in excess of $100,000 during the
fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
--------------------------- -------------
Name and Fiscal Stock Options All Other
Principal Position Year Salary($) Bonus($)<F1><F2> Granted <F3> Compensation <F4>
- --------------------- ------ --------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
C.W. Gilluly,
Chairman and 1998 $ 131,690 $ 8,000 12,000 $ 1,000
Chief Executive 1997 131,600 10,000 15,000 125
Officer 1996 131,600 8,000 15,000 125
George E. Fowler, 1998 $136,834 $ 26,749 12,000 $ 1,000
President and 1997 122,759 28,750 15,000 125
Chief Operating 1996 118,761 16,000 15,000 125
Officer
Donald E. Jewell, 1998 $ 88,971 $56,829 8,000 $ 920
Vice President 1997 81,995 44,622 10,000 125
1996 79,558 48,488 7,500 125
<FN>
<F1> In fiscal year 1998, the Company paid the bonuses awarded for fiscal year 1997, and in
fiscal year 1997, the Company paid the bonuses awarded for fiscal year 1996.
<F2> The Company has awarded the following fiscal 1998 bonuses to be paid in fiscal 1999:
C.W. Gilluly-$34,408; George E. Fowler-$20,154; and Donald E. Jewell-$33,591.
<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>
<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, 1998.
<TABLE>
Option Grants in Fiscal Year 1998
<CAPTION>
% of
Number of Total Options Potential
Shares Grant to Realizable Value at Assumed
Underlying Employees Annual Rates of Stock Price
Options in Fiscal Price Exercise Appreciation for Option Term <F1>
Name Granted <F2> Year Date Date 5% 10%
- ---- ------------ -------------- ----- -------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.W. Gilluly 12,000 15% $.94 9/17/2007 $ 7,094 $ 17,977
George E. Fowler 12,000 15% .94 9/17/2007 7,094 17,977
Donald E. Jewell 8,000 10% .94 9/17/2007 4,729 11,985
<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 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.
</TABLE>
On September 17, 1998, the Compensation Committee approved
the grant, to 21 employees of the Company, of options to acquire
up to 114,000 shares of Common Stock.
<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, 1998.
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1998 at June 30, 1998 <F1>
----------------------------------------- --------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C.W. Gilluly 59,000 13,000 $ 92,340 $ 15,030
George E. Fowler 59,000 13,000 92,340 15,030
Donald E. Jewell 31,833 8,667 49,059 10,021
<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, 1998, which was $2.00 per share. Options that have
an exercise price greater than the fiscal year-end market value are not included in the value
calculation.
</TABLE>
<PAGE>
Employment Agreements, Termination of Employment and Change of
Control Arrangements
The Company entered into a rolling two-year agreement with
Dr. Gilluly, to serve as Chief Executive Officer, on July 1,
1998, at an initial base salary of $140,000. His employment
agreement with the Company further provides for Dr. Gilluly to
participate in the Company's Stock Option and Bonus Plans. Under
the Bonus Plan, Dr. Gilluly may receive additional compensation
based upon the financial performance of the Company. If Dr.
Gilluly is constructively discharged, the Company must pay him a
lump sum payment equal to two times his base salary. In no case,
however, will the Company pay Dr. Gilluly 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."
The Company renewed its annual agreement with Mr. Fowler, to
serve as President and Chief Operating Officer, on July 1, 1998,
at a base salary of $145,000. His employment agreement with the
Company further provides for Mr. Fowler to participate in the
Company's Stock Option and Bonus Plans. Under the Bonus Plan,
Mr. Fowler may receive additional compensation based upon 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 renewed its annual agreement with Mr. Jewell, to
serve as Vice President of the Company and as President of its
EISI subsidiary, on July 1, 1998, at a base salary of $110,000.
His employment agreement with the Company further provides for
Mr. Jewell to participate in the Company's Stock Option and Bonus
Plans. Under the Bonus Plan, Mr. Jewell may receive additional
compensation 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.
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.
<PAGE>
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 1998
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 attaining revenue and profitability goals. To implement
these policies, the Compensation Committee has designed a
compensation program consisting of base salary, an annual
incentive bonus 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.
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 technology service providers and/or government
contracting firms who face similar challenges in their
markets. Periodic increases in base salary relate to
individual contribution evaluated against established
objectives.
<PAGE>
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 or
exceeding specific revenue and profitability goals. For
1998, 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.
1998 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.
Dr. Gilluly's fiscal 1998 compensation was determined by the
Board of Directors, included a base salary of $130,000 and
provided for a performance-based bonus, which totaled $34,408.
In August 1998, the Committee reviewed Dr. Gilluly's salary,
taking into consideration the Company's profitable growth,
financial results, Dr. Gilluly's performance and his salary
relative to those for comparable positions. Based on this
review, the Committee determined to enter into an employment
agreement with Dr. Gilluly, commencing in fiscal year 1999 at an
initial base annual salary of $140,000. See "Executive
Compensation -Employment Agreements." Dr. Gilluly's salary is
based upon his management skills, particularly in the areas of
turnaround, refinancing, diversification and growth.
<PAGE>
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 87,000
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.
1998 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 1998 was determined by the terms of his
employment agreement dated October 1, 1997, which included an
annual base salary of $135,000 and provided a formula for earning
a performance-based bonus, which totaled $20,154. 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
Mr. Fowler options under the 1994 Stock Option Plan to purchase a
total of 87,000 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.
<PAGE>
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, 1993.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Hadron, Inc. 100.00 14.73 19.47 42.63 45.78 105.26
MG-Bus Serv Index 100.00 104.41 131.72 167.83 188.23 212.03
NASDAQ Market Index 100.00 109.66 128.61 161.89 195.02 258.52
</TABLE>
<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, 1997 and ended June 30, 1998, 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, 1998, AMASYS, owner
of approximately 11.7% of the outstanding Common Stock of the
Company, was charged $19,357 for corporate relations and
administrative services provided by the Company to AMASYS. At
June 30, 1998, the Company had a net payable balance to AMASYS of
approximately $3,064. Dr. Gilluly, Chairman of the Board and
Chief Executive Officer of the Company, is Chairman of the Board
of AMASYS. Mr. Lynch, an independent outside director of the
Company, is also a director of AMASYS.
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
bear interest at the prime rate plus two percent and 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 $225,000
Promissory Note to Dr. Gilluly. Under the terms of the original
Promissory Note dated October 21, 1993, which had been extended
and amended as of April 21, 1997, the Company issued 900,000
warrants, which expire on October 21, 2003, to Dr. Gilluly to
acquire the Company's common stock ("Common Stock") at $.25 per
share.
<PAGE>
In June 1997, 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.
As of August 1, 1998, the Company entered into a letter
agreement with Dr. John Sanders to provide strategic financial
consulting services for six months for $2,500 per month.
SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended
to be presented at the Company's 1999 Annual Meeting of
Shareholders must be received by the Company no later than July
10, 1999 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year
ended June 30, 1998, 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 1998
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 1998 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/ S. AMBER GORDON
S. Amber Gordon
Executive Vice President and
Corporate Secretary
Date: October 28, 1998
<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 4, 1998
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 4, 1998, 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 ratify the selection of Ernst & Young, LLP
as independent accountants for the Company for fiscal
year 1999.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. 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:------------------------
<PAGE>
When properly executed, this proxy will be voted in the
manner directed herein. If no direction is made, this proxy
will be voted FOR proposal 2 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>
