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.
7611 Little River Turnpike, Suite 404W
Annandale, Virginia 22003
October 28, 1999
Dear Fellow Shareholders:
You are cordially invited to attend Hadron, Inc.'s Annual
Meeting of Shareholders to be held on December 7, 1999, at 11:00
a.m. local time at the Courtyard by Marriott, 2700 Eisenhower
Avenue, 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) approval of an amendment to the
Company's 1997 Employee Stock Purchase Plan; (iii) ratification
of the appointment of Ernst & Young LLP as the Company's
independent accountants; and (iv) 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
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 7, 1999
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 7, 1999 at 11:00
a.m., local time, at the Courtyard by Marriott located at 2700
Eisenhower Avenue, Alexandria, Virginia for the following
purposes:
1. To elect five 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 1997 Employee
Stock Purchase Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by an
additional 100,000 shares of Common Stock to 350,000;
3. To ratify the selection of Ernst & Young LLP as
independent accountants for the Company for fiscal
2000; and
4. 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
25, 1999 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
Annandale, Virginia
October 28, 1999
<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 Tuesday, December 7, 1999, 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 9, 1999 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 Proposals
No. 2 and 3 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
25, 1999 are entitled to notice of and to vote at the Annual
Meeting. As of the record date, 2,707,217 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, the proposed amendment of the Company's
1997 Employee Stock Purchase Plan, proposal Number 3, the
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 25,
1999 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., 7611 Little River Turnpike, Suite
404W, Annandale, Virginia 22003. 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> 7.5 %
Six Nations, Inc.
5521 Newhall Court
Centreville, VA 22020 228,723 <F2> 7.8 %
C.W. Gilluly, Ed.D. 983,875 <F3> 30.9 %
William J. Howard 17,420 <F4> *
Robert J. Lynch, Jr. 57,510 <F4> 2.1 %
John D. Sanders, Ph.D. 45,010 <F5> 1.7 %
Howard C. Whetzel, Ph.D. 233,723 <F6> 8.0 %
George E. Fowler 246,737 <F7> 8.8 %
S. Amber Gordon 243,388 <F7> 8.7 %
Donald E. Jewell 109,946 <F8> 4.0 %
All directors and executive
officers as a group
(9 persons) 1,941,009 52.9 %
<FN>
* Less than 1%
<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> Consists of 228,723 shares of Common Stock which Six
Nations, Inc., a company controlled by Dr. Whetzel, has the
right to acquire pursuant to convertible promissory notes.
See "Certain Relationships and Related Transactions."
<F3> Includes 400,000 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 82,000 shares which
may be acquired upon the exercise of vested options granted
under the Company's 1994 Stock Option Plan.
<PAGE>
<F4> Includes 12,510 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
<F5> Includes 5,010 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
<F6> Includes 228,723 shares of Common Stock which Six Nations,
Inc., a company controlled by Dr. Whetzel as to which he
disclaims beneficial ownership, has the right to acquire
pursuant to convertible promissory notes. See "Certain
Relationships and Related Transactions." Also includes
5,000 shares which may be acquired upon the exercise of
vested options granted under the Company's 1994 Stock Option
Plan.
<F7> Includes 82,000 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
<F8> Includes 47,170 shares which may be acquired upon the
exercise of vested options granted under the Company's 1994
Stock Option Plan.
</TABLE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Five 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.
<PAGE>
<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. 53 1992 Chairman of the Board and
Chief Executive Officer
William J. Howard 52 1989 Director
Robert J. Lynch, Jr. 66 1991 Director
John D. Sanders, Ph.D. 61 1997 Director
Howard C. Whetzel, Ph.D. 45 1999 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.
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, Sensys Technologies,
Inc. and Comtex Scientific Corporation.
<PAGE>
HOWARD C. WHETZEL, Ph.D., serves as Chairman and Chief
Executive Officer of the Company's Avenue Technologies, Inc.
subsidiary, which he founded in 1994. Dr. Whetzel has
specialized in signals intelligence, electronic warfare and
communication systems with the U.S. Army, the Defense
Intelligence Agency, the National Security Agency, TRW and Booz
Allen Hamilton.
<TABLE>
EXECUTIVE OFFICERS
The following table contains information as of October 25,
1999 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,
Secretary and Treasurer
Donald E. Jewell 1996 Vice President
Shawn K. McCoy 1999 Vice President
</TABLE>
GEORGE E. FOWLER (60) 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 (45) was appointed Executive Vice President
of the Company in July 1995. Ms. Gordon was named Corporate
Secretary in December 1993, and also serves as Treasurer. She was
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 from 1985 to 1991. Ms. Gordon was Vice
President of the venture capital firm, Biotech Capital Corp.,
from 1980 until 1985. Ms. Gordon has served as President of S.A.
Gordon Enterprises, Inc., a consulting firm specializing in
financial and corporate relations, since 1985.
<PAGE>
DONALD E. JEWELL (48) 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.
SHAWN K. McCOY (44) was appointed Vice President of the
Company in June 1999, and also serves as President of the
Company's SyCom Services, Inc. (SyCom) subsidiary. Most recently,
Mr. McCoy served as General Manager of EDO Corporation's
Technology Services and Analysis subsidiary, which had been
acquired in 1998 from Global Associates Ltd., where he served as
Chief Operating Officer. Mr. McCoy's previous experience
includes positions with Betac Corporation, Lockheed Martin and
Martin Marietta Corporation, and service as an intelligence
officer in the U.S. Navy.
There are no family relationships among the directors or
executive officers of the Company.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of five meetings during
the Company's fiscal year ended June 30, 1999. 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 1999, 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
1999.
<PAGE>
The Compensation Committee of the Board of Directors (the
"Compensation Committee"), which held two meetings in fiscal
1999, is comprised of Messrs. Howard, Lynch and Sanders. 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.
PROPOSAL NO. 2
AMENDMENT TO THE 1997 EMPLOYEE STOCK PURCHASE PLAN
On September 14, 1999, the Board of Directors adopted,
subject to shareholder approval, an amendment to the Hadron, Inc.
1997 Employee Stock Purchase Plan to increase the number of
shares reserved for issuance thereunder from 250,000 to 350,000.
At the Annual Meeting, the shareholders are being asked to
approve this amendment to the 1997 Employee Stock Purchase Plan.
DESCRIPTION OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
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 (as
proposed to be amended) authorizes the reservation of 350,000
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.
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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.
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.
<PAGE>
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
AMENDMENT TO THE HADRON, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 3
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, 2000. 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 2000.
<PAGE>
<TABLE>
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 $100,000 during the
fiscal year ended June 30, 1999:
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------- -------------
Name and Fiscal Stock Options All Other
Principal Position Year Salary($) Bonus($)<F1><F2> Granted<F3> Compensation <F4>
- ------------------ ------ --------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
C.W. Gilluly, 1999 $140,796 $ 34,408 15,000 $ 1,000
Chairman 1998 131,690 8,000 12,000 1,000
and Chief Excutive 1997 131,600 10,000 15,000 125
Officer
George E. Fowler, 1999 $147,440 $ 20,155 15,000 $ 1,000
President 1998 136,834 26,749 12,000 1,000
and Chief Operating 1997 122,759 28,750 15,000 125
Officer
S. Amber Gordon 1999 $ 95,244 $ 13,436 15,000 $ 1,000
Executive 1998 91,276 8,000 12,000 1,000
Vice President 1997 85,330 14,250 15,000 125
Donald E. Jewell, 1999 $109,832 $ 33,591 10,000 $ 1,000
Vice President 1998 88,971 56,829 8,000 920
1997 81,995 44,622 10,000 125
<FN>
<F1> The Bonuses paid in each fiscal year represent the bonuses
awarded for the prior fiscal year.
<F2> No bonuses were awarded for fiscal year 1999.
<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>
<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, 1999:
OPTION GRANTS IN FISCAL YEAR 1999
<CAPTION>
Number of % of Total Options
Shares Underlying Granted to Employees Exercise Expiration
Name Options Granted<F2> in Fiscal Year Price Date
- ---- ------------------- -------------------- ------ ---------
<S> <C> <C> <C> <C>
C.W. Gilluly 15,000 12% $1.99 9/17/2008
George E. Fowler 15,000 12% 1.99 9/17/2008
S. Amber Gordon 15,000 12% 1.99 9/17/2008
Donald E. Jewell 10,000 8% 1.99 9/17/2008
<FN>
<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>
<TABLE>
<CAPTION>
Potential
Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation of Option Term <F1>
--------------------------------
Name 5% 10%
- ---- --- ---
<S> <C> <C>
C.W. Gilluly $18,772 $47,573
George E. Fowler $18,772 $47,573
S. Amber Gordon $18,772 $47,573
Donald E. Jewell $12,515 $31,715
<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.
<PAGE>
</TABLE>
On September 30, 1999, the Compensation Committee approved
the grant, to 22 employees of the Company, of options to acquire
up to 102,000 shares of Common Stock.
<TABLE>
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, 1999:
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at June 30, 1999 at June 30, 1999 <F1>
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C.W. Gilluly 68,000 4,000 $ 54,258 $ 1,365
George E. Fowler 68,000 4,000 54,258 1,365
S. Amber Gordon 68,000 4,000 54,258 1,365
Donald E. Jewell 37,840 2,660 29,065 908
<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, 1999, which was $1.2813 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 400,000 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, 1999,
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 two-year agreement with Ms. Gordon,
to serve as Executive Vice President, effective July 1, 1999, at
an initial base salary of $104,000. Her employment agreement
with the Company further provides for Ms. Gordon to participate
in the Company's Stock Option Plan and Bonus Plans. Under the
Bonus Plan, Ms. Gordon may receive additional compensation based
upon the financial performance of the Company. If Ms. Gordon is
constructively discharged, the Company must continue to pay her
base salary for the term of her contract. If the Company does
not renew her employment agreement, she will receive a severance
payment equal to six months of her base salary. In no case,
however, will the Company pay Ms. Gordon severance benefits if
she is terminated for cause, as defined in the employment
agreement, or if she leaves the employ of the Company
voluntarily.
<PAGE>
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, 1999, 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 (unless such meeting is combined with a full Board of
Directors' meeting). 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 three independent non-
employee directors. This report sets forth the major components
of executive compensation and the basis by which fiscal year 1999
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.
<PAGE>
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 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.
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.
<PAGE>
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 profitability goals. For 1999, no
incentive awards were paid to executive officers and
operating managers.
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.
1999 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 August 1998, the Committee reviewed Dr. Gilluly's salary,
taking into consideration the Company's 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 1998 at an initial base annual
salary of $140,000. Dr. Gilluly's fiscal 1999 compensation was
determined by the Board of Directors, included a base salary of
$140,000 and provided for a performance-based bonus. 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.
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.
<PAGE>
1999 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 1999 was determined by the terms of his
employment agreement dated July 1, 1998 with a base salary of
$145,000 and provided for a performance-based bonus. 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 COMMITTEE
William J. Howard
Robert J. Lynch, Jr.
John D. Sander, Ph.D.
<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, 1994.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Hadron, Inc. 100.00 132.14 289.28 310.71 714.28 457.13
MG-Bus Serv Index 100.00 126.15 160.73 180.27 203.06 203.20
NASDAQ Market Index 100.00 117.28 147.64 177.85 235.75 330.37
</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
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, 1998 and ended June 30, 1999, 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, 1999, AMASYS, owner
of approximately 7.5% of the outstanding Common Stock of the
Company, was charged $7,000 for corporate relations and
administrative services provided by the Company to AMASYS. At
June 30, 1999, the Company had a net receivable balance from
AMASYS of approximately $1,000. 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.
<PAGE>
In June 1997, the Company prepaid 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. In
June 1999, Dr. Gilluly exercised warrants to acquire 400,000
shares of the Company's common stock at a purchase price of $.25
per share.
Certain members of the Company's management or Board of
Directors (the "Investors") each agreed, in June 1997 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. In June 1999,
the Investors elected to convert their notes into restricted
shares.
As part of the December 1998 purchase of Vail, the Company
issued to Jeannine Mantz, sole shareholder of Vail, two non-
interest bearing promissory notes of $300,000 and $100,000,
respectively. The $300,000 non-interest bearing note, which is
based upon the collection of Vail's accounts receivable, shall be
payable each month in the amount of $25,000 for twelve months.
As of June 30, 1999, $136,000 has been paid and $14,000 offset
due to post-closing adjustments, leaving an outstanding note
balance of $150,000. The $100,000 non-interest promissory note
is due and payable on the two-year anniversary of the closing
date, less permitted deductions taken for contingent liabilities
and uncollected accounts receivable.
As part of the May 1999 purchase of ATI, the Company issued
$1,478,000 in short term promissory notes, interest payable at
prime, and $998,000 in three-year convertible notes, interest
payable at 6%. The notes are convertible into 444,000 shares of
the Company's Common Stock at $2.25 per share. Six Nations,
Inc., controlled by Dr. Whetzel, was a majority shareholder of
ATI.
The Company entered into a Loan and Security Agreement dated
June 29, 1999 (the "Loan Agreement") among the Company, United
Bank and each of the Company's wholly owned subsidiaries, ATI,
Vail, SyCom, and EISI. The Loan Agreement provides the Company
with a one-year $1.5 million line of credit facility (the "Credit
Facility") and a three-year $1.5 million term loan (the "Term
Loan"). Interest on each of the facilities is at the prime rate
plus 150 basic points. Dr. Gilluly and his wife have personally
guaranteed the Term Loan.
The Credit Facility replaces the Company's previous line of
credit with Century National Bank. Proceeds from the Term Loan
were used to repay the Company's $1.5 million in short-term notes
that were issued in connection with the Company's May 1999
acquisition of ATI. The Term Loan provides for monthly principal
payments of $42,000, plus interest.
<PAGE>
The Term Loan and the Credit Facility are secured by the
accounts receivable and other assets of the Company. In
addition, the convertible notes issued by the Company in
connection with the Company's acquisition of ATI were
subordinated to the Company's obligations under the Term Note and
the Credit Facility.
In September 1999, Dr. Gilluly transferred warrants
representing 200,000 commons shares to certain key senior
management. Dr. Gilluly transferred 100,000 warrants, which
expire on October 21, 2003, to George E. Fowler, President and
Chief Operating Officer of the Company, to acquire the Company's
common stock at $.25 per share. On September 20, 1999, Mr.
Fowler exercised the warrants to acquire the 100,000 shares of
the Company's common stock. Dr. Gilluly transferred 100,000
warrants, which expire on October 21, 2003, to S. Amber Gordon,
Executive Vice President of the Company, to acquire the Company's
common stock at $.25 per share. On September 20, 1999, Ms.
Gordon exercised the warrants to acquire the 100,000 shares of
the Company's common stock. Also, on September 20, 1999, Dr.
Gilluly exercised warrants to acquire 20,000 shares of the
Company's common stock at the purchase price of $.25 per share.
As of August 1, 1998, the Company entered into a letter
agreement with Dr. John Sanders to provide strategic financial
consulting services for the remainder of the fiscal year 1999.
In fiscal 1999, $27,500 was paid to Mr. Sanders for consulting
services. Also, a $25,000 finder's fee was paid to Mr. Sanders
associated with the acquisition of Vail.
SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended to
be presented at the Company's 2000 Annual Meeting of Shareholders
must be received by the Company no later than July 10, 2000 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, 1999, 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.
<PAGE>
The Company will provide without charge a copy of its 1999
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 1999 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, 7611 Little River Turnpike,
Suite 404W, Annandale, Virginia 22003, 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, 1999
<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 7, 1999
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 2, 1999, 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 FIVE nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the FIVE nominees
listed below
C.W. Gilluly, William J. Howard,
Robert J. Lynch, Jr., John D. Sanders
and Howard C. Whetzel
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. 1997 Employee Stock
Purchase Plan to increase the number of shares reserved
for issuance thereunder.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
3. Proposal to ratify the selection of Ernst & Young LLP
as independent accountants for the Company for fiscal
year 2000.
[ ] FOR this proposal
[ ] AGAINST this proposal
[ ] ABSTAIN
<PAGE>
4. 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 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>
