SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14f-1
INFORMATION STATEMENT
Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder
Hadron, Inc.
(Exact name of registrant as specified in its charter)
New York 0-5404 11-2120726
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(State of (Commission File (IRS Employer
Incorporation) Number) Identification No.)
Suite 300
5904 Richmond Highway 22303
Alexandria, Virginia -----------
------------------------- (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (703) 329-9400
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INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
The information contained herein is being furnished to
holders of the common stock, par value $.02 per share (the
"Common Stock"), of Hadron, Inc., a New York corporation (the
"Company"), pursuant to the requirements of Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14f-1 under the Exchange Act in order to effect a change
in majority control of the Company's Board of Directors other
than by a meeting of shareholders. The date of this Information
Statement is May 31, 2000.
SUMMARY
On March 30, 2000 (the "Closing Date"), Jon M. Stout,
Patricia W. Stout and the Stout Dynastic Trust (collectively the
"Stouts") led a group of investors to purchase 2,250,000 shares
of the Company's Common Stock plus warrants to purchase an
additional 2,025,000 shares of the Company's Common Stock. As a
condition to that transaction, certain investors who presently
own voting shares of the Company's capital stock, the Stouts, J.
Richard Knop and C.W. Gilluly entered into a voting agreement
which provides for voting as to the number and identity of those
persons who will serve on the Company's Board of Directors (the
"Board").
Effective on the Closing Date, in accordance with the terms
of the investment, William J. Howard and Robert J. Lynch, Jr.
resigned from their positions as directors of the Company leaving
C.W. Gilluly and John D. Sanders as the remaining members of the
Board. On March 31, 2000, Jon M. Stout was appointed to the
Company's Board of Directors. On April 13, 2000, Gerald
McNichols, Sc.D and Gerald Young were appointed to the Board to
take office on June 12, 2000, subject to compliance with the
requirements of Section 14(f) of the Exchange Act and Rule 14f-1
under the Exchange Act.
Further, on the Closing Date, C.W. Gilluly resigned from his
position as the Company's Chief Executive Officer, and Jon M.
Stout was appointed as the Company's President and Chief
Executive Officer. Dr. Gilluly continues to serve as Chairman of
the Company's Board of Directors.
NO ACTION IS REQUIRED BY THE SHAREHOLDERS OF THE COMPANY IN
CONNECTION WITH THE RESIGNATION AND APPOINTMENT OF ANY DIRECTOR
OR OFFICER. However, Section 14(f) of the Exchange Act requires
the mailing to the Company's shareholders of the information set
forth in this Information Statement. The Company is notifying its
shareholders of the contemplated change in majority control of
the Company's Board of Directors by mailing this Information
Statement to shareholders of record as of May 18, 2000 and by
filing a copy of the Information Statement with the Securities &
Exchange Commission (SEC). After the new directors have taken
office, the Company will report the resulting change of control
by filing a Current Report on Form 8-K.
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On May 18, 2000, the Company had 5,111,226 shares of Common
Stock outstanding. The Common Stock is the only class of
securities of the Company outstanding and entitled to vote. Each
share of Common Stock is entitled to one non-cumulative vote.
Shareholders of the Company will have the opportunity to vote
with respect to the election of directors at the next annual
meeting of the Company's shareholders.
THE SECURITIES PURCHASE AGREEMENT
On March 30, 2000, a group of investors led by Jon M. Stout,
Patricia W. Stout, the Stout Dynastic Trust (collectively the
"Stouts"), J. Richard Knop ("Knop") (the Stouts and Knop, being
collectively the "Investors" ) and John D. Sanders purchased
certain of the Company's securities pursuant to a Securities
Purchase Agreement among the Company and the Investors (the
"Purchase Agreement"). Pursuant to the Purchase Agreement, the
Investors acquired 2,250,000 units, each consisting of one share
of Common Stock and a warrant to purchase 0.9 share of Common
Stock (a "Unit"), at $0.39 per Unit or a total of $877,500 in
cash. Mr. Stout purchased 261,290 Units for an aggregate
purchase price of $101,903.10 in cash. Ms. Stout purchased
256,410 Units for an aggregate purchase price of $99,999.90 in
cash. The Trust purchased 1,128,200 Units for an aggregate
purchase price of $439,998 in cash. Mr. Knop purchased 514,100
Units for an aggregate purchase price of $200,499 in cash. Dr.
Sanders purchased 90,000 Units for an aggregate purchase price of
$35,100 in cash.
Pursuant to the Purchase Agreement, the Investors have
caused the Company to use two hundred thousand dollars ($200,000)
of the proceeds from the sale to repay a portion of a loan owed
by the Company to Dr. Gilluly, Chairman and former Chief
Executive Officer of the Company. In addition, the Investors
have agreed to cause the Company to repay the balance of the loan
in the amount of $230,000 within six months.
Pursuant to the Purchase Agreement, two members of the Board
resigned and Jon M. Stout was appointed a director and President
and CEO of the Company. As further required by the Purchase
Agreement, the Investors, and others designated therein, have
also entered into a Voting Agreement dated March 30, 2000 (the
"Voting Agreement"). The Voting Agreement was entered into by
and among certain affiliates of Boles Knop & Company, L.L.C. (the
"Affiliates"), Dr. Sanders, C.W. Gilluly and the Investors
(collectively, the "Voting Group"). The Voting Group agreed, for
a period of five (5) years from March 30, 2000, to vote all of
the voting shares over which they have voting control and to take
all other actions within such Voting Group's control (whether in
his or its capacity as a stockholder, director, member of a board
committee or officer of the Company or otherwise), including,
without limitation, attendance at meetings in person or by proxy
for purposes of obtaining a quorum and execution of written
consents in lieu of meetings so that:
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(1) The authorized number of members of the Company's Board
of Directors (the "Board") will continue to be five (5) unless
and until such greater number is directed or approved by the
Investors.
(2) During the term of the Voting Agreement, the Investors
shall be entitled to nominate (the "Nominees") and the
Stockholders shall vote their shares to elect the Nominees as the
majority of the members of the Board.
(3) Any Nominee elected or appointed as a director will be
removed from the Board (and thereupon from all committees of the
Board), with or without cause, only upon the written request or
consent of the Investors.
(4) In the event that any Nominee designated hereunder for
any reason ceases to serve as a member of the Board or any
committee thereof during such representative's term of office,
the resulting vacancy on the Board or committee will be filled by
a newly designated Nominee.
(5) Upon the written direction or consent of the Investors,
the Company will take such actions as may be necessary and
convenient to change the corporate domicile of the Company to the
state of Delaware.
In addition, the Voting Agreement provides that with the
exception of transfers made: (i) pursuant to open market sales in
brokers' transactions; or (ii) sales made after the Investors
declined a right of first refusal to purchase such shares at the
same price and terms, any attempt to transfer the Voting Group's
voting shares will be of no effect unless the person(s) to whom
such shares are being transferred agrees in writing to be bound
by the terms of the Voting Agreement.
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BENEFICIAL SECURITY OWNERSHIP
The following table sets forth information with respect to
the beneficial ownership of the Company's Common Stock as of May
18, 2000, by: (i) each person who is known by the Company to
beneficially own 5% or more of the Company's outstanding Common
Stock; (ii) the Company's President and Chief Executive Officer
("CEO"); (iii) each director and director nominee; and (iv) all
directors, director nominees and executive officers of the
Company as a group. The Company is not aware of any beneficial
owner of more than 5% of the outstanding Common Stock other than
as set forth in the following table. Unless otherwise indicated,
the address of each named beneficial owner is c/o Hadron, Inc.,
Suite 300, 5904 Richmond Highway, Alexandria, Virginia 22303
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING
Jon M. Stout 5,813,885(1)(2) 72.1%
C.W. Gilluly, Ed.D. 1,413,875(1)(3) 23.5%
J. Richard Knop 5,813,885(1)(4) 72.1%
Patricia W. Stout 5,813,885(1)(5) 72.1%
John D. Sanders, Ph.D. 216,010(1)(6) 4.2%
Gerald McNichols, Sc.D. 20,000 *
Gerald Young ____ ____
All directors, director
nominees and executive
officers as a group
(8 persons) 6,196,385 (1)(7) 75.7%
*Less than 1 percent.
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1) Includes shares as to which voting power is shared in certain
respects as a result of the Voting Agreement more fully described
in the preceding section entitled "The Securities Purchase
Agreement."
2) Includes 1,389,490 shares, and warrants immediately exercisable
to purchase 1,250,541 shares of the Company's Common Stock, held
by Mr. Stout individually and as Trustee of the Stout Dynastic
Trust. Includes options to purchase 15,000 shares of the
Company's Common Stock, of which, options to purchase 5,000
shares are currently exercisable. Includes 1,477,385 shares, and
warrants and options immediately exercisable to purchase
1,691,469 shares of the Company's Common Stock, held by others,
as to which Mr. Stout has shared voting power by
virtue of the Voting Agreement.
3) Includes 501,875 shares, and warrants immediately exercisable
to purchase 830,000 shares of the Company's Common Stock held by
Dr. Gilluly. Includes options to purchase 87,000 shares of the
Company's Common Stock, of which, options to purchase 82,000
shares are currently exercisable.
4) Includes 537,575 shares, and warrants immediately exercisable
to purchase 462,690 shares of the Company's Common Stock, held by
Mr. Knop. Includes 2,329,300 shares, and warrants and options
immediately exercisable to purchase 2,484,320 shares of the
Company's Common Stock, held by others, as to which Mr. Knop has
shared voting power by virtue of the Voting Agreement.
5) Includes 256,410 shares, and warrants immediately exercisable
to purchase 230,769 shares of the Company's Common Stock, held by
Ms. Stout. Includes 2,610,465 shares, and warrants and options
immediately exercisable to purchase 2,716,241 shares of the
Company's Common Stock, held by others, as to which Ms. Stout has
shared voting power by virtue of the Voting Agreement.
6) Includes 130,000 shares, and warrants immediately exercisable
to purchase 81,000 shares of the Company's Common Stock, held by
Dr. Sanders. Includes options to purchase 7,500 shares of the
Company's Common Stock, of which, options to purchase 5,010
shares are currently exercisable.
7) Includes 2,271,295 shares, and warrants and options immediately
exercisable by members of the group to purchase 2,386,121 shares
of the Company's Common Stock. Includes 845,510 shares, and
warrants and options immediately exercisable to purchase 693,459
shares of the Company's Common Stock, as to which Mr. Stout has
shared voting power by virtue of the Voting Agreement.
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BOARD OF DIRECTORS
Upon the Closing Date, the resignations of William Howard
and Robert J. Lynch, Jr. became effective. Dr. C.W. Gilluly and
Dr. John D. Sanders continue to serve as directors. Jon M.
Stout was appointed as a director on March 31, 2000, and on April
13, 2000, Gerald McNichols, Sc.D, and Gerald Young were appointed
to the Board of Directors to take office on June 12, 2000,
subject to compliance with the requirements of Section 14(f) of
the Exchange Act and Rule 14f-1 under the Exchange Act.
Name Age POSITION HELD
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C.W. Gilluly, Ed.D. 53 Chairman of the
Board of Directors
John D. Sanders, Ph.D. 61 Director
Jon M. Stout 53 Director, President and
Chief Executive Officer
Gerald Young 70 Director Nominee
Gerald McNichols, Sc.D. 56 Director Nominee
C.W. GILLULY, Ed.D., has served as Chairman of the Company since
October 1994, having served as Chief Executive Officer of the
Company since May 1993. Since June 1992, Dr. Gilluly has served
as Chairman of COMTEX News Network, Inc., a provider of
electronic news and business information, for which he also
served as Chief Executive Officer from 1992 through September
1997. Dr. Gilluly has served as Chairman of the Board and
President of AMASYS Corp. and its predecessor, Infotechnology,
Inc. since June 1992. Dr. Gilluly holds a B.S. from Marquette
University, an M.A. from University of California - Irvine
(formerly Chapman College) and an Ed.D. from Catholic University.
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, SenSyTech, Inc. and
COMTEX News Network, Inc. Dr. Sanders received his Bachelor of
Electrical Engineering from the University of Louisville and M.S.
and Ph.D. degrees in electrical engineering from Carnegie-Mellon
University.
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JON M. STOUT was appointed the Company's President and Chief
Executive Officer and the Board of Directors on March 31, 2000.
Previously, Mr. Stout, along with his wife, founded DPC
Technologies, Inc., a military intelligence information
technology company, which they recently sold to Northrop Grumman.
Prior to that endeavor, Mr. Stout served in senior management and
marketing positions with various firms, including the Harris
Corporation and Perkin Elmer Corporation. Mr. Stout holds a B.A.
from the State University of New York at Buffalo and a J.D. from
the University of Chicago Law School.
GERALD YOUNG serves as a management consultant to emerging
companies. Mr. Young served on the Board of Directors and as a
management consultant with DPC Technologies until 1999 when DPC
was acquired by Northrop Grumann Logicon. Mr. Young continues to
provide service to Logicon/DPC Technologies as a member of its
Board of Advisors. Mr. Young holds a BS in Business
Administration from Merrimack College. Mr. Young has also studied
at the Harvard Graduate School of Business, the National War
College and the Federal Executive Institute.
GERALD MCNICHOLS, Sc.D., has more than 35 years of experience in
management and consulting. He has founded several companies and
serves on the boards of several public and private companies. In
1977, Dr. McNichols founded Management Consulting & Research,
Inc. which he sold to GRC International, Inc. in 1999. Dr.
McNichols was commissioned by the Air Force in 1965 and spent
four years in the Air Force before joining the Office of the
Secretary of Defense. Dr. McNichols holds a Sc.D. in Engineering
from The George Washington University, an M.S. in Operations
Research from the University of Pennsylvania and a B.S. in
Management Science/Mathematics from Case Western Reserve
University.
Following the Effective Date, the Company will designate
audit and compensation committees of the Board of Directors. 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
internal system of accounting controls and has general
responsibility in connection with related matters. The
Compensation Committee evaluates management's recommendations and
makes recommendations to the Board of Directors concerning the
compensation of the Company's executive officers. The
Compensation Committee 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.
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The Company's Amended and Restated Bylaws provide that the
Board of Directors shall consist of not less than four (4) nor
more than ten (10) members, the exact number to be fixed from
time to time by resolution of either the Board or the
Shareholders. Each director is elected at the annual meeting of
the shareholders to serve until his successor is elected and
qualified.
Executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.
Neither Jon M. Stout nor either Director nominee, Gerald
Young or Gerald McNichols, are a party to any material proceeding
adverse to, or have a material interest adverse to, the Company
or any of its subsidiaries.
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.
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EXECUTIVE OFFICERS
The following table contains information as of May 18, 2000
as to the executive officers of the Company who are not also
directors of the Company:
Name Officer Since Office Held With the Company
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S. Amber Gordon 1991 Executive Vice
President, Secretary
and Treasurer
Donald E. Jewell 1996 Vice President
Shawn K. McCoy 1999 Vice President
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.
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) and SyCom
Services, Inc. (SyCom) subsidiaries, positions he has held,
respectively, since 1993 and February 2000. 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 served as President of the Company's SyCom
subsidiary until February 2000. Mr. McCoy also serves as Vice
President, Operations of the Company's Advanced Biosystems, Inc.
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.
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EMPLOYMENT AGREEMENTS, TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
On March 30, 2000, pursuant to the Purchase Agreement, the
Company entered into a two-year renewable employment agreement
with Mr. Stout. Under the agreement, Mr. Stout will serve as the
Company's President and Chief Executive Officer. Mr. Stout will
receive an initial annual base salary of $50,000 for the first
six months of his employment and thereafter will receive an
annual base salary of $140,000. Mr. Stout's employment
agreement further provides for Mr. Stout to participate in the
Company's Stock Option and Bonus Plans. Under the Bonus Plan,
Mr. Stout may receive additional compensation based upon the
Company's financial performance. If Mr. Stout is terminated by
the Company other than for cause, the Company must pay Mr. Stout
a lump sum payment that is the sum of (1) Mr. Stout's base salary
and bonus through the date of termination; (2) any compensation
previously deferred by Mr. Stout; (3) any accrued vacation pay;
and (4) the base salary that would have been payable to Mr. Stout
through the remainder of the term of the agreement. In
connection with his service as the Company's President and Chief
Executive Officer, Mr. Stout has also been awarded a 5-year
option to purchase 15,000 shares of the Company's common stock at
a purchase price of $1.64 per share, exercisable in one-third
increments on March 31, 2000, March 31, 2001 and March 31, 2002.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's
executive officers, directors and holders of more than 10% of the
Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the
"Commission"). Such persons are required to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting
persons that no other reports were required from such persons,
the Company believes, that during or with respect to the period
from January 1, 1999 to December 31, 1999, all of its executive
officers, directors and 10% stockholders complied with their
Section 16(a) obligations.
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1934,
the Company has duly caused this report to be signed on its
behalf by the undersigned who is so duly authorized.
HADRON, INC.
By: /S/ JON M. STOUT
Name: Jon M. Stout
Title: President and Chief Executive Officer
Date: May 31, 2000
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