SCHEDULE 14A INFORMATION
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
Halifax Corporation
------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(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: August 12, 1997
- --------------------------------------------------------------------------------
<PAGE>
HALIFAX CORPORATION
Alexandria, Virginia
--------------------------
ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Halifax
Shareholders which will be held on September 19, 1997, at 2:00 p.m. local time
at our offices at 5250 Cherokee Avenue, Alexandria, VA 22312.
In addition to the meeting purposes enumerated in the attached Notice, it
shall be our pleasure to entertain questions pertaining to the affairs of the
Company which affect the interests of Shareholders as a whole.
We encourage your attendance and look forward to seeing you.
Sincerely,
Howard C. Mills
President
August 15, 1997
<PAGE>
HALIFAX CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD September 19, 1997
To the Shareholders of Halifax Corporation:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Halifax
Corporation (The "Company") will be held at its executive offices, 5250 Cherokee
Avenue, Alexandria, VA 22312 on Friday, September 19, 1997, at 2:00 p.m. local
time, for the purpose of considering and acting upon the following:
1. Election of seven (7) directors for the ensuing year.
2. Ratification of the Board of Directors' appointment Ernst & Young
Certified Public Accountants, as the Company's independent accountants
for the fiscal year ending March 31, 1998.
3. Approval of Non-Employee Directors Stock Option Plan.
4. Transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on Friday, August 8,
1997, as the record date for the determination of shareholders entitled to
notice of and vote at this meeting and any adjournments thereof, and only
shareholders of record at such time will be so entitled to vote.
Shareholders who will not attend the meeting in person are requested to
specify their choices and to date, sign, and return the enclosed Proxy in the
envelope provided. Prompt response is helpful, and your cooperation will be
appreciated.
By Order of the Board of Directors
Ernest L. Ruffner
Secretary
<PAGE>
HALIFAX CORPORATION
5250 Cherokee Avenue
Alexandria, Virginia 22312
PROXY STATEMENT
The Annual Meeting of Shareholders of Halifax Corporation (The "Company")
will be held on September 19, 1997, at the offices of the Company located at
5250 Cherokee Avenue, Alexandria, Virginia 22312, for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders and described more
fully below.
The enclosed Proxy is solicited on behalf of the Board of Directors of the
Company.
The cost of preparing, assembling and mailing the Notice, Proxy Statement
and Proxy and miscellaneous costs with respect to the same will be paid by the
Company. The Company may, in addition, use the services of its officers,
directors and employees to solicit Proxies personally or by telephone and
telegraph, but at no additional salary or compensation. The Company intends to
request banks, brokerage houses and other custodians, nominees and fiduciaries
to forward copies of the proxy material to those persons for whom they hold
shares and to request authority for the execution of Proxies. The Company will
reimburse them for reasonable out-of-pocket expenses incurred by them in so
doing.
The Proxy may be revoked by the person giving it at any time before it has
been exercised by delivering written notice to the Company or by delivering a
later dated Proxy.
Unless instructed to the contrary on the Proxy, each Proxy will be voted
for the persons named below in the election of directors to the Company's Board
of Directors; for ratification of the appointment of Ernst & Young Certified
Public Accountants, to be the Company's independent accountants for fiscal 1998,
in favor of approving the Non-Employee Directors Stock Option Plan, and with
respect to such other matters which may properly come before the Annual Meeting,
the persons named as proxy holders will exercise their best judgment with
respect to such other matters. A shareholder who abstains from a vote by
registering an abstention vote will be deemed present at the meeting for quorum
purposes but will not be deemed to have voted on the particular matter.
Management knows of no other matters to come before the Annual Meeting at this
time.
SHARES OUTSTANDING AND VOTING RIGHT
Shareholders of record at the close of business on August 8, 1997, will be
entitled to notice of and vote at the Annual Meeting. On that date there were
2,003,632 shares of the Company's Common Stock outstanding. The holders of these
shares are entitled to one vote per share.
Under the rules of the American Stock Exchange (AMEX) brokers who hold
shares in street name for customers have the authority to vote on certain items
when they have not received instruction from beneficial owners. Such votes are
known as "broker non-votes", and are counted for purposes of determining the
presence of a quorum, but are not counted for purposes of determining whether a
director has been elected or whether a proposal has been approved by the
shareholders.
<PAGE>
Directors are elected by a plurality of the votes of the shares present or
represented at the meeting and entitled to vote. Approval of each other matter
to be voted upon requires the affirmative vote of a majority of the votes of
shares present or represented at the meeting and entitled to vote on such
matter.
FORM 10-K
The Annual Report on Form 10-K for the Company's fiscal year ended March
31, 1997, has been filed with the Securities and Exchange Commission.
Shareholders should they so desire may obtain without charge a copy of the Form
10-K from the Company by written request which should be made to Halifax
Corporation, 5250 Cherokee Avenue, Alexandria, Virginia 22312, Attention:
Corporate Secretary.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Company shall be managed by a
Board of Directors consisting of between three and seven members, the precise
number of directors to be fixed from time to time by resolution of the Board of
Directors. The number of Directors has been fixed at seven.
It is, therefore, proposed to elect a Board of Directors of seven persons
to serve until the next annual meeting of Shareholders or until the election and
qualification of their respective successors. Unless authority is withheld, the
proxies shall be voted for the election as directors of the following persons,
provided that if any of such nominees shall be unavailable for election for any
reason, the Proxies will be voted for the election of a substitute nominee
designated by management. All seven of the nominees are now serving as directors
and have agreed to serve if elected. Those nominees receiving a majority of or
the greatest number of votes cast at the Annual Meeting by Shareholders entitled
to vote will be elected to the Board of Directors.
Management has no reason to believe that any nominee will not be available
to serve, but if any nominee should be or become unable to serve, the shares
represented by Management proxies will be voted, instead, for the election of
another person recommended by the Board of Directors as a director.
2
<PAGE>
The following table sets forth the name and age of each of the nominees to
the Board of Directors of the Company, together with respective periods of
service as directors and other positions with the Company:
THE BOARD OF DIRECTORS RECOMMENDS THE FOLLOWING NOMINEES:
Date First Principal Occupation and
Nominee Age Elected Employment; Other Background
- ------- --- ---------- ----------------------------
Arch C. Scurlock 77 1973 Arch C. Scurlock, presently Chairman of
the Board of Directors, has been a
Director of the Company since 1973. He
has been President and a Director of
Research Industries Incorporated, a
private investment company since 1968.
He served from 1969 to 1992 as Chairman
of the Board of TransTechnology
Corporation, a manufacturer of aerospace
defense and other industrial products.
Howard C. Mills 63 1984 Howard C. Mills, since October 16, 1984,
has been President, Chief Executive
Officer and a Director of the Company.
Prior to that time he served as Vice
President and Executive Vice President
of the Company.
John H. Grover 69 1984 John H. Grover became a Director of the
Company in 1984. He has served as Vice
President, Treasurer and Director of
Research Industries Incorporated since
1968, and as a Director of
TransTechnology Corporation from 1969
to 1992.
Clifford M. Hardin 81 1985 Clifford M. Hardin has been a Director
of the Company since 1985. From 1981 to
1987, Dr. Hardin served as a Director of
Stifel Financial Corporation, the parent
corporation of Stifel, Nicolaus &
Company, a St. Louis securities
brokerage firm registered with the
Securities & Exchange Commission.
Dr. Hardin is also a Director of Gallup,
Inc., Lincoln, Nebraska.
Ernest L. Ruffner 62 1985 Ernest L. Ruffner, elected Director of
the Company on March 25, 1985, is an
attorney engaged in the private practice
of law as a member of Pompan, Ruffner &
Werfel in Alexandria, Virginia.
Mr. Ruffner is a Director of Research
Industries Incorporated. He was elected
Secretary of the Company effective
July 2, 1985 and General Counsel on
September 16, 1994.
3
<PAGE>
Alvin E. Nashman 70 1993 Alvin E. Nashman is a Director and
Consultant of Computer Sciences
Corporation (CSC). For 27 years until
his retirement in 1992, Dr. Nashman
headed the multi-division Systems Group
of CSC, which under his leadership
experienced continued growth with 1992
revenues in excess of $1 billion. He
served two terms as Chairman of the
Board of the Armed Forces Communications
and Electronics Association (AFCEA). He
currently serves on the Boards of NYMA
Corporation and MILTOPE Corporation,
where he is Chairman.
John M. Toups 71 1993 John M. Toups served as President and
CEO of Planning Research Corporation
(PRC) from 1978 to 1987. Prior to that
he served in various executive positions
with PRC. For a short period of time in
1990, he served as interim Chairman of
the Board and CEO of the National Bank
of Washington and Washington Bancorp and
is currently a Director of CACI
International, Inc., NVR, Inc., Telepad
Corporation and Thermatrix, Inc.
4
<PAGE>
OTHER EXECUTIVE OFFICERS
In addition to President Mills and Secretary/General Counsel Ruffner, the
following persons are executive officers of the company.
James L. Sherwood, IV, age fifty-five, is Vice President Contracts and
Administration. He has been with the Company and its subsidiaries for eighteen
years. He previously served as a Vice President managing the Company's
Facilities Services Division.
Melvin L. Schuler, age fifty-three, is the Vice President Operations,
Federal Services Division. Mr. Schuler has been with the Company for twenty-five
years, serving in various management positions within the Electronics Services
line.
James C. Dobrowolski, age thirty-four, joined Halifax as a result of the
Company acquiring EAI Services which he had managed for two years. Mr.
Dobrowolski currently serves as a Vice President, in charge of the Simulation
and Facilities Services Division. Prior to joining EAI as director of contracts
in April 1988, he was with Engineering and Professional Services, Inc., where he
served as Manager of Subcontract Administration for two years.
Thomas F. Nolan, age fifty-two, is the Vice President, Computer Services
Division. Before joining the Company, Mr. Nolan worked six years as an
independent executive in Financial Services Management. Prior to that, he was
Senior Vice President, Marketing for Decision Data Services, Inc., a nationwide
computer maintenance firm. For sixteen years Mr. Nolan held various executive
positions with Bell Atlantic Corporation's SORBUS Service Division.
John D. D'Amore, age forty-seven, Vice President Finance, Treasurer, and
Controller, joined Halifax on April 10, 1996. He previously served as Vice
President Finance for CTA Space Systems and CTA International, Inc.,
subsidiaries of CTA Incorporated. Prior to that he served in various executive
finance positions including five years as Vice President Finance with Presearch
Inc. Mr. D'Amore is a Certified Public Accountant and a member of the Virginia
Bar.
Thomas L. Mountcastle, age forty-three, is President of Halifax Technology
Services Company, a wholly owned subsidiary of Halifax and Vice President of
Halifax's Network Integration Services Division. Mr. Mountcastle joined Halifax
as a result of the Company acquiring CMS Automation, Inc. on April 1, 1996 where
he had served as President since 1990. Prior to that he served in various
capacities in computer technology including two years as President of Data
Support Systems.
Frank J. Ostronic, age sixty-seven, Vice President Federal Services
Division, joined Halifax on May 24, 1996. Mr. Ostronic has over thirty-nine
years experience in various executive positions including fourteen years with
Computer Sciences Corporation as Vice President of Program Development. A U.S.
Naval Academy graduate, Mr. Ostronic retired from the U.S. Navy with the rank of
Captain.
5
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based on a review of SEC Forms 3, 4 & 5 and amendments thereto furnished to
the Company, to the best of the knowledge and belief of management, no person
who was required to file said forms failed to do so on a timely basis.
Board of Directors; Committees
During the year ended March 31, 1997, the Board of Directors held five
meetings. During that year, all members who were directors at the time attended
at least 75% of the total number of meetings held by the Board and by each
committee of the Board of which he was a member.
Set forth below is certain information regarding the existing committees of
the Board of Directors:
Audit Committee. The Audit Committee reviews the results of, and the
suggestions provided in connection with, the Company's annual audit by its
independent public accountants; reviews internal audit and other accounting
procedures established by management; and considers the scope of the audit
and non-audit services provided by the Company's independent public
accountants, including the fees charged for those services. The committee's
members are Messrs. Hardin, Toups and Nashman. The Audit Committee held one
meeting in Fiscal Year 1997.
Compensation and Incentive Committee. The Compensation and Incentive
Committee advises the Board of Directors with respect to compensation
levels and the issuance of stock options to key employees of the Company.
The committee members are Messrs. Scurlock, Grover, and Toups. During the
year ended March 31, 1997, the committee held two meetings.
Nominating Committee. The Nominating Committee was created by the Board of
Directors on May 21, 1993, for the purpose of considering individuals to be
nominated for election to the Board of Directors. Selections are presented
to the Board for inclusion in the slate of management nominees submitted to
the shareholders for election. The committee members are Messrs. Hardin,
Grover, and Scurlock. During the year ended March 31, 1997, the committee
held one meeting.
6
<PAGE>
PRINCIPAL SHAREHOLDERS AND DIRECTORS
The following table sets forth as of June 16, 1997 (1) the number of shares
of the Company's common stock owned beneficially by each person who owned of
record, or is known by the Company to have owned beneficially, more than 5% of
such shares then outstanding (2) the number of shares owned by each director of
the Company and (3) the number of shares owned beneficially by all officers and
directors as a group. Information as to the beneficial ownership is based upon
statements furnished to the Company by such persons.
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
- ---------------- -------------------- -------
Research Industries Incorporated (1)(3)(4)
123 North Pitt Street
Alexandria, Virginia 22314 615,000 30.7
Howard C. Mills (5)
5250 Cherokee Avenue
Alexandria, Virginia 22312 68,367 3.4
Arch C. Scurlock (1)(2)
123 North Pitt Street
Alexandria, Virginia 22314 616,500 30.8
John H. Grover (3)
123 North Pitt Street
Alexandria, Virginia 22314 1,500 0.1
Clifford M. Hardin
10 Roan Lane
St. Louis, Missouri 63124 1,500 0.1
Ernest L. Ruffner (4)
209 North Patrick Street
Alexandria, Virginia 22314 150 0
Alvin E. Nashman
3170 Fairview Park Drive
McLean, Virginia 22042 4,500 0.2
John M. Toups
1209 Stuart Robeson Drive
McLean, Virginia 22101 4,500 0.2
All officers and directors as
a group (14 persons) (2) 739,461 36.9
(1) Research Industries Incorporated is 95% owned by Arch C. Scurlock, chairman
of the Company's Board of Directors.
(2) Includes 615,000 shares owned by Research Industries.
(3) Mr. Grover is also a 5% owner and director of Research Industries
Incorporated.
(4) Mr. Ruffner is a director of Research Industries Incorporated.
(5) Includes 300 shares held by Mr. Mills' wife.
7
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE
The overall philosophy regarding compensation of the Company's executive
officers continues to be based upon the concept that in order to achieve the
Company's objectives of progress, growth and profitability it is necessary to
attract and retain qualified executives who are motivated to provide a high
level of performance. A vital element in this motivation is to offer an
executive compensation program that is not only competitive but rewards those
executives whose efforts enable the Company to achieve its goals. To accomplish
this objective, the Committee has an established policy whereby a significant
segment of an executive's total compensation is related directly to performance
resulting in the interest of the Company's executives being in parallel with the
interest of its shareholders.
The executive compensation program includes three elements which are
intended to constitute a flexible and balanced method of establishing total
compensation. These are base salary, annual bonus, and stock options. When
combined, these elements are intended to provide key executives sufficient
motivation and incentives so that their efforts will maximize corporate
performance thereby enhancing shareholder value. In accomplishing this
objective, the compensation program seeks to balance performance rewards with
what is reasonable under the total circumstances including the competitiveness
of the executive market place.
The primary component of the Company's executive compensation program is
base salary. The base salaries of the executive officers are a reflection of the
size of the Company, the scope of responsibility of each individual and the
extent of experience in their particular position. Reviewed annually, base
salaries are related indirectly to the Company's performance and marginally
related to the cost of living.
The base salary of Howard Mills, the Company's president and chief
executive officer since 1984, is largely based on the performance of the
Company, both for the fiscal year and since he has been CEO. The other criteria
considered to a lessor degree is the annual change in the cost of living. During
the last fiscal year, the Company's total return, as displayed in the
accompanying five year cumulative performance graph, increased over 150 percent
on substantially increased revenues. Reflecting the Company's stated
compensation policy, in August Mr. Mills base salary was increased by 5 percent
to $166,860 effective September 1, 1996. He also participated in the company's
Profit Sharing Bonus Plan and Key Employees Stock Option Plan, to the extent set
forth below.
The second component of the executive compensation program is an annual
bonus determined in accordance with the Company's Profit Sharing Bonus Plan
approved annually by the Board of Directors based upon projected profit goals
set for each year. The Company creates separate profit pools related to project,
division and corporate performance. Employees in the Plan are monetarily
rewarded if the profitability of their profit pool meets specified threshold
goals, and further rewarded for exceeding these goals based upon a fixed
formula. As a result of the Company's performance during the previous fiscal
year, Mr. Mills received a bonus from the corporate profit pool that was equal
to approximately 27% of his base salary which was paid in fiscal year 1997.
8
<PAGE>
The final component of the executive compensation program is a Key Employee
Stock Option Plan ("Plan") which was adopted and approved by the Company's
shareholders at the 1994 annual meeting and is for the benefit of the Company's
key employees, including officers, who meet certain criteria. The purpose of the
Plan is to attract, motivate, and retain those highly competent individuals upon
whose judgment, initiative, and leadership, the continued success of the Company
depends. The Plan is administered by a committee of three members of the Board
of Directors who are not eligible to participate in the Plan. Subject to the
provisions of the Plan, the Committee has sole discretion and authority to
determine from among eligible employees those to whom and time or times at
which, options may be granted, the numbers of shares of Common Stock to be
subject to each option, and the type of option to be granted. During the past
year the Committee considered it appropriate and justified to motivate and
reward Mr. Mills with regard to decisions influencing future growth of the
Company and therefore granted him stock options for 7200 shares of Common Stock
at an exercise price of $6.13 per share expiring May 3, 2001.
No member of the Compensation and Incentive Committee is a former or
current officer or employee of the Company or any of its subsidiaries.
Arch C. Scurlock John M. Toups John H. Grover
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information on compensation paid in fiscal
year 1997 and the two prior fiscal years to the Company's Chief Executive
Officer and the Company's five other executive officers whose income exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------- --------------------------------
Awards Payouts
---------------------- -------
Other Restricted LTIP
Annual Stock Options/ Payouts All Other
Year Salary($) Bonus($) Compensation($)(1) Awards($) SARs(#) ($) Compensation($)
---- --------- -------- ------------------ ---------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard C. Mills(5) 1997 160,804 43,200 4,323 none 7,200 none 3,135(2)
CEO/President 1996 149,925 28,336 5,623 none 7,200 none 2,999(2)
1995 150,188 27,067 3,331 none 14,400 none 2,604(2)
James L. Sherwood IV 1997 101,550 14,400 none none 3,000 none 2,013(2)
1996 96,785 13,970 none none 1,800 none 5,284(3)
1995 96,962 21,886 none none 5,400 none 1,939(2)
James C. Dobrowolski 1997 113,549 28,430 none none 6,375 none 6,117(3)
1996 96,940 13,627 2,400 none 3,600 none 599(2)
1995 95,099 23,672 none none 5,400 none 5,855(3)
Melvin L. Schuler 1997 97,786 57,670 none none 4,500 none 1,956(2)
1996 89,733 19,712 none none 1,500 none 1,794(2)
1995 89,902 8,999 none none 3,000 none 1,798(2)
Thomas L. Mountcastle 1997 127,497 none none none 13,500 none 1,200(2)
Thomas E. Nolan 1997 107,623 none none none 6,375 none 13,768(4)
</TABLE>
(1) Value of Company furnished auto.
(2) Amounts contributed to officer under 401(k) plan.
(3) Amounts contributed to officer under 401(k) plan and paid vacation.
(4) Amounts contributed to officer under 401(k) plan and living expenses.
(5) The Company entered into an Executive Severance Agreement ("Agreement")
with Mr. Mills in recognition of his position of high responsibility and
the substantial contributions he has made to the Company over many years.
The Agreement provides benefits under certain circumstances including a
change in control of the Company and is automatically renewed from year to
year. It confirms that employment is at will and provides for termination
without additional compensation in the event of death, resignation,
retirement or for cause. Except in connection with a change of control,
termination for any other reason results in compensation equal to eighteen
(18) months salary. In the event of termination within one (1) year after a
change in control or in the event Mr. Mills resigns or retires during the
first ninety (90) days after a change in control, he would receive
compensation equal to thirty-six (36) months salary subject to statutory
limitations.
10
<PAGE>
Director Compensation
Directors who are not officers of the Company receive an annual fee of
$1,000. During the fiscal year ended March 31, 1997, Directors also received
$2,000 and reimbursement of expenses incurred for each meeting of the Board of
Directors which they attended. Alvin Nashman receives $2,000 per month for
consulting services provided the Company.
The following two tables present further details on stock options:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Percent Total Appreciation for Option
Options/SARs Granted Exercise Term(2)
Options/SARs to Employees in or Base Expiration -----------------------
Name Granted Fiscal Year (1) Price($) Date 5%($) 10%($)
- ---- ------------ -------------------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard C. Mills 7,200 6.8 6.13 5/3/01 12,194 26,945
President/CEO
James L. Sherwood, IV 3,000 2.8 6.13 5/3/01 5,081 11,227
Vice President
James C. Dobrowolski 6,375 6.0 6.13 5/3/01 10,797 23,858
Vice President
Melvin L. Schuler 4,500 4.3 6.13 5/3/01 7,621 16,841
Vice President
Thomas L. Mountcastle 13,500 12.8 467 - 6.13 4/1/01-5/3/01 19,839 43,835
Vice President
Thomas E. Nolan 6,375 6.0 6.13 5/3/01 10,797 23,858
Vice President
</TABLE>
(1) This column will not total 100% because employees other than those named
received options during the year.
(2) Discloses the potential realizable value assuming that the market price of
the underlying security appreciates at annualized rates of 5 and 10 percent
over the term of the award.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES OF UNEXERCISED OPTIONS/SARs
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-The-
Shares Options at Year-End Money Options at Year-End($)
Acquired on Value -------------------------- -------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable(1)
- ---- ----------- ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Howard C. Mills 6,000 16,500 2,250 29,550 11,250 188,790
President/CEO
James L. Sherwood, IV 4,500 12,375 675 10,425 4,388 66,460
Vice President
Melvin L. Schuler 4,500 12,375 675 11,925 4,388 74,515
Vice President
James Dobrowolski -- -- 1,125 15,750 7,312 97,566
Thomas Nolan -- -- -- 7,875 -- 44,614
Thomas Mountcastle -- -- -- 13,500 -- 83,445
</TABLE>
(1) Based on the fair market value of the Common Stock on March 31, 1997, of
$11.50 less the option exercised price.
11
<PAGE>
PERFORMANCE GRAPH--SHAREHOLDERS RETURN
Set forth below is a graph comparing the cumulative return of Halifax
Corporation, the Standard & Poor's ("S&P") 500 Composite Stock Index ("S&P 500")
and the Technology Sector Composite Index compiled by S&P. The graph assumes a
$100 initial investment on March 31, 1992 and a reinvestment of dividends in
Halifax Corporation and each of the companies reported in the indices through
March 31, 1997 (the end of the Company's fiscal year).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among Halifax Corporation, The S&P 500 Index and The S&P Technology
Sector Index -- Formerly The S&P High Tech Composite Index
[BAR CHART HERE]
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
YEARS Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97
----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Halifax Corporation -HX 100 86 101 88 93 234
S&P 500 -1500 100 115 117 135 179 214
S&P Technology Sector -IHTC 100 110 129 164 221 299
</TABLE>
12
<PAGE>
TRANSACTIONS WITH MANAGEMENT
On May 1, 1986, Ernest L. Ruffner, a director of the Company, joined the
law firm of Pompan, Ruffner & Werfel. Jacob Pompan of that firm has represented
Halifax in its government contract affairs since 1984. During the fiscal year
ended March 31, 1997, the firm received fees of $4,652 from the Company. In
addition, Mr. Ruffner, as General Counsel, receives $5,000 per month retainer
from the Company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst & Young, independent
accountants, subject to the ratification of such appointment by the
Shareholders, to serve as independent accountants for the Company and its
subsidiaries for the year ending March 31, 1998.
This year's financial statements were audited by Ernst & Young who replaced
Grant Thornton on September 16, 1994. The change was made by recommendation of
the Audit committee.
The company is advised that no member of Ernst & Young has any direct or
indirect interest in the Company or any of its subsidiaries or has had, since
its appointment, any connection with the Company or any of its subsidiaries in
the capacity of promoter, underwriter, voting trustee, director, officer or
employee. Representatives of Ernst & Young will be invited to the annual meeting
and, if present, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
ADOPTION OF THE HALIFAX NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
On May 16, 1997, the Board of Directors of the Company approved for
submission to the stockholders at the 1997 Annual Meeting the Halifax
Non-Employee Directors Stock Option Plan (the "Option Plan"). The following
summary describes features of the Option Plan. This Summary is qualified in its
entirety by reference to the specific provisions of the Option Plan, the full
text of which is set forth as Appendix A.
The Board has determined that the Option Plan will work to increase the
non-employee directors' proprietary interest in the Company and to align more
closely their interests with the interests of the Company's stockholders. The
Option Plan will also maintain the Company's ability to attract and retain the
services of experienced and highly qualified non-employee directors.
If approved by the stockholders, the Option Plan would commence in 1997 and
end in 2004 and would provide for an automatic initial grant and subsequent
discretionary annual grants, as set forth below, of stock options to each
director who is not a Halifax employee. Each grant will permit the holder, for a
period of up to ten years from the date of grant, to purchase from the Company
shares of the Company's common stock (subject to adjustment as provided in the
Option Plan) at 100% of the fair market value of such shares on the date the
option is granted.
Each year, as of the first day of the month following the Annual Meeting of
Stockholders of the Company, each Non-Employee Director who has been elected or
reelected as a member of the Board as of the adjournment of the Annual Meeting
shall receive an Option for shares of Common Stock as follows.
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(i) at any time a director is elected by the Stockholders and said director
has not previously been granted an option, a First Option shall be granted for
5000 Common Stock shares which shall become exercisable in installments
cumulatively with respect to one sixtieth of the Optioned Stock per month after
the date of grant, so that one hundred percent (100%) of the Optioned Stock
shall be exercisable five (5) years after the date of grant.
(ii) upon each annual reelection as a director by the Stockholders, a
Subsequent Option shall be granted of up to a maximum of 2000 Common Stock
shares which shall become exercisable in installments cumulatively with respect
to one-twelfth of the Optioned Stock per month after the date of grant, so that
one hundred percent (100%) of the Optioned Stock shall be exercisable one (1)
year after the date of grant.
(iii) the total maximum number of shares of Common Stock for which any
director shall be granted Options under this Plan is 13,000.
In the event an option holder ceases to be a director of the Company, all
options granted to such director which have not vested shall immediately
terminate. Each option and all rights shall be nonassignable and
non-transferable other than by will or the laws of descent and distribution.
Options for a maximum of 100,000 shares of common stock (subject to
adjustment as provided in the Option Plan) can be granted under the Option Plan
for all directors combined. The options under the Option Plan shall be
nonstatutory options not intended to qualify under section 422A of the Internal
Revenue Code of 1986 (the "Code").
The Option Plan will be administered by the Board of Directors who will be
authorized to interpret the Option Plan but have no authority with respect to
the selection of directors to receive options, the number of shares subject to
the Option Plan, or the option price for shares subject to options. The Board
shall have no authority to increase materially the benefits under the Option
Plan. The Board may amend the Option Plan as it shall deem advisable but may not
amend the Option Plan without further approval of the stockholders if such
approval is required by law, and may not amend the Option Plan provisions
relating to the amount, price, and timing of options more than once every six
months other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Adjustments shall be made
in the number and kind of shares subject to the Option Plan and the number and
kind of shares subject to outstanding and subsequent option grants and in the
purchase price of outstanding options, in each such case to reflect changes in
the Company's common stock through changes in the Company's corporate structure
or capitalization, such as through a merger or stock split.
On May 16, 1997, Halifax common stock closed at 7-7/8 on the American Stock
Exchange.
SHAREHOLDERS' PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
annual meeting of shareholders should be sent to the Secretary of the Company at
5250 Cherokee Avenue, Alexandria, Virginia 22312, and must be received not later
than the close of business on April 1, 1998. Material filed with the Company in
a timely manner will be considered, pursuant to the requirements of all
applicable laws and regulations, for inclusion the Company's 1998 proxy
materials for such annual meeting.
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TRANSFER AGENT AND REGISTRAR
The American Stock Transfer & Trust Company, is the Company's transfer
agent and registrar.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
additional matters to be presented for vote of the shareholders at the Annual
Meeting, nor has it been advised that others will present any other matters.
Should any matters be properly presented at the Annual Meeting for a vote of the
shareholders, the proxies will be voted in accordance with the best judgment of
the proxy holder.
By Order of the Board of Directors
Ernest L. Ruffner
Secretary
<PAGE>
APPENDIX A
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. Purpose. The purpose of the Halifax Non-Employee Directors Stock Option Plan
(the "Plan") is to secure for Halifax Corporation (the "Company") and its
stockholders the benefits of the incentive inherent in increased common stock
ownership by the members of the Board of Directors (the "Board") of the Company
who are not employees of the Company or any of its subsidiaries.
2. Adoption and Term. The Plan has been approved by the Board effective upon
approval by the Company's shareholders on September 19, 1997. The Plan shall
terminate without further action at the close of the Company's business day at
its principal executive office on September 18, 2004.
3. Administration. The Plan shall be administered by the Board. The Board shall
have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of stock options made under the Plan (the
"Options") and the power to determine the restrictions, if any, on the ability
of participants to dispose of any stock issued in connection with the exercise
of any options granted pursuant to the Plan. The Board shall, subject to the
provisions of the Plan, have the power to construe the Plan, to determine all
questions arising thereunder and to adopt and amend such rules and regulations
for the administration of the Plan as it may deem desirable. Any decisions of
the Board in the administration of the Plan, as described herein, shall be final
and conclusive. The Board may authorize any one or more of their number or the
Secretary or any other officer of the Company to execute and deliver documents
on behalf of the Board. The Board hereby authorizes the Secretary to excute and
deliver all documents to be delivered by the Board pursuant to the Plan. No
member of the Board shall be liable for anything done or omitted to be done by
such member or by any other member of the Board in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.
4. Amount of Stock. The stock which may be issued and sold under the Plan will
be the Common Stock (par value $0.24 per share) of the Company. the total number
of shares of stock for which Options may be granted under the Plan shall not
exceed 100,000 shares of Common Stock shares, subject to adjustment as provided
in Paragraph 7 below. The stock to be issued may be either authorized and
unissued shares or issued shares acquired by the Company or its subsidiaries.
5. Eligibility. Each member of the Board of the Company who is not an employee
of the Company or any of its subsidiaries (a "Non-Employee Director") shall be
eligible to receive an Option in accordance with Paragraph 6 below. The adoption
of this Plan shall be not deemed to give any director any right to be granted an
Option, except to the extent and upon such terms and conditions, in accordance
with the terms of the Plan, as may be determined by the Board.
6. Terms and Conditions of Options. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan, and shall comply with the following terms and
conditions:
(a) The Option exercise price shall be the fair market value of the Common
Stock shares subject to such Option on the date the Option is granted,
which shall be the average of the high and the low sales prices of a
Common Stock share on the date of grant as reported on the American
Stock Exchange Composite Transactions Tape or, if the American Stock
Exchange is closed on that date, on the last preceding date on which
the American Stock Exchange was open for trading.
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(b) Each year, as of the first day of the month following the Annual
Meeting of Stockholders of the Company, each non-Employee Director who
has been elected or reelected as a member of the Board as of the
adjournment of the Annual Meeting shall receive an Option for shares
of Common Stock as follows.
(i) at any time a director is elected by the Stockholders and said
director has not previously been granted an option, a First Option
shall be granted for 5,000 Common Stock shares.
(ii) upon each annual reelection as a director by the Stockholders, a
Subsequent Option shall be granted of up to a maximum of 2,000 Common
Stock shares.
(iii) the total maximum number of shares of Common Stock for which any
director shall be granted Options under this Plan is 13,000.
(c) Options shall not be transferable by the Optionee otherwise than by
will or the laws of descent and distribution, and shall be exercisable
during the lifetime of the Optionee only by the Optionee.
(d) No Option or any part of an Option shall be exercisable:
(i) after the expiration of ten years from the date the Option was
granted,
(ii) unless written notice of the exercise is delivered to the Company
specifying the number of shares to be purchased and payment in full is
made for the shares of Common Stock being acquired thereunder at the
time of exercise; such payment shall be made (a) in United States
dollars by check, or bank draft, or (b) by tendering to the Company
Common Stock shares owned by the person exercising the Option and
having a fair market value equal to the cash exercise price applicable
to such Option, such fair market value to be the average of the high
and low sales prices of a Common Stock share on the date of exercise
as reported on the American Stock Exchange Composite Transactions
Tape, or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open
for trading, it being understood that the Board shall determine
acceptable methods of tendering Common Stock shares and may impose
such conditions on the use of Common Stock shares to exercise Options
as it deems appropriate, or (c) by a combination of United States
dollars and Common Stock shares as aforesaid; and
(iii) in the event the right to exercise the Option granted did not
vest pursuant to paragraph 6(e) or 6(d) of the Plan prior to the date
the Optionee ceased to be a Director of the Company.
(e) If the Option granted is a First Option, it shall become exercisable
in installments cumulatively with respect to one sixtieth of the
Optioned Stock per month after the date of grant, so that one hundred
percent (100%) of the Option Stock shall be exercisable five (5) years
after the date of grant.
(f) If the Option granted is a Subsequent Option, it shall become
exercisable in installments cumulatively with respect to one-twelfth
of the Optioned Stock per month after the date of grant, so that one
hundred percent (100%) of the Option Stock shall be exercisable one
(1) year after the date of grant.
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7. Effective of Changes in Capitalization.
(a) Changes in Shares.
If the number of outstanding shares of Stock is increased or decreased
or changed into or exchanged for a different number or kind of stock
or other securities of the Company by reason of any recapitalization,
reclassification, Stock split, reverse split, combination of Stock,
exchange of Stock, Stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the
date the Option is granted, a proportionate and appropriate adjustment
shall be made by the Company in the number and kind of shares subject
to the Option, so that the proportionate interest of the Optionee
immediately following such event shall, to the extent practicable, be
the same as immediately prior to such event. Any such adjustment in
the Option shall not change the total Option Price with respect to
shares subject to the unexercised portion of the Option but shall
include a corresponding proportionate adjustment in the Option Price
per share.
(b) Reorganization in Which the Company Is the Surviving Entity.
Subject to Section (c) of this Section, if the Company shall be the
surviving entity in any reorganization, merger or consolidation of the
Company with one or more other entities, the Option shall pertain to
and apply to the securities to which a holder of the number of shares
subject to the Option would have been entitled immediately following
such reorganization, merger or consolidation, with a corresponding
proportionate adjustment of the Option Price per share so that the
aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately
prior to such reorganization, merger or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving Company or
Sale of Assets or Stock.
Upon the dissolution liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other
companies in which the Company is not the surviving company, or upon a
sale of substantially all of the assets of the Company to another
company, or upon any transaction (including, without limitation, a
merger or reorganization in which the Company is the surviving
company) approved by the Board which results in any person or entity
owning 50 percent or more of the combined voting power of all classes
of stock of the Company, the Option shall terminate, except to the
extent provision is made in writing in connection with such
transaction for the assumption of the Option, or for the substitution
for the Option of a new option covering the stock of a successor
company, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise prices,
in which event the Option shall continue in the manner and under the
terms so provided. In the event of any such termination of the Option,
the Optionee shall have the right immediately prior to the occurrence
of such termination and during such period occurring prior to such
termination as the Board in its sole discretion shall determine and
designate, to exercise the Option to the extent that the Option was
otherwise exercisable at the time such termination occurs. The
Administrator shall send written notice of an event that will result
in such a termination to the Optionee not later than the time at which
the Company gives notice thereof to its stockholders.
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8. Miscellaneous Provisions.
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an option
under the Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
(b) An Optionee's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of an Optionee's death, by will
or the laws of descent and distribution), including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy, or in any other manner, and no such right or interest of
any participant in the Plan shall be subject to any obligation or
liability of such participant.
(c) No Common Stock shares shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in
compliance with applicable Federal, state, and other securities laws
and regulations.
(d) It shall be a condition to the obligation of the Company to issue
Common Stock shares upon exercise of an Option, that the Optionee (or
any beneficiary or person entitled to act under subparagraph 5(d)(iii)
above) pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any liability
to withhold Federal, state, local, or foreign income or other taxes.
If the amount requested is not paid [which payment may be made in any
manner prescribed in subparagraph 5(d)(ii)], the Company may refuse to
issue Common Stock shares.
(e) The expenses of the Plan shall be borne by the Company.
(f) the Plan shall be unfunded, the Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares upon exercise
of any Option under the Plan, and the issuance of shares upon exercise
of Options shall be subordinate to the claims of the Company's general
creditors.
(g) By accepting any Option or other benefit under the Plan, each Optionee
and each person claiming under or through such person shall be
conclusively deemed to have indicated his or her acceptance and
ratification of, and consent to, any action taken under the Plan by
the Company or the Board.
9. Amendment or Discontinuance. The Plan may be amended at any time and from
time to time by the Board as the Board shall deem advisable; provided, however,
that no amendment shall become effective without stockholder approval if such
stockholder approval is required by law, rule, or regulation, and provided
further, to the extent required by Rule 16B-3 under Section 16 of the Securities
Exchange Act of 1934, in effect from time to time, Plan provisions relating to
the amount, price, and timing of Options shall not be amended more than once
every six months, except that the foregoing shall not preclude any amendment to
comport with changes in the internal Revenue Code of 1986, the Employee
Retirement Income Security Act of 1974, or the rules thereunder in effect from
time to time. No amendment of the Plan shall materially and adversely affect any
right of any participant with respect to any Option theretofore granted without
such participant's written consent.
10. Effective Date of Plan. The Plan shall become effective with the Plan is
approved and adopted by the Company's stockholders.
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