<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction 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:
- --------------------------------------------------------------------------------
<PAGE> 2
HALIFAX CORPORATION
5250 Cherokee Avenue
Alexandria, Virginia 22312
----------------------
ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Halifax
Shareholders which will be held on Thursday, March 2, 2000 at 2:00 p.m. local
time at the Hilton Hotel, 5000 Seminary Road, Alexandria, VA 22311.
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 at the
meeting, but whether or not you plan to attend, your vote is very important to
us. Information about voting procedures can be found in the proxy statement and
on the stub portion of the enclosed proxy card. Please return a signed proxy
card or give us instructions by telephone so that you can be sure your shares
will be properly voted.
Sincerely,
/s/ John J. Reis
John J. Reis
President and Chief Executive Officer
February 1, 2000
<PAGE> 3
HALIFAX CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 2, 2000
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, 5000 Seminary Road, Alexandria, VA
22311 on Thursday, March 2, 2000, at 2:00 p.m. local time, for the purpose of
considering and acting upon the following:
1. Election of six (6) directors for the ensuing year.
2. Ratification of the Board of Directors' appointment of Deloitte &
Touche LLP Certified Public Accountants, as the Company's
independent auditors for the fiscal year ending March 31, 2000.
3. Approval of Amendment of the Company's "1994 Key Employee Stock
Option Plan" to increase the number of shares issuable from 280,000
to 400,000.
4. Transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on January 19, 2000 are
entitled to vote. Your vote is important regardless of the number of shares that
you own. Kindly sign, date and return the enclosed proxy card.
By Order of the Board of Directors
/s/ Ernest L. Ruffner
Ernest L. Ruffner
Secretary
<PAGE> 4
HALIFAX CORPORATION
5250 CHEROKEE AVENUE
ALEXANDRIA, VIRGINIA 22312
PROXY STATEMENT
The Annual Meeting of Shareholders of Halifax Corporation (The "Company")
will be held on March 2, 2000 at the Hilton Hotel, 5000 Seminary Road,
Alexandria, Virginia 22311, 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 voted 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 Deloitte & Touche LLP,
Certified Public Accountants, to be the Company's independent auditors for
fiscal 2000; for approval of an Amendment to the Company's 1994 Key Employee
Stock Option Plan to increase the number of shares issuable; 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 matters. Management knows of
no other matters to come before the Annual Meeting at this time.
<PAGE> 5
SHARES OUTSTANDING AND VOTING RIGHT
Shareholders of record at the close of business on January 19, 2000, will
be entitled to notice of and vote at the Annual Meeting. On that date there
were 2,050,686 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.
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.
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 six.
It is, therefore, proposed to elect a Board of Directors of six 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 named below. Five of the six nominees are now serving as directors. All
six of the nominees 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.
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:
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS THE FOLLOWING NOMINEES:
<TABLE>
<CAPTION>
DATE
FIRST PRINCIPAL OCCUPATION AND
NOMINEE AGE ELECTED EMPLOYMENT; OTHER BACKGROUND
- ------- --- ------- ----------------------------
<S> <C> <C> <C>
Arch C. Scurlock 79 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.
John J. Reis 57 1999 John J. Reis joined the Company on March 1,
1999, as President and Chief Executive
Officer, and was elected to the Board on
March 24, 1999. He was President, CEO and
Director of NumereX Corporation, a data
transport company, from 1996 to 1998 and
President and CEO and Director of MAXM
Systems Corporation, an enterprise software
company, from 1989 to 1996.
John H. Grover 72 1984 John H. Grover became a Director of the
Company in 1984. He has served as Executive
Vice President, Treasurer and Director of
Research Industries Incorporated since 1968,
and as a Director of TransTechnology
Corporation from 1969 to 1992.
Alvin E. Nashman 72 1993 Alvin E. Nashman, elected Director of the
Company on September 17, 1993, served on the
Board of Directors of Computer Sciences
Corporation (CSC) and as President of its
Systems Group until 1986 and 1991
respectively. Dr. Nashman currently serves
on the Boards of Andrulis Corporation, an
information systems company, Micros to
Mainframes, Inc. (OTC), an information
systems company, and on the Advisory Boards
of Dominion Wireless, a personal security
company, Unitech Inc., an information
systems company, Trawick Assoicates, an
information systems company, Performance
Engineering Corporation, an information
systems company, e-Greenbiz.com, an internet
portal company, and James Monroe Bank, a
community bank.
John M. Toups 73 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., an information
technology company, NVR, Inc. a home builder
company, Thermatrix, Inc., an air emissions
control technology company, Andrulis
Corporation, an information systems company
and GTSI, a reseller of software/hardware
company.
Thomas L. Hewitt 61 --- Thomas L. Hewitt founded Federal Sources in
December of 1984, a market research and
consulting firm, and served as the Company's
CEO until the recent sale of the Company.
Prior to Federal Sources, Mr. Hewitt served
as a Senior Vice President of Kentron, an
information technology professional services
company acquired by PRC, and held several
senior level positions at CSC, an IT systems
integration company, including President of
the Infonet Government Systems Division and
VP of Program Development of the Systems
Group.
</TABLE>
<PAGE> 7
OTHER EXECUTIVE OFFICERS
In addition to President Reis, the following persons are executive
officers of the Company.
James C. Dobrowolski, age thirty-six, joined Halifax as a result of the
Company acquiring EAI Services which he had managed for two years. Mr.
Dobrowolski currently serves as Vice President, of Halifax Technical Services,
Inc. 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
Sub-contract Administration for two years.
Charles McNew, age forty-seven, Executive Vice President since July 1999
and CFO since September 1999. Prior to joining Halifax, he was CFO and COO of
NumereX Corporation for five years. He has held the CFO position with
Interdigital Corporation, Reed Telepublishing, and Digilog, Inc. and was an
auditor for Coopers and Lybrand in the 1970's.
Thomas F. Nolan, age fifty-four, has been Vice President, Computer
Services Division since January 1996. 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., and a nationwide computer maintenance firm. For seventeen years
Mr. Nolan held various executive positions with Bell Atlantic Corporation's
SORBUS Service Division.
Robert Santmyer, age thirty-nine, Vice President and General Manager,
Technology Services Division since June 1999. Prior to joining Halifax, he was
Vice President, Professional Services, of Dictaphone Corporation. Other
positions held were General Manager, DCX Systems LTD of NumereX Corporation;
Vice President, Professional Services, MAXM Systems Corporation; and Manager,
Network Provisioning Sprint.
Melvin L. Schuler, age fifty-five, is the Vice President Communications
Services Division. Mr. Schuler has been with the Company for twenty-six years,
serving in various management positions within the Communications services line
of business.
James L. Sherwood, IV, age fifty-seven, is Vice President Contracts and
Administration. He has been with the Company and its subsidiaries for twenty
years. He previously served as a Vice President and manager for the Company's
Facilities Services Division.
Ernest L. Ruffner, age sixty-five is Corporate Secretary. Until his
retirement in December 1999 he also served as General Counsel of the Company.
He was first elected Secretary in July of 1985.
<PAGE> 8
BOARD OF DIRECTORS; COMMITTEES
During the year ended March 31, 1999, the Board of Directors held seven
meetings. During that year, all members who were directors at the time attended
all of the 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 certain 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 auditors; 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, and recommends to the Board the appointment of the
Company's independent auditors. The committee's current members are
Messrs. Toups and Nashman. Dr. Clifford Hardin resigned from the
board and the committee in December 1998. During the year ended
March 31, 1999, the committee held one meeting.
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, 1999,
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
current committee members are Messrs. Nashman, Grover, and
Scurlock. During the year ended March 31, 1999, the committee held
one meeting.
<PAGE> 9
PRINCIPAL SHAREHOLDERS AND DIRECTORS AND OFFICERS
The following table sets forth as of January 25, 2000 (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 and officer 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.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- ---------------- -------------------- -------
<S> <C> <C>
Research Industries Incorporated (1)(3)(5) 715,780 34.9
123 North Pitt Street
Alexandria, Virginia 22314
Howard C. Mills (4) 68,367 3.3
5221 Mountain View Drive
Broad Run, Virginia 20137
Arch C. Scurlock (1)(2) 717,280 35.0
123 North Pitt Street
Alexandria, Virginia 22314
John H. Grover (3) 1,500 0.1
123 North Pitt Street
Alexandria, Virginia 22314
Ernest L. Ruffner 150 0
209 North Patrick Street
Alexandria, Virginia 22314
Alvin E. Nashman 4,500 0.2
3609 Ridgeway Terrace
Falls Church, VA 22044
John M. Toups 4,500 0.2
1209 Stuart Robeson Drive
McLean, Virginia 22101
Melvin L. Schuler 6,850 0.3
5250 Cherokee Avenue
Alexandria, VA 22312
James L. Sherwood IV 425 0
5250 Cherokee Avenue
Alexandria, VA 22312
Thomas E. Nolan 249 0
5250 Cherokee Avenue
Alexandria, VA 22312
John J. Reis 0 0
5250 Cherokee Avenue
Alexandria, VA 22312
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- ---------------- -------------------- -------
<S> <C> <C>
Charles L. McNew 0 0
5250 Cherokee Avenue
Alexandria, VA 22312
James C. Dobrowolski 0 0
1800 JFK Blvd., 16th Floor
Philadelphia, PA 19103
Thomas L. Mountcastle(6) 33,740
207 Tuckahoe Boulevard
Richmond, VA 23226
John D. D'Amore(7) 296 0
1616 East Avenue
McLean, VA 22101
Frank J. Ostronic(8) 478 0
8323 Turnberry Court
Potomac, MD 20854
All officers and directors as a
a group (12 ) persons(2) 802,321 39.1
</TABLE>
(1) Research Industries Incorporated is 93% owned by Arch C. Scurlock,
chairman of the Company's Board of Directors.
(2) Includes 715,780 shares owned by Research Industries.
(3) Mr. Grover is also a 5% owner and director of Research Industries
Incorporated.
(4) Includes 450 shares held by Mr. Mills' wife.
(5) Research Industries Incorporated owns $2 million face amount of Halifax
7% convertible debentures and warrants to purchase 50,000 shares of
Halifax stock at $7.00 which expire on October 7, 2003.
(6) Mr. Mountcastle's employment terminated in April 1999.
(7) Mr. D'Amore's full time employment terminated in October 1999, and
part-time employment terminated in December 1999.
(8) Mr. Ostronic's employment terminated in November 1999.
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.
<PAGE> 11
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 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 from 1994 until his retirement in February 1999, was largely
based on the performance of the Company, both for the fiscal year and since he
had been CEO. The other criteria considered to a lessor degree was the annual
change in the cost of living. Reflecting the Company's stated compensation
policy, in August 1998, Mr. Mills' base salary was increased by 5 percent to
$175,000 effective July 1, 1998. He also participated in the Company's 401(k)
Plan, to the extent set forth below.
On March 1, 1999, John Reis was elected President and CEO following
Mills' retirement. Mr. Reis' appointment was based on a thorough search by a
committee of the Board, which considered candidate qualifications and
competitive salaries. Mr. Reis' salary is $200,000 annually, effective March
1, 1999.
The second component of the executive compensation program is incentive
compensation related to the achievement of business plan objectives. The
business plan and related objectives are reviewed and approved by the Board of
Directors. Executives who qualify under the program are monetarily awarded if
specific objectives are achieved and can be further rewarded, based upon a
formula calculation if assigned objectives are exceeded. Mr. Reis may qualify
for incentive compensation which could total $200,000 or more based on the
achievement of certain objectives.
The final component of the executive compensation program is the 1994 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. On October 5, 1999 options were granted to Mr. Reis to acquire 75,000
shares of the Company's common stock at $5.75 per share. These options are
exercisable upon the earlier of the share price reaching $9 (1/3), $12 (1/3),
$15 (1/3), October 5, 2003, or a change of control event. The options expire
October 5, 2009.
<PAGE> 12
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
<PAGE> 13
SUMMARY COMPENSATION TABLE
The following table sets forth information on compensation paid in fiscal
year 1999 and the two prior fiscal years to the Company's current and former
Chief Executive Officers and the Company's four other executive officers whose
income exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation(1)
----------------------
Other All
Annual Restricted Other
Compen- Stock Compen-
Salary Bonus sation Awards Options sation
Year ($) ($) ($) ($) (#) ($)
---- ------ ----- --- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Reis(7)(8) 1999 11,539
CEO/President
Howard C. Mills(7) 1999 172,603 none 4,697(2) none none 22,900(3)
CEO/President 1998 164,417 none 4,119(2) none none 3,227(3)
1997 160,804 43,200 4,323(2) none 7,200 3,135(3)
James L. Sherwood IV 1999 111,348 3,220 none none 5,000 9,453(3)
Vice President 1998 106,156 none none none none 2,136(3)
1997 101,550 14,400 none none 3,000 2,013(3)
James C. Dobrowolski 1999 113,659 6,864 2,400 none 8,000 2,130(3)
Vice President 1998 112,390 17,950 none none none 2,607(3)
1997 113,549 28,430 none none 6,375 6,117(4)
Thomas Mountcastle(9) 1999 134,718 none none none none 2,784(3)
Vice President 1998 129,996 none none none none 2,700(3)
1997 127,497 none none none 13,500 1,200(3)
Thomas E. Nolan 1999 117,219 19,107 none none 5,000 3,032(3)
Vice President 1998 111,177 8,439 none none 1,500 2,399(6)
1997 107,623 none none none 6,375 13,768(5)
</TABLE>
(1) Charles L. McNew and Robert Santmyer were appointed as officers of the
Company after the end of the 1999 fiscal year. Mr. McNew's salary is
$150,000 per year and he can quality for incentive compensation which
could total $75,000 or more based on the achievement of certain
objectives. Mr. Santmyer's salary is $140,000 per year and he can
qualify for incentive compensation which could total $70,000 or more
based on the achievement of certain objectives.
(2) Value of Company furnished auto.
(3) Amounts contributed to officer under 401(k) plan.
(4) Amounts contributed to officer under 401(k) plan and paid vacation.
(5) Amounts contributed to officer under 401(k) plan and living expenses.
(6) Amount contributed to officer under 401(k) plan and Health Club.
<PAGE> 14
(7) Mr. Mills was President & CEO for 11 months until his retirement in
February 1999 and Mr. Reis was President and CEO for only 1 month of
Fiscal 1999. Mr. Reis' annual salary is $200,000 and he can qualify for
incentive compensation which could total $200,000 or more based on the
achievement of certain objectives.
(8) The Company entered into an Executive Severance Agreement ("Agreement")
with Mr. Reis in recognition of his position of high responsibility and
authority. 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 event 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 he would receive compensation
equal to thirty-six (36) months salary subject to statutory limitations.
(9) Mr. Mountcastle's employment terminated in April 1999.
DIRECTOR COMPENSATION
Except for Howard Mills, who became a consultant to the Company upon his
retirement as President and CEO, directors who are not officers of the Company
receive an annual fee of $1,000. During the fiscal year ended March 31, 1999
Directors also received $2,000 and reimbursement of expenses incurred for each
meeting of the Board of Directors which they attended. Each Director is granted
5,000 options on the date of their initial election and 2,000 options on each
anniversary thereafter to the extent they continue to serve as a Director of
the Company. Alvin Nashman (Director) received $2,000 per month for consulting
services provided the Company through September 1999.
Upon his retirement as President and CEO in February 1999, Howard Mills
(Director) entered into a Consulting Agreement with the Company for a period of
ten years based on an annual rate of $50,000.
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
1994 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assured
Percent Total Annual Rates of
Options Stock Price
Granted to Exercise Appreciation for
Options Employees in or Base Expiration Option
NAME Granted(1) Fiscal Year Price($) Date Term (3)
- ---- ---------- ----------- -------- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
----- ------
John J. Reis(2) --- --- --- --- --- ---
CEO/President
Howard C. Mills(2) --- --- --- --- --- ---
CEO/President
James Sherwood IV 5,000 5.7 7.81 8/7/03 10,789 2,384
Vice President
James Dobrowolski 8,000 9.2 7.81 8/7/03 17,264 38,144
Vice President
Thomas
Mountcastle(4) 8,000 9.2 7.81 8/7/03 17,264 38,144
Vice President
Thomas Nolan 5,000 5.7 7.81 7/7/03 10,789 23,840
Vice President
</TABLE>
(1) On October 5, 1999 options were granted to the following individuals:
John J. Reis (75,000), Charles L. McNew (45,000), Robert Santmyer
(25,000), and James Sherwood (5,000). These options may be exercised at
a price of $5.75 and are exercisable in 1/3 increments upon the earlier
of the share price reaching $9 (33%), $12 (33%), $15 (33%), October 5,
2003, or a change of control event. The options expire October 5, 2009.
(2) Mr. Mills was President & CEO for 11 months until his retirement in
February 1999. Mr. Reis was President and CEO for only 1 month of Fiscal
1999.
(3) Discloses the potential realizable value assuming that the market price
of the underlying security appreciates at annualized rates of 5 and 10
percent over the term of the award.
(4) Mr. Mountcastle's employment terminated April 1999.
<PAGE> 16
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assured
Percent Total Annual Rates of
Options Stock Price
Granted to Exercise Appreciation for
Options Employees in or Base Expiration Option
NAME Granted Fiscal Year Price($) Date Term (1)
- ---- ------- ----------- -------- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
----- ------
Arch Scurlock 2,000 16.7 7.03 10/1/08 8,842 22,408
Chairman
John Grover 2,000 16.7 7.03 10/1/08 8,842 22,408
Director
Ernest Ruffner(2) 2,000 16.7 7.03 10/1/08 8,842 22,408
Director
Alvin Nashman 2,000 16.7 7.03 10/1/08 8,842 22,408
Director
John Toups 2,000 16.7 7.03 10/1/08 8,842 22,408
Director
Clifford Hardin(3) 2,000 16.7 7.03 10/1/08 8,842 22,408
Director
</TABLE>
(1) 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
(2) Mr. Ruffner retired as General Counsel in December 1999, but will serve
out his term as Director and will continue as Corporate Secretary until a
successor is elected.
(3) Dr. Hardin resigned in December 1998.
<PAGE> 17
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES OF UNEXERCISED OPTIONS
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised In-The-
Acquired on Value ($) Options at Year-End Money Options at Year-end($)
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable (1)
- ---- ----------- -------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John J. Reis(2) --- --- --- --- --- ---
President & CEO
Howard C. Mills(3) --- --- 27,000 1,800 67,374 2,466
President/CEO
James L. Sherwood, IV --- --- 9,450 5,750 23,171 1,028
Vice President
James C. Dobrowolski --- --- 13,781 9,594 31,444 2,184
Vice President
Thomas L. Mountcastle(4) --- --- --- --- --- ---
Vice President
Thomas F. Nolan --- --- 5,906 6,969 9,835 3,279
Vice President
</TABLE>
(1) Based on the fair market value of the Common Stock on March 16, 1999, of
$7.50 less the option exercised price. NOTE: Trading halted on March
17, 1999, upon public release of the embezzlement of Company assets.
(2) Mr. Reis became President/CEO March 1, 1999.
(3) Mr. Mills was President/CEO through February 1999, when he retired.
(4) Mr. Mountcastle's employment terminated April 1999.
<PAGE> 18
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, 1994 and a reinvestment of
dividends in Halifax Corporation and each of the companies reported in the
indices through March 31, 1999 (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
[GRAPH]
(*) $100 Invested on March 31, 1994 in Stock or Index.
Including Reinvestment of Dividends. Fiscal Year Ending March 31.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
- --------------------------------------------------------------------------------------------------
YEARS MAR-94 MAR-95 MAR-96 MAR-97 MAR-98 MAR-99
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Halifax Corporation -HX 100 87 92 231 189 158
- --------------------------------------------------------------------------------------------------
S&P 500 -1500 100 116 153 183 271 321
- --------------------------------------------------------------------------------------------------
S&P Technology Sector -IHTC 100 127 171 231 349 560
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
TRANSACTIONS WITH MANAGEMENT
On May 1, 1986, Ernest L. Ruffner, a director of the Company, joined the
law firm of Pompan, Murray, Ruffner & Werfel. Jacob Pompan of that firm has
represented Halifax in its government contract affairs since 1984. During the
fiscal year ended March 31, 1999, the firm received fees of $88,247 from the
Company. In addition, Mr. Ruffner, as General Counsel, received an average
monthly retainer of $5,683 from the Company.
Upon his retirement as President and CEO in February 1999, Howard Mills
entered into a consulting agreement with the Company for a period of ten years
at an annual rate of $50,000.
Dr. Alvin Nashman provided consulting services to the Company, while also
performing as a Director of the Company, for which he was compensated at the
rate of $2,000 per month. This arrangement concluded in September 1999.
The Company entered into an Executive Severance Agreement ("Agreement")
with Mr. Reis in recognition of his position of high responsibility and
authority. The Agreement provides benefits under certain circumstances
including a change in control of the Company and remains in effect so long as
Mr. Reis continues to be employed by the Company. It confirms that employment
is at will and provides for termination without additional compensation in the
event of death, resignation, retirement or "for cause," as defined therein.
Except in connection with a change of control event 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 Mr. Reis
would receive compensation equal to thirty-six (36) months salary subject to
statutory limitations.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Deloitte & Touche LLP,
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, 2000.
Ernst & Young LLP (the "Former Accountants") resigned as the independent
accountants for Halifax Corporation (the "Company") on October 19, 1999.
No report prepared by the Former Accountants on the consolidated
financial position of the Company at March 31, 1999 and 1998, and the
consolidated results of operations and its cash flows of each of the three
years in the period ended March 31, 1999, contained an adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles.
In connection with the audit conducted by the Former Accountants for the
fiscal year ended March 31, 1999, which was concluded on September 7, 1999, and
which included the consolidated balance sheets of the Company as of March 31,
1999 and 1998, and the related consolidated statements of operations, changes
in stockholders' equity (deficit) and cash flows for each of the three years in
the period ended March 31, 1999, there were no disagreements between the
Company and the Former Accountants on any matter of accounting principles or
<PAGE> 20
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of the Former
Accountants, would have caused them to make reference thereto in their report
on the financial statements for those years.
The fiscal year 1999 audit was completed on September 7, 1999 with the
issuance, by the Former Accountants, of a clean opinion as presented in the
Company's Form 10-K which was filed with the SEC on September 9, 1999.
The Company is advised that no member of the Former Accountants had and
Deloitte & Touche LLP 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 Deloitte &
Touche LLP 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.
APPROVAL OF AMENDMENT OF THE
COMPANY'S 1994 KEY EMPLOYEE STOCK
OPTION PLAN TO INCREASE THE NUMBER
OF SHARES ISSUABLE
In May 10, 1994 the shareholders approved the Company's 1994 Key Employee
Stock Option Plan (the "Employee Plan"). In August 1998, the Employee Plan was
amended by the Board of Directors, and approved by the shareholders in
September 1998 to increase the total number of shares under the Employee Plan
for which options may be granted from 180,000 to 280,000. In January 2000, the
Employee Plan was amended by the Board of Directors, subject to shareholders
approval, to increase the total number of shares under the Employee Plan for
which options may be granted from 280,000 to 400,000.
The Board of Directors recommends that the amendment to the Employee Plan
be approved because it believes that the Plan, as amended, will advance the
interests of the Company and its shareholders by strengthening the Company's
ability to attract, retain and motivate officers and key employees.
Set forth below is a summary of provisions of the Employee Plan. This
summary is qualified in its entirety by the detailed provisions of the text of
the Employee Plan.
PURPOSE
The purpose of the Employee Plan is to provide additional incentive to
employees of the Company by encouraging them to invest in the Company's Common
Stock and thereby acquire a proprietary interest in the Company and an
increased personal interest in the Company's continued success and progress.
<PAGE> 21
ADMINISTRATION
The Employee Plan is administered by The Compensation and Incentive
Committee ("Committee") which is appointed by the Board of Directors and
consists only of Directors who are not eligible to receive options under the
Employee Plan. The Committee determines, and recommends to the Board, among
other things, which officers and key employees receive an option or options
under the Employee Plan, the type of option (incentive stock options or
non-qualified stock options, or both) to be granted, the number of shares
subject to each option, the rate of option exercisability, and, subject to
certain other provisions to be discussed below, the option price and duration
of the option.
The Committee may, in its discretion, modify or amend any of the option
terms hereafter described, provided that if an incentive option is granted
under the Plan, the option as modified or amended continues to be an incentive
stock option.
AGGREGATE NUMBER OF SHARES
The aggregate number of shares which may be issued upon the exercise of
options under the Employee Plan, if this proposal is approved by shareholders,
is 400,000 shares of Common Stock. In the event of any change in the
capitalization of the Company, such as by stock dividend, stock split or what
the Board of Directors deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued
under the Employee Plan will be appropriately adjusted in a manner determined
in the sole discretion of the Board of Directors. Reacquired shares of the
Company's Common Stock, as well as unissued shares, may be used for the purpose
of the Employee Plan. Common Stock of the Company subject to options which have
terminated unexercised, either in whole or in part, will be available for
future options granted under the Employee Plan.
OPTION PRICE
The option price for options issued under the Employee Plan must be at
least equal to 100% of the fair market value of the Common Stock as of the date
the option is granted. The fair market value on a particular day shall mean the
average on such date of the high and low quoted sales price of one share of
Company Common Stock on the American Stock Exchange (AMEX) as published in the
Wall Street Journal or another newspaper of general circulation, or if no sales
were reported as of such date, as of the last date preceding such date on which
a sale was reported.
PAYMENT
Payment of the option price on exercise of options granted under the
Employee Plan may be made in (a) cash, (b) (unless prohibited by the Board of
Directors) Company Common Stock which will be valued by the Secretary of the
Company at its fair market value or (c) (unless prohibited by the Board of
Directors) any combination of cash and Common Stock of the Company valued as
provided in clause (b).
Under the terms of the Employee Plan, the Board has interpreted the
provision of the Employee Plan which allows payment of the option price in
Common Stock of the Company to permit the "pyramiding" of shares in successive
exercises. Thus, an optionee could initially
<PAGE> 22
exercise an option in part, acquiring a small number of shares of Common Stock,
and immediately thereafter effect further exercises of the option, using the
Common Stock acquired upon earlier exercises to pay for an increasingly greater
number of shares received on each successive exercise. This procedure could
permit an optionee to pay the option price by using a single share of Common
Stock or a small number of shares of Common Stock and to acquire a number of
shares of Common Stock having an aggregate fair market value equal to the
excess of (a) the fair market value (as determined above) of all shares to
which the option relates over (b) the aggregate exercise price under the
option.
EXERCISABILITY
The Committee may determine the rate of option exercisability. In the
event of "change in control" of the Company, as defined in the Employee Plan,
each optionee may exercise the total number of shares then subject to the
option. Consequently, the Employee Plan may be deemed to have certain
"anti-takeover" effects.
OPTION EXPIRATION AND TERMINATION
Unless terminated earlier by the option's terms, incentive stock options
expire five or ten years after the date they are granted and non-qualified
stock options expire ten years after the date they are granted.
Options terminate three months after the date on which employment is
terminated (whether such termination be voluntary or involuntary), other than
by reason of death or disability. The option terminates two years from the date
of termination due to death or disability (but not later than the scheduled
termination date).
NON-TRANSFERABILITY
Options granted pursuant to the Plan are not transferable, except by will
or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
AMENDMENT OR TERMINATION; PLAN EXPIRATION
The Company's Board of Directors has the right at any time, and from time
to time, to modify, amend, suspend or terminate the Employee Plan, without
shareholder approval, except to the extent that shareholder approval of the
Employee Plan modification amendment is required by the Internal Revenue Code
of 1986, as amended, to permit the granting of incentive stock options under
the Employee Plan. Any such action will not affect options previously granted.
If the Board of Directors voluntarily submits a proposed modification,
amendment, suspension or termination for shareholder approval, such submission
will not require any future modifications, amendments, suspensions or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for shareholder approval.
<PAGE> 23
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF
THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE EMPLOYEE PLAN AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECITON INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
INCENTIVE STOCK OPTIONS
Generally, under the Code, an optionee will not realize taxable income by
reason of the grant or the exercise of an incentive stock option intended to
qualify under Section 422 of the Code ("Incentive Option") (see, however,
discussion of Alternative Minimum Tax below). If an optionee exercises an
Incentive Option and does not dispose of the shares until the later of (i) two
years from the date the option was granted and (ii) one year from the date of
exercise, the entire gain, if any, realized upon disposition of such shares
will be taxable to the optionee as long-term capital gain, and the Company will
not be entitled to any deduction. If an optionee disposes of the shares within
the period of two years from the date of grant or one year from the date of
exercise (a "disqualifying disposition"), the optionee generally will realize
ordinary income in the year of disposition and the Company will receive a
corresponding deduction, in an amount equal to the excess of (1) the lesser of
(a) the amount, if any, realized on the disposition and (b) the fair market
value of the shares on the date the option was exercised (or such later date,
if applicable, as described below in "Non-Qualified Options", if the optionee
is a 16(b) Person who has not made an 83(b) Election as such terms are defined
in "Non-Qualified Options" below) over (2) the option price. Any additional
gain realized on the disposition will be long-term or short-term capital gain
and any loss will be long-term or short-term capital loss. The optionee will be
considered to have disposed of a share if he sells, exchanges, makes a gift of
or transfers legal title to the share (except transfers, among others, by
pledge, on death or to spouses). If the disposition is by sale or exchange, the
optionee's tax basis will equal the amount paid for the share plus any ordinary
income realized as a result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the
shares purchased at the time of the exercise (or such later date, if
applicable, as described above in "Non-Qualified Options", if the optionee is a
16(b) Person who has not made an 83(b) Election) exceeds the option exercise
price is an adjustment for purposes of computing the so-called alternative
minimum tax. In the event of a disqualifying disposition of the shares in the
same taxable year as exercise of the Incentive Option, no adjustment is then
required for purposes of the alternative minimum tax, but regular income tax,
as described above, may result from such disqualifying dispositon.
An optionee who surrenders shares as payment of the exercise price of his
Incentive Option generally will not recognize gain or loss on his surrender of
such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise
<PAGE> 24
price of another Incentive Option, is, however, a "disposition" of such stock.
If the incentive stock option holding period requirements described above have
not been satisfied with respect to such stock, such disposition will be a
disqualifying disposition that may cause the optionee to recognize ordinary
income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise
of an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option
had been exercised for cash.
NON-QUALIFIED OPTIONS
Generally, there will be no federal income tax consequences to either the
optionee or the Company on the grant of a stock option not intended to qualify
under Section 422 of the Code (a "Non-Qualified Option"). On the exercise of a
Non-Qualified Option, the optionee (except as described below) has taxable
ordinary income equal to the excess of the fair market value of the shares
acquired on the exercise date over the option price of the shares. The Company
will be entitled to a federal income tax deduction in an amount equal to such
excess, provided that the Company complies with applicable withholding rules.
However, special rules apply where stock is registered under the Exchange Act
and the optionee is an officer, director or 10% or greater shareholder of the
Company subject to potential liability under Section 16(b) of the Exchange Act
for so-called "short-swing" profits (a "16(b) Person") in connection with
certain purchases and sales, or sales and purchases, of the Company's stock
within a period of six months.
Under SEC rules promulgated under Section 16(b) of the Exchange Act, the
grant of an option, not its exercise, is treated as a "purchase" for Section
16(b) purposes. If such grant is made pursuant to a plan qualifying under the
SEC rules and six months elapse between the grant of the option and the sale of
the shares received upon the exercise thereof, such grant will be exempt from
Section 16(b). With respect to the exercise of a Non-Qualified Option, if a
16(b) Person has not purchased or acquired shares of Common Stock within the
six month period prior to the exercise date (other than purchases or
acquisitions exempt from Section 16(b), the 16(b) Person will be required to
recognize ordinary income (i) six months after the date of grant (in the event
of exercise within six months of the date of grant) or (ii) the date of
exercise (in the event of exercise after six months from the date of grant).
The timing of income recognition with respect to a 16(b) Person who exercises a
Non-Qualified Option within six months of a prior non-exempt purchase or
acquisition of Common Stock is uncertain. It is possible that the Internal
Revenue Service will take the position that, despite the prior non-exempt
purchase or acquisition, the 16(b) Person recognizes income on the date of
exercise rather than the date which is six months following the date of such
prior non-exempt purchase
<PAGE> 25
or acquisition. A 16(b) Person can be certain of recognizing income on the
exercise date by making an election not later than 30 days following the
exercise date to have the income determined as of the date of exercise (an
"83(b) Election"), in which case the Company's deduction will also be
determined as of the exercise date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of
capital gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying
disposition. See "Federal Income Tax Consequences Incentive Stock Options." The
optionee will recognize ordinary income on the exercise of the Non-Qualified
Option as described above. Of the shares received in such an exchange, that
number of shares equal to the number of shares surrendered will have the same
tax basis and capital gains holding period as the shares surrendered. The
balance of the shares received will have a tax basis equal to their fair market
value on the date of exercise and the capital gains holding period will begin
on the date of exercise (or such later date, as described above, if the
optionee is a 16(b) Person who has not made an 83(b) Election, and such later
date is applicable).
SECTION 162(m)
Generally, Section 162(m), denies a deduction to any publicly held
corporation, such as the Company, for certain compensation exceeding $1,000,000
paid to the chief executive officer and the other four highest paid executive
officers during any taxable year. Although ordinary income that is realized
upon the exercise of a Non-Qualified Option or the disqualifying disposition of
shares acquired pursuant to the exercise of an Incentive Option is potentially
subject to the limitation imposed under Section 162(m), Section 162(m) and the
regulations thereunder provide that compensation attributable to the stock
options granted under the Employee Plan having an exercise price of not less
than the fair market value of the Common Stock on the date of grant may qualify
for the performance-based exclusion in Section 162(m). If the stock options
qualify for the performance-based exclusion, the compensation received upon
their exercise would not be subject to the deduction limit set forth in Section
162(m). The Company believes that, assuming satisfaction of certain other
conditions set forth in Section 162(m), the compensation attributable to the
stock options granted under the Employee Plan will meet the performance-based
exclusion under Section 162(m) and therefore the deduction limitation will be
inapplicable to options to be issued under the Employee Plan.
OPTION GRANTS
Except as provided herein, no determinations have been made as to the
number of options, if any, to be granted in the fiscal year ending March 31,
2000 or as to how the proposed additional option shares will be allocated among
any particular officers or key employees. To date, options to acquire 274,200
shares of Common Stock have been granted under the Employee Plan. Information
concerning options granted in the fiscal year ended
<PAGE> 26
March 31, 1999 under the Employee Plan to the persons named in the Summary
Compensation Table is set forth under Option/SAR Grants In Last Fiscal Year. In
fiscal 1999, the Board granted options under the Employee Plan to purchase
26,000 shares to all executive officers of the Company as a group. No other
options were granted in fiscal 1999. In October 1999, the Board granted options
under the Employee Plan to purchase, in the aggregate, 155,000 shares to Mr.
Reis, Mr. McNew, Mr. Santmyer, Mr. Sherwood and Mr. Schuler as a group. There
would not have been any material difference in the amount of these grants had
they been made under the Employee Plan if the proposed amendment had already
been approved.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
The Company recently learned that Form 4s, reporting option grants during
the fiscal year ended March 31, 1999 and for prior periods were not timely
filed by Messrs. Mills, D'Amore, Dobrowolski, Nolan, Schuler, Sherwood,
Scurlock, Grover, Ruffner, Nashman, Toups and Hardin. In addition, a Form 3
report for Mr. Reis, reporting his appointment as an officer and director of
the Company during the fiscal year, was not timely filed. All of the above
reference forms have now been filed. To the Company's knowledge no other
reports were required during the fiscal year ended March 31, 1999.
SHAREHOLDERS' PROPOSALS
Pursuant to recent amendments to the proxy rules under the Exchange Act,
the Company's shareholders are notified that the deadline for providing the
Company timely notice of any shareholder proposal to be submitted outside of
the Rule 14a-8 process for consideration at the Company's 2000 Annual Meeting
of Stockholders (the "2000 Meeting") will be April 17, 2000. As to all such
matters which the Company does not have notice on or prior to April 17, 2000,
discretionary authority shall be granted to the persons designated in the
Company's proxy related to the 2000 Meeting to vote on such proposal. This
change in procedure does not affect the Rule 14a-8 requirements applicable to
inclusion of shareholder proposals in the Company's proxy materials related to
the 2000 Meeting. A shareholder proposal regarding the 2000 Meeting must be
submitted to the Company at its office located at 5250 Cherokee Avenue,
Alexandria, Virginia 22312, by June 1, 2000 to receive consideration for
inclusion in the company's 2000 proxy materials. Any such proposal must also
comply with the proxy rules under the Exchange Act, including Rule 14a-8.
TRANSFER AGENT AND REGISTRAR
The American Stock Transfer & Trust Company, is the Company's transfer
agent and registrar.
<PAGE> 27
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.
FORM 10-K
THE ANNUAL REPORT ON FORM 10-K FOR THE COMPANY'S FISCAL YEAR ENDED MARCH
31, 1999, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
SHAREHOLDERS, SHOULD THEY SO DESIRE, MAY OBTAIN A COPY OF THE FORM 10-K WITHOUT
CHARGE, EXCEPT FOR EXHIBITS TO THE REPORT, FROM THE COMPANY BY WRITTEN REQUEST
WHICH SHOULD BE MADE TO HALIFAX CORPORATION, 5250 CHEROKEE AVENUE, ALEXANDRIA,
VIRGINIA 22312, ATTENTION: CORPORATE SECRETARY.
By Order of the Board of Directors
/s/ Ernest L. Ruffner
Ernest L. Ruffner
Secretary
