<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
Star Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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
[STAR TECHNOLOGIES LOGO]
NOTICE OF
1997 ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE> 3
STAR TECHNOLOGIES, INC.
515 SHAW ROAD
STERLING, VIRGINIA 20166
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders of Star Technologies, Inc., a
Delaware corporation (the "Company"), will be held at the Holiday Inn at 1000
Sully Road, Sterling, Virginia, on Thursday, August 21, 1997, at 11:00 a.m., for
the following purposes:
(1) To elect two Directors to hold office for a term of three years;
and
(2) To transact any other business that may properly come before the
meeting or any adjournments thereof.
Stockholders who wish to bring other business before the Annual Meeting
must comply with the provisions of Section 2.1 of the By-Laws of the Company.
Only stockholders of record at the close of business on June 24, 1997, are
entitled to vote at the Annual Meeting or any adjournments thereof. A complete
list of the stockholders entitled to vote at the Annual Meeting will be open to
the examination of any stockholder, for any purpose germane to the Annual
Meeting, during ordinary business hours, for a period of ten days prior to the
Annual Meeting at the Company's principal executive offices at 515 Shaw Road,
Sterling, Virginia.
By Order of the Board of Directors
Brenda A. Potosnak
Secretary
July 28, 1997
THE FORM OF PROXY IS ENCLOSED. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT
THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING.
<PAGE> 4
[STAR TECHNOLOGIES LOGO]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
AUGUST 21, 1997
The enclosed proxy is solicited on behalf of the Board of Directors of Star
Technologies, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at the Holiday Inn at 1000 Sully Road,
Sterling, Virginia, on Thursday, August 21, 1997, at 11:00 a.m., or any
adjournments thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying form of proxy will be mailed to stockholders on or about July 29,
1997. The Company's principal executive office is located at 515 Shaw Road,
Sterling, Virginia 20166.
Any person signing and returning the enclosed proxy may revoke it at any
time before it is voted by giving written notice of the revocation to the
Company or by voting in person at the meeting.
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to stockholders, will be borne by the Company.
Solicitation initially will be made by mail. Further solicitation may be made by
telephone, telegram or in person by officers and employees of the Company who
would be reimbursed by the Company for any costs they might incur in making any
solicitation. Brokerage houses, custodians, nominees, fiduciaries and others
acting in a representative capacity will be requested to forward the proxy
solicitation material to the beneficial owners of the Company's stock and the
Company will reimburse them for their reasonable expenses.
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Company's
common stock, having a par value of $.01 per share ("Common Stock"), and the
Company's preferred stock, having a par value of $.01 per share ("Preferred
Stock"). Three series of Preferred Stock are issued and outstanding: the Series
A Preferred Stock ("Series A Stock"), the Series B Senior Preferred Stock
("Series B Stock") and the Series C Senior Preferred Stock ("Series C Stock").
With regard to the election of Directors of the Company, and to any other
business that may properly come before the Annual Meeting, the holders of Common
Stock and Preferred Stock vote together as a single class. Each share of Common
Stock is entitled to one vote. Each share of Preferred Stock is entitled to vote
on an "as if converted" basis. Each share of Series A Stock was, as of the
record date, convertible into 7.20 shares of Common Stock. Each share of Series
B Stock and each share of Series C Stock were, as of the record date,
convertible into 100 shares of Common Stock.
Only stockholders of record at the close of business on June 24, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. On June 24, 1997, the Company had outstanding 19,872,884 shares of
Common Stock; 13,200 shares of Series A Stock, which vote as if converted to
95,040 shares of Common Stock; 11,917 shares of Series B Stock, which vote as if
converted to 1,191,700 shares of Common Stock; and 7,945 shares of Series C
Stock, which vote as if converted to 794,500 shares of Common Stock. The
presence of a majority of the shares of Common Stock and Common Stock
equivalents represented by the Preferred Stock, in person or by proxy, will
constitute a quorum for the Annual Meeting.
<PAGE> 5
All shares of Common Stock and Preferred Stock will vote to elect the
Directors at the Annual Meeting. The presence of a majority of the shares, in
person or by proxy, will constitute a quorum for the election of the Directors.
All shares of Common Stock and Preferred Stock will vote on any other business
that may be considered at the Annual Meeting or any adjournments thereof. Under
Delaware law and the Company's Restated Certificate of Incorporation, if a
quorum is present at the Annual Meeting, each nominee for Director who receives
the greatest number of votes cast for the election of each Director at the
Annual Meeting by the shares present in person or by proxy and entitled to vote
shall be elected a Director and, except as described below, any other matters
submitted to a vote of the stockholders must be approved by the affirmative vote
of the majority of the shares present in person or by proxy and entitled to vote
on the subject matter. With regard to the election of Directors, an abstention
will not be counted either in favor of or against the election of the nominee.
Abstention from voting will have the practical effect of voting against any
other matter voted upon at the Annual Meeting since it is one less vote for
approval. Broker nonvotes will have no impact on any matter voted upon at the
Annual Meeting since they are not considered "shares present" for voting
purposes.
Unless otherwise indicated, reference to "voting" stock throughout this
Proxy Statement assumes the full conversion of the relevant series of Preferred
Stock to Common Stock and reference to "shares" includes both shares of
outstanding Common Stock and shares of Common Stock into which the relevant
series of Preferred Stock is or are convertible.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows the beneficial ownership, on June 24, 1997, of
(i) each person known by the Company to be the beneficial owner of more than
five percent of any class of the Company's stock, (ii) each Director, (iii) the
Chief Executive Officer (there were no other executive officers whose total
annual salary and bonus exceeded $100,000 for the last fiscal year) and (iv) all
of the Company's Directors and executive officers as a group. Because each
series of Preferred Stock is convertible into Common Stock (see "Voting
Securities" above), each beneficial owner of Preferred Stock is deemed by the
Securities and Exchange Commission (the "SEC") to be the beneficial owner of the
number of shares of Common Stock into which such Preferred Stock is convertible.
Therefore, in indicating the number of shares of Common Stock and the percentage
of the class of Common Stock beneficially owned by each person, the table's
figures assume that such person has converted into Common Stock all shares of
Preferred Stock of which such person is the beneficial owner. For this reason,
the table contains substantial duplication in the number of shares and
percentages of Common Stock.
2
<PAGE> 6
PERCENT OF VOTING POWER
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME OF BENEFICIAL OF
BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP(1) CLASS(2)
- ------------------------------------------------ -------------- ------------ ------
<S> <C> <C> <C>
Principal Stockholders
- ------------------------------------------------
General Electric Company Common Stock 2,610,539(3) 11.9%
3135 Easton Turnpike Series B Stock 11,917 100.0%
Fairfield, CT 06431 Series C Stock 7,945 100.0%
Gale & Co. Common Stock 50,400(4) *
c/o Harris Trust & Savings Bank Series A Stock 7,000 53.0%
P.O. Box 71940
Chicago, IL 60694
Stuebner Properties Common Stock 20,160(4) *
7000 Northland Circle Series A Stock 2,800 21.2%
Minneapolis, MN 55428
Inland Investment Co., Inc. Common Stock 10,800(4) *
2 East Mifflin, Suite 901 Series A Stock 1,500 11.4%
Madison, WI 53703-2860
Directors
- ------------------------------------------------
Alan O. Maxwell Common Stock 1,006,000(5) 5.1%
Carl E. Ravin Common Stock 20,000(6) *
Chief Executive Officer
- ------------------------------------------------
Robert C. Compton** Common Stock 465,959(7) 2.3%
All executive officers and Directors as a group Common Stock 1,502,459(8) 7.4%
(4 persons)
</TABLE>
- ---------------
* Less than one percent.
** Also serves as a Director.
(1) A person is considered to "beneficially own" any shares over which such
person directly or indirectly exercises sole or shared voting or investment
power or of which such person has the right to acquire beneficial ownership
within sixty days (for example, through the conversion of securities or
exercise of stock options or warrants). Unless otherwise indicated, voting
and investment power relating to the above shares is exercised solely by the
beneficial owner or shared by such owner and such owner's spouse or
children.
(2) Any securities not outstanding that are subject to options or warrants shall
be deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person, but shall not be
deemed to be outstanding for the purpose of computing the percentage of the
class owned by any other person.
(3) Includes 1,191,700 shares of Common Stock issuable upon the conversion of
Series B Stock and 794,500 shares of Common Stock issuable upon the
conversion of Series C Stock.
(4) Represents shares of Common Stock issuable upon the conversion of Series A
Stock.
(5) Includes 45,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of June 24, 1997.
(6) Represents 20,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of June 24, 1997.
3
<PAGE> 7
(7) Includes 460,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of June 24, 1997.
(8) Includes 535,500 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of June 24, 1997.
ELECTION OF DIRECTORS
There are five positions on the Company's Board of Directors. Two of these
positions are and will remain vacant until such time as the Board of Directors
acts to fill them.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
The terms of Dr. Ravin and Mr. Compton expire on the date of the Annual
Meeting. The term of Mr. Maxwell expires on the date of the 1998 annual meeting.
Mr. Jungers resigned from the Board of Directors effective November 1996. The
Board has nominated Mr. Compton and Dr. Ravin for re-election to the Board for
terms of three years, or until the election and qualification of a successor or
death, resignation or removal from office. Thus, the holders of Common Stock and
Preferred Stock will vote to fill two Board positions at the Annual Meeting. The
persons named on the enclosed proxy intend to vote for the re-election of Mr.
Compton and Dr. Ravin to the Board of Directors. In the event that Mr. Compton
or Dr. Ravin should become unable to stand for re-election as Directors, the
proxy will be voted in accordance with the best judgment of the persons acting
under the proxy.
INFORMATION REGARDING DIRECTORS OF THE COMPANY
ROBERT C. COMPTON, age 50, has served as a Director since July 1988 and was
elected Chairman of the Board in March 1990. He has served as Chief Executive
Officer since October 1989 and as President since June 1988. His previous
positions with the Company include Executive Vice President and Vice
President -- Finance, Administration and Corporate Development. Prior to joining
the Company in 1985, he served for seventeen years in various financial,
management and corporate auditing positions at the General Electric Company
("GE"). He is a vice-chairman and director of Virginia's Center for Innovative
Technology and a director of the Northern Virginia Technology Council.
ALAN O. MAXWELL, age 67, has served as a Director since 1981. He was
Chairman and President of Sunny Service Stations, Inc., a chain of retail and
wholesale fuel distribution centers and convenience food stores, from 1984 until
1988. Since 1989, he has served as Managing Director of Maxwell Management, a
capital and management company. He is a director of Excel Sports Science.
CARL E. RAVIN, age 54, has served as a Director since February 1994. Dr.
Ravin is the Chairman of the Department of Radiology at Duke University Medical
Center and Professor of Radiology at Duke University, where he has been
associated since 1978. He is a nationally known expert in thoracic radiology,
currently serves on the editorial board of the "Journal of Thoracic Imaging,"
and is a Fellow of the American College of Chest Physicians and the American
College of Radiology. Dr. Ravin has served for a number of years on the General
Electric Medical Advisory Board.
COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1997, there were nine meetings of
the Board of Directors. Each Director of the Company attended all of the
meetings of the Board of Directors and all meetings of committees on which he
served. The Audit Committee, together with all other Directors, met once during
fiscal year 1997. The Compensation Committee of the Board met once during fiscal
year 1997. The Board of Directors does not have a Nominating Committee.
4
<PAGE> 8
The Audit Committee, currently consisting of Mr. Maxwell and Dr. Ravin, is
primarily responsible for approving the services performed by the Company's
independent public accountants and for reviewing and evaluating the Company's
accounting principles and reporting practices and its system of internal
accounting controls. The Compensation Committee, currently consisting of Mr.
Maxwell and Dr. Ravin, principally reviews and approves the salaries, bonuses
and stock options of executive officers of the Company.
COMPENSATION OF DIRECTORS
Directors' fees may be paid in cash or Common Stock, or a combination
thereof, at the discretion of each Director. Fees are not paid to the Chairman
or to Directors who are employees of the Company. The Company's policy is to pay
to each eligible Director $8,000 annually plus $1,000 for each regular meeting
and $500 for each conference telephone meeting of the Board of Directors
attended and to reimburse each eligible Director for any expenses incurred as a
result of such meetings attended. No additional fees are paid for committee
participation. During fiscal 1997, the Company paid Mr. Jungers $25,000 for his
contribution in assisting the Company during its negotiations with General
Electric Medical Systems to resolve the breach of contract suit and other
corporate issues.
The Company believes that it is important for directors to have a personal
interest in the success of the Company and for their interests to be aligned
with those of the Company's stockholders. Therefore, in addition to the cash
compensation described above, each nonemployee Director, under the 1989 Stock
Option Plan for Nonemployee Directors (the "1989 Plan"), annually receives
options to purchase 10,000 shares of Common Stock, subject to the limitations
that a nonemployee Director may not receive options or rights to purchase in the
aggregate more than 100,000 shares pursuant to the 1989 Plan or any other plan
of, or agreement with, the Company and that no more than an aggregate of 700,000
shares may be granted under the 1989 Plan. Options have an exercise price equal
to the fair market value of the shares covered by the option at the time of the
grant and are exercisable immediately.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee")
establishes and oversees the general compensation policies of the Company,
including the review and approval of compensation levels and cash incentive
initiatives for the executive officers, and administers the Company's employee
compensation plans. The Committee is composed of two nonemployee Directors.
Executive officers are generally compensated through a combination of base
salary, year-end performance bonuses and stock options. The officers, as well as
substantially all full-time employees, are eligible to participate in the
Company's 401(k) Plan. The Company provides compensation that helps attract,
retain and motivate the skilled people it requires. The Committee reviews
annually with the full Board of Directors compensation for all of the Company's
officers, along with annual performance reviews evaluating the criteria listed
below.
In determining base salary and salary increases, the Committee considers
such variables as the officer's attainment of individual and corporate
performance criteria especially increased revenue and profitability as well as
the officer's expertise, responsibilities, and contributions to corporate
teamwork, and efficiency. The Committee also considers the salary of officers
with comparable responsibilities and performance criteria of other companies
with which the Company competes for executive officers. There was no change to
the Chief Executive Officer's base pay in fiscal year 1997.
5
<PAGE> 9
The Committee believes that year-end bonuses for the Chief Executive
Officer and the other top executive officers must be tied to the achievement of
profitability objectives, business growth and the Company's overall performance,
both current and long-term. All bonus awards are the sole responsibility of the
Committee and are based on the philosophy that incentive compensation should be
directly and materially linked to the operating results of the Company. In
determining that no bonuses would be paid to executive officers for fiscal year
1997, the Committee focused only on the Company's significant reduction of
revenue and lack of operating profitability in fiscal year 1997. The Committee,
however, did award the Chief Executive Officer a $100,000 bonus based solely on
his accomplishment in resolving the following key corporate issues: 1) bringing
the GEMS arbitration to a successful conclusion with the receipt, in August
1996, of $9.4 million; 2) the $2.9 million settlement of a $67.5 million
outstanding patent litigation, and; 3) the $4.6 million repurchase of
approximately 90% of the Company's outstanding Series B and Series C Senior
Preferred Stock which had a redemption price of $24.1 million, including
cumulative undeclared dividends totaling $7.7 million.
The long-term component of the compensation for the Chief Executive Officer
and other executive officers has been the award of stock options, which aligns
the interests of the executive officers with those of the stockholders. An award
of stock options has historically been granted to the executive officers when
hired and in connection with a significant change in responsibilities. When
making stock option grants for executive officers, the Committee considers the
performance, especially increasing revenue and profitability, and the
responsibility level of the executive officer. The stock options generally
become exercisable over a five-year period, and have exercise prices equal to
the fair market value of the Company's Common Stock on the date of grant. Except
for the repriced options, discussed below, the Committee did not grant options
to the Chief Executive Officer during fiscal year 1997.
In August 1996, the Committee offered all employees who were holding 1.3
million options granted pursuant to the Company's option plans, the opportunity
to cancel such options and be granted new options for half the number of
original options. The original options had exercise prices which were
substantially above the market price of the Company's common stock. The
Committee believes the repriced options will benefit the Company's stockholders
by providing greater assurance that the Company will be able to retain
experienced and productive employees and by creating a greater incentive for
employees to increase the Company's revenues and profits. The exercise price of
$0.41 is the opening price as reflected on the NASDAQ National Market on the
date on which the options were canceled and regranted to participating
employees. The Chief Executive Officer and other executive officers participated
in the repricing. See "Ten-Year Option Repricing."
Due to the changing nature of the Company's business, the Committee plans
to evaluate compensation and alternative long-term compensation incentives.
Alan O. Maxwell
Carl E. Ravin
6
<PAGE> 10
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STAR TECHNOLOGIES, INC. COMMON STOCK, THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ COMPUTER MANUFACTURER INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STAR TECHNOLOGIES, NASDAQ COMPUTER NASDAQ STOCK
(FISCAL YEAR COVERED) INC. MANUFACTURER MARKET (US)
<S> <C> <C> <C>
3/92 100 100 100
3/93 61 114 115
3/94 57 111 124
3/95 24 133 138
3/96 50 204 187
3/97 20 223 208
</TABLE>
*$100 INVESTED ON 03/31/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING MARCH 31.
In last year's proxy notice, the Company used the S&P Computer Systems
(Excluding IBM) Index as its peer group index. For the fiscal 1997 proxy this
index was no longer published. The Company has therefore chosen the NASDAQ
Computer Index as its peer group index.
The Board of Directors and the Committee recognize that although the market
price of stock is influenced by many factors, a key factor is company
performance. The stock price performance shown on the graph is not necessarily
indicative of future price performance.
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the fiscal years ended March
31, 1997, 1996, and 1995, of the Chief Executive Officer (the "Named Executive
Officer"). There were no other executive officers whose total annual salary and
bonus exceeded $100,000 for the last fiscal year.
<TABLE>
<CAPTION>
ANNUAL
NAME AND FISCAL COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------------------------------------- ------ ------------ --------
<S> <C> <C> <C>
Robert C. Compton 1997 $160,000 $100,000(1)
Chairman of the Board, President and 1996 $160,000 --
Chief Executive Officer 1995 $160,000 $ 38,260(2)
</TABLE>
- ---------------
(1) Represents bonus for successful resolution of key corporate issues. See
"Report of the Compensation Committee of the Board of Directors."
(2) Represents bonus for fiscal 1994 performance.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning grants to the Named Executive Officer
of stock options pursuant to the Company's 1994 Plan made during the fiscal year
ended March 31, 1997. In August 1997, the Compensation Committee offered all
employees, including the Chief Executive Officer and other executive officers,
who were holding options granted pursuant to the Company's option plans, the
opportunity to cancel such options and be granted new options for half the
number of original options. The options shown below are the repriced options.
The terms and vesting schedules of the original options were applied to the
repriced options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------ REALIZABLE
NUMBER PERCENT VALUE AT ASSUMED
OF OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME (#)(1) YEAR PER SHARE DATE 5% 10%
- ------------------ ---------- ---------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Compton 10,000 1.3 $0.41 8/25/97 $ -- $ --
100,000 13.3 $0.41 11/8/97 $ 2,000 $ 5,000
350,000 46.4 $0.41 8/16/00 $23,000 $47,000
</TABLE>
- ---------------
(1) These options represent the repriced options offered to all employees who
held options. Under the terms of the Company's 1994 Plan, the per share
option price is 100% of the fair market value of the Common Stock on the
date of the grant. The terms and vesting schedules of the original options
were applied to the repriced options.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% assumed appreciation rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Common Stock price.
8
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to the aggregate fiscal year-end
value of unexercised options to purchase the Company's Common Stock under the
1994 Plan. There were no stock options exercised by the Named Executive Officer
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT MARCH 31, OPTIONS AT MARCH 31,
1997(#) 1997($)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert C. Compton 460,000 0 0 0
</TABLE>
TEN-YEAR OPTION REPRICING
The following table sets forth information regarding repricing of options
for the Company's executive officers during the last ten years. On August 22,
1996, all employees who held options were offered the opportunity to cancel such
options and be granted new options at $0.41 for half the number of original
options. On April 20, 1989, employees were offered the opportunity to cancel and
receive regranted options at $0.88.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK PRICE NEW REMAINING
OPTIONS AT TIME OF AT TIME OF EXERCISE AT DATE
REPRICED REPRICING REPRICING PRICE OF REPRICING
NAME DATE (#) ($) ($) ($) (IN YEARS)
- -------------------------- ------- ---------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Compton 8/22/96 10,000 $ 0.41 $ 0.88 $ 0.41 1.0
Chairman, President, 8/22/96 100,000 $ 0.41 $ 0.88 $ 0.41 1.2
& CEO 8/22/96 350,000 $ 0.41 $ 0.88 $ 0.41 3.0
4/20/89 2,049 $ 0.88 $ 2.44 $ 0.88 1.0
4/20/89 5,000 $ 0.88 $ 2.38 $ 0.88 6.7
4/20/89 5,155 $ 0.88 $ 0.97 $ 0.88 2.0
4/20/89 20,000 $ 0.88 $ 3.31 $ 0.88 8.3
4/20/89 40,000 $ 0.88 $ 2.13 $ 0.88 6.7
4/20/89 40,000 $ 0.88 $ 3.31 $ 0.88 7.2
4/20/89 200,000 $ 0.88 $ 2.31 $ 0.88 8.5
Brenda A. Potosnak 8/22/96 5,000 $ 0.41 $ 1.00 $ 0.41 3.0
VP, Finance & Adm., 8/22/96 7,500 $ 0.41 $ 1.00 $ 0.41 2.4
Chief Financial Officer
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, Directors and beneficial owners of more than ten percent of the
Company's Common Stock to file reports of their ownership of the Company's stock
and of changes in such ownership with the SEC and the National Association of
Securities Dealers, Inc. SEC regulations require those persons to furnish the
Company with copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no such forms were required
for those persons, the Company believes that, during fiscal year 1997, each
person subject to Section 16 of the Exchange Act complied with all applicable
filing requirements.
9
<PAGE> 13
MARKET VALUE OF COMMON STOCK
On June 24, 1997, the average of the closing bid and ask prices of the
Common Stock of the Company reported on the NASDAQ National Market was $17/64
($0.27).
AUDITORS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP
("Peat Marwick"), independent certified public accountants, to serve as auditors
of the Company for the current fiscal year. Representatives of Peat Marwick will
be present at the Annual Meeting, will have an opportunity to make a statement
if they so desire and will be available to respond to questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to have an appropriate proposal presented for
action at next year's Annual Meeting of Stockholders, and who wishes to have it
shown in the Proxy Statement and form of proxy for the meeting, must notify the
Company and submit the proposal in writing for receipt at the Company's
principal executive office not later than March 31, 1998. See SEC Rule 14a-8 for
additional applicable requirements and procedures.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report to Stockholders and Annual
Report on Form 10-K for fiscal year ended March 31, 1997, as filed with the SEC
are being mailed with this Proxy Statement to each stockholder of record as of
June 24, 1997. Additional copies may be obtained from the Secretary of the
Company, at the Company's principal executive office located at 515 Shaw Road,
Sterling, Virginia, 20166.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that will
be presented at this year's Annual Meeting of Stockholders. If any other matter
arises at the Annual Meeting, it is intended that the shares represented by
proxies in the accompanying form will be voted in accordance with the best
judgment of the persons acting under the proxies.
By Order of the Board of Directors
Brenda A. Potosnak
Secretary
July 28, 1997
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