-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EoFy5A/Lf0Iv9awQ5z2ZqP/k2MRCtuxMQ0DBP4JnqGakALIvMHvaY4zxgN6a//Iw EDrEz0nR/kXyziUPnoZDag== 0000914039-97-000218.txt : 19970625 0000914039-97-000218.hdr.sgml : 19970625 ACCESSION NUMBER: 0000914039-97-000218 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970813 FILED AS OF DATE: 19970624 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYSIS & TECHNOLOGY INC CENTRAL INDEX KEY: 0000310876 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 952579365 STATE OF INCORPORATION: CT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14161 FILM NUMBER: 97628508 BUSINESS ADDRESS: STREET 1: TECHNOLOGY PARK RTE 2 STREET 2: PO BOX 220 CITY: NORTH STONINGTON STATE: CT ZIP: 06359 BUSINESS PHONE: 2035993910 MAIL ADDRESS: STREET 1: TECHNOLOGY PARK RTE 2 STREET 2: P O BOX 220 CITY: NORTH STONINGTON STATE: CT ZIP: 06359 DEF 14A 1 DEFINITIVE PROXY MATERIALS 1 [A & T Logo] July 1, 1997 Dear Shareholder: You are cordially invited to attend the Annual Meeting of Shareholders of Analysis & Technology, Inc. which will be held at 10:00 a.m., Tuesday, August 5, 1997, at The Mystic Hilton, Coogan Boulevard, Mystic, Connecticut. The formal Notice of the Annual Meeting of Shareholders and Proxy Statement accompanying this letter provide detailed information concerning matters to be considered and acted upon at the meeting. Whether or not you plan to attend the Annual Meeting, please mark, sign, date, and return the enclosed proxy at your earliest convenience. If you later attend the meeting and wish to vote in person, you may withdraw your proxy and so vote at that time. I look forward to seeing you at the Annual Meeting. Sincerely, /s/ Gary P. Bennett Gary P. Bennett Chairman, President and CEO 2 - -------------------------------------------------------------------------------- NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- To the Shareholders of Analysis & Technology, Inc.: The 1997 Annual Meeting of Shareholders of Analysis & Technology, Inc. will be held at 10:00 a.m., E.D.T., at The Mystic Hilton, Coogan Boulevard, Mystic, Connecticut on August 5, 1997 to consider and act on the following matters: 1. Election of directors; 2. Ratification of the appointment of independent public accountants for fiscal year 1998; 3. Approval of the 1997 Stock Option Plan; and 4. Any other matters which may properly come before the meeting. Shareholders of record at the close of business on June 6, 1997 are entitled to notice of and to vote at the meeting and any adjournment thereof. /s/ David M. Nolf David M. Nolf Executive Vice President and Secretary July 1, 1997 - -------------------------------------------------------------------------------- YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING YOU MAY VOTE IN PERSON OR BY PROXY. - -------------------------------------------------------------------------------- 3 ANALYSIS & TECHNOLOGY, INC. ROUTE 2 P.O. BOX 220 NORTH STONINGTON, CONNECTICUT 06359 PROXY STATEMENT GENERAL This proxy statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Analysis & Technology, Inc. (the "Company") for use at the 1997 Annual Meeting of Shareholders to be held at The Mystic Hilton, Coogan Boulevard, Mystic, Connecticut on August 5, 1997 at 10:00 a.m., E.D.T., and all postponements or adjournments thereof (the "Annual Meeting"). This proxy statement and the accompanying proxy card and Annual Report are being mailed to shareholders on or about July 1, 1997. Shareholders are requested to mark, sign, date and return the enclosed proxy card. Execution of the proxy card will not affect the shareholder's right to attend the meeting and vote in person. PROXIES AND VOTING It is important that all shareholders' votes be represented at the Annual Meeting either in person or by proxy. Each proxy will be voted as directed by the shareholder. Unless specifically directed otherwise, however, proxies will be voted in favor of each of the nominees and in favor of each of the proposals indicated in the meeting notice. A proxy may be revoked by delivering a written notice of revocation to the Secretary of the Company, by delivering an executed proxy card bearing a later date to the Secretary of the Company, or by appearing at the Annual Meeting and voting in person. Each share of the Company's common stock entitles the holder thereof to one vote upon any business properly presented at the Annual Meeting. At the close of business on June 6, 1997, the record date, there were 2,320,021 shares of common stock issued and outstanding. Unless otherwise noted in this proxy statement, all matters listed on the Notice of Meeting require the affirmative vote of a majority of those shares present and voting in person or by proxy at the Annual Meeting to be adopted. This assumes that a quorum is present. A majority of the outstanding shares entitled to vote must be present in person or represented by proxy at the Annual Meeting to constitute a quorum. Under Connecticut corporation law, the approval of any corporate action taken at a shareholder meeting is based on votes cast. "Votes cast" means votes actually cast "for" or "against" a particular proposal, whether by proxy or in person. Abstentions and broker nonvotes are not considered "votes cast." Broker nonvotes occur when a broker nominee, which has voted on one or more matters at the meeting, does not vote on one or more other matters at the meeting because it has not received instructions from the beneficial owner to so vote, and does not have discretionary authority to do so. Accordingly, abstentions and broker non-votes will be treated as shares which are present and entitled to vote for purposes of determining a quorum, but those shares will not be treated as having been voted for purposes of determining the approval of any matter submitted to shareholders for a vote. Participants in the Company's Employee Stock Ownership Plan and in its Savings and Investment Plan are receiving instruction forms with this proxy statement rather than a proxy card. The instruction form is to be used by such participants to direct voting instructions to the trustees. Shares allocated to a participant's account cannot be voted unless the instruction form is signed and returned. Page 1 4 ANNUAL REPORT The Company's 1997 Annual Report to Shareholders is being mailed with this proxy statement and should be referred to with regard to the Company's performance in fiscal year 1997. ITEM 1. ELECTION OF DIRECTORS GENERAL Under the Company's Certificate of Incorporation, the Board of Directors is divided into three classes whose terms are staggered to expire in different years. The term of office of one class of directors expires each year in rotation so that one class is elected at each Annual Meeting of Shareholders for a full three-year term. There are at present seven directorships, the number having been set by the Board of Directors in accordance with the Company's by-laws. The terms of two directors, Mrs. Nelda S. Nardone and Mr. Thurman F. Naylor, expire at the Annual Meeting. The Board of Directors will nominate these two directors for re-election for terms expiring in 2000. Unless otherwise indicated on any proxy card, the proxy will be voted to re-elect these directors. The Board of Directors knows of no reason why either nominee for director would be unable to continue to serve as a director. However, if either nominee should for any reason be unable to serve, the shares represented by all valid proxies not containing contrary instructions may be voted for the election of such other person as the Board may recommend in his or her place, or the Board may reduce the number of directorships to eliminate the vacancy. BACKGROUND INFORMATION ABOUT CURRENT DIRECTORS Set forth below, in alphabetical order, as of May 1, 1997, are the names and ages of all current directors, including the two directors whose terms expire in 1997 and who will be nominated for re-election. The information set forth includes, as to each person, the positions and offices held with the Company, the period of service to the Company in such capacities, and a brief account of the person's business experience. Family relationships among the Board are summarized at the conclusion of this section. Gary P. Bennett Gary P. Bennett, 55, is Chairman of the Board, President and Chief Executive Officer of the Company. He joined the Company in 1972, became an Executive Vice President in 1978, was named Chief Operating Officer in 1984, became President in 1991, and Chief Executive Officer in November 1992. Mr. Bennett was elected Chairman of the Board of the Company in February 1997. He is also an officer and director of various wholly owned subsidiaries of the Company. In addition, he is chairman of the board of directors of Automation Software Incorporated, the Company's joint venture with Brown & Sharpe Manufacturing Company and is a director of Washington Trust Bancorp, Inc. Mr. Bennett has served as a director of the Company since 1979. His present term of office expires in 1999. James B. Fox James B. Fox, 69, has been a director of the Company since 1972. He served as Chairman of the Board from November 1992 to February 1997. In 1986, Mr. Fox retired from his position as president of Mobil Oil Credit Corporation, a wholly owned subsidiary of Mobil Oil Corporation that handles its credit functions. He had been an employee of Mobil Oil Corporation since 1949. His present term of office expires in 1999. Page 2 5 Larry M. Fox Larry M. Fox, 44, has been a director of the Company since 1978. He was elected Vice-Chairman of the Board of the Company in February 1997. Mr. Fox is programs manager for VTEL Corporation, a manufacturer of video teleconferencing systems. He has been with VTEL Corporation since 1991. His present term of office expires in 1998. Nelda S. Nardone Nelda S. Nardone, 58, has been a director of the Company since 1977. She was the Company's Corporate Secretary from 1976 until 1985. Her present term of office expires in 1997, and she will be nominated for re-election. Thurman F. Naylor Thurman F. Naylor, 77, has been a director of the Company since 1989. Mr. Naylor has been president and sole stockholder of Cameras and Images International, Inc., a company involved in the purchase and sale of photographic materials, since 1984. Prior to 1984, Mr. Naylor was chairman and president of Standard Thomson Corporation and Thomson International Corporation, manufacturers of temperature, pressure, and electronic controls. He has also been a director of Benthos, Inc., a fabricator of oceanographic equipment since 1987 and a director of CREME de la CREME, which buys, sells and exhibits cameras and images since October, 1994. His present term of office expires in 1997, and he will be nominated for re-election. David M. Nolf David M. Nolf, 54, is Executive Vice President, Chief Financial and Administrative Officer and Secretary of the Company. Mr. Nolf has served in these capacities since 1985. He joined the Company in 1971 and became a Senior Vice President in 1979. He has been a Company director since 1976 and served as Chairman of the Board from 1978 to May 1985. He is also an officer and director of various wholly owned subsidiaries of the Company. In addition, he is a director of Automation Software Incorporated, the Company's joint venture with Brown & Sharpe Manufacturing Company. Mr. Nolf also serves as a trustee of The Westerly Hospital and as a director for The New London Day newspaper. His present term of office expires in 1998. Dennis G. Punches Dennis G. Punches, 61, has been a director of the Company since May 1992. He is chairman of Payco American Corporation, the accounts receivable management company he founded in 1959. Mr. Punches serves as a trustee of Carroll College and as a director of Intrum Justitia-Netherlands. His present term of office expires in 1998. Family Relationships Nelda S. Nardone is the widow of Maurice W. Fox, a co-founder of the Company who died in 1978. James B. Fox, Maurice W. Fox's brother, is the father of Larry M. Fox. NOMINATING PROCESS Pursuant to the Company's by-laws, nominations for the election of directors may be made by the Board of Directors or by a nominating committee appointed by the Board of Directors. The directors named above for re-election will be nominated at the Annual Meeting by the Board of Directors. Any shareholder entitled to vote in the election of directors may nominate one or more persons for election as directors at an Annual Page 3 6 Meeting if written notice of such shareholder's intention to make such nomination or nominations has been given in the manner provided in the Company's by-laws at least 90 days in advance of the Annual Meeting. Any such notice must set forth the information required by the by-laws concerning identification and standing of the shareholder and the nominee(s), their relationship, information about the nominee(s) and consent of the nominee(s). As no such notices were received, no nominations from shareholders will be accepted at the Annual Meeting. COMMITTEES OF THE BOARD AND MEETINGS OF THE BOARD AND COMMITTEES The standing committees of the Board of Directors are as follows: an Audit Committee comprised of Larry M. Fox and Nelda S. Nardone; a Compensation Committee comprised of James B. Fox, Larry M. Fox and Thurman F. Naylor; a Stock Option Committee comprised of James B. Fox, Nelda S. Nardone and Dennis G. Punches; and two newly appointed committees, the Corporate Governance Committee comprised of Larry M. Fox, Chairman; James B. Fox, Nelda S. Nardone, Thurman F. Naylor and Dennis G. Punches; and a Nominating Committee comprised of Gary P. Bennett and Larry M. Fox. In fiscal 1997 the Board of Directors met seven times with two of the seven meetings conducted via teleconference. During the period, all incumbent directors attended 100% of the meetings of the Board of Directors and of the committees of the Board of Directors of which they were members, except for Mr. Punches who attended 71% of these meetings. In addition, Board of Directors' action was taken by unanimous written consent four times during the year in lieu of meetings. The Audit Committee met three times with two of the three meetings conducted via teleconferences; the Compensation Committee acted once by unanimous written consent; and the Stock Option Committee acted seven times by unanimous written consent. The Corporate Governance Committee and the Nominating Committee were formed after the end of the fiscal year. The Audit Committee monitors and approves all services provided by the Company's independent public accountants, consults with the accountants on the scope of the audit and the adequacy of internal controls, reviews audit reports and accompanying management letters and advises the Board on the annual selection of the Company's independent public accounting firm. The Compensation Committee reviews and recommends to the Board all forms of remuneration and perquisites for the Company's officers at the level of senior vice president and higher and monitors the Company's compliance with all applicable executive compensation rules. The Stock Option Committee administers the Company's various stock option plans and is responsible for awarding stock option grants to key employees. The Corporate Governance Committee, which is composed entirely of outside directors, has been formed to establish the structure and procedures to govern the Board's work, conduct periodic evaluations of the Company's Chief Executive Officer, assess the Board's effectiveness, coordinate and provide for the orientation of new directors and ongoing education for incumbent directors, establish selection criteria for new directors, and assist in the creation and implementation of management and Board succession plans. This committee was established in May 1997. The Nominating Committee has been formed to make recommendations to the Board on director nominees and to develop a set of criteria and qualifications for the selection of director nominees. It is anticipated that the selection criteria will include the relevance of the candidate's experience to the business of the Company and the ability of the candidate to attend Board meetings regularly and devote an appropriate amount of time to meeting preparation. This committee was established in May 1997. Page 4 7 COMPENSATION OF DIRECTORS Members of the Board of Directors who are not also full-time employees of the Company receive a retainer of $19,000 per year, a meeting fee of $1,600 for each Board or committee meeting they attend in person and a teleconference meeting fee, which is 50% of the meeting fee, for each Board or committee meeting in which they participate. In addition to the directors' retainer and meeting fees, Mr. Larry M. Fox, Vice-Chairman of the Board, receives an annual retainer of $60,000. All directors are reimbursed for their travel and lodging expenses. The Company maintains a deferred compensation plan, pursuant to which the Vice-Chairman of the Board and any director of the Company, who is not also an employee of the Company or an employee of an affiliate of the Company, may elect annually to defer from 10% to 100% of his or her annual compensation from the Company. Officers may elect to defer up to 25% of their total compensation from the Company. A deferred income account is established in the name of each participant with a Committee, comprised of at least three individuals, who invest the plan assets. The Committee may solicit information from the participants to determine the investments for which investment returns will be allocated to their deferred income accounts. However, no such indication of preference is binding upon the Committee. While the right of the participant to receive deferred compensation equal to the amount in such account is always 100% vested, such right is that of a general, unsecured creditor of the Company. Benefits are payable under the plan when a director retires or an officer reaches age 55, upon either a director's or officer's death, or in the event of financial hardship. SECURITY OWNERSHIP OF MANAGEMENT AND 5% SHAREHOLDERS To the best knowledge of the Company based on information provided to it in connection with filings made with the Securities and Exchange Commission and the Company's stock records, the following table sets forth the beneficial ownership of the Company's common stock as of June 1, 1997 by beneficial owners of more than 5% of the Company's outstanding common stock, of each director and executive officer named in the Summary Compensation Table and of all executive officers and directors as a group.
AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) CLASS - -------------------------------------------------------------- ------------------------ ---------- A&T Employee Stock Ownership Trust 380,879(3) 16.5% Dimensional Fund Advisors, Inc. 142,500(4) 6.2 Nelda S. Nardone (current Director and Nominee) 109,795(5) 4.7 Gary P. Bennett (current Director and named executive) 90,135(6) 3.8 David M. Nolf (current Director and named executive) 85,525(7) 3.6 James B. Fox (current Director) 51,658(8) 2.2 Jay W. Ryerson (named executive) 38,232(9) 1.6 Larry M. Fox (current Director) 34,323(10) 1.5 James R. Lavoie (named executive) 21,569(11) * Joseph M. Marino (named executive) 17,854(12) * Dennis G. Punches (current Director) 3,000(13) * Thurman F. Naylor (current Director and Nominee) 1,000 * Executive Officers and Directors as a Group 563,097(14) 22.3
- --------------- (*) Indicates less than 1.0% Page 5 8 (1) The address for Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. The address for the individual shareholders and the Company's Employee Stock Ownership Trust is c/o Analysis & Technology, Inc., Route 2, P.O. Box 220, North Stonington, Connecticut 06359. (2) Beneficial ownership of a security consists of sole or shared power to vote, invest, or dispose of a security, whether through any contract, arrangement, understanding, relationship or otherwise. Except as set forth below, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by each of them. With respect to shares of common stock held by the Company's Employee Stock Ownership Trust, such persons have voting power and shared dispositive power. (3) Includes 47,691 shares which are also reported as being beneficially owned by other parties named in the table and by all executive officers and directors as a group who are among the beneficiaries of the trust. The Trustees of this trust only have a limited right to dispose of the shares held in the trust. The right to vote the allocated shares belongs to the employee beneficiaries in accordance with the number of shares credited to their accounts in the trust. The Trustees of this trust have the right to vote any shares not allocated to the accounts of employee beneficiaries. (4) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 142,500 shares of Analysis & Technology, Inc. stock as of December 31, 1996, all of which shares are held in portfolios of DFA Investment Dimensions Group, Inc., a registered open-end investment company, or in series of the DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional serves as investment manager. Dimensional disclaims beneficial ownership of all such shares. (5) Includes 1,700 shares held by Mrs. Nardone's husband for which she may be said to have shared voting and investment powers. (6) Includes 3,200 shares held by Mr. Bennett's wife for which Mr. Bennett may be said to have shared voting and investment powers; 4,926 shares held in the Analysis & Technology, Inc. 401(k) Plan; and includes 43,100 shares subject to options which are exercisable within 60 days of June 1, 1997. (7) Includes 4,000 shares held by Mr. Nolf's wife and 17,600 shares held jointly by Mr. and Mrs. Nolf, for all of which Mr. Nolf may be said to have shared voting and investment powers; and includes 32,883 shares subject to options which are exercisable within 60 days of June 1, 1997. (8) Includes 4,298 shares held by Mr. Fox's wife and 1,000 shares held jointly by Mr. and Mrs. Fox, for all of which Mr. Fox may be said to have shared voting and investment powers; 14,360 shares held in the Analysis & Technology, Inc. Deferred Compensation Plan; and includes 1,000 shares subject to options which are exercisable within 60 days of June 1, 1997. (9) Includes 200 shares held by Mr. Ryerson's wife for which Mr. Ryerson may be said to have shared voting and investment powers and includes 31,717 shares subject to options which are exercisable within 60 days of June 1, 1997. (10) Includes 2,823 shares held by Mr. Fox's wife; 7,477 shares held by Mr. Fox for a minor child; 5,400 shares held by Mr. Fox for a second minor child; and 400 shares held jointly by Mr. and Mrs. Fox, for all of which Mr. Fox may be said to have shared voting and investment powers; 4,319 shares held in the Analysis & Technology, Inc. Deferred Compensation Plan; and includes 2,000 shares subject to options which are exercisable within 60 days of June 1, 1997. (11) Includes 15,786 shares subject to options which are exercisable within 60 days of June 1, 1997. (12) Includes 50 shares held jointly by Mr. and Mrs. Marino for which Mr. Marino may be said to have shared voting and investment powers; 400 shares held in the Analysis & Technology, Inc. 401(k) Plan; and includes 14,946 shares subject to options which are exercisable within 60 days of June 1, 1997. Page 6 9 (13) Includes 2,000 shares subject to options which are exercisable within 60 days of June 1, 1997. (14) Represents the aggregate of the shares listed in notes (5)-(13) above and includes 209,742 shares subject to options which are exercisable within 60 days of June 1, 1997. TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS The Company has no employment agreements with any of its officers. In 1997, the Board of Directors entered into Change In Control Agreements with the Company's executive officers. These agreements were the result of a determination by the Board of Directors that it was important and in the best interests of the Company and its shareholders to ensure that, in the event of a possible change in control (as defined) of the Company, the stability and continuity of management would continue unimpaired, free of the distractions incident to any such change in control. Benefits are payable under the Change in Control Agreements if a change in control occurs, and within two years thereafter the officer's employment is terminated involuntarily other than for cause or disability or voluntarily by the officer for reasons such as demotion, relocation, loss of benefits or other changes. The principal benefits to be provided to officers under the Change in Control Agreements are (i) a lump sum payment equal to either 24 or 18 months' compensation (base salary and target cash incentive bonus), (ii) continued participation in the Company's employee benefit programs or equivalent benefits for 24 or 18 months following termination, (iii) all previously granted stock options which have not yet vested would become vested and immediately exercisable, and (iv) outplacement services until the earlier of the officer's re-employment or 24 or 18 months. The Change in Control Agreements are not employment agreements, and do not generally impair the right of the Company to terminate the employment of the officer with or without cause prior to a change in control or the right of the officer to voluntarily terminate his or her employment. Page 7 10 REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION Introduction This report is provided by the Company's Compensation Committee and the Stock Option Committee to assist shareholders in understanding the objectives and procedures used in establishing the compensation of the Company's Chairman, President and Chief Executive Officer ("CEO") and other senior Company executives for the Company's fiscal year ended March 31, 1997. The Compensation Committee reviewed and recommended to the Board of Directors the overall remuneration and perquisites for the Company's CEO and other officers at the level of senior vice president and higher. Based on the recommendations of the Compensation Committee, the Board of Directors determined the compensation to be paid to the CEO and officers at the level of senior vice president and higher for the Company's fiscal year ended March 31, 1997. The Stock Option Committee is responsible for administering the Company's stock option plans. The Compensation Committee and the Stock Option Committee are composed solely of non-employee directors. Compensation Philosophy and Principles The design of the Company's executive compensation program is based on four fundamental principles. First, compensation awards are directly related to the financial results of the Company or a business unit and to individual contributions and accomplishments. The second principle underlying the program is that it should offer compensation opportunities comparable to those provided by other companies with which the Company competes both for business and for employees. It is essential that the Company be able to retain and reward talented executives who are critical to its long-term success in its competitive marketplace. The third principle is that an appropriate balance between base salary and short- and long-term incentive opportunities should be maintained. The final principle is that the compensation program must provide a long-term incentive for executives to continue providing service to the Company by directly linking the long-term success and prosperity of executives to the long-term success and prosperity of the Company. Independent Compensation Consultant Review In carrying out its compensation philosophy and principles, the Company has periodically utilized the services of an independent compensation consultant to review the Company's executive compensation program. These reviews have focused on (i) the competitiveness and appropriateness of annual total compensation, defined as salary and cash incentive bonus under the Performance Incentive Compensation Plan; (ii) the design and performance goals of the Performance Incentive Compensation Plan; and (iii) an analysis of the total compensation of the CEO and other senior executive positions compared with the comparable compensation as determined by reference to both published and proprietary surveys and a review of seven peer companies as reported in their proxy statements. Although the Compensation Committee did not retain an independent compensation consultant in fiscal 1997, the Committee intends to periodically use the services of an independent consultant to assess both the appropriate components to be included in the total compensation package of the CEO and the senior executives and the competitive status of the Company's compensation program. Page 8 11 Key Elements of Executive Compensation The Company's executive compensation program consists of three basic elements: base salary, annual performance incentives, and long-term incentives. * Base Salary The Compensation Committee recommends base salaries for the Company's senior executives, working with advice submitted by the CEO and the Company's Senior Vice President of Human Resources. The base salary is established after reviewing industry, peer group and national compensation data, focusing on the median percentile of compensation for comparable positions. While some of the companies used as a basis for comparison are selected from the companies comprising the index of SIC Code 8711 used for the Performance Graph which appears on page 14 of this proxy statement, other companies are included in order to concentrate on companies of a comparable size and to include companies with product lines which are similar to those of the Company. * Annual Performance Incentives Under the Performance Incentive Compensation Plan, key employees of the Company may be awarded annual bonuses in amounts determined by the Compensation Committee. Executive officers and senior managers throughout the Company are eligible for participation in the Performance Incentive Compensation Plan. The purpose of the Performance Incentive Compensation Plan is to deliver competitive levels of compensation for the attainment of financial and non-financial objectives which the Compensation Committee believes are primary determinants of the success of the Company. The Compensation Committee reviews the administration of the overall plan, approves and recommends to the Board of Directors the annual bonuses for senior officers reporting to the CEO, and determines the appropriate award to be recommended to the Board of Directors for the CEO. The factors considered by the Compensation Committee in recommending fiscal 1997 incentive compensation payments for executive officers and senior managers included the degree to which certain overall corporate and individual performance objectives were achieved. In determining the level of fiscal 1997 annual incentive compensation for the executive officers and senior managers, the Compensation Committee evaluated performance relative to two key corporate financial objectives: growth in both earnings per share and revenue. In fiscal 1997, the Company exceeded or fully achieved both of the objectives. Individual awards were also based on the Compensation Committee's assessment of each executive officer's and senior manager's performance against non-financial objectives that reflect their specific responsibilities. Compensation under the Performance Incentive Compensation Plan is paid in cash during the first quarter of each fiscal year for services rendered during the previous fiscal year. Based on survey data, the Compensation Committee believes that incentive awards for senior executives under the Performance Incentive Compensation Plan for the last fiscal year are at the low end of the competitive range. * Long-Term Incentives The fourth principle of the Company's executive compensation program, the provision of long-term incentives to its executives, is realized through the Company's various stock option plans. The Stock Option Committee determines at its discretion the key employees of the Company to whom options are awarded, the number of shares of the Company's common stock for which options are granted, and whether the options granted are incentive or non-qualified options. Stock options are granted under these plans at fair market value at the time of the option grant. Incentive stock options have a term of seven years and non-qualified stock options have a term of ten years. Options are exercisable in cumulative annual installments of 20% of the total Page 9 12 number of shares covered. The potential gain to the recipients will depend on the Company's future stock price. In fiscal 1997, stock options were granted to selected key employees. In setting the size of grants for executives, the Stock Option Committee took into consideration an employee's position, individual performance, number and terms of stock options presently held and the total number of shares available for issuance under the various stock option plans. Compensation of the CEO As reported in the Summary Compensation Table on page 11 of this Proxy Statement, Mr. Bennett's salary of $242,410 for fiscal year 1997 represented an approximate 5.1% increase over his fiscal year 1996 salary. In determining this amount, the Committee took into account his performance and the fact that Mr. Bennett's fiscal year 1996 salary was in the first quartile of compensation paid to chief executive officers at the surveyed companies. Mr. Bennett's fiscal year 1997 annual incentive award of $48,000 reflects the Committee's assessment of Mr. Bennett's performance against his objectives. Specifically, the Committee determined that Mr. Bennett exceeded or fully achieved the key financial objectives in the Company's plan: growth in both earnings per share and revenue. Mr. Bennett's non-financial objectives consisted of: (1) putting emphasis on growth through acquisitions, (2) growth in the Company's commercial multimedia training business, and (3) substantially increasing proposal backlog. The first two of the non-financial objectives were fully achieved, while the third was partially met. A stock option to acquire 3,500 shares was granted to Mr. Bennett during fiscal year 1997. This award was consistent with the total compensation strategy, approved by the Compensation Committee, whereby stock options serve as an important piece of Mr. Bennett's total compensation package. Omnibus Budget Reconciliation Act Implications for Executive Compensation It is the responsibility of the Compensation and Stock Option Committees to address the issues raised by changes in federal tax laws which make certain non-performance-based compensation to executives of public companies in excess of $1,000,000 non-deductible to the Company beginning in 1996. In this regard, the Committees must determine whether any actions with respect to this new limit should be taken by the Company. At this time, it is not anticipated that any Company executive officer will receive compensation in excess of this limit during 1997. Therefore, the Compensation Committee has not taken any action to comply with the new limit. The Compensation Committee will continue to monitor this situation and will take appropriate action if it is warranted in the future. The Compensation and Stock Option Committees believe that executive compensation for fiscal 1997 adequately reflects their policies, which are to align executive compensation with the Company's overall business strategy, and to ensure that the Company's goals and performance are consistent with the interests of its shareholders.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE - ---------------------- ---------------------- James B. Fox James B. Fox Larry M. Fox Nelda S. Nardone Thurman F. Naylor Dennis G. Punches
Page 10 13 COMPENSATION OF EXECUTIVE OFFICERS The following table summarizes all the compensation paid to the Company's CEO and to each of the Company's four most highly compensated executive officers other than the CEO for services rendered in all capacities to the Company for the fiscal years ended March 31, 1997, 1996 and 1995, respectively. TABLE I SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION NAME AND PRINCIPAL FISCAL ------------------------ ------------ ALL OTHER POSITION YEAR SALARY (1) BONUS (2) OPTIONS (3) COMPENSATION (4) - -------------------------------- ------ ----------- ---------- ------------ ---------------- ($) ($) (#) ($) G.P. Bennett 1997 $ 242,410 $ 48,000 3,500 $ 8,868 Chairman, President and Chief 1996 230,584 30,000 6,000 8,316 Executive Officer 1995 210,372 40,000 5,000 10,133 D.M. Nolf 1997 $ 215,330 $ 39,000 3,000 $ 8,849 Executive Vice President, Chief 1996 207,704 27,500 5,000 8,130 Financial and Administrative 1995 191,492 35,500 4,000 10,371 Officer J.W. Ryerson 1997 $ 197,748 $ 39,000 3,000 $ 6,583 Executive Vice President, Chief 1996 186,854 27,500 5,000 6,661 Operating Officer 1995 170,833 40,000 4,000 7,734 J.R. Lavoie 1997 $ 141,237 $ 24,000 2,500 $ 25,135(5) Senior Vice President 1996 133,597 50,000 1,800 6,449(5) 1995 130,936 22,500 2,000 11,935(5) J.M. Marino 1997 $ 152,207 $ 25,000 2,500 $ 5,562 Senior Vice President 1996 129,827 25,000 7,650 4,865 1995 124,146 23,500 4,500 5,003
- --------------- (1) Includes salary amounts paid and deferred, including the value of benefits paid and deferred, pursuant to the Company's Managers' Benefit Options Plan, the Officers' Benefit Options Plan and the Deferred Compensation Plan. (2) Includes bonus amounts paid and deferred pursuant to the Company's Performance Incentive Compensation Plan and the Deferred Compensation Plan. Amounts represent bonus awards determined for the performance year indicated and paid in the following year. (3) Options were granted pursuant to the Company's various stock option plans. (4) Represents Company contributions to the Company's Savings and Investment Plan and Employee Stock Ownership Plan on behalf of each named officer. (5) Includes cash payments in lieu of vacation. Page 11 14 OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table sets forth information with respect to grants of stock options pursuant to the various Company stock option plans during the fiscal year ended March 31, 1997 to the executive officers identified in the Summary Compensation Table. Under all of the stock option plans, other than the 1994 and 1995 Stock Option Plans, an optionee may elect to relinquish up to 30% of an option being exercised and receive a cash payment equal to the number of shares covered by the portion of the option relinquished multiplied by the difference between the option price per share and the fair market value of a share of the Company's common stock at the time of election. With respect to the executive officers named in the Summary Compensation Table, this right is subject to the discretionary consent of the Stock Option Committee. (See Table II) TABLE II OPTION/SAR GRANTS IN LAST FISCAL YEAR 4/1/96 TO 3/31/97
INDIVIDUAL GRANTS ------------------------------------------------------- POTENTIAL NUMBER OF % OF TOTAL REALIZABLE VALUE SECURITIES OPTIONS/SARS AT ASSUMED ANNUAL UNDERLYING GRANTED TO EXERCISE RATES OF STOCK OPTIONS/SARS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION NAME GRANTED (#) FISCAL YEAR (1) SHARE (2) DATE (3) FOR OPTION TERM (4) - ----------------- ------------ --------------- --------- ---------- -------------------------- 0% (5) 5% 10% G.P. Bennett 3,500 7.4 $ 14.50 1/31/04 $0 $20,660 $48,147 D.M. Nolf 3,000 6.3 $ 14.50 1/31/04 $0 $17,709 $41,269 J.W. Ryerson 3,000 6.3 $ 14.50 1/31/04 $0 $17,709 $41,269 J.R. Lavoie 2,500 5.3 $ 14.50 1/31/04 $0 $14,757 $34,391 J.M. Marino 2,500 5.3 $ 14.50 1/31/04 $0 $14,757 $34,391
- --------------- (1) 47,400 stock options were granted to all employees of the Company as a group during the fiscal year ended March 31, 1997. (2) The exercise price is the average of the high and low market prices on the date of grant. The exercise price may be paid in cash, by delivery of shares of common stock of the Company at fair market value, or by a combination of cash and shares. (3) Incentive stock options generally have a seven-year term and non-qualified stock options have a term of up to ten years and one day as determined by the Stock Option Committee. Options are exercisable over their respective periods from the date of grant in cumulative annual installments of 20% of the total number of shares covered. To the extent not already exercisable, the options become fully exercisable in the event of a "change in control" as defined in the Company's various stock option plans. (4) The dollar amounts under the potential realizable values columns use the 0%, 5% and 10% rates of appreciation as permitted by the SEC, and are not intended to forecast actual future appreciation in the stock price. Actual gains, if any, on stock option exercises are dependent on the future performance of the Company's stock. There can be no assurance that the amounts reflected in this table will be achieved. The assumed rates are compounded annually to the full seven-year term of the options. (5) No gain to the optionee is possible without an increase in stock price appreciation, which will benefit all shareholders commensurately. A zero percent gain in stock price appreciation will result in zero dollars for the optionee. Page 12 15 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table provides information concerning each option exercised during the fiscal year ended March 31, 1997 by each of the executive officers named in the Summary Compensation Table and the fiscal year-end value of unexercised options held by such executive officer. (See Table III) TABLE III AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES 4/1/96 TO 3/31/97 ENDING FAIR MARKET VALUE: $14.1875
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY SHARES OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END (1) ACQUIRED ON -------------------------- -------------------------- EXERCISE VALUE NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------- ----------- -------- ----------- ------------- ----------- ------------- G.P. Bennett 0 $0 64,667 8,400 $ 173,568 $ 225 D.M. Nolf 0 $0 32,883 7,000 $ 112,738 $ 188 J.W. Ryerson 0 $0 31,717 7,000 $ 104,637 $ 188 J.R. Lavoie 0 $0 15,786 5,480 $ 27,309 $ 68 J.M. Marino 0 $0 14,946 8,790 $ 28,449 $ 287
- --------------- (1) Values stated are based on the closing price of $14.1875 per share of the Company's Common Stock on The Nasdaq Stock Market, Inc. on March 31, 1997, the last trading day of the fiscal year. Page 13 16 PERFORMANCE GRAPH
MEASUREMENT PERIOD NASDAQ MARKET ANALYSIS & (FISCAL YEAR COVERED) INDEX PEER GROUP INDEX TECHNOLOGY 1992 100.00 100.00 100.00 1993 115.00 84.81 104.63 1994 124.10 75.91 150.87 1995 138.00 65.03 126.09 1996 187.40 79.80 130.67 1997 208.50 83.52 149.85
31-MAR- 31-MAR- 31-MAR- 31-MAR- 31-MAR- 31-MAR- 92 93 94 95 96 97 ------- ------- ------- ------- ------- ------- ANALYSIS & TECHNOLOGY.................... $ 100 $104.63 $150.87 $126.09 $130.67 $149.85 PEER GROUP INDEX......................... $ 100 $ 84.81 $ 75.91 $ 65.03 $ 79.80 $ 83.52 NASDAQ MARKET INDEX...................... $ 100 $115.00 $124.10 $138.00 $187.40 $208.50
The above line graph is a comparison of the five-year cumulative total return of the Company's common stock with (a) a performance index for the broad market in which the Company's stock is traded and (b) a published industry peer group index. The Company's stock is traded on the NASDAQ National Market, and the Company's four-digit industry SIC Code is 8711, Engineering Services. Accordingly, the performance graph compares the cumulative total return for Company stock with (a) the NASDAQ Market Index and (b) a published industry peer group index comprised of the SIC Code 8711 companies. Page 14 17 The graph assumes $100 was invested on March 31, 1992 in the stock of companies in the NASDAQ Market Index, a published industry peer group index, and in Company stock, and that all dividends were reinvested. Total shareholder return is calculated using the closing price of the last trade date of the stock for such fiscal year. The stock price performance shown is not intended to forecast or be indicative of the possible future performance of the Company's stock. ITEM 2. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS KPMG Peat Marwick LLP has audited the financial statements of the Company since fiscal year 1980. The selection of KPMG Peat Marwick LLP to audit the Company's financial statements for its fiscal year ending March 31, 1998, has been recommended by the Audit Committee of the Board of Directors and approved by the Board of Directors. In addition to its audit services, KPMG Peat Marwick LLP provides certain non-audit services to the Company, including the preparation of federal and state income tax returns and assistance with government contract procedures. A representative of KPMG Peat Marwick LLP is expected to be in attendance at the Annual Meeting. The representative will be given the opportunity to make a statement if he desires to do so and will be available to respond to appropriate questions. The Board of Directors recommends that the shareholders vote in favor of the following resolution at the Annual Meeting: RESOLVED: That the appointment of KPMG Peat Marwick LLP by the Board of Directors of the Company to audit the Company's financial statements for its fiscal year ending March 31, 1998 be, and it hereby is, ratified, confirmed and approved. ITEM 3. PROPOSED 1997 STOCK OPTION PLAN Other than in fiscal years 1991, 1993 and 1996, the Company has adopted employee stock option plans annually since 1978. The Board of Directors has adopted, subject to shareholder approval, a 1997 Stock Option Plan (the "1997 Plan"), which provides for options to be granted to key employees of the Company and its affiliate corporations, similar to previous stock option plans of the Company. It also provides for the grant of options to directors of the Company who are not employees ("Non-Employee Directors"). The 1997 Plan, if approved by the shareholders at the Annual Meeting by a majority vote of the shares represented in person or by proxy, will cover 230,000 shares of the Company's common stock. No options will be granted under the 1997 Plan until shareholder approval of the 1997 Plan has been obtained. A copy of the 1997 Plan is attached to this proxy statement as Exhibit A. The Board of Directors believes that the Company's stock option plans have, to date, successfully assisted the Company in attracting and retaining quality employees and in stimulating their performance. The 1997 Plan is intended to continue those goals. In addition, the 1997 Plan is intended to increase the Non-Employee Directors' proprietary interest in the Company and to align more closely their interests with the interests of the Company's shareholders by providing further opportunity for ownership of common stock, thereby giving the Non-Employee Directors of the Company additional incentive to promote the best interests of the Company. The Board of Directors recommends that the shareholders approve the 1997 Plan at the Annual Meeting by adopting the following resolution: RESOLVED: That the Analysis & Technology, Inc. 1997 Stock Option Plan covering 230,000 shares of the Company's common stock, substantially in the form delivered to shareholders with the proxy statement for this meeting be, and hereby is, approved, ratified and confirmed. Page 15 18 A summary of the terms of the 1997 Plan is provided below but is qualified in its entirety by reference to the full text of the 1997 Plan. The 1997 Plan provides for awards in the form of stock options. Either incentive or non-qualified options can be granted under the 1997 Plan. To date, no awards have been made under the 1997 Plan. The total number of shares of the Company's common stock available for issuance under the 1997 Plan is 230,000. If any options are forfeited or if options terminate for any other reason prior to exercise, then the underlying shares of common stock again become available for awards under the 1997 Plan. The 1997 Plan is administered by a committee (the "Stock Option Committee") of at least three directors, none of whom is, or has been, eligible to receive options under the 1997 Plan other than Options granted to a Non-Employee Director automatically upon his or her election, re-election, or continuance in office, as the case may be, as a Director in accordance with the terms of the 1997 Plan. With respect to options granted to key employees, the Stock Option Committee designates the key employees of the Company or any affiliate corporation to whom options are awarded and determines the number of shares of the Company's common stock issuable pursuant to the exercise of options granted under the 1997 Plan. The Stock Option Committee determines whether the options granted to key employees of the Company will be incentive or non-qualified options. Under the 1997 Plan, options to purchase 2,000 shares of the Company's common stock will be granted to each Non-Employee Director automatically upon his or her election, re-election, or continuance as a director of the Company in years 1997, 1998 and 1999. All such options granted to Non-Employee Directors are non-qualified options. If the 1997 Plan is approved and if there continue to be five Non-Employee Directors, in the aggregate, options to purchase 30,000 shares of the Company's common stock will have been granted to Non-Employee Directors through 1999. The Company estimates that approximately 100 key employees will be eligible to participate in the 1997 Plan as well as five Non-Employee Directors. No employee may receive options under the 1997 Plan covering more than 10% of the shares which may be issued under the 1997 Plan. The 1997 Plan has a seven-year term and, if approved by the shareholders at the Annual Meeting, will expire on December 31, 2004. The 1997 Plan provides for the granting of incentive and non-qualified stock options, as discussed above. Incentive stock options granted under the 1997 Plan have a seven-year term unless the grant is to a 10% shareholder of the Company, in which case the term is five years. Non-qualified stock options granted under the 1997 Plan may have a term of up to ten years and one day as determined by the Stock Option Committee; provided, however, that non-qualified stock options granted to Non-Employee Directors have a seven-year term. Options granted to employees of the Company terminate in connection with the termination of employment pursuant to the terms of the 1997 Plan. Options granted to Non-Employee Directors terminate in connection with the termination of directorship pursuant to the terms of the 1997 Plan. In the event of death, the option holder's estate (whether such option holder was an employee or a Non-Employee Director) has either 180 days from the date of death or until the expiration date of the option, whichever is earlier, to exercise such option holder's rights to the extent such rights were exercisable at the date of death. Options are exercisable over their respective periods from the date of grant in cumulative annual installments of 20% of the total number of shares covered. The 1997 Plan provides for the immediate exercisability of all options upon a "change in control" (as defined in the 1997 Plan) of the Company. The options under the 1997 Plan allow an option holder to pay for shares purchased upon exercise of an option by cash, by delivery of shares of common stock of the Company at fair market value, or by a combination of cash and shares. Page 16 19 Option exercise prices are set at the fair market value of the Company's shares on the date of the grant, which is based on the average of the high and low sales prices of the Company's common stock as reported on the NASDAQ National Market ("NASDAQ") on the day such fair market value is to be determined. The average of the high and low sales prices per share of the Company's common stock as reported on NASDAQ on May 30, 1997 was $14.75. As of that date, the aggregate market value of the shares reserved pursuant to the 1997 Plan was $3,392,500. The grant of an incentive stock option has no immediate federal income tax consequences to the Company or the optionee. For federal income tax purposes, an optionee will not realize ordinary income upon exercise of an incentive stock option. The subsequent sale of stock received on such exercise will generate a long-term capital gain or loss provided the stock is held for the requisite holding periods, which are two years from the date of grant and one year from the date of exercise. A disposition of stock received on such exercise before the requisite holding periods expire produces ordinary income in the year of disposition equal to the difference between the option price and the fair market value of the stock on the date of exercise. The balance of the optionee's gain, if any, on such disposition will be recognized as long-term capital gain if the rules applicable to the holding period for long-term capital assets are satisfied. Special rules apply to disqualifying dispositions of such stock where a loss would be recognized. Long-term capital gains are currently taxed at a maximum rate of 28%. If incentive stock option shares are purchased for cash, the optionee's income tax basis will be the amount paid. If the optionee pays with previously acquired shares, the optionee's aggregate income tax basis in the new shares will be the same as the aggregate basis of the old shares transferred in the exchange increased by any gain realized and cash paid. The Company is not allowed a tax deduction for the benefits conferred upon employees by incentive stock options unless optionees dispose of stock acquired under circumstances which cause recognition of ordinary income. In such circumstances, the Company can take a deduction in an amount equal to the ordinary income realized by the employee. Special rules apply to holders of incentive stock options who may be subject to the alternative minimum tax on "tax preferences." The grant of a non-qualified stock option would have no immediate federal income tax consequences to the Company or the optionee. Upon exercise of a non-qualified option, in contrast to an exercise of an incentive stock option, the option holder will recognize ordinary income to the extent of the excess of the fair market value of the stock on the date of exercise (or the date of the lapse of the Section 16(b) restrictions, if applicable) over the option price. The Company is entitled to a tax deduction in an amount equal to the ordinary income realized by the employee. If non-qualified stock options are exercised using cash, the optionee's tax basis will be the amount paid plus the amount of income recognized. If the optionee pays with previously acquired shares, the tax basis in the shares acquired will be the same as the basis of the shares transferred in the exchange. The tax basis of the additional shares acquired will be their fair market value at the time of exercise. To the extent that the exercisability of an option is accelerated as a result of a "change in control," the value of the acceleration (the value of the right to exercise the option sooner than would otherwise have been the case) could be subject to an excise tax imposed on the optionee under Section 4999 of the Code and nondeductible by the employer under Code Section 280G. Such consequences would only follow, however, if the total of the payments contingent on the change in control (including the value of the acceleration) exceeded three times the optionee's base compensation as described in the Code. The preceding paragraphs briefly summarize the applicable federal income tax laws applicable to the 1997 Plan and should not be considered as a complete statement thereof. Page 17 20 ITEM 4. OTHER BUSINESS The Board of Directors knows of no other business which is likely to be brought before the Annual Meeting. However, the persons named in the enclosed proxy card will, at their discretion, vote the shares they represent upon any other business which may properly come before the Annual Meeting. OTHER MATTERS The cost of solicitation of the proxies will be borne by the Company. Proxies may be solicited by directors, officers and employees by mail, telephone, facsimile or in person without additional compensation. Copies of this proxy statement and of the 1997 Annual Report to Shareholders will be delivered by the Company, through the services of ADP Proxy Services, to brokers, dealers, banks, and voting trustees, or their nominees, for the purpose of having these materials forwarded to beneficial owners. The Company will pay ADP Proxy Services a service charge anticipated to be $2,000 and will reimburse ADP Proxy Services for out-of-pocket expenses associated with each delivery, such expenses to include reimbursement of record holders for their reasonable expenses in connection with forwarding materials to beneficial owners. Returned proxies will be processed and tabulated under the supervision of independent Inspectors of Election. COMPLIANCE WITH SECTION 16(A) FILINGS Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC and NASDAQ. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports furnished to the Company, or written representations that no Forms 5 were required, the Company believes that during the fiscal year, its officers, directors and greater than ten-percent beneficial owners complied with all applicable Section 16(a) filing requirements. 1998 SHAREHOLDER PROPOSALS In order for shareholder proposals to be eligible for inclusion in the Company's proxy statement for the 1998 Annual Meeting of Shareholders, they must be received by the Company at its principal office, Route 2, P.O. Box 220, North Stonington, Connecticut 06359, by March 3, 1998. Page 18 21 EXHIBIT A ANALYSIS & TECHNOLOGY, INC. 1997 STOCK OPTION PLAN 1. Definitions: as used herein, the following terms have the meanings hereinafter set forth unless the context clearly indicates to the contrary: 1.1. "Affiliated Corporation" shall mean any corporation which controls, is controlled by or is under common control with the Corporation and any predecessor corporation. 1.2. "Board of Directors" shall mean the Board of Directors of the Corporation. 1.3. "Committee" shall mean the Committee of Directors of the Corporation to be appointed from time to time by the Corporation's Board of Directors to administer this Plan. 1.4. "Corporation" shall mean Analysis & Technology, Inc. 1.5. "Fair Market Value" of the Shares shall be deemed to be the average of the high and low sales price per Share as reported by the NASDAQ National Market System, or by the national securities exchange on which the Shares are traded if they are no longer traded on the NASDAQ National Market System, on the day on which Fair Market Value is to be determined. If there was no trading activity on such date, the average of the high and low sales price per share on the most recent date on which a trade occurred shall be deemed to be the Fair Market Value of a Share on the date in question. If the Shares are not traded on the NASDAQ National Market System or a national securities exchange, Fair Market Value of the Shares shall be determined by the Committee in an equitable manner. 1.6. "Incentive Stock Options" shall mean those Options granted hereunder or under other plans of the Corporation or any Affiliated Corporation as Incentive Stock Options as defined in, and which by their terms comply with the requirements of such options set out in, Section 422 of the Internal Revenue Code of 1986 and Treasury Regulations issued pursuant thereto. 1.7. "Non-Employee Director" shall mean a director of the Corporation who is not an employee of the Corporation or an Affiliated Corporation. 1.8. "Non-Qualified Stock Options" shall mean those Options granted hereunder or otherwise by the Corporation or any Affiliated Corporation which are not designated as Incentive Stock Options as described in Section 1.6 or, pursuant to Section 6.2, are not treated as Incentive Stock Options. 1.9. "Option" shall mean an option to purchase Shares granted pursuant to the provisions of Section 7 of this Plan. 1.10. "Optionee" shall mean an employee or Non-Employee Director to whom an Option has been granted under this Plan. 1.11. "Plan" shall mean the Analysis & Technology, Inc. 1997 Stock Option Plan. 1.12. "Shares" shall mean shares of the no par value common stock of the Corporation. 1.13. "Stock Option Agreement" shall mean the agreement between the Corporation and the Optionee under which the Optionee may purchase Shares under this Plan. 1.14. "Ten Percent Shareholder" shall mean an individual who owns shares of stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of its parent or subsidiary corporation, if any. Page 19 22 2. Purpose of Plan: The purpose of this Plan is to attract and retain outstanding key employees, to furnish existing key employees with further inducement to continue their employment with the Corporation and to encourage such employees and Non-Employee Directors to acquire a greater stake in the Corporation's success and, thus, provide an additional incentive for them to promote its best interests. Options granted pursuant to the Plan may be Incentive Stock Options or Non-Qualified Stock Options or both with respect to employees and Non-Qualified Stock Options only with respect to Non-Employee Directors. 3. Effective Date: The effective date of this Plan is the date on which this Plan is approved by the shareholders of the Corporation subsequent to its adoption by the Board of Directors of the Corporation. 4. Shares Reserved for Plan: Subject to adjustment as provided in Section 12 hereof, a total of Two Hundred Thirty Thousand (230,000) Shares of the Corporation shall be subject to this Plan; and such amount of Shares shall be, and is hereby, reserved for sale for such purpose. The Shares subject to this Plan shall consist of authorized but unissued Shares or previously issued Shares reacquired and held by the Corporation as treasury shares. Any of such Shares which may remain unsold and which are not subject to outstanding options at the termination of this Plan shall cease to be reserved for the purpose of this Plan, but until termination of this Plan the Corporation shall at all times reserve a sufficient number of Shares to meet the requirements of this Plan. If any Option granted under this Plan shall expire or terminate for any reason without having been exercised in full, the Shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under this Plan. 5. Administration of the Plan: 5.1. The Plan shall be administered by the Committee. The Committee shall consist of not less than three members of the Corporation's Board of Directors. Each member of the Committee shall be a "disinterested person" as such term is defined in Rule 16b-3 under the Securities Exchange Act of 1934. Any member of the Committee who ceases to qualify as a "disinterested person" for any reason shall, simultaneously with such disqualification, cease to be a member of the Committee. 5.2. Subject to the terms of this Plan, including, without limitation, Section 7.2 hereof relating to Options granted to Non-Employee directors upon their election or re-election as such, the Committee shall have full and final authority to determine the persons who are to be granted Options under this Plan and the number of Shares subject to each Option. 5.3. Subject to the terms of this Plan, the Committee shall also have complete authority to interpret this Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the details and provisions of each Stock Option Agreement, to determine whether Options to be granted hereunder shall be Incentive Stock Options or Non-Qualified Stock Options, and to make all other determinations necessary or desirable in the administration of this Plan. 6. Eligibility: 6.1. The individuals who shall be eligible to participate in this Plan and to receive Options hereunder shall be such key employees of the Corporation and its Affiliated Corporations as the Committee shall, in its sole discretion, determine and Non-Employee Directors in accordance with Section 7.2 hereof. In determining the employees to whom Options shall be granted and the number of Shares to be covered by each Option, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Corporation and its Affiliated Corporations and such other factors as the Committee, in its discretion, may deem relevant. Options may be granted to key employees who hold or have held options under previous plans. 6.2. No employee may receive Options under this Plan covering more than ten percent (10%) of the total number of Shares reserved under Section 4 of this Plan. In addition, the aggregate Fair Market Value (determined as of the time the Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for the first time by any employee in any one calendar year (under all stock Page 20 23 option plans of the Corporation or any Affiliated Corporation) shall not exceed $100,000. In the event any Option or Options intended as Incentive Stock Options become exercisable (including by reason of acceleration of exercisability as provided in Section 12(b) hereof or otherwise) in such a way that the foregoing limitation would be exceeded in any year, such Option or Options shall be exercisable in such year; but to the extent such exercisability would cause such limitation to be exceeded, the value of the shares in excess of $100,000 shall be treated as Non-Qualified Stock Options when exercised rather than treated as Incentive Stock Options. 7. Option Grant: 7.1. Each Option granted under this Plan to an employee of the Corporation shall be evidenced by minutes of a meeting of the Committee or the unanimous written consent of all members of the Committee and by a written Stock Option Agreement effective as of the date of the grant and executed by the Corporation and the employee, which Stock Option Agreement shall set forth such terms and conditions as may be determined by the Committee to be consistent with this Plan. 7.2. Immediately following the Corporation's annual meeting of shareholders held in the years 1997, 1998, and 1999 each Non-Employee Director elected, re-elected, or continuing in office, as the case may be, shall automatically, without need for any further action, be granted an option to acquire 2,000 Shares. Each Option granted pursuant to this Section 7.2 shall be evidenced by a written Stock Option Agreement effective as of the date of the grant and executed by the Corporation and the director, which Stock Option Agreement shall set forth such terms and conditions as may be determined by the Committee to be consistent with this Plan. The provisions of this Section 7.2 shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, the Employee Retirement Income Security Act, or the rules thereunder. 8. Term of Option: 8.1. Each Incentive Stock Option shall commence on the date as of which the Stock Option Agreement is effective between the Corporation and the Optionee and shall terminate seven (7) years thereafter; provided, however, that if at the time the Option is granted the Optionee is a Ten Percent Shareholder the Option shall terminate five (5) years thereafter. Each Non-Qualified Option shall commence on the date as of which the Stock Option Agreement is effective between the Corporation and the Optionee and shall terminate, in the case of a Non-Qualified Option granted other than to a Non-Employee Director, at such time as is provided in the relevant Stock Option Agreement, up to ten (10) years and one (1) day after the date of the grant and, in the case of a Non-Qualified Option granted to a Non-Employee Director, seven (7) years after the date of the grant. In any case, if the Optionee shall cease to be a regular full-time employee of the Corporation, or an Affiliated Corporation, for any reason other than a termination for cause or a termination by reason of death, or, with respect to Non-Employee Directors, if the Optionee shall cease to be a director of the Corporation for any reason other than removal by the shareholders of the Corporation for cause or by reason of death, any unexercised portion of said Option shall terminate sixty (60) days after the date of the termination of employment or directorship, as the case may be, or upon the expiration of the Option, whichever shall first occur. 8.2. In the event that the Optionee's employment is terminated for cause or with respect to a Non-Employee Director, the Optionee is removed as a director of the Corporation by the shareholders for cause, the unexercised portion of the Option shall terminate immediately upon the giving of the notice of such termination or removal. Nothing in this Plan or in any Option granted pursuant to this Plan shall confer on any Optionee the right to continue in the service of the Corporation or any of its Affiliated Corporations, or interfere in any way with the right of the Corporation or any of its subsidiaries or Page 21 24 affiliates to terminate the Optionee's employment at any time or the right of the shareholders of the Corporation to remove or to fail to re-elect any director of the Corporation. 8.3. In the event of the death of the Optionee, the Optionee's estate shall have the privilege of exercising any rights not theretofore exercised by the Optionee, to the extent that the Optionee was entitled to exercise such rights on the date of the Optionee's death; but in such event, the period of time within which the purchase may be made shall be the earlier of (a) 180 days next succeeding the death of the Optionee or (b) the expiration of the term of the Option. 9. Exercise of Option: An Option granted under this Plan shall become exercisable in installments as follows: to the extent of twenty percent (20%) of the number of Shares originally covered thereby at any time after the commencement of the Option; and, to the extent of an additional 20% of such number of Shares per year at any time after the commencement of the second, third, fourth and fifth years of the term of the Option; and such installments shall be cumulative. The Option to purchase such Shares may be exercised in whole or in part as to any Shares which have become purchasable under the provisions of the Option at any time during the term of the Option by written notice delivered to the Corporation. Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be accompanied by payment in full of the purchase price of such Shares. Payment shall be made to the Corporation either: (a) in cash (including certified check, bank draft, or money order); or (b) by delivering Shares already owned by the Optionee, which shall be valued at their Fair Market Value on the day on which notice of exercise is received by the Corporation; or (c) a combination of such Shares and cash. Delivery of Shares pursuant to alternative (b) or (c) above shall be accomplished by the Optionee's delivery of one or more stock certificates representing at least the number of Shares to be used to pay for the option exercise, duly endorsed for transfer or accompanied by one or more properly executed stock powers, together with written instructions to the Corporation as to the number of Shares to be used for payment. Unless the Shares to be purchased have been registered under the applicable securities laws, a notice of exercise hereunder shall be accompanied by an investment letter indicating nondistributive intent in a form approved by the Committee. 10. Option Price: The purchase price per Share shall be the Fair Market Value of a Share as of the effective date of the Stock Option Agreement entered into between the Corporation and the Optionee. Provided, however, with respect to Incentive Stock Options, if at the time the Option is granted the Optionee is a Ten Percent Shareholder, the purchase price per Share for said Optionee shall be one hundred ten percent (110%) of the Fair Market Value of a Share as of the effective date of the Stock Option Agreement entered into between the Corporation and the Optionee. 11. Non-assignability of Option: The Option to purchase shall not be transferable by the Optionee and shall be exercisable, during the Optionee's lifetime, only by the Optionee. 12. Adjustment Upon Fundamental Corporate Change: (a) Notwithstanding any other provisions of this Plan, each Stock Option Agreement shall contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number, kind, class or issuer of Shares subject to such Option, the option price and/or such other provisions as the Committee shall deem advisable or necessary in connection with fundamental corporate changes of the Corporation by reason of any stock dividend, stock split, recapitalization, combination or exchange of Shares, merger, consolidation, acquisition of property or stock, the sale of substantially all corporate assets, separation, reorganization or liquidation and the like. (b) Notwithstanding any other provision of this Plan or any Option granted hereunder, each Option granted under this Plan and still outstanding shall become immediately exercisable in the event that there is a "Change in Control" of the Corporation; provided, however, that in the case of an Incentive Stock Option, Page 22 25 such acceleration of exercisability shall be subject to the limitations of Section 6.2 of this Plan. For purposes of this Plan, the term "Change in Control" shall mean any of the following events: (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") except that a Person shall not include any employee benefit plan maintained by the Corporation) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding Voting Securities; (ii) The individuals who, as of the date of this Agreement are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the members of the Board; provided, however, that if the election, or nomination for election by the Company's common shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (iii) Approval by shareholders of the Company of: (1) A merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization of the Company where: (A) the shareholders of the Company, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization, (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially directly or indirectly owning a majority of the Voting Securities of the Surviving Corporation, and (C) no Person other than (i) the Company, (ii) any subsidiary, (iii) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of forty percent (40%) or more of the then outstanding Voting Securities), has Beneficial Ownership of forty percent (40%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities; (2) A complete liquidation or dissolution of the Company; or (3) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). 13. Compliance with Laws: Notwithstanding any other provisions of this Plan, each Stock Option Agreement shall contain such provisions as the Committee shall determine to be appropriate to ensure that the Optionee agrees for the Optionee and the Optionee's legal representatives, that the Option shall not be exercisable by the Optionee or the Optionee's legal representatives, and that the Corporation shall not be Page 23 26 obligated to issue any Shares, during a time period in which such exercise would adversely affect the Corporation under applicable state or federal securities laws. The Corporation shall, however, provide Optionee with an opportunity to elect to exercise the Options, within the limits specified in this Plan, at a minimum of approximately once a year and, if not sooner terminated, at the termination of the Option's term. If an Option is terminated early pursuant to Section 8.1 or 8.3 of this Plan, and if the Optionee attempts to exercise the Option, in accordance with its terms, within the period specified in Sections 8.1 or 8.3, as applicable, and if the Corporation determines that it should defer the exercise for the securities laws compliance reasons previously referenced in this Section, then the Corporation may extend the period of time during which an Optionee may exercise the Option. Any such extension shall last only until the next time the Corporation provides the Optionees with an opportunity to exercise Options granted under this Plan. The Corporation shall have the right to require the payment (through withholding from the participant's salary, or otherwise as the Corporation shall determine) of any federal and state taxes required to be withheld from any transfer of Shares hereunder (including a transfer of Shares on exercise of an Option granted hereunder). 14. No Rights in Option Stock: No Optionee shall have any rights as a shareholder with respect to Shares as to which the Option shall not have been exercised and payment made as herein provided, and an Optionee shall have no rights with respect to such Shares not expressly conferred by this Plan. 15. Effect on Changes in Capital Structure: The existence of the Option to purchase shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation's capital structure or its business, or any merger or consolidation of the Corporation, or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the capital stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. 16. Successors: This Plan shall be binding upon any successors of the Corporation. 17. Amendment and Termination: Unless this Plan shall theretofore have been terminated as hereinafter provided, it shall terminate on December 31, 2004, except as to Options previously granted and outstanding under this Plan at that date, and no Option shall be granted hereunder after that date. This Plan may be terminated, modified, or amended by the shareholders of the Corporation. The Board of Directors may terminate this Plan or make such modifications or amendments thereof as it shall deem advisable, or in order to conform to any change in any law or regulation applicable thereto; provided, however, that the Board of Directors may not, without further approval by the shareholders of the Corporation, in the manner required by Connecticut law, (a) increase the maximum number of Shares as to which Options may be granted under this Plan, except as may be needed to make necessary adjustments pursuant to Section 12 of this Plan, (b) change the class of Persons eligible to be granted Options, (c) increase the periods during which Options may be granted or exercised, except as provided in Section 13 of this Plan, or (d) provide for the administration of this Plan otherwise than by the Committee. No termination, modification, or amendment of this Plan may, without the consent of an Optionee to whom any Option shall theretofore have been granted, adversely affect the rights of such Optionee under such Option. Page 24 27 THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. Please Mark Your Votes as X Indicated in This Example 1. Election of Directors (terms to expire in 2000) Nelda S. Nardone, Thurman F. Nayor FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority listed above (except AUTHORITY to vote for any individual nominee, as marked to the to vote for all write that nominee's name in the contrary). nominees listed space provided below.) above. ------------------------------------ 2. Proposal to ratify the selection of KPMG Peak Marwick LLP as the independent public accountants of the Company for the fiscal year ending March 31, 1998. FOR AGAINST ABSTAIN / / / / / / 3. Approval of the 1997 Stock Option Plan. FOR AGAINST ABSTAIN / / / / / / 4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. The Undersigned Acknowledges Receipt of the Notice of Annual Meeting and Proxy Statement. Each person named to the left is asked to sign this Proxy exactly as his or her name appears, including the title "Executor," "Trustee," etc., if the same is indicated. If more than one person's name is set forth, all should sign. If stock is held in the name of a corporation or partnership, this Proxy should be executed by a properly authorized person. Dated: , 1997 --------------------------------------- -------------------------------------------------- Signature -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- Signature, if held jointly Shareholders planning to attend the Annual Meeting in person are asked to check this block / / PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. -- FOLD AND DETACH HERE -- 28 PROXY PROXY ANALYSIS & TECHNOLOGY, INC. ROUTE 2, P.O. BOX 220 NORTH STONINGTON, CONNECTICUT 06359 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints David M. Nolf and Gary P. Bennett as proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all the shares of common stock of Analysis & Technology, Inc. (the "Company") held of record by the undersigned on June 6, 1997, at the Annual Meeting of Shareholders to be held on August 5, 1997 or any adjournment thereof. (Continued on reverse side) -- FOLD AND DETACH HERE -- -----END PRIVACY-ENHANCED MESSAGE-----