-----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, Bo5JZ1betjaHHK251o2pP7NUG7iDw3XRbmk9KacHd/GEKdMISJjO0pUqJj7/VrJ9 VxmSrQZL+GZoHiuPPYN8ZA== 0000720671-98-000007.txt : 19980803 0000720671-98-000007.hdr.sgml : 19980803 ACCESSION NUMBER: 0000720671-98-000007 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980918 FILED AS OF DATE: 19980731 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALIFAX CORP CENTRAL INDEX KEY: 0000720671 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540829246 STATE OF INCORPORATION: VA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 001-08964 FILM NUMBER: 98675512 BUSINESS ADDRESS: STREET 1: 5250 CHEROKEE AVE CITY: ALEXANDRIA STATE: VA ZIP: 22312 BUSINESS PHONE: 7037502202 MAIL ADDRESS: STREET 1: 5250 CHEROKEE AVENUE CITY: ALEXANDRIA STATE: VA ZIP: 22312 FORMER COMPANY: FORMER CONFORMED NAME: HALIFAX ENGINEERING INC/VA DATE OF NAME CHANGE: 19911204 PRE 14A 1 PRELIMINARY HALIFAX CORPORATION Alexandria, Virginia ANNUAL MEETING OF SHAREHOLDERS Dear Shareholders: You are cordially invited to attend the Annual Meeting of Halifax Shareholders which will be held on September 18, 1998, at 2:00 p.m. local time at our offices at 5250 Cherokee Avenue, Alexandria, VA 22312. In addition to the meeting purposes enumerated in the attached Notice, it shall be our pleasure to entertain questions pertaining to the affairs of the Company which affect the interests of Shareholders as a whole. We encourage your attendance and look forward to seeing you. Sincerely, Howard C. Mills President August 15, 1998 HALIFAX CORPORATION NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD September 18, 1998 To the Shareholders of Halifax Corporation: NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Halifax Corporation (The "Company") will be held at its executive offices, 5250 Cherokee Avenue, Alexandria, VA 22312 on Friday, September 18, 1998, at 2:00 p.m. local time, for the purpose of considering and acting upon the following: 1. Election of seven (7) directors for the ensuing year. 2. Ratification of the Board of Directors' appointment of Ernst & Young Certified Public Accountants, as the Company's independent accountants for the fiscal year ending March 31, 1999. 3. Approval of Amendment of Articles of Incorporation to increase authorized Common Stock and to authorize Preferred Stock. 4. Approval of Amendment of the Company's "1994 Key Employee Stock Option Plan" to increase the number of shares issuable from 180,000 to 280,000. 5. Transact such other business as may properly come before the meeting. The Board of Directors has fixed the close of business on Friday, August 7, 1998, as the record date for the determination of shareholders entitled to notice of and vote at this meeting and any adjournments thereof, and only shareholders of record at such time will be so entitled to vote. Shareholders who will not attend the meeting in person are requested to specify their choices and to date, sign, and return the enclosed Proxy in the envelope provided. Prompt response is helpful, and your cooperation will be appreciated. By Order of the Board of Directors Ernest L. Ruffner Secretary HALIFAX CORPORATION 5250 Cherokee Avenue Alexandria, Virginia 22312 PROXY STATEMENT The Annual Meeting of Shareholders of Halifax Corporation (The "Company") will be held on September 18, 1998, at the offices of the Company located at 5250 Cherokee Avenue, Alexandria, Virginia 22312, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders and described more fully below. The enclosed Proxy is solicited on behalf of the Board of Directors of the Company. The cost of preparing, assembling and mailing the Notice, Proxy Statement and Proxy and miscellaneous costs with respect to the same will be paid by the Company. the Company may, in addition, use the services of its officers, directors and employees to solicit Proxies personally or by telephone and telegraph, but at no additional salary or compensation. The Company intends to request banks, brokerage houses and other custodians, nominees and fiduciaries to forward copies of the proxy material to those persons for whom they hold shares and to request authority for the execution of Proxies. The Company will reimburse them for reasonable out-of-pocket expenses incurred by them in so doing. The Proxy may be revoked by the person giving it at any time before it has been exercised by delivering written notice to the Company or by delivering a later dated Proxy. Unless instructed to the contrary on the Proxy, each Proxy will be voted for the persons named below in the election of directors to the Company's Board of Directors; for ratification of the appointment of Ernst & Young Certified Public Accountants, to be the Company's independent accountants for fiscal 1999, for approval of an Amendment to the Articles of Incorporation to increase authorized Common Stock and to authorize Preferred Stock, for approval of an Amendment to the Company's 1994 Key Employee Stock Option Plan to increase the number of shares issuable, and with respect to such other matters which may properly come before the Annual Meeting, the persons named as proxy holders will exercise their best judgment with respect to such other matters. A shareholder who abstains from a vote by registering an abstention vote will be deemed present at the meeting for quorum purposes but will not be deemed to have voted on the particular matter. Management knows of no other matters to come before the Annual Meeting at this time. SHARES OUTSTANDING AND VOTING RIGHT Shareholders of record at the close of business on August 7, 1998, will be entitled to notice of and vote at the Annual Meeting. On that date there were 2,013,406 shares of the Company's Common Stock outstanding. The holders of these shares are entitled to one vote per share. Under the rules of the American Stock Exchange (AMEX) brokers who hold shares in street name for customers have the authority to vote on certain items when they have not received instruction from beneficial owners. Such votes are known as "broker non-votes", and are counted for purposes of determining the presence of a quorum, but are not counted for purposes of determining whether a director has been elected or whether a proposal has been approved by the shareholders. Directors are elected by a plurality of the votes of the shares present or represented at the meeting and entitled to vote. Approval of each other matter to be voted upon requires the affirmative vote of a majority of the votes of shares present or represented at the meeting and entitled to vote on such matter. FORM 10-K The Annual Report on Form 10-K/A for the Company's fiscal year ended March 31, 1998, has been filed with the Securities and Exchange Commission. Shareholders should they so desire may obtain without charge a copy of the Form 10-K/A from the Company by written request which should be made to Halifax Corporation, 5250 Cherokee Avenue, Alexandria, Virginia 22312, Attention: Corporate Secretary. ELECTION OF DIRECTORS The Bylaws of the Company provide that the Company shall be managed by a Board of Directors consisting of between three and seven members, the precise number of directors to be fixed from time to time by resolution of the Board of Directors. The number of Directors has been fixed at seven. It is, therefore, proposed to elect a Board of Directors of seven persons to serve until the next annual meeting of Shareholders or until the election and qualification of their respective successors. Unless authority is withheld, the proxies shall be voted for the election as directors of the following persons named below. All seven of the nominees are now serving as directors and have agreed to serve if elected. Those nominees receiving a majority of or the greatest number of votes cast at the Annual Meeting by Shareholders entitled to vote will be elected to the Board of Directors. Management has no reason to believe that any nominee will not be available to serve, but if any nominee should be or become unable to serve, the shares represented by Management proxies will be voted, instead, for the election of another person recommended by the Board of Directors as a director. The following table sets forth the name and age of each of the nominees to the Board of Directors of the Company, together with respective periods of service as directors and other positions with the Company: THE BOARD OF DIRECTORS RECOMMENDS THE FOLLOWING NOMINEES:
Date Principal Occupation and Nominee Age First Employment; Other Background Elected Arch C. Scurlock 78 1973 Arch C. Scurlock, presently Chairman of the Board of Directors, has been a Director of the Company since 1973. He has been President and a Director of Research Industries Incorporated, a private investment company since 1968. He served from 1969 to 1992 as Chairman of the Board of TransTechnology Corporation, a manufacturer of aerospace defense and other industrial products. Howard C. Mills 64 1984 Howard C. Mills, since October 16, 1984, has been President, Chief Executive Officer and a Director of the Company. Prior to that time he served as Vice President and Executive Vice President of the Company. John H. Grover 70 1984 John H. Grover became a Director of the Company in 1984. He has served as Executive Vice President, Treasurer and Director of Research Industries Incorporated since 1968, and as a Director of TransTechnology Corporation from 1969 to 1992. Clifford M. Hardin 82 1985 Clifford M. Hardin has been a Director of the Company since 1985. From 1981 to 1987, Dr. Hardin served as a Director of Stifel Financial Corporation, the parent corporation of Stifel, Nicolaus & Company, a St. Louis securities brokerage firm registered with the Securities & Exchange Commission. Ernest L. Ruffner 63 1985 Ernest L. Ruffner, elected Director of the Company on March 25, 1985, is an attorney engaged in the private practice of law as a member of Pompan, Murray, Ruffner & Werfel in Alexandria, Virginia. Mr. Ruffner is a Director of Research Industries Incorporated. He was elected Secretary of the Company effective July 2, 1985 and General Counsel on September 16, 1994. Alvin E. Nashman 71 1993 Alvin E. Nashman, for 27 years until his retirement in 1992, headed the multi-division Systems Group of CSC, which under his leadership experienced continued growth with 1992 revenues in excess of $1 billion. He served two terms as Chairman of the Board of the Armed Forces Communications and Electronics Association (AFCEA). He currently serves on the Boards of Andrulis Corporation, Space Works; and Federal Sources, Inc. John M. Toups 72 1993 John M. Toups served as President and CEO of Planning Research Corporation (PRC) from 1978 to 1987. Prior to that he served in various executive positions with PRC. For a short period of time in 1990, he served as interim Chairman of the Board and CEO of the National Bank of Washington and Washington Bancorp and is currently a Director of CACI International, Inc., NVR, Inc., Telepad Corporation and Thermatrix, Inc.
OTHER EXECUTIVE OFFICERS In addition to President Mills and Secretary/General Counsel Ruffner, the following persons are executive officers of the company. James L. Sherwood, IV, age fifty-six, is Vice President Contracts and Administration. He has been with the Company and its subsidiaries for nineteen years. He previously served as a Vice President managing the Company's Facilities Services Division. Melvin L. Schuler, age fifty-four, is the Vice President Operations, Federal Services Division. Mr. Schuler has been with the Company for twenty- six years, serving in various management positions within the Electronics Services line. James C. Dobrowolski, age thirty-five, joined Halifax as a result of the Company acquiring EAI Services which he had managed for two years. Mr. Dobrowolski currently serves as a Vice President, in charge of the Simulation and Facilities Services Division. Prior to joining EAI as director of contracts in April 1988, he was with Engineering and Professional Services, Inc., where he served as Manager of Subcontract Administration for two years. Thomas F. Nolan, age fifty-three, is the Vice President, Computer Services Division. Before joining the Company, Mr. Nolan worked six years as an independent executive in Financial Services Management. Prior to that, he was Senior Vice President, Marketing for Decision Data Services, Inc., a nationwide computer maintenance firm. For seventeen years Mr. Nolan held various executive positions with Bell Atlantic Corporation's SORBUS Service Division. John D. D'Amore, age forty-eight, Vice President, Treasurer, and Chief Financial Officer, joined Halifax on April 10, 1996. He previously served as Vice President Finance for CTA Space Systems and CTA International, Inc., subsidiaries of CTA Incorporated. Prior to that he served in various executive finance positions including five years as Vice President Finance with Presearch Inc. Mr. D'Amore is a Certified Public Accountant and a member of the Virginia Bar. Thomas L. Mountcastle, age forty-four, is a Vice President and Chief Information Officer of Halifax, and President of Halifax Technology Services Company, a wholly owned subsidiary of Halifax. Mr. Mountcastle joined Halifax as a result of the Company acquiring CMS Automation, Inc. on April 1, 1996 where he had served as President since 1990. Prior to that he served in various capacities in computer technology including two years as President of Data Support Systems. Frank J. Ostronic, age sixty-nine, Vice President of Business Development and Head of the Federal Services Division, joined Halifax on May 24, 1996. Mr. Ostronic has over forty years experience in various executive positions including fourteen years with Computer Sciences Corporation as Vice President of Program Development. A U.S. Naval Academy graduate, Mr. Ostronic retired from the U.S. Navy with the rank of Captain. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Based on a review of SEC Forms 3, 4 & 5 and amendments thereto furnished to the Company, to the best of the knowledge and belief of management, no person who was required to file said forms failed to do so on a timely basis. Board of Directors; Committees During the year ended March 31, 1998, the Board of Directors held seven meetings. During that year, all members who were directors at the time attended at least 75% of the total number of meetings held by the Board and by each committee of the Board of which he was a member. Set forth below is certain information regarding the existing committees of the Board of Directors: Audit Committee. The Audit Committee reviews the results of, and the suggestions provided in connection with, the Company's annual audit by its independent public accountants; reviews internal audit and other accounting procedures established by management; and considers the scope of the audit and non-audit services provided by the Company's independent public accountants, including the fees charged for those services. The committee's members are Messrs. Hardin, Toups and Nashman. The Audit Committee held one meeting in Fiscal Year 1998. Compensation and Incentive Committee. The Compensation and Incentive Committee advises the Board of Directors with respect to compensation levels and the issuance of stock options to key employees of the Company. The committee members are Messrs. Scurlock, Grover, and Toups. During the year ended March 31, 1998, the committee held two meetings. Nominating Committee. The Nominating Committee was created by the Board of Directors on May 21, 1993, for the purpose of considering individuals to be nominated for election to the Board of Directors. Selections are presented to the Board for inclusion in the slate of management nominees submitted to the shareholders for election. The committee members are Messrs. Hardin, Grover, and Scurlock. During the year ended March 31, 1998, the committee held one meeting. PRINCIPAL SHAREHOLDERS AND DIRECTORS The following table sets forth as of June 16, 1998 (1) the number of shares of the Company's common stock owned beneficially by each person who owned of record, or is known by the Company to have owned beneficially, more than 5% of such shares then outstanding (2) the number of shares owned by each director of the Company and (3) the number of shares owned beneficially by all officers and directors as a group. Information as to the beneficial ownership is based upon statements furnished to the Company by such persons.
Name of Amount and Nature of Beneficial Owner Beneficial Ownership Percent Research Industries Incorporated (1)(3)(4)(6) 660,300 32.8 123 North Pitt Street Alexandria, Virginia 22314 Howard C. Mills (5) 68,367 3.4 5250 Cherokee Avenue Alexandria, Virginia 22312 Arch C. Scurlock (1)(2) 661,800 32.9 123 North Pitt Street Alexandria, Virginia 22314 John H. Grover (3) 1,500 0.1 123 North Pitt Street Alexandria, Virginia 22314 Clifford M. Hardin 1,500 0.1 10 Roan Lane St. Louis, Missouri 63124 Ernest L. Ruffner (4) 150 0 209 North Patrick Street Alexandria, Virginia 22314 Alvin E. Nashman 4,500 0.2 3609 Ridgeway Terrace Falls Church, VA 22044 John M. Toups 4,500 0.2 1209 Stuart Robeson Drive McLean, Virginia 22101 Thomas L. Mountcastle 32,666 1.6 2215 Tomlynn Street Richmond, VA 23230 Melvin L. Schuler 7,450 0.4 5250 Cherokee Avenue Alexandria, VA 22312 John D. D'Amore 450 0 5250 Cherokee Avenue Alexandria, VA 22312 James L. Sherwood, IV 425 0 5250 Cherokee Avenue Alexandria, VA 22312 Frank J. Ostronic 150 0 5250 Cherokee Avenue Alexandria, VA 22312 Thomas E. Nolan 100 0 5250 Cherokee Avenue Alexandria, VA 22312 James C. Dobrowolski 0 0 5250 Cherokee Avenue Alexandria, VA 22312 All officers and directors as a group (14 persons) (2) 783,558 38.9
(1) Research Industries Incorporated is 93% owned by Arch C. Scurlock, chairman of the Company's Board of Directors. (2) Includes 660,300 shares owned by Research Industries. (3) Mr. Grover is also a 5% owner and director of Research Industries Incorporated. (4) Mr. Ruffner is a director of Research Industries Incorporated. (5) Includes 450 shares held by Mr. Mills' wife. (6) Research Industries Incorporated owns $2 million face amount of Halifax 7% convertible debentures. EXECUTIVE COMPENSATION REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE The overall philosophy regarding compensation of the Company's executive officers continues to be based upon the concept that in order to achieve the Company's objectives of progress, growth and profitability it is necessary to attract and retain qualified executives who are motivated to provide a high level of performance. A vital element in this motivation is to offer an executive compensation program that is not only competitive but rewards those executives whose efforts enable the Company to achieve its goals. To accomplish this objective, the Committee has an established policy whereby a significant segment of an executive's total compensation is related directly to performance resulting in the interest of the Company's executives being in parallel with the interest of its shareholders. The executive compensation program includes three elements which are intended to constitute a flexible and balanced method of establishing total compensation. These are base salary, annual bonus, and stock options. When combined, these elements are intended to provide key executives sufficient motivation and incentives so that their efforts will maximize corporate performance thereby enhancing shareholder value. In accomplishing this objective, the compensation program seeks to balance performance rewards with what is reasonable under the total circumstances including the competitiveness of the executive market place. The primary component of the Company's executive compensation program is base salary. The base salaries of the executive officers are a reflection of the size of the Company, the scope of responsibility of each individual and the extent of experience in their particular position. Reviewed annually, base salaries are related indirectly to the Company's performance and marginally related to the cost of living. The base salary of Howard Mills, the Company's president and chief executive officer since 1984, is largely based on the performance of the Company, both for the fiscal year and since he has been CEO. The other criteria considered to a lessor degree is the annual change in the cost of living. Reflecting the Company's stated compensation policy, in September Mr. Mills base salary was increased by 5 percent to $166,580 effective July 1, 1997. He also participated in the company's 401(k) Plan, to the extent set forth below. The second component of the executive compensation program is an annual bonus determined in accordance with the Company's Profit Sharing Bonus Plan approved annually by the Board of Directors based upon projected profit goals set for each year. The Company creates separate profit pools related to project, division and corporate performance. Employees in the Plan are monetarily rewarded if the profitability of their profit pool meets specified threshold goals, and further rewarded for exceeding these goals based upon a fixed formula. The final component of the executive compensation program is a Key Employee Stock Option Plan ("Plan") which was adopted and approved by the Company's shareholders at the 1994 annual meeting and is for the benefit of the Company's key employees, including officers, who meet certain criteria. The purpose of the Plan is to attract, motivate, and retain those highly competent individuals upon whose judgment, initiative, and leadership, the continued success of the Company depends. The Plan is administered by a committee of three members of the Board of Directors who are not eligible to participate in the Plan. Subject to the provisions of the Plan, the Committee has sole discretion and authority to determine from among eligible employees those to whom and time or times at which, options may be granted, the numbers of shares of Common Stock to be subject to each option, and the type of option to be granted. No member of the Compensation and Incentive Committee is a former or current officer or employee of the Company or any of its subsidiaries. Arch C. Scurlock John M. Toups John H. Grover SUMMARY COMPENSATION TABLE The following table sets forth information on compensation paid in fiscal year 1998 and the two prior fiscal years to the Company's Chief Executive Officer and the Company's seven other executive officers whose income exceeded $100,000.
SUMMARY COMPENSATION TABLE Annual Long Term Compensatio Compensation n Awards Payouts Other Annual Restri All Other Salary Bonus Compen- cted Options LTIP Compen-sation sation Stock SARs payouts Awards Year ($) ($) ($) (1) ($) (#) ($) ($) Howard C. 1998 164,417 none 4,119 none none none 3,227(2) Mills(6) CEO/President 1997 160,804 43,200 4,323 none 7,200 none 3,135(2) 1996 149,925 28,336 5,623 none 7,200 none 2,999(2) James L. 1998 106,156 none none none none none 2,136(2) Sherwood IV 1997 101,550 14,400 none none 3,000 none 2,013(2) 1996 96,785 13,970 none none 1,800 none 5,284(3) James C. 1998 112,390 17,950 none none none none 2,607(2) Dobrowolski 1997 113,549 28,430 none none 6,375 none 6,117(3) 1996 96,940 13,627 2,400 none 3,600 none 599(2) Melvin L. 1998 103,650 54,096 none none none none 3,345(2) Schuler 1997 97,786 57,670 none none 4,500 none 1,956(2) 1996 89,733 19,712 none none 1,500 none 1,794(2) Thomas L. 1998 129,996 none none none none none 2,700(2) Mountcastle 1997 127,497 none none none 13,500 none 1,200(2) Thomas E. 1998 111,177 8,439 none none none none 2,399(5) Nolan 1997 107,623 none none none 6,375 none 13,768(4) John D. 1998 102,412 none none none 4,000 none 2,050(2) D'Amore Frank J. 1998 110,240 none none none 5,000 none 1,823(2) Ostronic
(1) Value of Company furnished auto. (2) Amounts contributed to officer under 401(k) plan. (3) Amounts contributed to officer under 401(k) plan and paid vacation. (4) Amounts contributed to officer under 401(k) plan and living expenses. (5) Amount contributed to officer under 401(k) plan and Health Club. (6) The Company entered into an Executive Severance Agreement ("Agreement") with Mr. Mills in recognition of his position of high responsibility and the substantial contributions he has made to the Company over many years. The Agreement provides benefits under certain circumstances including a change in control of the Company and is automatically renewed from year to year. It confirms that employment is at will and provides for termination without additional compensation in the event of death, resignation, retirement or for cause. Except in connection with a change of control, termination for any other reason results in compensation equal to eighteen (18) months salary. In the event of termination within one (1) year after a change in control or in the event Mr. Mills resigns or retires during the first ninety (90) days after a change in control, he would receive compensation equal to thirty-six (36) months salary subject to statutory limitations. Director Compensation Directors who are not officers of the Company receive an annual fee of $1,000. During the fiscal year ended March 31, 1998 Directors also received $2,000 and reimbursement of expenses incurred for each meeting of the Board of Directors which they attended. Alvin Nashman receives $2,000 per month for consulting services provided the Company. The following two tables present further details on stock options: OPTION/SAR GRANTS IN LAST FISCAL YEAR
Name Potential Realizable Value at Percent Total Assurred Annual Rates of Stock Options/SARs Granted Exercise Price Appreciation for Option Options/SARs to Employees in or Base Expiration Term(1) Granted Fiscal Year Price(S) Date 5%(S) 10%(S) John D. D'Amore 4,000 44.4 7.56 5/16/02 8,355 18,462 Vice President Frank Ostronic 5,000 55.6 7.56 5/16/02 10,443 23,077 Vice President
(1) Discloses the potential realizable value assuming that the market price of the underlying security appreciates at annualized rates of 5 and 10 percent over the term of the award. AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES OF UNEXERCISED OPTIONS/SARs
Shares Number of Unexercised Value ofUnexercised In-The- Acquired on Value Options at Year-End Money Options at Year-end(s) Name Exercise (#) Realized(S) Exercisable Unexercisable Exercise Unexercisable(1) Howard C. Mills 3,000 12,750 7,200 21,600 32,976 87,264 President/CEO James L. 900 3,825 2,700 7,500 12,366 29,682 Sherwood, IV Vice President Melvin L. 3,600 9,000 16,191 34,385 Schuler Vice President James 1,500 6,375 2,700 12,675 12,366 48,199 Dobrowolski Vice President Thomas Nolan --- --- --- 7,875 --- 26,927 Vice President Thomas --- --- --- 13,500 --- 53,100 Mountcastle Vice President John D. D'Amore 7,750 --- 18,478 Vice President Francis J. 5,000 --- 8,450 Ostronic
(1) Based on the fair market value of the Common Stock on March 31, 1998, of $9.25 less the option exercised price. PERFORMANCE GRAPH--SHAREHOLDERS RETURN Set forth below is a graph comparing the cumulative return of Halifax Corporation, the Standard & Poor's ("S&P") 500 Composite Stock Index ("S&P 500") and the Technology Sector Composite Index compiled by S&P. The graph assumes a $100 initial investment on March 31, 1993 and a reinvestment of dividends in Halifax Corporation and each of the companies reported in the indices through March 31, 1998 (the end of the Company's fiscal year). COMPARISON OF FIVE CUMULATIVE TOTAL RETURN* Among Halifax Corporation, The S&P 500 Index, and the S&P Technology Sector Index
Years Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Halifax Corporation -HX 100 117 102 107 271 222 S&P 500 -1500 100 101 117 155 186 275 S&P Technology Sector -IHTC 100 118 149 201 272 411
*$100 Invested on March, 1993 In Stock or Index- including Reinvestment of Dividends. Fiscal Year Ending March 31. TRANSACTIONS WITH MANAGEMENT On May 1, 1986, Ernest L. Ruffner, a director of the Company, joined the law firm of Pompan, Murray, Ruffner & Werfel. Jacob Pompan of that firm has represented Halifax in its government contract affairs since 1984. During the fiscal year ended March 31, 1998, the firm received fees of $9,095 from the Company. In addition, Mr. Ruffner, as General Counsel, receives $5,500 per month retainer from the Company. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has appointed the firm of Ernst & Young, independent accountants, subject to the ratification of such appointment by the Shareholders, to serve as independent accountants for the Company and its subsidiaries for the year ending March 31, 1999. This year's financial statements were audited by Ernst & Young who replaced Grant Thornton on September 16, 1994. The change was made by recommendation of the Audit committee. The company is advised that no member of Ernst & Young has any direct or indirect interest in the Company or any of its subsidiaries or has had, since its appointment, any connection with the Company or any of its subsidiaries in the capacity of promoter, underwriter, voting trustee, director, officer or employee. Representatives of Ernst & Young will be invited to the annual meeting and, if present, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK AND TO AUTHORIZE PREFERRED STOCK On July 10, 1998, the Board of Directors approved a proposal to amend Halifax's Articles of Incorporation to increase the number of authorized shares of Common Stock from 4,500,000 shares to 6,000,000 and to authorize 1,500,000 shares of preferred stock and further decreed that the proposal be submitted to the shareholders with the recommendation that the amendment be approved. The text of the proposed amendment is set forth in the Appendix to this Proxy Statement. At this time, the Company has no present plans, understandings, or agreements for the issuance or use of the proposed additional shares of Common Stock or the newly authorized Preferred Stock. Nevertheless, the Board of Directors believes that the proposal is desirable so that, as the need may arise, the Company will have more financial flexibility and be able to issue shares of Common or Preferred Stock, without the expense and delay of a special shareholders' meeting, in connection with future opportunities for expanding the business through investments or acquisitions, possible stock splits or stock dividends, equity financing, management incentive and employee benefit plans, and for other purposes. Authorized but unissued shares of the Company's Common and Preferred Stock may be issued at such times, for such purposes and for such consideration as the Board of Directors may determine to be appropriate without further authority from the Company's shareholders, except as otherwise required by applicable corporate law or stock exchange policies. The Company's authorized but unissued Preferred Stock may be issued with such rights, preferences, and limitations as the Board of Directors may determine subject to applicable corporate law. APPROVAL OF AMENDMENT OF THE COMPANY'S 1994 KEY EMPLOYEE STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE At the present time the Company's 1994 Key Employee Stock Option Plan ("Plan") as approved by the shareholders authorizes the issuance of 180,000 shares of Common Stock (adjusted to reflect prior 3 for 2 stock split) to key employees. To date the Company has granted options for 136,800 shares of stock pursuant to the Plan leaving a total of 43,200 shares available under the Plan for future grants. The Plan expires September 15, 2004. The Board of Directors believes strongly that it is essential to incentivize key employees by insuring they have a direct interest in the overall success of the Company. A principal means of doing this is to encourage ownership of corporate stock which can be realized on an advantageous basis through stock options. In this regard, the Company intends to continue with an aggressive stock option program to hold and recruit individuals valuable to the organization. In order to be able to carry out its objectives throughout the remaining six (6) years of the Plan, the Board of Directors recommends that the shareholders approve an amendment to the Plan, at this time, which will add 100,000 shares of Common Stock to the present number of shares issuable. SHAREHOLDERS' PROPOSALS Any proposal which a shareholder wishes to have presented at the next annual meeting of shareholders should be sent to the Secretary of the Company at 5250 Cherokee Avenue, Alexandria, Virginia 22312, and must be received not later than the close of business on April 1, 1999. Material filed with the Company in a timely manner will be considered, pursuant to the requirements of all applicable laws and regulations, for inclusion the Company's 1999 proxy materials for such annual meeting. TRANSFER AGENT AND REGISTRAR The American Stock Transfer & Trust Company, is the Company's transfer agent and registrar. OTHER MATTERS As of the date of this Proxy Statement, the Board of Directors knows of no additional matters to be presented for vote of the shareholders at the Annual Meeting, nor has it been advised that others will present any other matters. Should any matters be properly presented at the Annual Meeting for a vote of the shareholders, the proxies will be voted in accordance with the best judgment of the proxy holder. By Order of the Board of Directors Ernest L. Ruffner Secretary For a menu of Halifax Corporation news releases available by fax 24 hours (no charge) or to retrieve a specific release, please call 1-800-758- 5804, ext. 391950, or access the address http://www.prnewswire.com on the Internet. APPENDIX Article III of the Corporation's Articles of Incorporation is proposed to be amended as follows: ARTICLE III A. The total number of shares of stock of all classes that the Corporation has authority to issue is 7,500,000, consisting of 6,000,000 shares of common stock, $0.24 par value per share (the "Common Stock"), and 1,500,000 shares of preferred stock without nominal or par value (the "Preferred Stock"). B. The Preferred Stock may be issued from time to time in one or more series. C. The Board of Directors of the Corporation is authorized to fix, in whole or in part, the preferences, limitations and relative rights, within the limits set forth in the Code of Virginia, on any wholly unissued class of Preferred Stock by the adoption of an amendment of the Articles of Incorporation as provided for in the relevant provisions of the Code of Virginia. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4. The undersigned acknowledges receipt with this Proxy a copy of the Proxy Statement for the Annual Meeting of Shareholders to be held September 18, 1998. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. PLEASE CHECK IF YOU INTEND TO BE PRESENT AT THE MEETING. IMPORTANT: Please date this proxy and sign exactly as your name(s) appear in the Company records. If shares held jointly, signatures should include both names. Executors, administrators, trustees, guardians, and others, signing in a representative capacity, please give full title. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign partnership name by authorized person. Dated: , 1998 Signature of Shareholder Signature, if held jointly PROXY HALIFAX CORPORATION PROXY 5250 Cherokee Avenue Alexandria, Virginia 22312 Annual Meeting of Shareholders to be held September 18, 1998 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Ernest L. Ruffner and Richard J. Smithson or either of them, proxies and attorneys in fact with full power of substitution to represent and to vote for the undersigned all shares of Common Stock, $0.24 par value, of Halifax Corporation that the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of Halifax Corporation to be held on September 18, 1998, and at any adjournment thereof. 1. Election of Directors: FOR ALL NOMINEES listed below WITHHOLD AUTHORITY (except as marked on the contrary below) to vote for all nominees listed below INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name in the list below. Arch C. Scurlock Howard C. Mills Clifford M. Hardin John H. Grover Ernest L. Ruffner John M. Toups Alvin E. Nashman 2. Proposal to ratify Ernst & Young as Independent Public Accountants of the Company. FOR AGAINST ABSTAIN 3. Amendment of Articles of Incorporation to increase authorized common stock and to authorize preferred stock. FOR AGAINST ABSTAIN 4. Approval of amendment of the Company's "1994 Key Employee Stock Option Plan" to increase the number of shares issuable from 180,000 to 280,000. FOR AGAINST ABSTAIN 5. In their discretion, upon such other matters as properly may come before the meeting. -----END PRIVACY-ENHANCED MESSAGE-----