SRA INTERNATIONAL, INC.
4300 FAIR
LAKES COURT
FAIRFAX, VA 22033
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON OCTOBER 23, 2007
The Annual
Meeting of Stockholders of SRA International, Inc., or SRA, will be held at the
Hilton McLean Tysons Corner, 7920 Jones Branch Drive, McLean, Virginia 22102 on
Tuesday, October 23, 2007 at 9:30 a.m., local time, to consider and act upon the
following matters:
1.
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To elect four Class III directors
to serve until the 2010 Annual Meeting of Stockholders and until their
successors are duly elected and qualified.
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2.
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To ratify the selection by the
Audit and Finance Committee of Deloitte & Touche LLP as our
independent registered public accounting firm for the fiscal year ending
June 30, 2008.
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3.
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To approve the material terms of
our senior officer performance goals.
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4.
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To transact such other business
as may properly come before the meeting or any adjournment
thereof.
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Stockholders
of record at the close of business on September 10, 2007 will be entitled to
notice of and to vote at the meeting or any adjournment thereof.
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By Order of the Board of Directors,
Stephen C. Hughes, Secretary
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Fairfax, Virginia
September 27, 2007
WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
SRA INTERNATIONAL, INC.
4300 FAIR
LAKES COURT
FAIRFAX, VA 22033
PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, OCTOBER 23, 2007
This Proxy
Statement is furnished in connection with the solicitation of proxies by the
Board of Directors of SRA International, Inc., or SRA, for use at our annual
meeting of stockholders to be held on Tuesday, October 23, 2007, and at any
adjournment of that meeting. All executed proxies will be voted in accordance
with the stockholders instructions, and if no choice is specified, executed
proxies will be voted in favor of the matters set forth in the accompanying
notice of meeting. Any proxy may be revoked by a stockholder at any time before
its exercise by delivery of written revocation or a subsequently dated proxy to
our Secretary or by voting in person at the annual meeting.
On September
10, 2007, the record date for the determination of stockholders entitled to vote
at the annual meeting, there were outstanding and entitled to vote an aggregate
of 43,682,019 shares of class A common stock, $0.004 par value per share, and
14,199,828 shares of class B common stock, $0.004 par value per share, which
constitutes all of our voting stock, and which we collectively call the common
stock. Holders of class A common stock are entitled to one vote per share and
holders of class B common stock are entitled to ten votes per share. Holders of
class A common stock and holders of class B common stock vote together as a
single class on all matters presented to the stockholders for their vote or
approval, except as may otherwise be required by Delaware law.
Our annual
report to stockholders, including our annual Report on Form 10-K, for the year
ended June 30, 2007 is being distributed to stockholders, together with these
proxy materials, on or about September 27, 2007.
VOTES REQUIRED
The holders
of shares of common stock representing a majority of the votes entitled to be
cast at the annual meeting will constitute a quorum for the transaction of
business at the annual meeting. Shares of common stock represented in person or
by proxy (including shares which abstain or do not vote with respect to one or
more of the matters presented for stockholder approval) will be counted for
purposes of determining whether a quorum is present at the annual meeting.
The
affirmative vote of a plurality of the votes cast by stockholders entitled to
vote on the matter is required for the election of directors. The affirmative
vote of a majority of the shares of common stock voting on the matter is
required to ratify the selection by the Audit and Finance Committee of Deloitte
& Touche LLP as our independent registered public accounting firm for the
fiscal year ending June 30, 2008 and to approve the material terms of our senior
officer performance goals.
Shares which
abstain from voting as to a particular matter, and shares held in street name
by brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter, will not
be counted as votes in favor of such matter, and will also not be counted as
shares voting on such matter. Accordingly, abstentions and broker non-votes
will have no effect on the voting on the matters.
HOUSEHOLDING OF PROXY MATERIALS
Some banks,
brokers and other nominee record holders may be participating in the practice of
householding proxy statements and annual reports. This means that only one
copy of this proxy statement and our annual report to stockholders may have been
sent to multiple stockholders in your household. We will promptly deliver a
separate copy of either document to you if you call or write us at the following
address or phone number: SRA International, Inc., 4300 Fair Lakes Court,
Fairfax, Virginia 22033, phone: (703) 803-1500, Attention: Mr. David Keffer,
Vice President and Director, Investor Relations. If you want to receive separate
copies of our annual report and proxy statement in the future, or if you are
receiving multiple copies and would like to receive only one copy for your
household, you should contact your bank, broker or other nominee record holder,
or you may contact us using the above address and phone number.
2
BENEFICIAL OWNERSHIP OF COMMON STOCK
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 10, 2007 by (i) each person or
entity who is known by us to be the beneficial owner of more than 5% of the
outstanding shares of class A common stock or class B common stock, (ii) each
director or nominee for director, (iii) each of the current executive officers
named in the Summary Compensation Table section of this proxy statement and (iv)
all directors and executive officers as a group. Unless otherwise indicated,
each person or entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect to all shares
of common stock listed as owned by such person or entity.
Unless
otherwise indicated, the address of each person is c/o SRA International, Inc.,
4300 Fair Lakes Court, Fairfax, VA 22033.
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Number of
Shares
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Percentage of
Class
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Beneficia
lly
Owned(1)
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Owned
(%)
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Percentage
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Class
A
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Class
B
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Class
A
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Class
B
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of
Total
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Common
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Common
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Common
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Common
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Voting
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Name of Beneficial Owner
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Stock
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Stock
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Stock
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Stock
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Power
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Stanton D. Sloane
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125,000
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*
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%
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%
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*
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%
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Stephen C. Hughes
(2)
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321,180
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*
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*
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Barry S. Landew (3)
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801,856
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1.8
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*
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Ernst Volgenau
(4)
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112,768
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12,050,736
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*
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84.9
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65.0
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John W. Barter (5)
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42,655
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*
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*
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Renato A. DiPentima
(6)
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445,403
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1.0
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*
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Larry R. Ellis (7)
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4,479
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*
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*
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Miles R. Gilburne
(8)
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39,455
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*
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*
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Michael R. Klein (9)
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61,475
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*
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*
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David H. Langstaff
(10)
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101,012
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*
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*
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Delbert C. Staley (11)
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62,655
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*
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*
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Gail R. Wilensky
(12)
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10,000
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*
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*
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All
directors and executive officers
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as a group (12 persons) (13)
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2,127,938
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12,050,736
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4.7
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84.9
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65.6
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William K. Brehm
(14)
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11,742
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2,149,092
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*
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15.1
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11.6
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FMR
Corp. (15)
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6,146,871
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14.1
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3.3
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Eminence Capital,
LLC (16)
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4,100,000
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9.4
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2.2
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Neuberger Berman, LLC (17)
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2,300,570
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5.3
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1.2
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Munder Capital
Management (18)
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2,337,238
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5.4
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1.3
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Wasatch Advisors, Inc. (19)
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2,395,395
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5.5
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1.3
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____________________
*
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Less than 1%.
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(1)
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The number of shares beneficially
owned by each stockholder is determined under rules promulgated by the
Securities and Exchange Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual
or entity has sole or shared voting power or investment power and any
shares as to which the individual or entity has the right to acquire
beneficial ownership within 60 days after September 10, 2007 through the
exercise of any stock option, warrant or other right. The inclusion herein
of such shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of such
shares.
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(2)
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Includes 248,395 shares of class
A common stock issuable upon exercise of options and 800 shares of class A
common stock held by children of Mr. Hughes.
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(3)
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Includes 313,667 shares of class
A common stock issuable upon exercise of options, and 414,234 shares of
class A common stock pledged as security for a loan with a total amount
repayable of $2,548,606 as of our September 10, 2007 record date. The
principal amount of this loan was used to pay income tax withholding
related to a February 2007 stock option exercise.
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(4)
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Includes 5,150 shares of class A
common stock issuable upon exercise of options. Also includes 1,200,000
shares of class B common stock held by a grantor retained annuity trust,
of which Dr. Volgenaus wife is the trustee.
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3
(5)
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Includes 40,675 shares of class A
common stock issuable upon exercise of options.
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(6)
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Includes 404,454 shares of class
A common stock issuable upon exercise of options.
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(7)
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Includes of 1,829 shares of class
A common stock issuable upon exercise of options.
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(8)
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Includes 30,000 shares of class A
common stock issuable upon exercise of options.
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(9)
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Includes 59,495 shares of class A
common stock issuable upon exercise of options.
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(10)
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Includes 100,000 shares of class
A common stock issuable upon exercise of options.
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(11)
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Includes 20,675 shares of class A
common stock issuable upon exercise of options.
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(12)
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Consists of 10,000 shares of
class A common stock issuable upon exercise of options.
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(13)
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Includes 1,234,340 shares of
class A common stock issuable upon exercise of options described in notes
(2), (3), (4), (5), (6), (7), (8), (9), (10), (11), and (12) above and
1,200,000 shares of class B common stock held in the grantor retained
annuity trust described in note (4) above.
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(14)
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Includes 8,134 shares of class A
common stock issuable upon exercise of options.
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(15)
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Based solely upon a Schedule
13G/A filed by FMR Corp. on February 14, 2007. The address for FMR Corp.
provided in such Schedule 13G/A is 82 Devonshire Street, Boston, MA
02109.
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(16)
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Based solely upon a Schedule 13G
filed by Eminence Capital, LLC on March 8, 2007. The address for Eminence
Capital LLC provided in such Schedule 13G is 65 East 55
th
Street, 25
th
Floor, New York, NY 10022.
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(17)
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Based solely upon a Schedule
13G/A filed by Neuberger Berman, LLC on February 13, 2007. The address for
Neuberger Berman, LLC provided in such Schedule 13G/A is 605 Third Avenue,
New York, NY 10158.
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(18)
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Based solely upon a schedule 13G
filed by Munder Capital Management on February 12, 2007. The address for
Munder Capital Management provided in such Schedule 13G is 480 Pierce
Street, Birmingham, MI 48009.
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(19)
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Based solely upon a schedule 13G
filed by Wasatch Advisors, Inc. on February 14, 2007. The address for
Wasatch Advisors, Inc. provided in such Schedule 13G is 150 Social Hall
Avenue, Salt Lake City, UT 84111.
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4
PROPOSAL 1ELECTION OF
DIRECTORS
Our Amended
and Restated Certificate of Incorporation provides that the Board of Directors
is classified into three classes, designated as Class I directors, Class II
directors, and Class III directors, with members of each class holding office
for staggered three-year terms. There are currently four Class I directors,
whose terms expire at the 2008 annual meeting of stockholders, two Class II
directors, whose terms expire at the 2009 annual meeting of stockholders, and
four Class III directors, whose terms expire at the 2007 annual meeting of
stockholders, in all cases subject to the election and qualification of their
successors and to their earlier death, resignation, or removal.
The persons
named in the enclosed proxy will vote to elect as Class III directors the four
nominees named below, unless authority to vote for the election of any or all of
the nominees is withheld by marking the proxy to that effect. All four of the
nominees, Messrs. DiPentima, Klein, Langstaff and Volgenau, are presently Class
III directors. All of the nominees have indicated their willingness to serve, if
elected, but if any should be unable or unwilling to serve, proxies may be voted
for a substitute nominee designated by the Board of Directors. Each Class III
director will be elected to hold office until the 2010 annual meeting of
stockholders, subject to the election and qualification of his successor and to
his earlier death, resignation, or removal.
There are no
family relationships between or among any of our directors, executive officers
or persons nominated or chosen to become a director or executive officer.
NOMINATION OF CLASS III DIRECTORS
Set forth
below, for each nominee for Class III director, are name, age as of September
10, 2007, positions with SRA, principal occupation and business experience
during the past five years, and the year of the commencement of their term as a
director of SRA:
RENATO A.
DIPENTIMA is 66 years old and has served on our Board of Directors since
December 2005. He served as chief executive officer from January 2005 to April
2007, and as president from October 2003 to April 2007. From October 2003 to
January 2005 he served as chief operating officer. He was senior vice president
and president of our consulting and systems integration division since we formed
it in January 2001. From July 1997 to January 2001, he served as president of
the government sector, overseeing government business, projects, and contracts.
From July 1995 to July 1997, Dr. DiPentima served as vice president and as our
chief information officer. Prior to joining SRA, Dr. DiPentima held several
senior management positions in the federal government, including serving as
deputy commissioner for systems at the Social Security Administration from May
1990 to June 1995.
MICHAEL R.
KLEIN is 65 years old and has served on our Board of Directors since December
1998. He was a partner of the law firm Wilmer Cutler Pickering Hale and Dorr LLP
from 1974 through 2005. Mr. Klein co-founded and currently serves as chairman of
the board of directors of CoStar Group, Inc., a provider of electronic
commercial real estate information, and serves as vice chairman of Perini
Corporation, a civil engineering and building construction company.
DAVID H.
LANGSTAFF is 53 years old and has served on our Board of Directors since
February 2004. Mr. Langstaff has served as chief executive officer and
co-chairman of The Olive Group, a global integrated security company, since
August 2006. From September 2004 to June 2005, Mr. Langstaff was a part-time
employee of SRA, assisting the Board on strategic matters. He was the president,
chief executive officer, and director of Veridian Corporation, an advanced
technology company, since its formation in 1997 until its sale in August 2003,
and served as chief financial officer, chief operating officer and chief
executive officer of predecessor companies since 1984. Mr. Langstaff serves as a
seminar moderator with the Aspen Institute, a global forum which brings together
leaders from industry, government and various organizations, and on the board of
directors of the Information Technology Association of America, Potomac School,
BlackRock Center for the Arts and other non-profit organizations, and is Trustee
of the Committee for Economic Development.
ERNST
VOLGENAU, our founder, is 74 years old and has served as the Chairman of our
Board of Directors since October 2003. Dr. Volgenau led us as president or chief
executive officer from our founding in July 1978 until January 2005. From 1976
to 1978, he served as the director of inspection and enforcement for the U.S.
Nuclear Regulatory Commission. Dr. Volgenau retired from active duty with the
U.S. Air Force as Colonel in 1976. His military service included positions in
the Office of the Secretary of Defense, as director of data automation for the
Air Force Logistics Command, and various assignments involving aerospace
research and development.
5
Board Recommendation
The Board of Directors recommends a
vote FOR the election of the nominees named above.
INCUMBENT DIRECTORS
Set forth
below, for each incumbent director, are name, age as of September 10, 2007,
positions with SRA, principal occupation and business experience during the past
five years and the year of the commencement of their term as a director of SRA:
Incumbent Class I
Directors
JOHN W.
BARTER is 60 years old and has served on our Board of Directors since April
2003. From 1988 to 1994, he was senior vice president and chief financial
officer of AlliedSignal, Inc., now known as Honeywell International, Inc., an
advanced technology and manufacturing company. From October 1994 until his
retirement in December 1997, Mr. Barter was executive vice president of
AlliedSignal, Inc. and president of AlliedSignal Automotive. After retiring from
AlliedSignal, Inc., Mr. Barter served from January 2000 to May 2001 as chief
financial officer of Kestrel Solutions, Inc., a privately-owned early stage
company established to develop and bring to market a new product in the
telecommunications industry. Kestrel filed a voluntary petition for bankruptcy
protection in October 2002. Mr. Barter serves on the board of directors of
Genpact Limited, a global business process outsourcing company and Dice
Holdings, Inc., a global online job posting firm, as well as Lenovo Group
Limited, a Hong Kong listed company that manufactures and markets personal
computers.
LARRY R.
ELLIS is 61 years old and has served on our Board of Directors since September
2006. General Ellis served in the Army for over 35 years, holding positions of
increasing responsibility before retiring as Commanding General of the United
States Army Forces Command in July 2004. General Ellis joined the board of
directors of DHB Industries, Inc. in early December 2004, became president in
2005, and assumed the role of chief executive officer in July 2006. He also
serves on the board of directors of the Armed Forces Benefit Association and
UNITECH.
MILES R.
GILBURNE is 56 years old and has served on our Board of Directors since December
2003. Mr. Gilburne serves as a managing member of ZG Ventures, LLC, a venture
capital firm. Mr. Gilburne served as senior vice president of corporate
development for America Online, Inc., or AOL, from 1994 until December 1999. In
1999, he was elected to the board of directors of AOL and continued to serve on
the board of Time Warner, Inc. until stepping down in May 2006. He is
co-chairman of the board of ePals, Inc., a global online learning company. He
also serves on the board of directors of Pharmacyclics, Inc., a drug discovery
company, Revolution Health Group, a privately held company focused on consumer
directed health care, the Foundation for the National Institutes of Health, Maui
Land and Pineapple, a real estate and agriculture company, ClearSpring
Technologies, Inc., a Web 2.0 software company and iSkoot, a telephone
technology company.
GAIL R.
WILENSKY is 64 years old and has served on our Board of Directors since December
2005. Dr. Wilensky is an economist and a senior fellow at Project HOPE, an
international health foundation. Dr. Wilensky is a commissioner on the World
Health Organization Commission on the Social Determinants of Health. She is an
elected member of the Institute of Medicine, or IOM, and is on its Governing
Council; IOM is part of The National Academies of Science and Engineering. Dr.
Wilensky is also vice chair of the Maryland Health Care Commission, and a
trustee of the Combined Benefits Fund of the United Mineworkers of America, the
American Heart Association, and the National Opinion Research Center. She is an
advisor to the Robert Wood Johnson Foundation and the Commonwealth Fund and past
chair of the board of directors of Academy Health. From 1990 to 1992, Dr.
Wilensky was the administrator of the Health Care Financing Administration,
directing the Medicare and Medicaid programs. From 1992 to 1993, she served as
deputy assistant to President Bush for Policy Development. From 1997 to 2001,
she chaired the Medicare Payment Advisory Commission, which advises Congress on
payment and other issues relating to Medicare; and from 1995 to 1997, she
chaired the Physician Payment Review Commission. From 2001 to 2003, she
co-chaired the Presidents Task Force to Improve Health Care Delivery for Our
Nations Veterans, which included health care for both veterans and military
retirees.
6
Incumbent Class II
Directors
STANTON D.
SLOANE is 57 years old and has served on our Board of Directors since August
2007. Dr. Sloane was appointed our president and chief executive officer in
April 2007. Prior to joining SRA, Dr. Sloane was executive vice president of
Lockheed Martins Integrated Systems & Solutions from June 2004 until April
2007. Dr. Sloane began his career with General Electric Aerospace in 1984 and
progressed through engineering, program management, and business development
assignments in a variety of GE Aerospace and subsequently Lockheed Martin
businesses. He also served as an officer in the U.S. Navy from May 1976 until
August 1981.
DELBERT C.
STALEY is 82 years old and has served on our Board of Directors since October
1996. Mr. Staley served as chairman and chief executive officer of NYNEX
Corporation, a telecommunications company that later merged with Bell Atlantic
and became Verizon, from 1983 until his retirement in 1989. Mr. Staley has also
served on the board of directors of Bank of New York, Allied Signal, John
Hancock, Digital Equipment Corporation, Dean Foods, and Ball Corporation.
CORPORATE GOVERNANCE
Our Board of
Directors has long believed that good corporate governance is important to
ensure that SRA is managed for the long-term benefit of stockholders. Over the
past several years, our Board of Directors has reviewed its governance practices
in light of the Sarbanes-Oxley Act of 2002, new SEC rules and regulations and
the listing standards of the New York Stock Exchange, or NYSE. This section
describes key corporate governance guidelines and practices that SRA has
adopted. Complete copies of the governance policies, committee charters and
codes of conduct described below are available on our website at www.sra.com.
Alternatively, you can request a copy of any of these documents by writing to
our Corporate Secretary.
Governance Policies of
the Board of Directors
The Board
has adopted governance policies to assist in the exercise of its duties and
responsibilities and to serve the best interests of SRA and its stockholders.
These policies, which provide a framework for the conduct of the Boards
business, provide that:
-
the principal responsibility of the directors is
to oversee the management of our company;
-
a majority of the members of the Board shall be
independent directors;
-
the non-management directors shall meet regularly
in executive session;
-
directors have full and free access to management
and, as necessary and appropriate, independent advisors;
-
new directors participate in an orientation
program and all directors are expected to participate in continuing director
education on an ongoing basis; and
-
at least annually, the Board and its committees
will conduct a self-evaluation to determine whether they are functioning
effectively.
Board Determination of
Independence
Under NYSE
rules, a director of SRA will only qualify as independent if our Board of
Directors affirmatively determines that he or she has no material relationship
with us (either directly or as a partner, shareholder or officer of an
organization that has a material relationship with our company). The Board of
Directors has established guidelines to assist it in determining whether a
director has a material relationship. Under these guidelines, a director is
considered to have a material relationship with us if he or she is not
independent under Section 303A.02(b) of the NYSE Listed Company Manual or he or
she:
-
is an executive officer of another company that
does business with us and the annual sales to, or purchases from, us account
for more than $1 million or two percent, whichever is greater, of the annual
consolidated gross revenues of the company he or she serves as an executive
officer;
7
-
is an executive officer of another company which
is indebted to us, or to which we are indebted, and the total amount of either
companys indebtedness to the other is more than one percent of the total
consolidated assets of the company he or she serves as an executive officer;
or
-
serves as an officer, director or trustee of a
charitable organization and our discretionary charitable contributions to the
organization are more than the greater of $1 million or two percent of that
organizations total annual charitable receipts.
Ownership of
a significant amount of our stock, by itself, does not constitute a material
relationship.
For
relationships not covered by the guidelines set forth above, the determination
of whether a material relationship exists is made by the other members of the
Board of Directors who are independent.
Our Board of
Directors has determined that none of John W. Barter, Larry R. Ellis, Miles R.
Gilburne, Michael R. Klein, Delbert C. Staley or Gail R. Wilensky has a material
relationship with SRA and that each of these directors is independent as
determined under Section 303A.02(b) of the NYSE Listed Company Manual. In
determining the independence of these directors, the Board considered each of
the transactions discussed in the Certain Relationships and Related
Transactions section of this proxy statement below.
Board Meetings and
Attendance
The Board
met seven times during fiscal 2007, consisting of four two-day meetings and
three teleconference meetings. During fiscal 2007, each director attended at
least 85% of the number of Board meetings and the number of meetings held by all
committees on which the director then served, during the periods in which the
director so served. Consistent with the requirements of the Boards governance
policies, the Board met in executive session, without the presence of
management, following the conclusion of each regularly scheduled board meeting.
These meetings were chaired by Mr. Staley, who served as the Lead Director
during fiscal 2007.
Director Attendance at
Annual Meeting of Shareholders
The
governance policies of the Board provide that directors are responsible for
attending the annual meeting of stockholders. All directors then serving as
directors of SRA attended the 2006 annual meeting of stockholders on October 27,
2006.
Board Committees
The Board of
Directors has established three standing committeesAudit and Finance,
Compensation and Personnel, and Governanceeach of which operates under a
charter that has been approved by the Board. Current copies of each committees
charter are posted on our website, www.sra.com.
The Board of
Directors has determined that each member of the Audit and Finance, Compensation
and Personnel and Governance committees are independent as defined under the
rules of the NYSE, and in the case of all members of the Audit and Finance
Committee, under the additional independence requirements contemplated by Rule
10A-3 under the Exchange Act.
Audit and Finance
Committee
The Audit and Finance Committees
responsibilities include:
-
appointing, approving the compensation of, and
assessing the independence of our independent registered public accounting
firm;
-
overseeing the work of our independent registered
public accounting firm, including through the receipt and consideration of
certain reports from the independent registered public accounting
firm;
-
reviewing and discussing with management and the
independent registered public accounting firm our annual and quarterly
financial statements and related disclosures;
-
monitoring our internal controls over financial
reporting, disclosure controls and procedures and code of business ethics and
conduct;
8
-
overseeing our internal audit
function;
-
discussing our risk management
policies;
-
establishing policies regarding hiring employees
from the independent registered public accounting
firm and procedures for the receipt and retention of accounting related
complaints and concerns;
-
meeting independently with our internal auditing
staff, independent registered public accounting firm
and management; and
-
preparing the audit and finance committee report
required by SEC rules (which is included on page 29
of this proxy statement).
The Board of
Directors has determined that Mr. Barter is an audit committee financial
expert as defined in Item 407(d)(5) of Regulation S-K.
The members
of the Audit and Finance Committee are Messrs. Barter (Chairman), Gilburne and
Staley. The Audit and Finance Committee met seven times during fiscal 2007.
Compensation and
Personnel Committee
The Compensation and Personnel
Committees responsibilities include:
-
annually reviewing and approving corporate goals
and objectives relevant to CEO compensation;
-
determining the CEOs
compensation;
-
reviewing and approving, or making recommendations
to the Board with respect to, the compensation
of our other executive officers;
-
overseeing an evaluation of our senior executives;
and
-
overseeing and administering our cash and equity
incentive plans.
The
processes and procedures followed by the Compensation and Personnel Committee in
considering and determining executive and director compensation are described
below under the headings Director Compensation and Compensation Discussion
and Analysis.
The members
of the Compensation and Personnel Committee are Mr. Staley (Chairman), General
Ellis and Dr. Wilensky. The Compensation and Personnel Committee is authorized
to designate a subcommittee of its members with the authority to approve stock
option grants and other equity awards to our executive officers. It has also
granted a limited authority to the chairman of our Board of Directors and our
chief executive officer to make equity grants to employees other than executive
officers, subject to an annual grant limit of 20,000 stock options and 5,000
shares per individual and 100,000 options and 25,000 shares in the aggregate.
The Compensation and Personnel Committee met four times during fiscal 2007.
Governance Committee
The Governance Committees
responsibilities include:
-
identifying individuals qualified to become Board
members;
-
recommending to the Board the persons to be
nominated for election as directors;
-
reviewing and making recommendations to the Board
with respect to management succession planning;
-
developing and recommending to the Board
governance policies;
-
reviewing and making recommendations to the Board
with respect to director compensation; and
-
overseeing an annual evaluation of the
Board.
The
processes and procedures followed by the Governance Committee in identifying and
evaluating director candidates are described below under the heading Director
Candidates.
9
The members
of the Governance Committee are Messrs. Klein (Chairman), Barter and Gilburne.
The Governance Committee met one time during fiscal 2007.
Director Candidates
The process
followed by the Governance Committee to identify and evaluate director
candidates includes requests to Board members and others for recommendations,
meetings from time to time to evaluate biographical information and background
material relating to potential candidates and interviews of selected candidates
by members of the Committee and the Board. The Governance Committee may retain
the services of an executive search firm to help identify and evaluate potential
director candidates.
In
considering whether to recommend any particular candidate for inclusion in the
Boards slate of recommended director nominees, the Governance Committee will
apply the criteria set forth in our governance policies. These criteria include
the candidates integrity, business acumen, commitment to understand our
business and industry, experience, conflicts of interest and the ability to act
in the interests of all stockholders. The Governance Committee does not assign
specific weights to particular criteria and no particular criterion is a
prerequisite for each prospective nominee. We believe that the backgrounds and
qualifications of our directors, considered as a group, should provide a
composite mix of experience, knowledge and abilities that will allow the Board
to fulfill its responsibilities.
Stockholders
may recommend individuals to the Governance Committee for consideration as
potential director candidates by submitting their names, together with
appropriate biographical information and background materials and a statement as
to whether the stockholder or group of stockholders making the recommendation
has beneficially owned more than 5% of our common stock for at least a year as
of the date such recommendation is made, to our Secretary at 4300 Fair Lakes
Court, Fairfax, VA 22033, and they will be forwarded to the Governance Committee
members for consideration. Assuming that appropriate biographical and background
material has been provided on a timely basis, the Governance Committee will
evaluate stockholder-recommended candidates by following substantially the same
process, and applying substantially the same criteria, as it follows for
candidates submitted by others.
Stockholders
also have the right under our bylaws to directly nominate director candidates,
without any action or recommendation on the part of the Committee or the Board,
by following the procedures set forth under Stockholder Proposals for 2008
Annual Meeting on page 34 of this Proxy Statement.
Communicating with
Independent Directors
The Board
will give appropriate attention to written communications that are submitted by
stockholders and other interested parties, and will respond if and as
appropriate. The Chairman of the Board (if an independent director), or the Lead
Director (if one is appointed), or otherwise the Chairman of the Governance
Committee, with the assistance of our corporate Secretary, is primarily
responsible for monitoring communications from stockholders and other interested
parties and for providing copies or summaries to the other directors as he or
she considers appropriate. The Chairman of the Board (if an independent
director), or the Lead Director (if one is appointed) also serves as the
presiding director at all executive sessions of the non-management directors. As
the Lead Director during fiscal 2007, Mr. Staley performed these
responsibilities.
Communications are forwarded to all directors if they relate to important
substantive matters and include suggestions or comments that the Chairman of the
Board or the Lead Director considers to be important for the directors to know.
In general, communications relating to corporate governance and long-term
corporate strategy are more likely to be forwarded than communications relating
to ordinary business affairs, personal grievances and matters as to which we
tend to receive repetitive or duplicative communications.
Stockholders
who wish to send communications on any topic to the Board should address such
communications to the Board of Directors c/o Mr. Delbert C. Staley, Lead
Director, SRA International, Inc., 4300 Fair Lakes Court, Fairfax, VA 22033.
10
Codes of Ethics
The Board
has adopted a code of business ethics and conduct that applies to all of our
employees, officers and directors. This code is posted on our website at
www.sra.com. The code requires employees, officers and directors to report any
suspected violations of the code to the appropriate company official(s), or they
may anonymously report any suspected violations to our Business Ethics and
Procurement Fraud Hotline which is hosted by an independent third party.
We have also
adopted a Code of Ethics for Principal Financial Officers that addresses some of
the same issues as the Code of Business Ethics and Conduct, but establishes
specific standards related to financial controls and financial reporting, and
applies to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. Our principal financial officers are expected to adhere to both the
Code of Business Ethics and Conduct and the Code of Ethics for Principal
Financial Officers. We have posted a current copy of the Code of Ethics for
Principal Financial Officers on our website which is located at www.sra.com.
We intend to
post on our website all disclosures that are required by law or NYSE stock
market listing standards concerning any amendments to, or waivers from, any
provision of the codes.
DIRECTOR COMPENSATION
Pursuant to
our compensation plan for non-employee directors, which was developed by the
chairman with supporting analysis from our director of compensation, we pay each
non-employee director $35,000 per year, $2,000 for each board meeting attended,
$2,000 for each committee meeting attended in person, and $1,000 for
teleconference committee meetings. Committee meeting fees are only paid for
meetings held on a date different from a Board meeting. The Audit and Finance
Committee chair is paid an additional annual retainer of $20,000, and all other
committee chairs are paid an additional annual retainer of $10,000.
The Board
formed a temporary CEO Search Committee including Mr. Staley and Mr. Barter from
July 2006 until January 2007, and paid these non-employee director members for
their participation in teleconference and in-person meetings in accordance with
our regular director compensation plan.
Non-employee
directors may elect to receive shares of class A common stock in lieu of their
cash retainer. All shares delivered pursuant to such an election are granted
quarterly under our then-existing stock incentive plan on the third business day
following each quarterly issuance of our earnings. The number of shares granted
is determined using the closing price of our class A common stock as reported on
the New York Stock Exchange on the grant date, rounded to the nearest whole
share.
Non-employee
directors receive a one-time equity grant with an estimated value of $150,000
following their appointment or election to the Board. Each continuing
non-employee director receives an annual equity grant with an estimated value of
$50,000, beginning on the third business day following the issuance of our
earnings release for the fiscal year-end nearest the third anniversary of the
directors initial appointment or election to the Board or the date of the
directors most recent equity grant, whichever is later.
Each equity
grant described above consists in part of nonqualified stock options and in part
of restricted stock, in each case with respect to class A common stock. The
allocation of each equity grant between stock options and restricted stock is
made so that the estimated value attributable to both components is equal. The
estimated value is determined on the grant date in accordance with United States
generally accepted accounting principles and with our practices and
methodologies then in effect. The equity grants are made under our then-existing
stock incentive plan and vest in 25% increments over four years. In the case of
fiscal 2007 stock options granted prior to April 2007, the exercise price was
the average of the high and low trading prices on the New York Stock Exchange of
the class A common stock on the day of grant. Beginning in April 2007, the
exercise price is the closing trading price on the NYSE of our class A common
stock on the day of the grant.
11
The
following table sets forth information regarding the compensation of our
directors in fiscal 2007. Our named executive officers who also served as
directors are not included in this table because they were not separately
compensated for their service as directors.
Director Compensation
|
|
Stock Awards
|
Option
|
|
|
Fees
Earned or
|
($)
|
Awards ($)
|
|
Non-Employee Director
|
Paid in Cash ($)
|
(1)
|
(1)
|
Total ($)
|
John W. Barter
(2)
|
86,667
|
5,636
|
80,406
|
172,709
|
Steven A. Denning
(3)
|
11,500
|
|
12,467
|
23,967
|
Larry R. Ellis
(4)
|
49,167
|
12,163
|
12,420
|
73,750
|
Miles R. Gilburne
(5)
|
61,000
|
|
71,366
|
132,366
|
Michael R. Klein
(6)
|
68,000
|
5,636
|
42,989
|
116,625
|
David H. Langstaff
(7)
|
58,000
|
|
|
58,000
|
Delbert C. Staley
(8)
|
83,667
|
5,636
|
42,989
|
132,292
|
Gail Wilensky
(9)
|
57,000
|
|
117,159
|
174,159
|
____________________
(1)
|
|
The amounts in these columns
represent the expense recognized in connection with these awards for the
fiscal year ended June 30, 2007 in connection with awards made during
fiscal 2007 and during prior years in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No 123
(revised 2004) Share-Based Payment, or FAS 123(R). Assumptions used in the
calculation of these expenses are included in note 10 to our audited
financial statements for the year ended June 30, 2007 filed with the
Securities and Exchange Commission on August 16, 2007. Unlike the amounts
reflected in our audited financial statements, however, these amounts do
not reflect any estimate of forfeitures related to service-based vesting.
Instead, they assume that the director will remain with our company long
enough to fully vest in the award.
|
(2)
|
|
As of June 30, 2007, Mr. Barter
held 42,700 options and 1,000 restricted shares. Mr. Barter received an
option grant on August 7, 2003 for 40,000 options at an exercise price of
$16.795, which was the split-adjusted closing price on August 6, 2003. The
grant date fair value of these options computed in accordance with FAS
123(R) was $7.48. Mr. Barter received an option grant on August 7, 2006
for 2,700 options at an exercise price of $25.105, which was the average
of the high and low values of trading prices of class A common stock on
the date of grant, and a restricted stock grant for 1,000 shares. The
closing price on the date of grant was $24.99. The grant date fair value
of these options computed in accordance with FAS 123(R) was $9.19 per
share, and the grant date fair value of these shares was
$25.105.
|
(3)
|
|
Mr. Denning stepped down from the
Board effective September 1, 2006 and exercised all vested options within
60 days of that date. Mr. Denning received an option grant on August 7,
2003 for 40,000 options at an exercise price of $16.795, which was the
split-adjusted closing price on the August 6, 2003. The grant date fair
value of these options computed in accordance with FAS 123(R) was $7.48.
Mr. Denning received an option grant on August 7, 2006 for 2,700 options
at an exercise price of $25.105, which was the average of the high and low
values of trading prices of class A common stock on the date of grant, and
a restricted stock grant for 1,000 shares. The grant date fair value of
these options computed in accordance with FAS 123(R) was $9.19 per share,
and the grant date fair value of these shares was $25.105.
|
(4)
|
|
As of June 30, 2007, General
Ellis held 7,310 options and 2,650 restricted shares. General Ellis
received an option grant on November 6, 2006 for 7,310 options at an
exercise price of $28.295, which was the average of the high and low
values of trading prices of class A common stock on the date of grant, and
a restricted stock grant for 2,650 shares. The closing price on the date
of grant was $28.41. The grant date fair value of these options computed
in accordance with FAS 123(R) was $10.47 per share, and the grant date
fair value of these shares was $28.295.
|
(5)
|
|
As of June 30, 2007, Mr. Gilburne
held 40,000 options.
|
12
(6)
|
|
As of June 30, 2007, Mr. Klein
held 61,520 options and 1,000 restricted shares. Mr. Klein received an
option grant on August 7, 2006 for 2,700 options at an exercise price of
$25.105, which was the average of the high and low values of trading
prices of class A common stock on the date of grant, and a restricted
stock grant for 1,000 shares. The closing price on the date of grant was
$24.99. The grant date fair value of these options computed in accordance
with FAS 123(R) was $9.19, and the grant date fair value of these shares
was $25.105 per share.
|
(7)
|
|
As of June 30, 2007, Mr.
Langstaff held 100,000 options.
|
(8)
|
|
As of June 30, 2007, Mr. Staley
held 22,700 options and 1,000 restricted shares. Mr. Staley received an
option grant on August 7, 2006 for 2,700 options at an exercise price of
$25.105, which was the average of the high and low values of class A
common stock on the date of grant, and a restricted stock grant for 1,000
shares. The closing price on the date of grant was $24.99. The grant date
fair value of these options computed in accordance with FAS 123(R) was
$9.19, and the grant date fair value of these shares was $25.105 per
share.
|
(9)
|
|
As of June 30, 2007, Dr. Wilensky
held 40,000 options. Dr. Wilensky received an option grant on February 15,
2006 for 40,000 options at an exercise price of $32.20, which was the
average of the high and low values of trading prices of class A common
stock on February 14, 2006. The grant date fair value of these options
computed in accordance with FAS 123(R) was $11.72 per
share.
|
EXECUTIVE COMPENSATION
Compensation Discussion and
Analysis
Objectives and
Philosophy of Our Executive Compensation Program
The primary objectives of the
executive compensation program are to:
-
attract, retain and motivate executive
talent;
-
ensure executive compensation is aligned with our
corporate strategies and business objectives;
-
promote the achievement of strategic and financial
performance measures by linking short and
long-term cash and equity incentives to the achievement of measurable
corporate and individual
performance goals;
and
-
align executives' interests with those of our
stockholders.
To achieve
these objectives, the Compensation and Personnel Committee of our board of
directors evaluates our executive compensation program with the goal of setting
target compensation at levels the committee believes are competitive with those
of other companies in our industry that compete with us for executive talent. In
addition, our executive compensation program ties a substantial portion of each
executives overall compensation to strategic financial and operational goals
such as revenue, earnings per share, and new business orders, in addition to
individual goals. We also provide a portion of our executive compensation in the
form of stock option and restricted stock awards that vest over time. We believe
this helps to retain our executives and incentivizes them to participate in the
long term success of our company, and therefore aligns their interests with
those of our stockholders.
The
Compensation and Personnel Committee of our board of directors oversees our
executive compensation program. In this role, the Compensation and Personnel
Committee reviews and approves annually all compensation decisions relating to
our executive officers.
Although the
chief executive officer does not influence the Compensation and Personnel
Committees determination of his own compensation, he does assist the committee
in setting the compensation for the other executive officers who report to him.
The chief executive officers participation may include providing a summary of
the personal evaluations of each executive and recommending prospective base
salary and target incentive compensation levels. The other executives do not
have a role in establishing executive compensation.
13
We compete
with many other companies for our executive personnel. In making compensation
decisions, the Compensation and Personnel Committee reviews compensation survey
data for companies in the information technology industry and also compares our
executive compensation to that paid by a peer group of publicly traded companies
with executives in similar roles. The peer group and survey data analysis is
prepared for the Compensation and Personnel Committee by our director of
compensation and our chairman of the board. The peer group, which evolves over
time, consists of companies that we believe are generally comparable to our
company and against which we compete for executive talent. The companies
included in this peer group when our analysis for fiscal 2007 was performed
were: Anteon International Corporation, ManTech International Corporation, MTC
Technologies, Inc., NCI, Inc., and SI International, Inc.
The
Compensation and Personnel Committee generally targets overall compensation for
executives near the 50
th
percentile for base salary, and the
75
th
percentile for total cash compensation paid to similarly
situated executives, as determined by our survey and peer group analyses. The
difference between the 50
th
percentile base salary and
75
th
percentile total cash compensation is the executives annual
cash incentive target. Our intent is to establish corporate and individual
incentive targets that are challenging and require above average performance to
achieve above average compensation. Variations to these general targets may
occur as warranted by the experience level of our executives, individual job
responsibilities and by external market factors such as the demand for a
particular position.
Before Dr.
Sloane was hired as our president and chief executive officer in April 2007, the
Compensation and Personnel Committee consulted with a compensation consultant,
Frederick W. Cook & Co., Inc., in determining Dr. Sloanes compensation for
fiscal 2007, including salary and cash and equity incentives. Dr. Sloanes level
of experience, his compensation at his prior employer and our desire to retain
Dr. Sloane for an extended period of time were key considerations during this
process.
Components of our
Executive Compensation Program
The primary elements of our
executive compensation program are:
-
base salary;
-
annual cash incentive bonuses;
-
equity in the form of stock option and restricted
stock awards;
-
insurance, retirement and other employee benefits;
and
-
in some cases, severance and change-of-control
benefits.
During
fiscal 2007, we did not have a formal or informal policy or target for
allocating compensation between long-term and short-term cash compensation, and
non-cash compensation in the form of equity. The Compensation and Personnel
Committee determined subjectively what it believed to be the appropriate level
and mix of equity, after evaluating each executives level of responsibility
within SRA, their prior performance and their current existing equity
holdings.
Base Salary
Base salary
is used to recognize the experience, skills, knowledge and responsibilities
required of all our employees, including our executives. In general, we target
executive base salaries at the 50
th
percentile of the range of
salaries for executives in similar positions at comparable companies. When
establishing base salaries, the Compensation and Personnel Committee considers
not only the quantitative compensation survey data for our industry and peer
group, but also a variety of qualitative factors, including the seniority of the
individual, the level of the individuals responsibility, the ability to replace
the individual, and the individuals internal value to us. In the case of Dr.
Sloane, his base salary is mandated by our employment agreement with
him.
14
Base
salaries are reviewed by our Compensation and Personnel Committee at least
annually, and, if appropriate, are adjusted to realign with market levels after
taking into account individual responsibilities, performance and experience. The
base salaries paid to our chief executive officer and named executive officers
for the past two fiscal years are shown below:
|
End of Fiscal 2007
|
Fiscal 2006
|
Fiscal 2007
|
Annual
|
Name
of Executive
|
Position
|
Salary
|
Salary
|
%
Change
|
Stanton D. Sloane
|
President and
|
n/a
|
$
650,000
|
n/a
|
|
Chief Executive
|
|
|
|
|
Officer
|
|
|
|
Renato A. DiPentima
|
Former President
|
$410,000
|
$
435,000
|
6.1%
|
|
and Chief
|
|
|
|
|
Executive
Officer
|
|
|
|
Stephen C. Hughes
|
Chief Financial
|
$262,500
|
$
290,000
|
10.5%
|
|
Officer and
|
|
|
|
|
Executive
|
|
|
|
|
Vice President
|
|
|
|
|
Operations
|
|
|
|
Barry S. Landew
|
Executive Vice
|
$250,000
|
$
270,000
|
8.0%
|
|
President,
|
|
|
|
|
Strategic
|
|
|
|
|
Development
|
|
|
|
Ernst
Volgenau
|
Chairman
|
$195,000
|
$
195,000
|
0.0%
|
David A. Kriegman
|
Former Chief
|
$270,000
|
$
270,000
|
0.0%
|
|
Operating
Officer
|
|
|
|
Annual Cash Incentive
Bonuses
We have an
annual cash incentive bonus plan for our executives and key employees. These
bonuses are intended to reward the achievement of strategic operational and
financial goals by our company, as well as individual performance objectives.
Target amounts payable under the annual cash incentive bonus plan are measured
as a percentage of the applicable executives base salary, which percentage
typically increases in relation to the employees responsibilities.
At the
beginning of each fiscal year, the Compensation and Personnel Committee approves
the corporate performance goals for the executives, the weighting of various
goals and the formula for determining potential bonus amounts based on
achievement of those goals. Corporate financial performance targets for fiscal
2007 accounted for 85% of the executives annual cash incentive bonus
performance calculation, with the remaining 15% attributable to individual
objectives. The Compensation and Personnel Committee believes that making a
significant portion of the executive officers cash bonus contingent on
corporate performance aligns the executive officers interest with those of our
stockholders. The corporate targets conform to the financial metrics contained
in the internal business plan approved by the board of directors; which is also
approved at the beginning of the fiscal year. For fiscal 2007, the financial
performance measures and associated weights for each executive were revenue
(35%), earnings per share (35%) and the gross contribution of new business
orders (15%). Gross contribution is a non-GAAP measure of contract profit
excluding the allocation of certain fixed corporate costs. Individual objectives
(15%) address the executives performance on specific initiatives in his area of
expertise and his development of his personnel.
The
Compensation and Personnel Committee works with the chief executive officer to
develop challenging corporate and individual goals that they believe can be
achieved with hard work and above average performance over the next year. Since
the corporate financial goals are determined at the beginning of the fiscal
year, they are specifically organic and exclude the contribution of potential
acquisitions that may occur throughout the year. Therefore, contributions from
mid-year acquisitions are excluded when determining the actual results at fiscal
year-end.
15
Our
executive cash incentive bonuses are paid over a three year period, with 70% of
the earned amount paid at the end of the fiscal year for which it is earned. The
remaining 30% is paid in equal amounts of 15% at the end of the next two fiscal
years, as long as the executive remains employed by our company.
The annual
target cash incentive awards and total cash compensation targets for our named
executive officers over the past two fiscal years are shown in the table
below:
|
|
|
|
Cash Incentive
|
|
|
|
|
|
Salary
|
|
Bonus
Target
|
|
Total/Tar
get Cash Co
mpensation
|
|
|
Fiscal
|
Fiscal
|
|
Fiscal
|
Fiscal
|
|
Fiscal
|
Fiscal
|
|
|
2006
|
2007
|
|
2006
|
2007
|
|
2006
|
2007
|
%
Change
|
Dr.
Sloane
|
n/a
|
$650,000
|
|
n/a
|
$700,000
|
|
n/a
|
$1,350,000
|
n/a
|
Dr.
DiPentima
|
$410,000
|
$435,000
|
|
$490,000
|
$525,000
|
|
$900,000
|
$960,000
|
6.7%
|
Mr.
Hughes
|
$262,500
|
$290,000
|
|
$317,500
|
$350,000
|
|
$580,000
|
$640,000
|
10.3%
|
Mr.
Landew
|
$250,000
|
$270,000
|
|
$300,000
|
$320,000
|
|
$550,000
|
$590,000
|
7.3%
|
Dr.
Volgenau
|
$195,000
|
$195,000
|
|
|
|
|
$195,000
|
$195,000
|
0.0%
|
Mr.
Kriegman
|
$270,000
|
$270,000
|
|
$330,000
|
$350,000
|
|
$600,000
|
$620,000
|
3.3%
|
The fiscal
2007 total target cash compensation increases for Dr. DiPentima, Mr. Hughes and
Mr. Landew were merit based, and reflected the challenge of running a larger
organization that experienced over 34% growth during fiscal 2006. In the case of
Mr. Hughes, his increased fiscal 2007 salary and bonus target also reflected his
responsibility for managing more of our operations. Dr. Volgenaus fiscal 2007
salary was not adjusted from fiscal 2006, as he continued to work a reduced
schedule.
Stock Option and Restricted
Stock Equity Awards
Our equity
awards program is the primary vehicle for offering long-term incentives to our
executives. We believe that equity grants provide our executives with incentives
to achieve long-term corporate performance, create an ownership culture and help
to align executives interests with those of our stockholders. In addition, we
believe the vesting feature of our equity grants provides an incentive to our
executives to remain with our company. In determining the size and nature of
equity grants to our executives, our Compensation and Personnel Committee
considers our company-wide performance, the applicable executives performance,
the amount of equity previously awarded to the executive including the vesting
status of such awards, potential future stock price appreciation and the
expected stock compensation expense under FAS 123(R). As a result of our
adopting FAS 123(R) in fiscal 2006, we began granting a mix of stock option and
restricted stock awards to our executives and other employees. Prior to fiscal
2006, we generally granted only stock options as long-term incentives to our
employees.
Our fiscal
2007 equity awards were made in the form of non qualified stock options and
restricted stock both with respect to class A common stock. We typically grant
restricted stock awards at no cost to the executive. Because the shares have a
built-in value at the time the restricted stock grants are made, we generally
grant significantly fewer shares of restricted stock than the number of stock
options we would grant for a similar purpose.
The stock
options and restricted stock we grant to our executives typically vest at a rate
of 25% per year on the first four anniversaries of the date of grant. In the
case of stock options, the term of the option is typically ten years. Vesting
ceases and unvested options are forfeited on the date of termination of
employment, except in the case of death or total disability. Prior to the
exercise of a stock option, the holder has no rights as a stockholder with
respect to the shares subject to such option, including voting rights and the
right to receive dividends or dividend equivalents. In the case of restricted
stock, the holder has voting and dividend rights to both vested and unvested
awards.
16
While we did
not have a formal policy regarding the size of individual equity targets in
fiscal 2007, the Compensation and Personnel Committee reviewed equity targets
and awards in conjunction with the base salary and annual cash incentive for
each executive to ensure that the targets were commensurate with the
individuals total compensation and conformed to our overall philosophy and
objectives. For fiscal 2007, quantitative stock option and restricted stock
targets for our executives were established and approved by the Compensation and
Personnel Committee at the beginning of the year, at the same time their salary
and incentive targets were established. In general, the intent of the
Compensation and Personnel Committee was that equity targets for fiscal 2007
for each executive would have the same overall value as the executives fiscal
2006 targets. Therefore, the stock price depreciation during fiscal 2006
resulted in the quantitative targets for fiscal 2007 being higher. Actual stock
option and restricted stock awards were calculated at the end of the year by
applying the same financial performance measures contained in our internal
business plan used in calculating the cash bonus award to the executives stock
option and restricted stock targets.
Beginning in
fiscal 2008, executives will not have quantitative equity targets established at
the beginning of the fiscal year. Instead, the Compensation and Personnel
Committee will determine the size of any grants at the end of the year after
evaluating the executives performance.
The annual
stock option and restricted stock targets for our executive officers over the
past two fiscal years are shown in the table below:
|
|
Stock Option
|
|
Restricted Stock
|
|
|
Targets
|
|
Targets
|
|
|
(# Shares)
|
|
(# Shares)
|
|
|
|
Fiscal
2006
|
Fiscal
2007
|
|
Fiscal
2006
|
Fiscal
2007
|
Dr.
Sloane
|
|
n/a
|
30,000
|
|
n/a
|
|
Dr.
DiPentima
|
|
|
|
|
|
|
Mr.
Hughes
|
|
6,000
|
7,260
|
|
1,500
|
1,815
|
Mr.
Landew
|
|
6,000
|
7,260
|
|
1,500
|
1,815
|
Dr.
Volgenau
|
|
|
|
|
|
|
Mr.
Kriegman
|
|
9,000
|
7,260
|
|
2,250
|
1,815
|
We typically
make an initial equity award to new executives upon commencement of employment,
and annual performance based grants as part of our overall compensation program.
Performance based grants are awarded following the end of the fiscal year after
financial performance measures for that year have been calculated. Dr. DiPentima
and Dr. Volgenau did not have stock option and restricted stock targets during
fiscal 2007, due to the size of their pre-existing equity positions. In the case
of Dr. Sloane, his fiscal 2007 equity targets were mandated by our employment
agreement with him.
In April
2007, the Compensation and Personnel Committee established that the exercise
price of all stock options will equal the closing price of our class A common
stock on the New York Stock Exchange on the date of grant. For fiscal 2007 grants made prior to April 2007,
our method for determining the fair market value was to use the average of the
high and low trades of the class A common stock on the date of grant. All grants
of options and restricted stock to our executives are approved by the
Compensation and Personnel Committee in advance of the date of grant. Annual
equity grants to executive officers are issued on the third business day
following the public release of our year-end earnings. All other equity grants
to executive officers are issued on the date awarded, unless they are awarded
during a quarterly company-imposed trading blackout, in which case they are
issued on the third business day following the next public release of quarterly
earnings.
Upon hire,
Dr. Sloane received equity grants of non qualified stock options to purchase
200,000 shares of our class A common stock and 125,000 shares of restricted
stock. In accordance with our policies and procedures, these equity grants were
made on May 7, 2007, the third business day after our third fiscal quarter 2007
earnings were released. On May 15, 2007, Mr. Hughes and Mr. Landew were each
awarded a grant of 8,000 shares of restricted stock. These grants were approved
by the Compensation and Personnel Committee at the suggestion of Dr. Sloane
after his review of the unvested equity positions of these
individuals.
17
Financial Performance
Measures; Determination of Bonuses and Equity Awards
For fiscal
2007, the specific financial measures and method for determining executive cash
incentive bonuses and equity awards are summarized below:
|
|
Goal
|
Plan
|
Minimum
|
|
|
Performance
|
Performance
|
Performance
|
|
Measure
|
Level
|
Level
|
Level
|
Financial
Performance Measure
|
Weighting
|
($)
|
($)
|
($)
|
Revenue (in millions)
|
35%
|
1,398
|
1,325
|
1,008
|
Earnings Per Share
|
35%
|
1.28
|
1.24
|
0.92
|
Gross Contribution of New
Business
|
|
|
|
|
Orders (in millions)
|
15%
|
326
|
313
|
234
|
Individual
Objectives
|
15%
|
n/a
|
n/a
|
n/a
|
Total
|
100%
|
|
|
|
The
following algorithm was used to calculate the award earned for each variable
identified in the preceding table:
A = Actual performance
F = Factor paid at plan
performance
G = Goal performance level
M = Minimum performance
level
|
P = Plan performance level
T = Target award
W =
Weighting
|
Where Actual
performance equals or exceeds the Goal performance level;
Award Earned for that measure= (A/G)*T*W
Where Actual
performance is between the Plan and Goal performance
levels;
Award Earned for that measure = (F + (1-F)*((A-P)/(G-P)))*T*W
Where Actual
performance is between the Minimum and Plan performance
levels;
Award Earned for that measure = ((A-M)/(P-M))*F*T*W
Where Actual
performance is less than the Minimum performance level, the award earned for
that measure is zero.
The factor
was 85% for revenue, 91% for earnings per share and 89% for gross contributions
of new business orders during fiscal 2007.
Actual results and incentive metric
earned by each executive during fiscal 2007 are summarized below:
|
|
|
|
Goal
|
|
Plan
|
|
Minimum
|
|
|
|
|
Measure
|
|
Performance
|
|
Performance
|
|
Performance
|
|
Award
|
Financial Performance
Measure
|
|
Weighting
|
|
Level
|
|
Level
|
|
Level
|
|
Earned
|
Revenue (in millions)
|
|
35%
|
|
1,398
|
|
1,325
|
|
1,008
|
|
58%
|
Earnings Per Share
|
|
35%
|
|
1.28
|
|
1.24
|
|
0.92
|
|
46%
|
Gross Contribution of New Business Orders
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
15%
|
|
326
|
|
313
|
|
234
|
|
67%
|
Individual Objectives
|
|
15%
|
|
n/a
|
|
n/a
|
|
n/a
|
|
100%
|
Overall Incentive Metric for Fiscal
2007
|
|
|
|
|
|
|
|
|
|
61%
|
Accordingly,
each executive earned a cash bonus, stock options and restricted stock for
fiscal 2007 equal to 61% of his fiscal 2007 target.
18
Equity Ownership
Guidelines
While we did
not have equity ownership guidelines for our executives during fiscal 2007, the
Compensation and Personnel Committee periodically reviews their value and
applicability to SRA. In April 2007, the board approved voluntary stock
ownership guidelines for its non-employee directors, which are summarized as
follows:
-
Ownership Level
. Each non-employee director is expected to accumulate stock ownership
equal to
$100,000 by June 30, 2012 or within
five years of appointment to the board, if later.
-
Share Retention
. Until the $100,000 stock ownership level is attained, non-employee
directors are
expected to retain 100% of
after-tax profit shares, which are the shares attained upon exercise
of
stock options or vesting of restricted stock
awards.
-
Maintain Equity Position
. Non-employee directors are expected to maintain the
$100,000 stock
ownership level until six months
after termination of service on the board.
Benefits and Other
Compensation
We maintain
broad-based benefits that are provided to all employees, including health and
dental insurance, life and disability insurance and a company-sponsored 401(k)
plan. Executives are eligible to participate in all of our employee benefit
plans on the same basis as other employees.
We match a
portion of employee contributions into the 401(k) plan. Our matching
contribution is made annually after each calendar year ends. During fiscal 2007
we had a dual matching formula, which was designed to balance our matching
contribution fairly between highly and non-highly compensated employees, as well
as between existing employees and mid-year hires. All employees, including
executive officers, are subject to the same matching formula. During fiscal
2007, the annual company matching contribution for each employee was the greater
of:
1) 55% of the first $4,000
contributed by the employee (maximum match of $2,200); or
2) 50% of the employees
contribution (maximum match of 3.4% of employees salary).
The maximum
salary considered for the second match was $125,000. Therefore, the maximum
match under this formula during fiscal 2007 was $4,375 ($125,000 x
3.5%).
In
particular circumstances, we award one-time hiring incentives in the form of
cash or equity upon an executives commencement of employment. The amount of a
hiring bonus, if any, is determined on a case-by-case basis. For example, we
will consider paying signing bonuses to offset the economic loss for unvested
cash or equity value forfeited by an executive upon terminating prior
employment, to assist with relocation expenses or to create additional incentive
for an executive to join our company in a position where there is high market
demand.
When Dr.
Sloane joined us in April 2007, we awarded him a hiring bonus, consisting of
three payments totaling $280,000. We paid the first $30,000 upon hire. We paid
an additional $125,000 on July 1, 2007, with the remaining $125,000 payable on
July 1, 2008, contingent upon Dr. Sloanes continued employment through this
date. These amounts were determined by the Compensation and Personnel Committee,
after consulting with our chairman. The first of these payments is reflected in
the Summary Compensation Table below.
In general,
we do not offer other compensation and perquisites, such as commuting expense
reimbursement, corporate apartments, car allowances or tax gross-up provisions.
However, we are providing Dr. Sloane a monthly living allowance of $8,000 until
such time as he moves to the greater Washington, D.C. area, for a period of up
to two years from his April 2007 hire date.
Severance and
Change-of-Control Benefits
Pursuant to
the employment agreement we have entered into with Dr. Sloane and the agreements
associated with his one-time equity grants, he is entitled to specified benefits
in the event of the termination of or change in his employment under specified
circumstances, including termination following a change of control of our
company. The other executives do not have similar benefits.
19
His
change-of-control benefits have been structured as double trigger benefits. In
other words, the change of control does not itself trigger benefits; rather,
benefits are paid only if Dr. Sloane is not offered the position of President or
CEO of the successor companys ultimate parent company after the change of
control. We believe a double trigger benefit maximizes shareholder value
because it prevents an unintended windfall to Dr. Sloane in the event of a
friendly change of control, while still providing him appropriate protection in
the event a change in control results in the loss of his job or
position.
We have
provided more detailed information about these benefits, along with estimates of
their value under various circumstances, under the caption Potential Payments
Upon Termination or Change of Control below.
Tax and Accounting
Considerations
Section
162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a
tax deduction to public companies for certain compensation in excess of $1
million paid to our chief executive officer and the other named executive
officers. Certain compensation, including qualified performance-based
compensation, will not be subject to the deduction limit if certain requirements
are met. The Compensation and Personnel Committee reviews the potential effect
of Section 162(m) periodically and generally seeks to structure the long-term
incentive compensation granted to its executive officers with option issuances
in a manner that is intended to minimize disallowance of deductions under
Section 162(m). Nevertheless, there can be no assurance that compensation
attributable to awards granted under the 2002 Stock Incentive Plan will be
treated as qualified performance-based compensation under Section 162(m). In
addition, the Compensation and Personnel Committee reserves the right to use its
judgment to authorize compensation payments that may be subject to the limit
when the Compensation and Personnel Committee believes such payments are
appropriate and in the best interests of SRA and our stockholders, after taking
into consideration changing business conditions and the performance of its
employees.
Compensation Actions for
Fiscal 2008
We expect
Dr. Sloanes base salary, temporary housing allowance, hiring bonus and the
income he will receive upon the vesting of restricted stock will exceed $1
million in fiscal 2008. In order to qualify his fiscal 2008 cash incentives for
tax deductibility under Section 162(m), we have proposed stockholder approval
regarding the material terms of our senior officer performance goals from fiscal
2008 through fiscal 2012. A more detailed summary of the proposal may be found
in Proposal 3 below.
20
COMPENSATION AND PERSONNEL COMMITTEE
REPORT
ON EXECUTIVE COMPENSATION
The
Compensation and Personnel Committee has reviewed the Compensation Discussion
and Analysis and discussed that analysis with management. Based on its review
and discussions with management, the committee recommended to our Board of
Directors that the Compensation Discussion and Analysis be included in this
proxy statement.
Compensation and Personnel Committee
Delbert C. Staley (Chairman)
Larry R.
Ellis
Gail R. Wilensky
21
Summary Compensation
The
following table sets forth the compensation for fiscal 2007 for each individual
who served as our chief executive officer and chief financial officer during
fiscal 2007, our three other most highly compensated executive officers during
fiscal 2007, and a former executive officer, all of whom we refer to together as
the Named Executive Officers:
Summary Compensation
Table
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
Stock
|
Option
|
Incentive Plan
|
All Other
|
|
|
|
|
Awards
|
Awards
|
Compensation
|
Compensation
|
|
Name and Principal
|
Salary
|
Bonus
|
($)
|
($)
|
($)
|
($)
|
Total
|
Position
|
($)
|
($)
|
(1)
|
(1)
|
(2)
|
(3)
|
($)
|
Stanton D. Sloane,
|
162,500 (5)
|
30,000 (6)
|
121,454
|
69,980
|
75,285
|
24,000
|
483,219
|
President and Chief
|
|
|
|
|
|
|
|
Executive Officer
(4)
|
|
|
|
|
|
|
|
Renato A. DiPentima,
|
435,000
|
|
|
806,908
|
354,123
|
4,375
|
1,600,406
|
former President and Chief
|
|
|
|
|
|
|
|
Executive Officer
(4)
|
|
|
|
|
|
|
|
Stephen C. Hughes,
|
290,000
|
|
45,710
|
343,385
|
234,080
|
4,375
|
917,550
|
Chief Financial Officer,
|
|
|
|
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
Barry S. Landew,
|
270,000
|
|
13,510
|
225,155
|
219,041
|
4,375
|
732,081
|
Executive Vice President,
|
|
|
|
|
|
|
|
Strategic
Development
|
|
|
|
|
|
|
|
Ernst Volgenau,
Chairman
|
195,000
|
|
|
38,540
|
52,952
|
4,375
|
290,867
|
David A. Kriegman,
|
56,250
|
120,276 (8)
|
10,303 (9)
|
601,174 (9)
|
|
|
788,003
|
former Chief Operating
|
|
|
|
|
|
|
|
Officer (7)
|
|
|
|
|
|
|
|
____________________
(1)
|
The amounts in these columns
represent the expense recognized in connection with these awards for the
fiscal year ended June 30, 2007 in connection with awards made during
fiscal 2007 and during prior years in accordance with FAS 123(R).
Assumptions used in the calculation of these expenses are included in note
10 to our audited financial statements for the year ended June 30, 2007
filed with the Securities and Exchange Commission on August 16, 2007.
Unlike the amounts reflected in our audited financials statements,
however, these amounts do not reflect any estimate or forfeitures related
to service-based vesting. Instead, they assume that the executive will
remain with our company long enough to fully vest in the
award.
|
(2)
|
Our executive cash incentive
bonuses are paid over a three year period, with 70% of the earned amount
paid at the end of the fiscal year for which it is earned. The remaining
30% is paid in equal amounts of 15% at the end the next two fiscal years,
as long as the executive remains employed by our company. Amounts in this
column reflect 70% of the bonuses earned for fiscal 2005 and
2006.
|
(3)
|
For Dr. Sloane, this consists of
his $8,000 monthly housing allowance for the three months he was employed.
For Dr. DiPentima, Mr. Hughes, Mr. Landew and Dr. Volgenau, this consists
of their annual 401(k) company matching contribution of
$4,375.
|
(4)
|
Dr. DiPentima retired from his
position as president and chief executive officer in April 2007, at which
time Dr. Sloane was appointed his successor.
|
(5)
|
The amount for Dr. Sloane
represents his salary from April 2007 when he joined us through June
2007.
|
(6)
|
The bonus for Dr. Sloane
represents the first $30,000 installment of his three-part hiring
bonus.
|
(7)
|
Mr. Kriegman, former executive
vice president and chief operating officer retired in September
2006.
|
(8)
|
The amount for Mr. Kriegman
consists of 15% of his fiscal 2005 and 30% of his fiscal 2006 cash
incentive awards, which we discretionarily determined to pay to Mr.
Kriegman upon his retirement.
|
(9)
|
Mr. Kriegman forfeited 5,150
options at an exercise price of $16.795, 11,800 options at an exercise
price of $21.13, 150,000 options at an exercise price of $31.6125, 33,770
options at an exercise price of $35.40, 7,312 options at an exercise
price of $25.105 and 1,828 shares of restricted stock during 2007 in
connection with the end of his employment.
|
22
Non Qualified Deferred
Compensation
The
following table summarizes the compensation deferred by the named executives
under the Deferred Compensation Plan for Key Employees of SRA International,
Inc., or the 1994 Plan, and the 2005 Deferred Compensation Plan for Key
Employees of SRA International, Inc., or the 2005 Plan, both of which are
irrevocable rabbi trusts. During fiscal 2007, executives were permitted to
voluntarily defer up to 50% of their base salary and up to 100% (less statutory
tax withholding) of their paid cash incentive bonus into the 2005 Plan. At the
time a deferral election is made, the executive may elect the time and manner of
distribution, subject to Internal Revenue Service regulations, including recent
409A legislation. Salary and bonus amounts deferred remain assets of our company
during the period of deferral. Once deferred, the executive may request that we
invest their deferrals in a variety of mutual funds managed by Fidelity
Investments. Since 2005, executives may no longer contribute to the 1994 Plan,
although their balances and deferral elections remain in place pursuant to their
original elections.
Fiscal 2007 Nonqualified Deferred
Compensation
|
|
|
|
Aggregate
|
|
|
Executive
|
Registrant
|
Aggregate
|
Withdrawals/
|
Aggregate
|
|
Contributions in
|
Contributions in
|
Earnings in
|
Distributions During
|
Balance at
Fiscal
|
|
Fiscal 2007
|
Fiscal 2007
|
Fiscal 2007
|
Fiscal 2007
|
2007
End
|
Name of
Executive
|
($)
|
($)
|
($)
|
($)
|
($)
|
Dr. Sloane
|
|
|
|
|
|
Dr. DiPentima
|
21,750 (1)
|
|
142,575
|
196,333
|
584,230
|
Mr. Hughes
|
61,316 (2)
|
|
13,952
|
|
265,621
|
Mr. Landew
|
|
|
|
|
|
Dr. Volgenau
|
|
|
|
|
|
Mr. Kriegman
|
2,812 (1)
|
|
17,057
|
220,943
|
63,789
|
____________________
(1)
|
Consists entirely of elective base salary
deferrals made by the executive into the 2005 Plan during fiscal 2007.
These amounts are also included in the amounts reported as fiscal 2007
salary in the Summary Compensation Table.
|
(2)
|
Consists of elective base salary deferrals
of $14,500 and a bonus deferral of $46,816 made by Mr. Hughes during
fiscal 2007. These amounts are also included in the amounts reported as
fiscal 2007 salary and non- equity incentive plan compensation columns in
the Summary Compensation Table.
|
23
Outstanding Equity
Awards
The
following table sets forth information regarding outstanding stock options and
restricted stock awards held by our named executive officers as of June 30,
2007. Stock options granted prior to May 2002 were granted under our 1994 Stock
Option Plan. Stock options and restricted stock granted after May 2002 were
granted under our 2002 stock incentive plan.
Outstanding Equity Awards At Fiscal
2007 Year-End
|
Option Awards
|
Restricted Stock Awards
|
|
|
Number
|
Number
|
|
|
|
|
|
|
of Shares
|
of Shares
|
|
|
Number
|
|
|
|
Underlying
|
Underlying
|
|
|
of Shares
|
Market
|
|
|
Unexercised
|
Unexercised
|
Option
|
Option
|
that
|
Value
of
|
|
|
Options (#)
|
Options (#)
|
Exercise
|
Expiration
|
Have Not
|
Shares
that
|
|
|
Exercisable
|
Unexercisable
|
Price ($)
|
Date
|
Vested (#)
|
Have
Not
|
Name of
Executive
|
Grant
Date
|
(1)
|
(1)
|
(2)
|
(3)
|
(1)
|
Vested
($)
|
Dr. Sloane
|
5/7/2007
|
|
200,000
|
25.8100
|
5/7/2017
|
125,000
|
3,157,500
|
Dr. DiPentima
|
12/21/2001
|
1,438
|
|
5.0745
|
12/21/2016
|
|
|
|
8/15/2002
|
58,260
|
|
12.4000
|
8/15/2017
|
|
|
|
8/7/2003
|
19,516
|
6,504
|
16.7950
|
8/7/2013
|
|
|
|
8/5/2004
|
212,492
|
212,488
|
21.1300
|
8/5/2014
|
|
|
Mr. Hughes
|
6/30/2000
|
29,422
|
|
4.7685
|
6/30/2015
|
|
|
|
6/30/2001
|
36,422
|
|
4.2500
|
6/30/2016
|
|
|
|
8/15/2002
|
70,660
|
|
12.4000
|
8/15/2017
|
|
|
|
8/7/2003
|
15,450
|
5,150
|
16.7950
|
8/7/2013
|
|
|
|
8/5/2004
|
50,000
|
50,000
|
21.1300
|
8/5/2014
|
|
|
|
8/4/2005
|
5,535
|
16,605
|
35.4000
|
8/4/2015
|
|
|
|
2/15/2006
|
4,000
|
12,000
|
32.2000
|
2/15/2016
|
|
|
|
8/7/2006
|
|
4,875
|
25.1050
|
8/7/2016
|
|
|
|
2/15/2006
|
|
|
|
|
3,000
|
75,780
|
|
8/7/2006
|
|
|
|
|
1,219
|
30,792
|
|
5/15/2007
|
|
|
|
|
8,000
|
202,080
|
Mr. Landew
|
6/30/1998
|
55,940
|
|
3.1705
|
6/30/2008
|
|
|
|
6/30/1999
|
32,588
|
|
3.9355
|
6/30/2014
|
|
|
|
3/24/2000
|
58,822
|
|
4.1480
|
3/24/2015
|
|
|
|
6/30/2000
|
19,716
|
|
4.7685
|
6/30/2015
|
|
|
|
6/30/2001
|
33,210
|
|
4.2500
|
6/30/2016
|
|
|
|
8/15/2002
|
35,500
|
|
12.4000
|
8/15/2017
|
|
|
|
8/7/2003
|
15,450
|
5,150
|
16.7950
|
8/7/2013
|
|
|
|
8/5/2004
|
30,000
|
30,000
|
21.1300
|
8/5/2014
|
|
|
|
8/4/2005
|
5,535
|
16,605
|
35.4000
|
8/4/2015
|
|
|
|
8/7/2006
|
|
4,875
|
25.1050
|
8/7/2016
|
|
|
|
8/7/2006
|
|
|
|
|
1,219
|
30,792
|
|
5/15/2007
|
|
|
|
|
8,000
|
202,080
|
Dr. Volgenau
|
8/7/2003
|
|
5,150
|
16.7950
|
8/7/2013
|
|
|
Mr. Kriegman
(4)
|
|
|
|
|
|
|
|
____________________
(1)
|
In each case, the option or
restricted stock award vests in 25% increments on the first four
anniversaries of the grant date. All stock options listed are nonqualified
stock options, with the exception of the June 30, 1998 grant for Mr.
Landew, which are incentive stock options.
|
(2)
|
For fiscal 2007 options granted
after April 2007, the exercise price is equal to the closing price of our
class A common stock on the New York Stock Exchange on the date of grant.
Fiscal 2007 grants made prior to April 2007 have an exercise price equal
to the average of the high and low trading prices of the class A common
stock on the date of grant.
|
24
(3)
|
The expiration date is 10 years
from the grant date, except for grants made between June 30, 1999 and
August 15, 2002, in which case the expiration date is 15 years from the
grant date.
|
(4)
|
Mr. Kriegman exercised all of his
vested stock options during fiscal 2007 in connection with the end of his
employment with us. His unvested options were forfeited upon his
termination date.
|
Stock Option Exercises and
Restricted Stock Vesting
The
following table provides information on (1) stock option exercises by the named
executive officers during fiscal 2007, including the number of shares acquired
upon exercise and the value realized and (2) the number of shares acquired upon
the vesting of restricted stock awards held by the named executive officers in
fiscal 2007 and the value realized.
Fiscal 2007 Stock Option Exercises
and Restricted Stock Vesting
|
Option Awards
|
Stock
Awards
|
|
Number of Shares
|
Value Realized on
|
Number of Shares
|
Value Realized
on
|
Name of
Executive
|
Acquired on
Exercise (#)
|
Exercise
($)
|
Acquired on
Vesting (#)
|
Vesting
($)
|
Dr. Sloane
|
|
|
|
|
Dr. DiPentima
|
48,928
|
1,153,028
|
|
|
Mr. Hughes
|
41,176
|
944,145
|
1,000
|
23,320 (1)
|
Mr. Landew
|
268,234
|
5,696,464
|
|
|
Dr. Volgenau
|
17,160
|
282,814
|
|
|
Mr. Kriegman
|
124,570
|
2,281,073
|
|
|
____________________
(1)
|
Represents vesting of the first
25% of a 4,000 restricted stock share grant on February 15,
2007.
|
25
Plan Based
Awards
The
following table sets forth information regarding options granted and restricted
stock awards made to our named executive officers. All of the options were
granted under our 2002 stock incentive plan.
Fiscal 2007 Grants of Plan-Based
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
All
Other
|
All Other
|
Exercise
|
|
Value
|
|
|
|
|
|
|
|
|
|
Stock
|
Option
|
or
Base
|
Closing
|
of Stock
|
|
|
|
|
|
|
|
|
|
Awards:
|
Awards:
|
Price of
|
Price of
|
and
|
|
|
|
|
|
|
|
|
|
Number of
|
Number
of
|
Option
|
Stock on
|
Options
|
|
|
|
Estimated Future
Payouts
|
Estimated Future
Payouts
|
Shares of
|
Securities
|
Awards
|
Grant
|
Awards
|
Name
of
|
Grant
|
Date
|
Under
Non-Equity Incentive
|
Under
Equity Incentive Plan
|
Stock
or
|
Underlying
|
($/Sh)
|
Date
|
($)
|
Executive
|
Date
|
Approved
|
Plan Awards
|
Awards
|
Units (#)
|
Options (#)
|
(3)
|
($/Sh)
|
(4)
|
|
|
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|
|
|
|
|
|
|
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)
|
|
|
|
|
|
|
|
|
(1)
|
(1)
|
(2)
|
(1)
|
(1)
|
(2)
|
|
|
|
|
|
Dr. Sloane
|
|
|
|
175,000
|
|
|
7,500
|
|
|
|
|
|
|
|
5/7/2007
|
4/18/2007
|
|
|
|
|
|
|
125,000
|
200,000
|
25.81
|
25.81
|
5,085,170
|
Dr. DiPentima
|
|
|
|
525,000
|
|
|
|
|
|
|
|
|
|
Mr. Hughes
|
|
|
|
350,000
|
|
|
9,075
|
|
|
|
|
|
|
|
8/7/2006
|
8/3/2006
|
|
|
|
|
|
|
1,219
|
4,875
|
25.105
|
24.99
|
75,418
|
|
5/15/2007
|
5/15/2007
|
|
|
|
|
|
|
8,000
|
|
|
25.80
|
206,400
|
Mr. Landew
|
|
|
|
320,000
|
|
|
9,075
|
|
|
|
|
|
|
|
8/7/2006
|
8/3/2006
|
|
|
|
|
|
|
1,219
|
4,875
|
25.105
|
24.99
|
75,418
|
|
5/15/2007
|
5/15/2007
|
|
|
|
|
|
|
8,000
|
|
|
25.80
|
206,400
|
Dr. Volgenau
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Kriegman
|
|
|
|
350,000
|
|
|
9,075
|
|
|
|
|
|
|
|
8/7/2006
|
8/3/2006
|
|
|
|
|
|
|
1,828
|
7,312
|
25.105
|
24.99
|
113,110
|
____________________
(1)
|
|
The threshold and target amounts
represent the amounts that were to be payable to the executive
if we met our minimum and goal performance levels for fiscal 2007 for all
corporate measures.
|
(2)
|
|
We did not limit the bonus or
equity amount that could be earned during fiscal 2007, but the ratio of
earned amount to the target for each executive was linear. As such, for an
executive to earn a bonus twice that of their target the corporate and
individual results must also have been twice that of the
goal.
|
(3)
|
|
Fiscal 2007 equity grants made
prior to April 2007 were valued at the average of the high and low trading
prices of our class A common stock on the date of grant.
|
(4)
|
|
The amounts in these columns
represent the full amount of the expense we will recognize in connection
with awards made during the fiscal year ended June 30, 2007 over the
entire term of the award in accordance with FAS 123(R). Assumptions used
in the calculation of these expenses are included in note 10 of our
audited financial statements for the year ended June 30, 2007 filed with
the Securities and Exchange Commission on August 16, 2007. Unlike the
amounts reflected in our audited financial statements, however, these
amounts do not reflect any estimate of forfeitures related to
service-based vesting. Instead, they assume that the executive will remain
with our company long enough to fully vest in the
award.
|
Potential Payments Upon Termination or
Change of Control
Pursuant to
the employment agreement we have entered into with Dr. Sloane and the agreements
associated with his one-time equity grants, he is entitled to specified benefits
in the event of the termination of or change in his employment under specified
circumstances, including termination following a change of control of our
company. Dr. Sloane is the only executive with these benefits.
Dr. Sloane
will be entitled to the following severance benefits in the event of an
involuntary termination without cause, whether before or after a change of
control: (i) full vesting of all unvested non qualified stock options and
restricted stock shares; (ii) payment of 50% of his prior years earned bonus,
or annual bonus target in the event of a termination occurring before June 30,
2008; (iii) continuation of his base Salary for 12 months; and (iv) continuation
of employee benefits for 12 months, subject to reduction in the event Dr. Sloane
receives
26
comparable benefits from a subsequent
employer. Post-termination payment of bonus amounts and continuation of Dr.
Sloanes base salary and benefits are contingent upon his execution of a
document releasing SRA from any and all liability relating to his employment,
and his compliance with the confidentiality, non-competition and
non-solicitation covenants set forth and/or incorporated in his
agreement.
In the event
of a change in control that results in Dr. Sloane not being offered the position
of President or CEO of the successor companys ultimate parent company after the
change of control, all of Dr. Sloanes non qualified stock options and
restricted stock shares will vest as of the effective date of the change in
control. For the purpose of the agreement, change in control means the
consummation of a merger, reorganization, consolidation or similar transaction,
unless our voting stock represents more than 50% of the voting power of the
surviving entity, or shareholder approval of the sale of all or substantially
all SRA assets or a plan of liquidation of SRA, unless our voting stock
represents more than 50% of the voting power of the purchasing
entity.
The
aggregate value of potential payments upon involuntary termination and change of
control as of the end of fiscal 2007 were $4,163,999 and $3,157,500,
respectively, as summarized in the following tables.
Involuntary Termination.
The following
table sets forth an estimate of the benefits that would have accrued to Dr.
Sloane in the event his employment had been terminated without cause as of the
end of fiscal 2007.
Benefit
|
|
Estimated
Value ($)
|
Vesting of options and restricted shares (1)
|
|
3,157,500
|
50% of fiscal
2007 target cash bonus
|
|
350,000
|
Base salary continuation for 12 months
|
|
650,000
|
Continuation of
benefits for 12 months (2)
|
|
6,499
|
Total potential payments
|
|
4,163,999
|
____________________
(1)
|
|
Based on the number of shares
that vest multiplied by $25.26, the closing price of our class A common
stock on June 29, 2007, the last trading day of fiscal 2007, and, in the
case of options, after deducting the aggregate exercise price of the
options that vest.
|
(2)
|
|
Based on premiums and other
benefit costs in effect on the last day of fiscal
2007.
|
Change of
Control.
The following table sets forth an
estimate of the benefits that would have accrued to Dr. Sloane in the event our
company had experienced a change of control as of the end of fiscal 2007 and he
had not been offered the position of President or CEO of the successor companys
ultimate parent after the change of control. These benefits would accrue to Dr.
Sloane even if his employment was not terminated following the change of
control.
Benefit
|
|
Estimated
Value ($)
|
Vesting of options and restricted shares (1)
|
|
3,157,500
|
____________________
(1)
|
|
Based on the number of shares
that vest multiplied by $25.26, the closing price of our class A common
stock on June 29, 2007, the last trading day of fiscal 2007, and, in the
case of options, after deducting the aggregate exercise price of the
options that vest.
|
27
EQUITY COMPENSATION PLAN INFORMATION
The
following table provides information about the securities authorized for
issuance under our equity compensation plans as of June 30, 2007:
|
|
|
|
Weighted-
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
exercise price
|
|
Number of securities
remaining
|
|
|
Number of securities
to
|
|
of outstanding
|
|
available for future
issuance
|
|
|
be issued upon
exercise
|
|
options,
|
|
under equity
compensation
|
|
|
of outstanding
options,
|
|
warrants and
|
|
plans (excluding
securities
|
Plan
category
|
|
warrants and
rights(a)
|
|
rights(b)
|
|
reflected in column(a))
(1)
|
Equity compensation plans approved by
|
|
|
|
|
|
|
security holders
|
|
6,618,797
|
|
$19.62
|
|
6,668,880 (2)
|
Equity
compensation plans not approved by
|
|
|
|
|
|
|
security holders
|
|
|
|
|
|
|
Total
|
|
6,618,797
|
|
$19.62
|
|
6,668,880
(2)
|
____________________
(1)
|
|
In addition to being available
for future issuance upon exercise of options that may be granted after
June 30, 2007, 6,268,751 shares under the 2002 Stock Incentive Plan may
instead be issued in the form of restricted stock or other equity-based
awards.
|
(2)
|
|
Includes shares issuable under
our 2002 Stock Incentive Plan. Under the terms of the 2002 Stock Incentive
Plan, the number of shares available for issuance is automatically
increased every July 1 beginning with fiscal year 2004 and ending with
fiscal year 2012 by an amount equal to the lesser of (i) 2,352,940 shares
of class A common stock, (ii) 3% of the outstanding shares of class A
common stock and class B common stock on such date or (iii) an amount
determined by our Board of Directors. On July 1, 2007, an additional
1,721,051 shares of class A common stock were reserved for issuance under
the terms of the 2002 Plan pursuant to this automatic increase provision.
Also includes 400,129 shares issuable under our 2004 Employee Stock
Purchase Plan, including those issuable in connection with the current
offering period, which ends on September 30,
2007.
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Affiliation of one of the directors
and one of our outside law firms
Mr. Klein,
one of our non-employee directors, was a partner of the law firm of Wilmer
Cutler Pickering Hale and Dorr, LLP, or WilmerHale, until December 31, 2005, and
has been senior counsel thereafter. We retained WilmerHale in fiscal 2007 and
expect to continue to retain WilmerHale in fiscal 2008.
Affiliation of the former President
and Chief Executive Officer with an employee
Dr.
DiPentimas son-in-law is employed by SRA. During fiscal 2007, he was paid total
compensation of $179,260.
Policy on Future Transactions
For all
future transactions, the Board of Directors has adopted a policy that all
transactions between SRA and our officers, directors, principal stockholders and
their affiliates must (i) be approved by a majority of the disinterested members
of the Board of Directors and (ii) be on terms no less favorable to us than
could be obtained from unaffiliated third parties.
28
AUDIT AND FINANCE COMMITTEE REPORT
The Audit
and Finance Committee reviewed our audited financial statements for the fiscal
year ended June 30, 2007 and discussed these financial statements with our
management and Deloitte & Touche LLP, our independent registered public
accounting firm. Management is responsible for the preparation, presentation,
and integrity of our financial statements and for the appropriateness of the
accounting principles and reporting policies we use. The independent registered
public accounting firm is responsible for auditing our financial statements and
for reviewing our unaudited interim financial statements. The Audit and Finance
Committee is responsible for monitoring and overseeing these processes.
The Audit
and Finance Committee has also received from, and discussed with, our
independent registered public accounting firm various communications that our
firm is required to provide to the Audit and Finance Committee, including the
matters required to be discussed by Statement on Auditing Standards 61 (SAS 61)
(Communication with Audit and Finance Committees). SAS 61 requires our
independent registered public accounting firm to discuss with our Audit and
Finance Committee, among other things, the following:
-
methods to account for significant, unusual
transactions;
-
the effect of significant accounting policies in
controversial or emerging areas for which there is a lack
of authoritative guidance or consensus;
-
the process used by management in formulating
particularly sensitive accounting estimates and the
basis for the independent registered public accounting firms
conclusions regarding the reasonableness
of
those estimates; and
-
disagreements with management over the application
of accounting principles, the basis for
managements accounting estimates and the disclosures in the financial
statements.
Our
independent registered public accounting firm also provided the Audit and
Finance Committee with the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
and Finance Committees). In addition, the Audit and Finance Committee discussed
with the independent registered public accounting firm their independence from
us. The Audit and Finance Committee also considered whether the independent
registered public accounting firms provision of other, non-audit related
services to us are compatible with maintaining such auditors independence.
Based on its
discussions with management and the independent registered public accounting
firm, and its review of the representations and information provided by
management and the independent registered public accounting firm, the Audit and
Finance Committee recommended to our Board of Directors that the audited
financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended June 30, 2007.
Audit and Finance
Committee
John W. Barter
(Chairman)
Miles R. Gilburne
Delbert C. Staley
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members
of the Compensation and Personnel Committee during fiscal 2007 were Messrs.
Staley, Ellis and Dr. Wilensky. No member of the Compensation and Personnel
Committee was at any time during fiscal 2007 an officer or employee of our
company or any of our subsidiaries. None of our executive officers serves or,
during fiscal 2007, served as a member of the board of directors or the
Compensation and Personnel Committee of any entity that has one or more
executive officers serving as a member of our Board of Directors or Compensation
and Personnel Committee.
29
PROPOSAL 2 RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS
The Audit
and Finance Committee has selected the firm of Deloitte & Touche LLP as our
independent registered public accounting firm for the current fiscal year.
Deloitte & Touche LLP has served as our independent registered public
accounting firm since March 2002. Although stockholder approval of the Audit and
Finance Committees selection of Deloitte & Touche LLP is not required by
law, the Board of Directors believes that it is advisable to give stockholders
an opportunity to ratify this selection. If this proposal is not approved at the
annual meeting, the Board of Directors may reconsider the selection of Deloitte
& Touche LLP.
Representatives of Deloitte & Touche LLP are expected to be present
at the annual meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
Independent Registered Public
Accounting Firms Fees
The
following table summarizes the fees of Deloitte & Touche LLP, our
independent registered public accounting firm, billed to us for each of the last
two fiscal years:
Fee Category
|
|
2007
|
|
2006
|
Audit Fees (1)
|
|
$719,500
|
|
$668,550
|
Audit-Related
Fees (2)
|
|
52,000
|
|
|
Tax Fees (3)
|
|
3,335
|
|
16,950
|
All Other
Fees
|
|
|
|
|
Total Fees
|
|
$774,835
|
|
$685,500
|
____________________
(1)
|
|
Audit fees consist of fees for
the audit of our financial statements, the review of the interim financial
statements included in our quarterly reports on Form 10-Q, and other
professional services provided in connection with statutory and regulatory
filings or engagements.
|
(2)
|
|
Audit-related fees in fiscal 2007
related to assistance provided in responding to an SEC comment
letter.
|
(3)
|
|
Tax fees consist of fees for tax
compliance, tax advice and tax planning services. Tax compliance services,
which relate to reviews of tax returns prepared by us in fiscal 2006
accounted for $8,000 of the total tax fees billed in fiscal 2006. Fiscal
2007 tax fees related to tax advice provided related to a past
acquisition.
|
Pre-Approval Policies and Procedures
The Audit
and Finance Committee has adopted policies and procedures relating to the
approval of all audit and non-audit services that are to be performed by our
independent registered public accounting firm. This policy generally provides
that we will not engage our independent registered public accounting firm to
render audit or non-audit services unless the service is specifically approved
in advance by the Audit and Finance Committee or the engagement is entered into
pursuant to one of the pre-approval procedures described below.
From time to
time, the Audit and Finance Committee may pre-approve specified types of
services that are expected to be provided to us by our independent registered
public accounting firm during the next 12 months. Any such pre-approval is
detailed as to the particular service or type of services to be provided and is
also generally subject to a maximum dollar amount.
The Audit
and Finance Committee has also delegated to the chairman of the Audit and
Finance Committee the authority to approve any audit or non-audit services to be
provided to us by our independent registered public accounting firm. Any
approval of services by a member of the Audit and Finance Committee pursuant to
this delegated authority is reported on at the next meeting of the Audit and
Finance Committee.
Board Recommendation
The Board of
Directors recommends a vote FOR the ratification of the selection of Deloitte
& Touche LLP as our independent registered public accounting firm for the
current fiscal year.
30
PROPOSAL 3 APPROVAL OF MATERIAL
TERMS OF OUR
SENIOR OFFICER PERFORMANCE GOALS
Section
162(m) of the Internal Revenue Code of 1986, as amended, generally disallows tax
deductions to a public company for certain compensation in excess of $1 million
per year paid to each of the companys chief executive officer and the four
other most highly compensated officers unless such payments are
performance-based as defined in Section 162(m). To qualify compensation as
performance-based compensation under Section 162(m), a public companys
stockholders must approve the material terms of the performance goals used to
determine the amount, if any, of such performance-based compensation. The Board
is requesting stockholder approval of the material terms of the performance
goals in this proposal to enable us to have a stockholder-approved arrangement
under which we may receive tax deductions under Section 162(m) for
performance-based compensation until the 2012 Annual Meeting, or until the
material terms of the performance goals change, whichever occurs earlier. The
material terms of the performance goals would constitute the framework that the
Compensation and Personnel Committee, or the Committee, would use to determine
the awards that qualify as performance-based compensation for purposes of
Section 162(m).
The
performance goals pertain to two specific forms of compensation that may be
awarded to our senior officers under our executive compensation plan during the
next five years: cash incentive bonuses and restricted stock awards. In the case
of restricted stock, these awards would be made under the SRA International,
Inc. 2002 Stock Incentive Plan, or 2002 Plan, or the plan then in effect if the
2002 Plan has expired.
The material terms of the
performance goals include:
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The employees who are eligible to
receive performance-based compensation;
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2.
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The performance goals and the
description of the business measurements on which the performance goals
are based; and
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3.
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The formula used to calculate the
maximum amount of performance-based compensation that can be paid to an
employee under the arrangement.
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Employees eligible to receive
performance-based compensation.
The group of
employees who are eligible to receive performance-based awards are our senior
officers, including the executive officers required to file reports under
Section 16 of the Securities Exchange Act of 1934, but the Committee may also
use this program for other officers or employees, even though the tax laws only
limit deductibility for compensation paid to our chief executive officer and the
other four most highly compensated officers.
The performance goals and their use
in determining incentive compensation.
For cash
bonuses and restricted stock awards, the Committee would use a combination of
some or all of the following corporate financial measures to determine the
amount of awards:
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(1)
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revenue as presented in our
financial statements;
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(2)
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customer orders, meaning the
value of new contracts awarded to our company;
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(3)
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labor based revenue as a measure
of how much we are paid by customers in exchange for labor performed by
our employees, as distinct from labor performed by our
subcontractors;
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(4)
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operating income as presented in
our financial statements;
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(5)
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net income as presented in our
financial statements;
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(6)
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diluted earnings per share as
presented in our financial statements;
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(7)
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days sales outstanding as a
measure of the time required to collect accounts receivable after earning
revenue;
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(8)
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return on invested capital as a
measure of the amount we earn on what we have invested in our business;
and
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(9)
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voluntary attrition as a measure
of employee satisfaction.
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31
The
Committee may express each performance objective in absolute or relative terms,
based on or using comparisons with current internal targets, the past
performance of our company (including the performance of one or more
subsidiaries, business divisions, or operating units) or the past or current
performance of other companies. The measures used in setting performance goals
under the plan would, to the extent applicable, be determined in accordance with
generally accepted accounting principles in the United States, or GAAP, and in a
manner consistent with the methods used in our financial statements, but in the
Committees discretion without regard to (i) extraordinary or nonrecurring items
in accordance with GAAP, (ii) the impact of any change in accounting principles
that occurs during one of the years included in the formula and the cumulative
effect thereof (the Committee may either apply the changed accounting principle
to all periods included in the formula, or exclude the changed accounting
principle from all periods included in the formula), (iii) goodwill and other
intangible impairment charges, (iv) gains or charges associated with
discontinued operations or restructuring activities, (v) gains or charges
related to the sale or impairment of assets, (vi) all charges directly related
to acquisitions, including all contingent liabilities identified as of the
acquisition date, (vii) the impact of any material change in tax law that occurs
during one of the years included in the formula, and (viii) other objective
income, expense, asset, or cash flow adjustments that may be consistent with the
purposes of the performance goals set for the given performance period and are
specified by the Committee within the applicable period. At the end of the
performance period, the Committee would certify the satisfaction of the level of
attainment of the performance goals.
In addition
to these financial measures, individual performance may also be evaluated based
on qualitative measures, such as ethics and leadership, and individual goals in
the executives division or area of expertise, such as budgeting and strategic
initiatives. These goals may be either subjective, objective, or a combination,
and would only be used to adjust downward (as appropriate) the results derived
using the objective corporate factors.
Following an
evaluation after the end of each performance period, the Committee would assign
a corporate performance metric factor applicable to all the senior officers
covered by this plan, using guidelines determined at the beginning of the
performance period. The Committee would establish a cash target and, if
applicable, a restricted stock target, for each executive at the beginning of
each performance period. If performance goals are exceeded, the corporate
performance factor may result in a cash or restricted stock award no greater
than 1.69 times the target.
Per-person maximum
compensation.
Under this
program, the maximum performance-based compensation to any individual for any
fiscal year is $3 million for cash incentive bonuses and 50,000 shares for
restricted stock awards.
The
Committee has established these business measurements and maximum amounts and it
considers them appropriate in light of foreseeable contingencies and future
business conditions. If approved by the stockholders, this proposal would not
limit the Committees ability to award or pay other or additional forms of
compensation to our senior officers, which could include salary, bonuses or
other stock-based awards. These other forms of compensation may be paid
regardless of whether the performance goals for performance-based compensation
in this proposal are achieved in any future year, and regardless of whether
payment of such other forms of compensation would be tax deductible. However,
any additional compensation would be designed, to the extent practicable, so as
not to affect the deductibility of arrangements intended to qualify as
performance-based compensation for purposes of Section 162(m).
Board Recommendation
The Board of
Directors recommends a vote FOR this proposal to approve the material terms of
our senior officer performance goals.
Section 16(a) Beneficial
Ownership Reporting Compliance
Based solely
on our review of copies of reports filed by reporting persons pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, or Section
16(a), or written representations from reporting persons that that no Form 5
filing was required for such persons, we believe that, during fiscal 2007, all
filings required to be made by our reporting persons were timely made in
accordance with Section 16(a).
32
OTHER MATTERS
The Board of
Directors does not know of any other matters which may come before the annual
meeting. However, if any other matters are properly presented at the annual
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of
solicitation of proxies will be borne by SRA. In addition to solicitations by
mail, our directors, officers and employees, without additional remuneration,
may solicit proxies by telephone, telegraph and personal interviews, and SRA
reserves the right to retain outside agencies for the purpose of soliciting
proxies. Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of stock held in their names, and, as required
by law, SRA will reimburse them for their out-of-pocket expenses in this regard.
33
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL
MEETING
Pursuant to
Securities Exchange Act Rule 14a-8(e), proposals of stockholders intended to be
presented at the 2008 annual meeting of stockholders must be received by SRA at
our principal office at 4300 Fair Lakes Court, Fairfax, Virginia 22033, not
later than May 28, 2008 for inclusion in the proxy statement for that meeting.
Under our
Amended and Restated By-laws, proposals of stockholders intended to be presented
at the 2008 annual meeting of stockholders (other than matters included in our
proxy statement pursuant to Rule 14a-8(e)) must be received by our Secretary at
our principal office in Fairfax, Virginia (i) not later than 60 days nor earlier
than 90 days prior to the first anniversary of the 2007 annual meeting or (ii)
if the date of the 2008 annual meeting is advanced by more than 20 days or
delayed by more than 60 days from the first anniversary of the 2007 annual
meeting, (a) not earlier than the 90
th
day prior to the 2008 annual
meeting and (b) not later than the later of the 60
th
day prior to the
2008 annual meeting and the 10
th
day following the day notice of the
date of the 2008 annual meeting was mailed or public disclosure of that date was
made, whichever first occurs. A copy of our Amended and Restated By-laws may be
obtained from our Secretary.
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By Order of the Board of
Directors,
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Stephen C. Hughes, Secretary
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September 27, 2007
THE BOARD OF DIRECTORS HOPES THAT
STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN IF THEY HAVE SENT IN THEIR PROXIES.
34
4300 FAIR
LAKES COURT
FAIRFAX, VA 22033
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy
card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction
form.
ELECTRONIC DELIVERY OF FUTURE
STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs
incurred by SRA International, Inc. in mailing proxy materials, you can consent
to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access stockholder
communications electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return
it to SRA International Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS:
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SRAIN1
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND
DATED.
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SRA INTERNATIONAL, INC.
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Vote on
Directors
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote
for any individual nominee(s), mark "FOR ALL EXCEPT" and write the
nominee's name on the line below
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1.
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To elect the following four (4)
persons to serve as Class III directors (except as noted to the right)
until the Annual Meeting of Stockholders held in 2010 and until their
successors are duly elected and qualified.
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Nominees:
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01) Renato A. DiPentima
02)
Michael R. Klein
03) David H.
Langstaff
04) Ernst Volgenau
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Vote on Proposals
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For
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Against
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Abstain
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For
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Against
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Abstain
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2.
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To
ratify the selection by the Audit Committee of Deloitte & Touche LLP
as our independent registered public accounting firm for the fiscal year
ending June 30, 2008.
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3.
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To approve the material terms of our senior
officer performance goals.
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IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
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NOTE:
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Please sign exactly as your name or names
appear(s) on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full
title as such. If signer is a partnership, please sign in partnership name
by authorized person.
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TO CHANGE THE ADDRESS ON
YOUR ACCOUNT, PLEASE CHECK THE BOX AT RIGHT AND INDICATE YOUR NEW ADDRESS
ON THE REVERSE. PLEASE NOTE THAT CHANGES TO THE REGISTERED NAME(S) ON THE
ACCOUNT MAY NOT BE SUBMITTED VIA THIS METHOD.
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Yes
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No
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MATERIALS
ELECTION
As of July 1, 2007, SEC rules permit companies to
send you a notice that proxy information is available on the Internet,
instead of mailing you a complete set of materials. Check the box to the
right if you want to receive a complete set of future proxy materials by
mail, at no cost to you. If you do not take action you may receive only a
Notice.
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Please
indicate if you plan to attend this meeting
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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PROXY
SRA INTERNATIONAL,
INC.
PROXY FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD
TUESDAY, OCTOBER 23, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY
The
undersigned, having received notice of the meeting and the Board of Directors'
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Ernst Volgenau and Stephen C. Hughes, and each of them, with full power of
substitution, as proxies to represent and vote, as designated herein, all shares
of stock of SRA International, Inc. (the "Company") which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at the Hilton McLean Tysons Corner, 7920 Jones Branch
Drive, McLean, Virginia 22102, on Tuesday, October 23, 2007, at 9:30 a.m., local
time, and at any adjournment thereof (the "Meeting"). The matters set forth on
the reverse have been proposed by the Company.
In their
discretion, the proxies are authorized to vote upon such other matters as may
properly come before the Meeting or any adjournment thereof.
This
proxy, when properly executed, will be voted in the manner directed herein by
the undersigned stockholder.
If no direction
is given, this proxy will be voted FOR all proposals
. Attendance of the undersigned at the meeting or at any adjournment
thereof will not be deemed to revoke this proxy unless the undersigned shall
revoke this proxy in writing or shall deliver a subsequently dated proxy to the
Secretary of the Company or shall vote in person at the Meeting.
(If you noted any Address Changes above, please
mark corresponding box on the reverse side.)
(CONTINUED AND TO BE SIGNED
ON REVERSE SIDE)
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