*
|
|
Less than 1%.
|
(1)
|
|
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
1, 2008 through the exercise of any stock option or other
right.
|
(2)
|
|
Includes 51,153 shares
of class A common stock issuable upon exercise of options.
|
(3)
|
|
Includes 219,420
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.
|
(4)
|
|
Includes 280,596
shares of class A common stock issuable upon exercise of
options.
|
(5)
|
|
Includes 3,048,161
shares of class B common stock held by a grantor retained annuity trust,
of which Dr. Volgenaus wife is the trustee.
|
(6)
|
|
Includes 42,010 shares
of class A common stock issuable upon exercise of options.
|
(7)
|
|
Includes 1,829 shares
of class A common stock issuable upon exercise of options.
|
(8)
|
|
Includes 40,660 shares
of class A common stock issuable upon exercise of options.
|
(9)
|
|
Includes 60,830 shares
of class A common stock issuable upon exercise of options.
|
(10)
|
|
Includes 100,660
shares of class A common stock issuable upon exercise of
options.
|
(11)
|
|
Consists of 20,000
shares of class A common stock issuable upon exercise of
options.
|
(12)
|
|
Includes 817,158
shares of class A common stock issuable upon exercise of options and
3,048,161 shares of class B common stock held in the grantor retained
annuity trust as described in the notes above.
|
(13)
|
|
Includes 8,134 shares
of class A common stock issuable upon exercise of options.
|
(14)
|
|
Based solely upon a
Schedule 13G/A filed by Eminence Capital LLC on February 14, 2008. The
address for Eminence Capital LLC provided in such Schedule 13G/A is 65
East 55th Street, 25th Floor, New York, NY, 10022.
|
(15)
|
|
Based solely upon a
schedule 13G/A filed by Fidelity Management & Research LLC on February
14, 2008. The address for Fidelity Management & Research provided in
such Schedule 13G/A is 82 Devonshire Street, Boston, MA,
02109.
|
(16)
|
|
Based solely upon a
Schedule 13G filed by Morgan Stanley on March 10, 2008. The address for
Morgan Stanley provided in such Schedule 13G is 1585 Broadway, New York,
NY, 10036.
|
(17)
|
|
Based solely upon a
Schedule 13G/A filed by Neuberger Berman Inc. on February 12, 2008. The
address for Neuberger Berman Inc. provided in such Schedule 13G/A is 605
Third Avenue, New York, NY, 10158.
|
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. Each class consists, as nearly as possible, of
one-third of the total number of directors. Vacancies on the Board may be filled
only by persons elected by a majority of the remaining directors.
The Board of
Directors presently has ten members. There are currently four Class I directors,
whose terms expire at the 2008 annual meeting of stockholders, three Class II
directors, whose terms expire at the 2009 annual meeting of stockholders, and
three Class III directors, whose terms expire at the 2010 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 I 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. Directors are
elected by a plurality of the votes of the holders of shares present in person
or represented by proxy and entitled to vote on the election of directors. The
four nominees receiving the highest number of affirmative votes will be elected.
All four of the nominees, Messrs. Barter and Gilburne, General Ellis and Dr.
Wilensky, are presently Class I 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 I director will be elected to hold office until the
2011 annual meeting of stockholders, subject to the election and qualification
of his or her successor and to his or her 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 I DIRECTORS
Set forth
below, for each nominee for Class I director, are name, age as of September 1,
2008, positions with SRA, principal occupation and business experience during
the past five years, and the year of the commencement of his or her term as a
director of SRA:
JOHN W. BARTER is 61 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. 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, and Lenovo Group
Limited, a Hong Kong listed company that manufactures and markets personal
computers.
LARRY R.
ELLIS is 62 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 Point Blank Solutions, Inc., a leading manufacturer of bullet,
fragmentation and stab resistant apparel, in early December 2004, became
president in 2005, and assumed the role of chief executive officer in July 2006.
He also serves on the boards of directors of the Armed Forces Benefit
Association and Universal Systems and Technology, Inc. (UNITECH), a professional
services company providing training, performance improvement, simulation and
security solutions.
MILES R.
GILBURNE is 57 years old and has served on our Board of Directors since December
2003. Mr. Gilburne has served as a managing member of ZG Ventures, LLC, a
venture capital firm, for eight years. 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 May 2006.
He is co-chairman of the board of ePals, Inc., a global online learning company.
He also serves on the boards of directors of Pharmacyclics, Inc., a drug
discovery company, Maui Land and Pineapple, a real estate and agriculture
company, and the Foundation for the National Institutes of Health.
5
GAIL R.
WILENSKY is 65 years old and has served on our Board of Directors since December
2005. Dr. Wilensky has served as an economist and a senior fellow at Project
HOPE, an international health foundation, since January 1993. 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, a
part of The National Academies of Science and Engineering, and is on its
Governing Council. 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. 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.
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 1, 2008,
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 II
Directors
STANTON D.
SLOANE is 58 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 1976 until 1981.
EDMUND P.
GIAMBASTIANI, JR. is 60 years old and has served on our Board of Directors since
January 2008. Admiral Giambastiani served as the seventh vice chairman of the
Joint Chiefs of Staff for the U.S. Armed Forces from August 2005 to July 2007
and as NATOs first Supreme Allied Commander Transformation and the Commander,
United States Joint Forces Command from October 2002 to August 2005. Admiral
Giambastiani currently serves on the board of directors of Monster Worldwide,
Inc, a global on-line employment company. He is a graduate of the U.S. Naval
Academy.
WILLIAM T.
KEEVAN is 61 years old and has served on our Board of Directors since February
2008. Since December 2006, Mr. Keevan has been a senior managing director and
the U.S. leader of the Forensic Accounting, Litigation Consulting, and
Government Contractor Advisory Services practice at Kroll, a leading global risk
consulting company. Mr. Keevan is a recognized expert on financial accounting
and reporting, government contractor regulatory compliance and related
governance matters. He has testified frequently as an expert witness. Prior to
joining Kroll, he led Navigant Consulting, Inc.s Government Contractor Services
practice for over four years and served 28 years with Arthur Andersen LLP, 20
years as a partner in various senior management positions. Mr. Keevan currently
serves on the board of directors of DeVry Inc., a post-secondary education
company.
6
Incumbent Class III Directors
MICHAEL R.
KLEIN is 66 years old and has served on our Board of Directors since December
1998. Mr. Klein serves as chairman of the board of
directors of CoStar Group, Inc., a provider of commercial real estate
information and related software, which he co-founded in 1987, and as vice
chairman and lead director of the board of directors of Perini Corporation,
a civil engineering and construction company. He also serves as the chairman of the board of directors of the
Sunlight Foundation which promotes transparency through internet postings of
information about Congress and those who seek to influence it, which he
co-founded in 2005 and as chairman of the board of directors of the
Shakespeare Theatre Company. He was a partner of the law firm Wilmer Cutler Pickering Hale and Dorr LLP from 1974 through 2005.
DAVID H.
LANGSTAFF is 54 years old and has served on our Board of Directors since
February 2004. Mr. Langstaff served as chief executive officer and co-chairman
of The Olive Group, a global integrated security company, from August 2006 to
January 2008. 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, from its formation in 1997 until its sale in August 2003,
and had served as chief financial officer, chief operating officer and chief
executive officer of Veridians 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 boards 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 75 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 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 with the rank of 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.
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, 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.
7
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 that he or she serves as an
executive officer;
-
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 that 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 that would disqualify a director from being independent.
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, Edmund P.
Giambastiani, Jr., Miles R. Gilburne, William T. Keevan, Michael R. Klein, David
H. Langstaff or Dr. 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. Our former director Delbert C.
Staley, who served as a director during fiscal 2008 but has subsequently
resigned from the Board of Directors, was also determined to be independent in
accordance with NYSE listing standards. Stanton D, Sloane, our president and
chief executive officer, and Ernst Volgenau, our founder and the chairman of our
Board of Directors, are not independent directors by virtue of their current
status as executive officers of our company. Renato DiPentima, who served as a
director during fiscal 2008, was determined not to be an independent director by
virtue of his status as an executive officer of our company in fiscal 2007, and
as an employee director in fiscal 2008.
Board Meetings and Attendance
The board
met six times during fiscal 2008, consisting of four in-person meetings and two
teleconference meetings. During fiscal 2008, each director attended at least 75%
of the aggregate of the meetings of the board and the 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. Klein, who served as Lead Director during fiscal 2008.
Director Attendance at Annual
Meeting of Stockholders
The
governance policies of the board provide that directors are responsible for
attending the annual meeting of stockholders. Six of our current directors
attended the 2007 Annual Meeting of Stockholders on October 23, 2007.
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.
8
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 Securities Exchange Act of 1934.
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;
-
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.
The members
of the Audit and Finance Committee are Messrs. Barter (Chairman), Gilburne and
Keevan. Mr. Staley was also a member of the committee until he resigned from the
committee in October 2007. The Board of Directors has determined that Messrs.
Barter and Keevan are audit committee financial experts as defined in Item
407(d)(5) of Regulation S-K. The Audit and Finance Committee met seven times
during fiscal 2008.
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;
-
overseeing and administering our cash and equity
incentive plans; and
-
reviewing with management the Compensation
Discussion and Analysis and recommending whether to
include it in this proxy statement and other filings.
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. Langstaff (Chairman), Admiral Giambastiani, and Dr.
Wilensky. General Ellis also served on the committee during fiscal 2008 but
resigned from the committee in July 2008. Mr. Staley also served on the
committee during fiscal 2008 until he resigned from the committee in October
2007. The Compensation and Personnel Committee is authorized to delegate its
authority to approve stock option grants and other
equity awards to our executive officers. It has 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 shares of class A common stock under options and 5,000
restricted shares of class A common stock per individual and 100,000 shares of
class A common stock under options and 25,000 restricted shares of class A
common stock in the aggregate. The Compensation and Personnel Committee met
three times during fiscal 2008.
9
The specific
determinations of the Compensation and Personnel Committee with respect to
executive compensation for fiscal 2008 are described in greater detail in the
Compensation Discussion and Analysis section of this proxy
statement.
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.
The members of the Governance
Committee are Messrs. Klein (Chairman) and Gilburne and General Ellis. Mr.
Barter also served on the committee during fiscal 2008 but resigned from the
committee in July 2008. The Governance Committee met one time during fiscal
2008.
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 corporate secretary at 4300 Fair
Lakes Court, Fairfax, VA 22033, and they will be forwarded to the Governance
Committee members for consideration. Any such submission must be accompanied by
the written consent of the proposed nominee to be named as a nominee and to
serve as a director if elected. 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.
10
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 2009
Annual Meeting on page 31 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 2008, Mr. Klein 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. Michael R. Klein, Lead
Director, SRA International, Inc., 4300 Fair Lakes Court, Fairfax, VA 22033.
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 officials, 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 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, we pay each non-employee
director an annual retainer of $35,000 per year, payable quarterly, plus $2,000
for each board meeting attended, $2,000 for each committee meeting attended in
person, and $1,000 for each teleconference committee meeting attended. 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, payable quarterly,
and all other committee chairs are paid an
additional annual retainer of $10,000, payable quarterly.
11
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 and are vested in full upon
grant. The number of shares granted is determined using the closing trading
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, determined in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123 (revised 2004)
Share-Based Payment
, or SFAS No.
123(R), of $150,000 upon their appointment or election to the board. Each
continuing non-employee director who has served for at least thirty months
receives an annual equity grant with an estimated value, determined in
accordance with SFAS No. 123(R), of $50,000. Annual equity grants are generally
made on the third business day following the issuance of our earnings release
for our annual financial results.
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 SFAS No.
123(R) and with our practices and methodologies then in effect. The equity
grants are made under our then-existing stock incentive plan and vest in equal
25% increments over four years. The exercise price for stock options granted is
the closing trading price on the New York Stock Exchange of our class A common
stock on the date of grant.
The
following table sets forth information regarding the compensation of our
directors in fiscal 2008. 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. Compensation for such directors in
their capacities as named executive officers is fully reflected in the Summary
Compensation Table included in this proxy statement.
Director Compensation Table
|
Fees Earned or
|
|
Option
|
|
|
Paid
in Cash
|
Stock
Awards
|
Awards
|
|
Non-Employee Director
|
(1)
|
(2)
|
(2)
|
Total
|
John W. Barter
(3)
|
$79,000
|
|
$11,821
|
|
$
79,145
|
|
$169,966
|
Larry R. Ellis
(4)
|
58,000
|
|
18,745
|
|
19,142
|
|
95,887
|
Edmund P.
Giambastiani, Jr. (5)
|
30,500
|
|
7,382
|
|
7,395
|
|
45,277
|
Miles R. Gilburne
(6)
|
60,000
|
|
5,544
|
|
76,900
|
|
142,444
|
William T. Keevan
(7)
|
16,750
|
|
6,510
|
|
6,522
|
|
29,782
|
Michael R. Klein
(8)
|
62,000
|
|
11,821
|
|
45,442
|
|
119,263
|
David H. Langstaff
(9)
|
56,000
|
|
5,544
|
|
5,534
|
|
67,078
|
Delbert C. Staley
(10)
|
24,000
|
|
11,821
|
|
45,442
|
|
81,263
|
Gail Wilensky
(11)
|
62,500
|
|
|
|
117,159
|
|
179,659
|
____________________
(1)
|
|
Represents the
aggregate dollar amount of fees paid for services as a director during
fiscal 2008, including annual retainer fees and committee chairman fees.
Directors may elect to receive class A common stock in lieu of cash for
annual retainer and committee chairman fees. In 2008, directors received
the following amount of class A common stock shares in lieu of cash:
General Ellis, 1,027 shares with a grant date fair value of $26,277; Mr.
Gilburne, 1,027 shares with a grant date fair value of $26,277; and Mr.
Klein, 1,319 shares with a grant date fair value of $33,747.
|
|
(2)
|
|
The amounts in these
columns represent the expense we recognized in connection with these
awards for the fiscal year ended June 30, 2008 in connection with awards
made during fiscal 2008 and during prior years in accordance with SFAS
No. 123(R). Assumptions used in the calculation of these expenses are
included in note 11 to our audited financial statements for the year ended
June 30, 2008 included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on August 28, 2008. Unlike the
amounts
|
12
|
|
reflected in our
audited financial statements, 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.
|
|
(3)
|
|
Mr. Barter received a
grant of 980 shares of restricted stock on August 13, 2007 with a grant
date fair value of $25,078, which was based on the closing price of class
A common stock on the date of grant, and an option to purchase 2,640
shares of class A common stock on August 13, 2007, with a grant date fair
value of $25,030, as calculated in accordance with SFAS No. 123(R). As of
June 30, 2008, Mr. Barter held options to purchase 45,340 shares and 1,980
restricted shares.
|
|
(4)
|
|
As of June 30, 2008,
General Ellis held options to purchase 7,310 shares and 2,650 restricted
shares.
|
|
(5)
|
|
Admiral Giambastiani
received a grant of 3,020 shares of restricted stock on February 8, 2008
with a grant date fair value of $74,896, which was based on the closing
price of class A common stock on the date of grant, and an option to
purchase 9,020 shares of class A common stock on February 8, 2008, with a
grant date fair value of $75,028, as calculated in accordance with SFAS
No. 123(R). As of June 30, 2008, Admiral Giambastiani held options to
purchase 9,020 shares and 3,020 restricted shares.
|
|
(6)
|
|
Mr. Gilburne received
a grant of 980 shares of restricted stock on August 13, 2007 with a grant
date fair value of $25,078, which was based on the closing price of class
A common stock on the date of grant, and an option to purchase 2,640
shares of class A common stock on August 13, 2007, with a grant date fair
value of $25,030, as calculated in accordance with SFAS No. 123(R). As of
June 30, 2008, Mr. Gilburne held options to purchase 42,640 shares and 980
restricted shares.
|
|
(7)
|
|
Mr. Keevan received a
grant of 2,960 shares of restricted stock on February 25, 2008 with a
grant date fair value of $74,888, which was based on the closing price of
class A common stock on the date of grant, and an option to purchase 8,720
shares of class A common stock on February 25, 2008, with a grant date
fair value of $75,028, as calculated in accordance with SFAS No. 123(R).
As of June 30, 2008, Mr. Keevan held options to purchase 8,720 shares and
2,960 restricted shares.
|
|
(8)
|
|
Mr. Klein received a
grant of 980 shares of restricted stock on August 13, 2007 with a grant
date fair value of $25,078, which was based on the closing price of class
A common stock on the date of grant, and an option to purchase 2,640
shares of class A common stock on August 13, 2007, with a grant date fair
value of $25,030, as calculated in accordance with SFAS No. 123(R). As of
June 30, 2008, Mr. Klein held options to purchase 64,160 shares and 1,980
restricted shares.
|
|
(9)
|
|
Mr. Langstaff received
a grant of 980 shares of restricted stock on August 13, 2007 with a grant
date fair value of $25,078, which was based on the closing price of class
A common stock on the date of grant, and an option to purchase 2,640
shares of class A common stock on August 13, 2007, with a grant date fair
value of $25,030, as calculated in accordance with SFAS No. 123(R). As of
June 30, 2008, Mr. Langstaff held options to purchase 102,640 shares and
980 restricted shares.
|
|
(10)
|
|
Mr. Staley resigned
from the Board effective December 27, 2007. Mr. Staley received a grant of
980 shares of restricted stock on August 13, 2007 with a grant date fair
value of $25,078, which was based on the closing price of class A common
stock on the date of grant, and an option to purchase 2,640 shares of
class A common stock on August 13, 2007, with a grant date fair value of
$25,030, as calculated in accordance with SFAS No. 123(R). As of June 30,
2008, Mr. Staley held options to purchase 25,340 shares and 1,980
restricted shares.
|
|
(11)
|
|
As of June 30, 2008,
Dr. Wilensky held options to purchase 40,000
shares.
|
13
COMPENSATION DISCUSSION AND ANALYSIS
Objectives and Philosophy of Our
Executive Compensation Program
The primary objectives of our
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 our 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 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
that grants of equity awards help to retain our executives and incentivize 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 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 for each year. The other
executives do not have a role in establishing executive compensation.
In
attracting and retaining our executive officers, we compete with many other
firms in the information technology industry. To keep abreast of changing
compensation packages of our competitors, we assess various compensation data
from other companies throughout the fiscal year. Historically, in making
compensation decisions, the Compensation and Personnel Committee has reviewed
compensation survey data for companies in the information technology industry
and has compared our executive compensation to that paid by a peer group of
publicly traded companies with executives in similar roles. 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
peer group most recently used, in fiscal 2007, consisted of ManTech
International Corporation, MTC Technologies, Inc., NCI, Inc., and SI
International, Inc. For fiscal year 2008, the Compensation and Personnel
Committee used data from compensation surveys of a broader group of
companies in the information technology industry to evaluate executive
compensation. The compensation survey data was prepared for the
Compensation and Personnel Committee by our director of compensation, with input
from our chairman of the board.
Components of our Executive
Compensation Program
The primary elements of our
executive compensation program are:
-
base salary;
-
annual cash incentives;
-
equity in the form of stock option and/or
restricted stock awards;
-
insurance, retirement and other employee benefits;
and
-
in some cases, severance and change-of-control
benefits.
14
During
fiscal 2008, we did not have a formal or informal policy or target for
allocating compensation between long-term and short-term cash compensation, or
between cash and non-cash compensation. At the end of fiscal 2008, the
Compensation and Personnel Committee determined subjectively what it believed to
be the appropriate level and mix of equity, after reviewing the chief executive
officers recommendations and evaluating each executives level of
responsibility within SRA, their performance and their existing equity
holdings.
Base Salary
In general,
we initially 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, however, the Compensation and Personnel
Committee considers not only the quantitative compensation data for our industry
and peer group, but in its discretion may adjust the initial target as a result
of 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. The base salaries paid to
our chief executive officer and other named executive officers for the past two
fiscal years are shown below:
|
End of Fiscal 2008
|
Fiscal 2007
|
Fiscal 2008
|
Annual
|
Name
of Executive
|
Position
|
Salary
|
Salary
|
% Change
|
Stanton D.
Sloane
|
President and
Chief
|
$
650,000
|
$
650,000
|
0.0%
|
|
|
Executive
Officer
|
|
|
|
|
Stephen C.
Hughes
|
Chief Financial
|
$
290,000
|
$
325,000
|
12.1%
|
|
|
Officer and
|
|
|
|
|
|
Executive Vice
|
|
|
|
|
|
President,
|
|
|
|
|
|
Operations
|
|
|
|
|
Barry S.
Landew
|
Executive Vice
|
$
270,000
|
$
300,000
|
11.1%
|
|
|
President, Strategic
|
|
|
|
|
|
Development
|
|
|
|
|
Ernst
Volgenau
|
Chairman
|
$
195,000
|
$
195,000
|
0.0%
|
|
Annual Cash
Incentives
We have an
annual cash incentive plan for our executives and key employees. These
incentives are intended to reward the achievement of strategic operational and
financial goals by our company, as well as individual performance objectives.
The Compensation and Personnel Committee believes that making a significant
portion of the executive officers cash incentives contingent on corporate
performance aligns the executive officers interest with those of our
stockholders. The committee targets incentive cash compensation above market,
relative to similarly situated executives, based upon our compensation analyses.
At the
beginning of each fiscal year, the Compensation and Personnel Committee approves
the executive salary and cash incentive targets, as well as the applicable
corporate and individual goals and objectives that form the basis for the cash
incentive. The corporate performance goals 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.
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 that are not included in establishing the corporate
financial goals shall be excluded when determining the actual results at fiscal
year-end. Our intent is to establish performance targets that are challenging
and require above average performance to achieve above average
compensation.
15
Our
executive cash incentives 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 initially
earned. The remaining 30% is paid in equal amounts of 15% at the end of each 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
|
|
Target
|
|
Total/Target Cash Compensation
|
|
|
Fiscal
|
Fiscal
|
|
Fiscal
|
Fiscal
|
|
Fiscal
|
Fiscal
|
|
|
2007
|
2008
|
|
2007
|
2008
|
|
2007
|
2008
|
%
Change
|
Dr.
Sloane
|
$650,000
|
$650,000
|
|
$700,000
|
$700,000
|
|
$1,350,000
|
$1,350,000
|
0.0%
|
Mr.
Hughes
|
$290,000
|
$325,000
|
|
$350,000
|
$390,000
|
|
$
640,000
|
$
715,000
|
11.7%
|
Mr.
Landew
|
$270,000
|
$300,000
|
|
$320,000
|
$355,000
|
|
$
590,000
|
$
655,000
|
11.0%
|
Dr.
Volgenau
|
$195,000
|
$195,000
|
|
|
|
|
$
195,000
|
$
195,000
|
0.0%
|
The
Compensation and Personnel Committee determined the fiscal 2008 salary and cash
incentive compensation increases for Mr. Hughes and Mr. Landew based on market
data and on their performance in fiscal 2007. Dr. Sloanes fiscal 2008 salary
was established by the terms of his employment agreement dated April 18, 2007.
Dr. Volgenaus fiscal 2008 salary was not adjusted from fiscal 2007 because he
continued to work a reduced schedule.
Stock Option and Restricted
Stock Equity Awards
Our equity
compensation 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 SFAS
No. 123(R). Prior to fiscal 2006, we generally granted only stock options as
long-term incentives to our employees. In fiscal 2006, we began granting a mix
of stock option and restricted stock awards to our executives and other
employees. For fiscal 2008, we granted only restricted stock awards to Messrs.
Hughes and Landew. Dr. Sloane received his fiscal 2008 equity award in the form
of nonstatutory stock options, as provided in his employment agreement.
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 no voting rights and no
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.
For fiscal
2008, the Compensation and Personnel Committee did not establish quantitative
equity targets at the beginning of the fiscal year for executives. Instead, the
Compensation and Personnel Committee determined the size of the grants at the
end of the year after evaluating the executives performance and the
recommendations of the chief executive officer. The Compensation and Personnel
Committee granted 8,562 restricted stock shares to Mr. Hughes and 6,422
restricted stock shares to Mr. Landew on August 15, 2008.
16
Dr. Sloanes
fiscal 2008 target of 30,000 option shares was established pursuant to his
employment agreement, and the actual grant was calculated at the end of the year
by applying the same financial and personal performance measures used in
calculating his fiscal 2008 cash incentive award described below. This
calculation resulted in the grant of an option to purchase 18,900 shares of
class A common stock, which was granted to Dr. Sloane on August 15,
2008.
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.
In April
2007, the Compensation and Personnel Committee established that the exercise
price of all stock options would be equal to the closing price of our class A
common stock on the New York Stock Exchange on the date of grant. All equity
grants must be approved in advance of or on the date of grant either by the
Compensation and Personnel Committee or under the limited authority delegated to
the chairman and chief executive officer. Annual equity grants are issued on the
third business day following the public release of our year-end earnings. All
other equity grants 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.
Determination of Cash
Incentives for Fiscal 2008
Cash Incentive for Chief Executive Officer
For fiscal 2008, Dr. Sloanes cash
incentive calculation was based on the following formula:
(Bonus Target) *
|
(Corporate Multiplier)
*
|
(Individual Multiplier)
=
|
Actual Cash Incentive Earned
|
|
(0.0 to
1.69)
|
(0.0 to 1.0)
|
|
For fiscal
2008, the Compensation and Personnel Committee considered the following
corporate financial performance measures:
|
|
Minimum
|
Goal
|
Actual
|
|
|
Performance
|
Performance
|
Performance
|
Financial
Objective
|
Target
$
|
(1)
($M)
|
(1)
($M)
|
(1)
($M)
|
Revenue
|
$175,000
|
$ 1,331
|
|
$ 1,490
|
|
$ 1,400
|
|
Operating
Income
|
$175,000
|
$
101
|
|
$
114
|
|
$
111
|
|
Orders
|
$175,000
|
$ 1,861
|
|
$ 2,396
|
|
$ 1,789
|
|
Days Sales
Outstanding (DSO) Q4
|
$105,000
|
76
|
|
69
|
|
77
|
|
Return on Invested
Capital (ROIC)
|
$
70,000
|
10.5%
|
|
11.4%
|
|
11.9%
|
|
Total
|
$700,000
|
|
|
|
|
|
|
____________________
(1)
|
|
Adjusted to account for
Dr. Sloanes eleven month performance period of August 1, 2007 through
June 30, 2008 and to reflect the acquisition of Constella Group, LLC which
was acquired August 9, 2007.
|
The
qualitative measures for assessing Dr. Sloanes performance in fiscal 2008
included enhancing SRAs ethic of Honesty and Service, improving the human
resource and employee development programs and implementing initiatives for
sustained growth, profitability, outstanding customer service, and employee
satisfaction. The qualitative factors used in determining the individual
multiplier may only decrease or sustain the amount earned based on the
quantitative factors.
After
evaluating the quantitative and qualitative factors shown above, the
Compensation and Personnel Committee established Dr. Sloanes cash incentive
earned at approximately 63% of his incentive target, or $442,400.
17
Cash Incentive for Other Executive Officers
Based on
review of corporate performance for fiscal 2008, the Compensation and Personnel
Committee, using its discretion, assigned the corporate multiplier at 80%.
Individual multipliers were determined using individual goals and objectives
related to performance during fiscal 2008, based on both quantitative
and qualitative factors. Although the goals
and objectives differ based on individual position and role within the company,
the items may or may not include factors such as ethics and leadership,
financial metrics, or functional specific objectives.
For fiscal
2008, the Compensation and Personnel Committee approved a cash incentive earned
metric of 72% of target for Mr. Hughes, and 68% of target for Mr. Landew. Fiscal
2008 cash incentives earned by Mr. Hughes and Mr. Landew were $280,800 and
$241,400 respectively. These amounts were determined using a similar formula as
above.
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 2008
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
2008, 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 3.5% of employees
salary).
|
The maximum
salary considered for the second match was $125,000. Therefore, the maximum
match under this formula during fiscal 2008 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 $30,000 upon hire and an additional
$125,000 on July 20, 2007. We paid the remaining $125,000 on July 25, 2008.
These amounts were determined by the Compensation and Personnel Committee, after
consulting with our chairman. In addition, we are providing Dr. Sloane a monthly
living allowance of $8,000 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 executive officers do not have similar benefits.
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.
18
We have
provided more detailed information about these benefits, along with estimates of
their value under various circumstances in the Potential Payments
Upon Termination or Change of Control section of this proxy statement.
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 specified
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 our 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.
19
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 and incorporated into our Annual Report on Form 10-K for the
fiscal year ended June 30, 2008.
1
Compensation and Personnel
Committee
Mr. David H. Langstaff (Chairman)
Admiral Edmund P. Giambastiani,
Jr.
Dr. Gail R. Wilensky
____________________
1
The material in this report is not soliciting material, is furnished
to, but not deemed filed with, the Securities and Exchange Commission and is
not deemed to be incorporated by reference in any filing of the Company under
the Securities Act of 1933 or the Securities Exchange Act of 1934, other than
the Companys Annual Report on Form 10-K, where it shall be deemed to be
furnished, whether made before or after the date hereof and irrespective of
any general incorporation language in any such filing.
20
EXECUTIVE COMPENSATION
Summary Compensation
Table
The
following table sets forth the compensation for fiscal 2007 and 2008 for each
individual who served as our chief executive officer and chief financial officer
during fiscal 2008 and our two other executive officers serving during fiscal
2008, all of whom we refer to together as the named executive officers:
Summary Compensation
Table
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
Stock
|
Option
|
Incentive Plan
|
All Other
|
|
Name and Principal
|
|
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Compensation
|
|
Position
|
Fiscal
Year
|
Salary
|
(1)
|
(2)
|
(2)
|
(3)
|
(4)
|
Total
|
Stanton D. Sloane,
|
2008
|
$650,000
|
$125,000
|
$806,563
|
$474,397
|
$325,812
|
$100,375
|
$2,482,147
|
President and Chief
|
2007
|
162,500
|
30,000
|
121,454
|
69,980
|
75,285
|
24,000
|
483,219
|
Executive
Officer
|
|
|
|
|
|
|
|
|
Stephen C. Hughes,
|
2008
|
325,000
|
|
97,764
|
319,249
|
267,518
|
4,375
|
1,013,906
|
Chief Financial Officer
and
|
2007
|
290,000
|
|
45,710
|
343,385
|
234,080
|
4,375
|
917,550
|
Executive Vice President,
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
Barry S. Landew,
|
2008
|
300,000
|
|
65,564
|
201,020
|
235,040
|
4,375
|
805,999
|
Executive Vice President,
|
2007
|
270,000
|
|
13,510
|
225,155
|
219,041
|
4,375
|
732,081
|
Strategic
Development
|
|
|
|
|
|
|
|
|
Ernst Volgenau, Chairman
|
2008
|
195,000
|
|
|
3,904
|
|
4,375
|
203,279
|
|
2007
|
195,000
|
|
|
38,540
|
52,952
|
4,375
|
290,867
|
____________________
(1)
|
|
The bonus
for Dr. Sloane of $30,000 in fiscal 2007 and $125,000 in fiscal 2008
represents the first and second installments, respectively, of his hiring
bonus. The final installment of $125,000 was paid in August
2008.
|
(2)
|
|
The amounts
in these columns represent the expense recognized in connection with these
awards for the fiscal year ended June 30, 2008, in connection with awards
made during fiscal 2008 and during prior years, in accordance with SFAS
No. 123(R). Assumptions used in the calculation of these expenses are
included in note 11 to our audited financial statements for the year ended
June 30, 2008 included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on August 28, 2008. Unlike the amounts
reflected in our audited financial statements, amounts presented in the
table 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.
|
(3)
|
|
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 initially 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 the indicated fiscal year and 15% of the bonuses earned for
each of the two prior fiscal years. In the case of Dr. Sloane, no bonus
was earned for periods prior to fiscal 2007, as his employment with the
company began effective April 2007.
|
(4)
|
|
For Dr.
Sloane, this consists of both his $8,000 monthly housing allowance and his
annual 401(k) company matching contribution of $4,375 for fiscal 2008. For
fiscal 2007, this amount consisted of his $8,000 monthly housing allowance
for the three months he was employed. For Mr. Hughes, Mr. Landew, and Dr.
Volgenau, this consists of their annual 401(k) company matching
contribution of $4,375 for both fiscal 2007 and fiscal
2008.
|
21
Grants of Plan-Based
Awards
The
following table sets forth information regarding options granted and restricted
stock awards made to our named executive officers. All of the options and
restricted stock were granted under our 2002 stock incentive plan.
Fiscal 2008 Grants of Plan-Based
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
Date
Fair
|
|
|
|
Estimated Future Payouts
|
Estimated Future Payouts
|
Stock
|
All Other
|
|
Closing
|
Value
|
|
|
|
Under Non-Equity Incentive
|
Under Equity Incentive
Plan
|
Awards:
|
Option
|
Exercise
|
Price of
|
of
Stock
|
|
|
|
Plan
Awards
|
Awards
|
Number
|
Awards:
|
or Base
|
Stock
|
and
|
|
|
|
|
|
|
|
|
|
of
|
Number of
|
Price of
|
on
|
Options
|
|
Grant
|
|
|
|
Maximum
|
|
|
Maximum
|
Shares of
|
Securities
|
Option
|
Grant
|
Awards
|
Name of
|
Date
|
Date
|
Threshold
|
Target
|
($)
|
Threshold
|
Target
|
(#)
|
Stock or
|
Underlying
|
Awards
|
Date
|
($)
|
Executive
|
(1)
|
Approved
|
($)
|
($)
|
(2)
|
(#)
|
(#)
|
(2)
|
Units
|
Options
|
($/Sh)
|
($/Sh)
|
(3)
|
Dr.
Sloane
|
8/13/2007
|
8/3/2007
|
n/a
|
700,000
|
1,183,000
|
n/a
|
30,000
|
50,700
|
|
4,612
|
25.59
|
25.59
|
43,727
|
Mr.
Hughes
|
8/13/2007
|
8/3/2007
|
n/a
|
390,000
|
659,100
|
n/a
|
|
|
1,116
|
4,464
|
25.59
|
25.59
|
70,883
|
Mr.
Landew
|
8/13/2007
|
8/3/2007
|
n/a
|
355,000
|
599,950
|
n/a
|
|
|
1,116
|
4,464
|
25.59
|
25.59
|
70,883
|
Dr.
Volgenau
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)
|
|
Equity
grants made to the executive officers effective August 13, 2007 were based
upon the Compensation and Personnel Committees evaluation of the
executives performance for fiscal 2007.
|
(2)
|
|
The bonus
amount that could be earned during fiscal 2008 was limited to 1.69 times
the target amount. Dr. Sloane was the only executive to have an equity
target for fiscal 2008, pursuant to his employment agreement.
|
(3)
|
|
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, 2008 over the entire term of the award in accordance with SFAS No.
123(R). Assumptions used in the calculation of these expenses are included
in note 11 of our audited financial statements for the year ended June 30,
2008 included in our Annual Report on Form 10-K filed with the Securities
and Exchange Commission on August 28, 2008. Unlike the amounts reflected
in our audited financial statements, 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.
|
22
Outstanding Equity Awards at Fiscal
Year End
The
following table sets forth information regarding outstanding stock options and
restricted stock awards held by our named executive officers as of June 30,
2008. Stock options granted prior to May 2002 were granted under our 1994 Stock
Option Plan. Stock options and restricted stock awards granted after May 2002
were granted under our 2002 Stock Incentive Plan.
Outstanding Equity Awards At June 30,
2008
|
Option Awards
|
Restricted Stock Awards
|
|
|
Number
|
Number
|
|
|
|
|
|
|
of Shares
|
of Shares
|
|
|
Number
|
Market
|
|
|
Underlying
|
Underlying
|
|
|
of Shares
|
Value
of
|
|
|
Unexercised
|
Unexercised
|
Option
|
Option
|
that
|
Shares
that
|
|
|
Options
|
Options
|
Exercise
|
Expiration
|
Have Not
|
Have
Not
|
|
|
Exercisable
|
Unexercisable
|
Price ($)
|
Date
|
Vested
|
Vested
($)
|
Name of
Executive
|
Grant
Date
|
(1)
|
(1)
|
(2)
|
(3)
|
(1)
|
(4)
|
Dr. Sloane
|
5/7/2007
|
50,000
|
150,000
|
25.8100
|
5/7/2017
|
93,750
|
2,105,625
|
|
8/13/2007
|
|
4,612
|
25.5900
|
8/13/2017
|
|
|
Mr. Hughes
|
8/15/2002
|
70,660
|
|
12.4000
|
8/15/2017
|
|
|
|
8/7/2003
|
20,600
|
|
16.7950
|
8/7/2013
|
|
|
|
8/5/2004
|
75,000
|
25,000
|
21.1300
|
8/5/2014
|
|
|
|
8/4/2005
|
11,070
|
11,070
|
35.4000
|
8/4/2015
|
|
|
|
2/15/2006
|
8,000
|
8,000
|
32.2000
|
2/15/2016
|
2,000
|
44,920
|
|
8/7/2006
|
1,221
|
3,654
|
25.1050
|
8/7/2016
|
912
|
20,484
|
|
5/15/2007
|
|
|
|
|
6,000
|
134,760
|
|
8/13/2007
|
|
4,464
|
25.5900
|
8/13/2017
|
1,116
|
25,065
|
Mr. Landew
|
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
|
20,600
|
|
16.7950
|
8/7/2013
|
|
|
|
8/5/2004
|
45,000
|
15,000
|
21.1300
|
8/5/2014
|
|
|
|
8/4/2005
|
11,070
|
11,070
|
35.4000
|
8/4/2015
|
|
|
|
8/7/2006
|
1,221
|
3,654
|
25.1050
|
8/7/2016
|
912
|
20,484
|
|
5/15/2007
|
|
|
|
|
6,000
|
134,760
|
|
8/13/2007
|
|
4,464
|
25.5900
|
8/13/2017
|
1,116
|
25,065
|
Dr.
Volgenau
|
|
|
|
|
|
|
|
____________________
(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.
|
(2)
|
|
For options granted subsequent to
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. Option
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.
|
(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)
|
|
Based on $22.46 per share, the
closing price of our class A common stock on June 30, 2008, the last
trading day of fiscal 2008.
|
23
Stock Option Exercises and
Restricted Stock Vesting
The
following table provides information on (1) stock option exercises by the named
executive officers during fiscal 2008, including the number of shares acquired
upon exercise and the value realized, and (2) the number of shares acquired upon
the vesting of restricted stock awards held by the named executive officers in
fiscal 2008 and the value realized.
Fiscal 2008 Stock Option Exercises
and Restricted Stock Vesting
|
Option
Awards
|
Stock
Awards
|
|
Number of Shares
|
Value Realized on
|
Number of Shares
|
Value Realized
on
|
Name of
Executive
|
Acquired on
Exercise
|
Exercise ($)
(1)
|
Acquired on Vesting
|
Vesting ($)
(2)
|
Dr.
Sloane
|
|
|
31,250
|
(3)
|
726,875
|
Mr.
Hughes
|
65,844
|
1,591,016
|
3,307
|
(4)
|
81,732
|
Mr.
Landew
|
55,940
|
1,119,891
|
2,307
|
(5)
|
56,322
|
Dr.
Volgenau
|
5,150
|
53,071
|
|
|
|
____________________
(1)
|
|
Based on the fair
market value of our class A common stock at the time of exercise as
determined by Citi Smith Barney, our captive broker, after deducting the
aggregate exercise price.
|
(2)
|
|
Based on the closing
price per share of our class A common stock on the vesting
date.
|
(3)
|
|
Represents vesting of
the first 25% of a 125,000 restricted stock share grant awarded on May 7,
2007. At the time of vesting, 10,063 shares were withheld to cover payment
of taxes due from vesting.
|
(4)
|
|
Represents vesting of
the second 25% of a 4,000 restricted stock share grant awarded on February
15, 2006, the first 25% of a 1,219 restricted stock share grant awarded on
August 7, 2006 and the first 25% of a 8,000 restricted stock share grant
awarded on May 15, 2007. At the time of vesting of the May 2007 grant, 644
shares were withheld to cover payment of taxes due from
vesting.
|
(5)
|
|
Represents vesting of
the first 25% of a 1,219 restricted stock share grant awarded on August 7,
2006 and the first 25% of a 8,000 restricted stock share grant awarded on
May 15, 2007. At the time of vesting of the May 2007 grant, 644 shares
were withheld to cover payment of taxes due from
vesting.
|
24
Non Qualified Deferred
Compensation
The
following table summarizes the compensation deferred by the named executive
officers 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 2008, 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 2008 Nonqualified Deferred
Compensation
|
|
|
|
Aggregate
|
|
|
Executive
|
Registrant
|
Aggregate
|
Withdrawals/
|
|
|
Contributions
|
Contributions
|
Earnings
|
Distributions
|
Aggregate
|
|
in
|
in
|
in
|
During
|
Balance at
Fiscal
|
Name of
Executive
|
Fiscal 2008
|
Fiscal 2008
|
Fiscal 2008
|
Fiscal 2008
|
2008 End
|
Dr.
Sloane
|
|
|
|
|
|
Mr.
Hughes
|
$86,004 (1)
|
|
$1,097
|
|
$353,533
|
Mr.
Landew
|
|
|
|
|
|
Dr.
Volgenau
|
|
|
|
|
|
____________________
(1)
|
|
Consists of elective base salary
deferrals of $32,500 and a bonus deferral of $53,504 made by Mr. Hughes
during fiscal 2008. These amounts are also included in the amounts
reported as fiscal 2008 salary and non-equity incentive plan compensation
columns in the Summary Compensation Table.
|
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, as defined in his agreement, 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; (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 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 an
agreement 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 or incorporated in his employment
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.
25
The
aggregate value of potential payments upon involuntary termination and change of
control as of the end of fiscal 2008 were $2,997,557 and $2,105,625,
respectively, as summarized in the following tables.
Involuntary Termination.
The following
table sets forth an estimate of the benefits that would have accrued to Dr.
Sloane in the event his employment had been terminated without cause as of the
end of fiscal 2008.
Benefit
|
|
Estimated Value ($)
|
Vesting
of options and restricted shares (1)
|
|
|
2,105,625
|
|
50% of fiscal 2008
earned cash bonus
|
|
|
221,200
|
|
Base
salary continuation for 12 months
|
|
|
650,000
|
|
Continuation of
benefits for 12 months (2)
|
|
|
20,732
|
|
Total
potential payments
|
|
|
2,997,557
|
|
____________________
(1)
|
|
Based on the number of
shares that vest multiplied by $22.46, the closing price of our class A
common stock on June 30, 2008, the last trading day of fiscal 2008, and,
in the case of options, after deducting the aggregate exercise price of
the options that vest.
|
(2)
|
|
Based on employer cost
of premiums and other benefit costs in effect on the last day of fiscal
2008.
|
Change of
Control.
The following table sets forth an
estimate of the benefits that would have accrued to Dr. Sloane in the event our
company had experienced a change of control as of the end of fiscal 2008 and he
had not been offered the position of President or CEO of the successor companys
ultimate parent after the change of control. These benefits would accrue to Dr.
Sloane even if his employment was not terminated following the change of
control.
Benefit
|
|
Estimated Value ($)
|
Vesting
of options and restricted shares (1)
|
|
|
2,105,625
|
|
____________________
(1)
|
|
Based on the number of
shares that vest multiplied by $22.46, the closing price of our class A
common stock on June 30, 2008, the last trading day of fiscal 2008, and,
in the case of options, after deducting the aggregate exercise price of
the options that vest.
|
26
EQUITY COMPENSATION PLAN
INFORMATION
The
following table provides information about the securities authorized for
issuance under our equity compensation plans as of June 30, 2008:
|
|
|
|
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
|
|
5,428,895
|
|
$21.24
|
|
|
8,106,300
|
(2)
|
Equity compensation
plans not approved by
|
|
|
|
|
|
|
|
|
security holders
|
|
|
|
|
|
|
|
|
Total
|
|
5,428,895
|
|
$21.24
|
|
|
8,106,300
|
(2)
|
____________________
(1)
|
|
In addition to being
available for future issuance upon exercise of options that may be granted
after June 30, 2008, the 7,757,516 shares available for future issuance
under the 2002 Stock Incentive Plan may instead be issued in the form of
restricted stock or other equity-based awards.
|
(2)
|
|
Includes 7,757,516
shares of class A common stock 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,
through 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, 2008, an
additional 1,718,153 shares of class A common stock were reserved for
issuance under the terms of the 2002 Plan pursuant to this automatic
increase provision. The amount reported in this column also includes
348,784 shares issuable under our 2004 Employee Stock Purchase Plan,
including shares issuable in connection with the current offering period,
which ends on September 30, 2008.
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Dr. Sloane,
our president and chief executive officer and a member of our Board of
Directors, utilizes his private airplane for business travel. During fiscal
2008, we reimbursed Dr. Sloane $56,000 for actual costs incurred in the operation of his private
airplane for business travel, plus $41,800 related to increased aircraft
insurance coverage required by the Board of Directors. The Board of Directors,
excluding Dr. Sloane, authorized SRA to reimburse Dr. Sloane for the reasonable
costs associated with the business use of his private aircraft and the
incremental cost of aircraft insurance purchased.
Christopher
Fitzgerald, the son-in-law of Dr. Volgenau, our chairman, is an officer of
Customer Value Partners, Inc. During fiscal 2008, we subcontracted with Customer
Value Partners and paid approximately $389,000 for services rendered. All work
performed by Customer Value Partners was direct work procured under our normal
government approved procurement practices.
Dr.
DiPentima ceased to be an executive officer in April 2007, but was an
employee director of the company during fiscal 2008. During fiscal 2008 he received a salary of $97,507, a 401(k) company
matching contribution of $4,375, and payment of $156,509 in bonus deferrals earned in prior years.
Kevin
Robbins, the son-in-law of Dr. DiPentima, who served as a member of our Board of
Directors in fiscal 2008 but who retired from our Board in August 2008, is
employed by us as a senior principal. For fiscal 2008, his salary and other
compensation paid by us totaled $192,855.
The Board of
Directors has adopted a policy that all transactions between SRA on the one hand
and our officers, directors, greater than 5% stockholders and their respective
immediate family members and affiliates on the other hand must be (i) approved
by a majority of the disinterested members of the Board of Directors and (ii) on
terms no less favorable to us than could be obtained from unaffiliated third
parties. Transactions involving compensation for services provided to us as an
employee, director, consultant or similar capacity by a related person are not
covered by this policy.
27
AUDIT AND FINANCE COMMITTEE REPORT
The Audit
and Finance Committee reviewed our audited financial statements for the fiscal
year ended June 30, 2008 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 they
are 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
Committees
, as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. 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, if any, 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 Committees
, as adopted by the Public Company Accounting Oversight Board in Rule
3600T. 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, 2008.
2
Audit and Finance
Committee
John W. Barter
(Chairman)
Miles R. Gilburne
William T. Keevan
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members
of the Compensation and Personnel Committee during fiscal 2008 were General
Ellis, Admiral Giambastiani, Dr. Wilensky and Mr. Staley. Mr. Langstaff joined
the Compensation and Personnel Committee in July 2008. No member of the
Compensation and Personnel Committee was at any time during fiscal 2008 an
officer or employee of our company or any of our subsidiaries, and no member has
ever served as an executive officer of our company. None of our executive
officers serves or, during fiscal 2008, served as a member of the Board of
Directors or the Compensation 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.
____________________
2
The material
in this report is not soliciting material, is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by reference in
any filing of the Company under the Securities Act of 1933 or the Exchange Act
of 1934, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
28
PROPOSAL 2 RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS
The Audit
and Finance Committee of the Board of Directors 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. All services provided by Deloitte & Touche LLP were
approved by the Audit and Finance Committee.
|
|
Fiscal Year Ended
|
|
Fiscal Year Ended
|
Fee Category
|
|
June 30, 2008
|
|
June 30, 2007
|
Audit
Fees (1)
|
|
|
$1,109,583
|
|
|
|
$719,500
|
|
Audit-Related Fees
(2)
|
|
|
211,285
|
|
|
|
52,000
|
|
Tax
Fees (3)
|
|
|
|
|
|
|
3,335
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
Total Fees
|
|
|
$1,320,868
|
|
|
|
$774,835
|
|
____________________
(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 2008 related to the opening balance sheet audit of Constella Group,
LLC and a review of financial transactions at a foreign field office.
Audit-related fees in fiscal 2007 related to assistance provided in
responding to an SEC comment letter.
|
(3)
|
|
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.
29
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, personal interviews, or other means, 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.
Preliminary
voting results will be announced at the annual meeting. Final voting results
will be published in our quarterly report on Form 10-Q for the quarter ending
December 31, 2008.
30
STOCKHOLDER PROPOSALS FOR 2009 ANNUAL
MEETING
Pursuant to
Securities Exchange Act Rule 14a-8(e), proposals of stockholders intended to be
presented at the 2009 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 19, 2009 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 2009 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 2008 annual meeting or (ii)
if the date of the 2009 annual meeting is advanced by more than 20 days or
delayed by more than 60 days from the first anniversary of the 2008 annual
meeting, (a) not earlier than the 90
th
day prior to the 2009 annual
meeting and (b) not later than the later of the 60th day prior to the 2009
annual meeting and the 10
th
day following the day notice of the date
of the 2009 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 corporate secretary.
|
By Order of the Board of
Directors,
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Stephen C. Hughes, Secretary
|
September 16, 2008
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 CARD IN THE
ACCOMPANYING ENVELOPE, OR YOU MAY VOTE BY INTERNET OR BY PHONE AS INSTRUCTED ON
THE PROXY CARD. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN IF THEY HAVE SENT IN THEIR PROXIES.
31
|
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 environmental impact and
costs incurred by SRA International, Inc. in mailing paper 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.
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
SRAIN1
|
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KEEP THIS PORTION FOR YOUR RECORDS
|
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DETACH AND RETURN THIS PORTION
ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
|
SRA INTERNATIONAL, INC.
|
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A
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Proposals
|
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1.
|
|
To elect the following four (4) persons to serve as Class
I directors (except as noted to the right) until the Annual Meeting of
Stockholders held in 2011 and until their successors are duly elected and
qualified.
|
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Nominees:
|
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01)
|
John W. Barter
|
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02)
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Larry R. Ellis
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03)
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Miles R. Gilburne
|
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04)
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Gail R. Wilensky
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For
All
|
Withhold
All
|
For All
Except
|
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write the number(s) of the
nominee(s) on the line below.
|
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o
|
o
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o
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For
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Against
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Abstain
|
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2.
|
|
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,
2009.
|
|
o
|
o
|
o
|
|
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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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B
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Authorized Signatures
|
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NOTE:
|
|
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.
|
o
|
Please
indicate if you plan to attend this meeting.
|
|
Yes
o
|
No
o
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Signature [PLEASE SIGN WITHIN BOX]
|
Date
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Signature (Joint Owners)
|
Date
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Important Notice Regarding Internet Availability of Proxy
Materials for the Annual Meeting:
The
Notice and Proxy Statement and Annual Report to Stockholders,
including the Form 10-K, are available at www.proxyvote.com.
PROXY
SRA INTERNATIONAL, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
THURSDAY,
OCTOBER 30, 2008
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 Thursday, October 30, 2008, at 8:30 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.
Address Changes/Comments:
|
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|
(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
(CONTINUED AND TO BE SIGNED ON
REVERSE SIDE)
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