SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
DATRON SYSTEMS INCORPORATED
- --------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
DATRON SYSTEMS INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, AUGUST 15, 1995 AT 11:00 A.M.
To the Stockholders of Datron Systems Incorporated:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
DATRON SYSTEMS INCORPORATED will be held at the Company's headquarters at
304 Enterprise Street, Escondido, California on August 15, 1995 at 11:00 A.M.
for the following purposes:
1. To elect seven directors to hold office until the next annual
meeting of stockholders and until their successors are elected and qualified;
2. To approve the 1995 Stock Option Plan of the Company; and
3. To transact any other business that properly comes before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on June 16, 1995
are entitled to notice of, and to vote at, the meeting and any adjournments
and postponements thereof.
By Order of the Board of Directors
Victor A. Hebert
Secretary
Escondido, California
July 6, 1995
___________________________________________________________________________
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY CARD
AS SOON AS POSSIBLE IN THE ENCLOSED POSTPAID ENVELOPE.
__________________________________________________________________________
<PAGE>
DATRON SYSTEMS INCORPORATED
_________
PROXY STATEMENT
To the Stockholders of Datron Systems Incorporated:
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Datron Systems Incorporated, a Delaware corporation (the
"Company"), for use at the Company's Annual Meeting of Stockholders and any
adjournments and postponements thereof (the "Annual Meeting") to be held at
11:00 a.m. on Tuesday, August 15, 1995, at the Company's principal executive
offices. The Company's principal executive offices are located at 304
Enterprise Street, Escondido, California 92029; the Company's telephone number
is (619) 747-3734.
Only stockholders of record as of the close of business on June 16, 1995
are entitled to notice of, and to vote at, the Annual Meeting. At the close
of business on that date, 2,596,222 shares of the Company's common stock,
$0.01 par value, (the "Common Stock") were outstanding. Holders of Common
Stock are entitled to one vote for each share of Common Stock held.
Any stockholder giving a proxy in the form accompanying this Proxy
Statement has the power to revoke the proxy prior to its use. A proxy can be
revoked (i) by an instrument of revocation delivered prior to the Annual
Meeting to the Secretary of the Company, (ii) by a duly executed proxy
bearing a later date or time than the date or time of the proxy being
revoked, or (iii) by voting in person at the Annual Meeting. Attendance at
the Annual Meeting alone will not revoke a proxy.
A stockholder who abstains from voting on any or all matters will be
deemed present at the meeting for quorum purposes, but will not be deemed to
have voted on the particular matter (or matters) as to which the stockholder
has abstained. Similarly, in the event a nominee (such as a brokerage firm)
holding shares for beneficial owners votes on certain matters pursuant to
discretionary authority or instructions from beneficial owners, but with
respect to one or more other matters does not receive instructions from
beneficial owners and/or does not exercise discretionary authority (a so-
called "non-vote"), the shares held by the nominee will be deemed present
at the meeting for quorum purposes but will not be deemed to have voted on
such other matters.
The approximate date on which this Proxy Statement and the accompanying
proxy card are being mailed to the Company's stockholders is July 6, 1995.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone or facsimile.
Costs of solicitation will be borne by the Company.
PROPOSAL 1 - NOMINATION AND ELECTION OF DIRECTORS
Nominees
Seven directors are to be elected at the Annual Meeting to serve until
the next annual meeting and until their respective successors are elected
and qualified. The Company will nominate the seven incumbents. If any
incumbent is unable or unwilling to serve as a director, proxies may be voted
for substitute nominees designated by the Board. The Board has no reason to
believe that any of the persons named below will be unable or unwilling to
serve as a director if elected. Proxies received will be voted "FOR" the
election of the nominees named below unless marked to the contrary. Pursuant
to applicable Delaware law, assuming the presence of a quorum, seven
directors will be elected from among those persons duly nominated for such
positions by a plurality of the votes actually cast by stockholders entitled
to vote at the meeting who are present in person or by proxy. Thus, the
seven nominees who receive the highest number of votes in favor of their
election will be elected, regardless of the number of abstentions or
non-votes.
The following table sets forth certain information regarding each
nominee as of June 16, 1995.
<TABLE>
<CAPTION>
Common Stock
Positions with Beneficially Percentage
Name Age the Company Owned <F1> <F2> Ownership
- ------------------- --- ----------------------- ------------- ----------
<S> <C> <C> <C> <C>
Richard W. Pershing 67 Chairman of the Board; 81,506<F3> 3.1%
Director
David A. Derby 53 President and Chief 93,128 3.5%
Executive Officer; Director
Prentis C. Hale 84 Director 90,091<F4> 3.5%
Kent P. Ainsworth 49 Director 19,037 0.7%
Adrian C. Cassidy 79 Director 16,050<F5> 0.6%
Peter F. Scott 68 Director 13,072<F6> 0.5%
Robert D. Sherer 59 Director 5,400 0.2%
<FN>
<F1> Assumes the exercise of all outstanding options held by such person to the
extent exercisable on or before August 15, 1995, and that no other person has
exercised any outstanding options. Includes 11,000, 37,500, 10,000, 10,000,
10,000, 10,000 and 5,000 shares subject to options held by Messrs, Pershing,
Derby, Hale, Ainsworth, Cassidy, Scott and Sherer, respectively.
<F2> The persons names in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable and to the
information contained in the other footnotes to this table.
<F3> Includes 26,000 shares listed under Mr. Hale's name which are owned of
record by two trusts of which Mr. Pershing and Mr. Hale are two of three
co-equal trustees who may act only by majority vote, and excludes 1,099
shares owned of record by Mr. Pershing's wife. Mr. Pershing disclaims
beneficial ownership of all such shares. None of the beneficiaries of
the trusts of which Mr. Pershing is a trustee is related to Mr. Pershing.
<F4> Includes 26,000 shares owned of record by two trusts of which Mr. Hale
is one of three co-equal trustees who may act only by majority vote, and
excludes 208,649 shares owned of record by a revocable trust of which
Mr. Hale's wife is the sole trustee. Mr. Hale disclaims beneficial
ownership of all such shares except for 5,638 shares owned of record by a
trust of which Mr. Hale is the beneficiary. The remaining trusts are for
the benefit of relatives of Mr. Hale who are not minor children, or the
spouse of, Mr. Hale.
<F5> Includes 6,050 shares owned by a trust of which Mr. Cassidy is
co-trustee and a beneficiary.
<F6> Includes 3,072 shares owned by a trust of which Mr. Scott is a
co-trustee and a beneficiary.
</FN>
</TABLE>
Business Experience of the Nominees
Richard W. Pershing has been a director of the Company since 1979 and
Chairman of the Board of Directors of the Company since September 1984.
David A. Derby has been a director, President and Chief Executive
Officer of the Company since May 1982. He also was President of the
Company's wholly owned subsidiary, Datron World Communications Inc.(formerly
known as Trans World Communications, Inc.), from March 1993 through March 1995.
Kent P. Ainsworth has been a director of the Company since May 1985.
From May 1985 until December 1986, he was President and Chief Executive
Officer of Hale Systems, Inc., of which the Company's predecessor, a
California corporation, was a subsidiary prior to May 1985. From January
until October 1987, Mr. Ainsworth was a consultant. From October 1987
through February 1990, Mr. Ainsworth was Chief Financial Officer of Di Giorgio
Corporation. He is presently Vice President and Chief Financial Officer of
U.R.S. Corporation.
Prentis C. Hale has been a director of the Company since September 1984.
He is a former director of Carter Hawley Hale Stores, Inc.
Adrian C. Cassidy has been a director of the Company since September
1984. He was a director of Basic American Foods, Inc. from 1979 to 1988.
He is presently a director of Clemente Global Growth Fund, Inc. and First
Philippine Fund, Inc., positions he has held since 1987 and 1989,
respectively. From June 1986 to April 1990, he was senior marketing
executive for Discount Corporation of New York Advisors. He also works as a
financial consultant.
Peter F. Scott became a director of the Company in September 1984. He
was a director, President, Chief Executive Officer and Chairman of Di Giorgio
Corporation from 1974, 1980, 1982 and 1984, respectively, through February
1990. On July 1, 1992 Mr. Scott became President and Chief Executive Officer
of Blue Shield of California. He retired from that position on October 1,
1993.
Robert D. Sherer became a director of the Company in May 1989. He is
the President and owner of Quality Concepts, Inc., which he founded in 1986.
All directors hold office until the next annual meeting of stockholders
and until their successors are elected and qualified. There are no family
relationships between any directors or executive officers of the Company.
Meetings and Committees of the Board
Regular meetings of the Board are generally held on a quarterly basis,
while special meetings are called when necessary. The Board held six (6)
meetings during the fiscal year ended March 31, 1995 ("Fiscal 1995").
During Fiscal 1995, each director attended 75% or more of the meetings of the
Board and of Board committees on which such director served, with the
exception of Mr. Hale, who attended 50% of the meetings. Each director who
is not an employee of the Company receives an attendance fee of $1,000 for
each meeting of the Board and $500 for each meeting of any committee on which
the director serves and an annual retainer of $5,000.
The Board has two standing committees, the Audit Committee and the
Compensation Committee.
Audit Committee
During Fiscal 1995, the Audit Committee consisted of Messrs. Ainsworth,
Scott and Sherer. This committee consults with the Company's auditors
concerning their auditing plan, the results of their audit, the
appropriateness of accounting principles utilized by the Company and the
adequacy of the Company's general accounting controls. This committee met
two (2) times during Fiscal 1995.
Compensation Committee
During Fiscal 1995, the Compensation Committee consisted of Messrs.
Ainsworth, Cassidy and Scott. The function of the Compensation Committee is
to recommend to the Board of Directors the salary and bonus levels of
officers and directors of the Company, and to administer the Company's 1985
Stock Option Plan. The Compensation Committee met three (3) times during
Fiscal 1995.
PROPOSAL 2 - APPROVAL OF 1995 STOCK OPTION PLAN
Description of the Plan
The Board of Directors has adopted, subject to stockholder approval,
the 1995 Stock Option Plan (the "Plan"). The Plan is intended to encourage
selected employees and directors to improve operations and increase profits
of the Company and accept or continue employment or association with the
Company or its subsidiaries, and to increase the interest of selected
employees in the Company's welfare through their participation in the growth
in value of the Common Stock of the Company. The Plan would be effective for
a period of ten years from February 7, 1995. The Plan provides for the grant
of incentive stock options ("ISOs") intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options ("NQOs") (ISOs and NQOs granted under the Plan are
collectively referred to as "Options") and stock appreciation rights ("SARs").
The Plan is being adopted as a successor to the Company's 1985 Stock
Option Plan (the "1985 Plan"). The 1985 Plan, which expired in May 1995, has
been the principal vehicle for providing stock options to directors, officers
and employees for the past decade. The new Plan permits up to 500,000 shares
of Common Stock to be issued pursuant to Options granted under the Plan or to
underlie SARs (as defined below) issued pursuant to the Plan. The 500,000
share limit is effectively reduced, however, by (i) the 260,800 options
outstanding under the 1985 Plan as of February 6, 1995 (the date immediately
preceding adoption of the Plan) and (ii) the 35,000 options granted under
the 1985 Plan between February 7, 1995 and the 1985 Plan's expiration in
May 1995. Because 2,500 options expired between February 6 and June 16, 1995
and the shares underlying them are therefore again available for issuance, at
June 16, 1995, there were 206,700 shares available for issuance under the
Plan. Of these 206,700 shares, 61,073 were available under the 1985 Plan at
the time of its expiration, so that the net increase in the number of shares
available for issuance pursuant to options as a result of adoption of the
Plan is 145,627. Shares underlying Options or SARs granted under the Plan
or the 1985 Plan that are canceled or expire unexercised become available
again for grants under the Plan. The market value as of June 16, 1995 of the
444,000 shares of the Company's Common Stock which either underlie Options
outstanding under the 1985 Plan on that date (and which could be issued
pursuant to future grants under the Plan if those Options are canceled or
expire unexercised) or are presently available for grants under the Plan is
$4,995,000. As of June 16, 1995 no new Options have been granted under the
Plan.
The Plan will be administered by the Compensation Committee of the Board
in accordance with the disinterested administration requirements promulgated
by the Securities and Exchange Commission. Under the Plan, the Compensation
Committee may grant Options to full-time employees of the Company or a parent or
subsidiary of the Company ("Affiliate"), as defined in the Code, including
officers and directors, but may grant only NQOs to nonemployee directors.
The exercise price of ISOs is the fair market value of the underlying
shares on the date of the grant. No ISO will be granted to an employee who
owns stock of the Company possessing more than 10% of the total combined
voting power of the Company's stock, or the stock of any Affiliate of the
Company, unless the exercise price of the ISO at the time the Option is
granted is at least 110% of the fair market value of the underlying stock
at the time of the grant, and the exercise period is no more than five years.
The exercise price of NQOs may not be less than 85% of the fair market value
of the shares on the date of grant.
NQOs must be exercised within ten years and two days from their
effective date and ISOs must be exercised within ten years from their
effective date (or five years for an ISO granted to a person who owns more
than 10% of the total combined voting power of the Company's stock or the
stock of any Affiliate), unless an earlier date is specified by the
Compensation Committee. Unless otherwise provided by the Compensation
Committee, Options become exercisable in three substantially equal annual
installments commencing one year after the effective date of the Options.
The Plan grants the Compensation Committee the right to issue stock
appreciation rights ("SARs") to Plan participants. As a result, a SAR
may be granted with respect to shares of Common Stock subject to any Option
("Related Right") held by the person (whether previously or concurrently
granted), or may be granted without reference to any Related Right.
If a SAR is exercised, the Related Right, if any, will be canceled to the
extent of the number of shares with respect to which the SAR was exercised.
Upon the exercise or termination of a Related Right, a SAR granted with
respect thereto also will terminate to the extent of the number of shares as
to which the Related Right was exercised or terminated. The holder of a SAR
is entitled upon exercise to receive payment of an amount representing the
appreciation in the market value (as defined in the Plan) of the number of
shares with respect to which the SAR was granted over a stated price
specified in a written agreement evidencing grant of the SAR. In the case
of a SAR granted with respect to a Related Right, the stated price will be
the exercise price per share of stock covered by the Related Right. Market
value, in general, is defined for this purpose as the market price of the
Common Stock on a national stock exchange or as quoted on NASDAQ on the date
on which the SAR is exercised or, if the SAR must be exercised within a
"window period," the highest market price of the Common Stock during the
window period in which the SAR is exercised. As of June 16, 1995, no SARs have
been issued under either the 1985 Plan or the 1995 Plan.
Payment for shares acquired pursuant to the Plan may be, in the
discretion of the Compensation Committee, by cash, check, the optionee's full
recourse promissory note for a portion of the aggregate exercise price of the
Option or the delivery of other property of the Optionee (including shares of
Common Stock) to the extent such property constitutes valid consideration for
shares of the Company's Common Stock. The Compensation Committee may, in
certain circumstances, make shares issued under the Plan subject to
repurchase at the option of the Company. The Board may amend, alter, suspend
or discontinue the Plan at any time without stockholder approval, except to
the extent that stockholder approval is required by applicable law. No such
action can be taken, however, if the action would impair the rights of any
grantee under any Option previously granted without the grantee's consent.
Federal Income Tax Consequences
The following description of federal income tax consequences is based
upon current statutes, regulations, and interpretations thereof, and has been
prepared under the supervision of Heller, Ehrman, White & McAuliffe.
Federal income tax consequences associated with stock options are
complex and vary depending upon an optionee's individual circumstances.
Accordingly, what follows is not a complete description of the federal
income tax consequences of the Plan or transactions therewith.
Nonqualified Stock Options. Under current Treasury Regulations,
nonqualified stock options granted under the Plan do not have readily
ascertainable fair market value at the time of grant. Thus, the optionee
does not recognize income at the time of grant. The optionee will recognize
ordinary income at the time the option is exercised to the extent that the
fair market value of the shares purchased exceeds the exercise price for
those shares. The optionee's tax basis for the purchased shares will be their
fair market value on the date the option is exercised, and the holding period
for purposes of determining whether capital gain or loss upon sale is long or
short-term will begin on the date of purchase.
If shares acquired by exercise of a NQO are subject to a right of
repurchase by the Company, or if they are acquired by an officer or director
of the Company or other person subject to Section 16(b) of the Exchange Act,
Section 83 of the Code may delay the time that the optionee has taxable
income due to the exercise of the NQO and the time that the holding period of
the shares begins for long-term capital gain or loss purposes.
The amount recognized as ordinary income by an optionee who is an
employee constitutes "supplemental wages" subject to withholding of federal
tax by the Company. The Company may compute the amount to be withheld in
accordance with either of two methods: (1) using a flat 28 percent rate
without allowance for the optionee's withholding exemptions; or (2) treating
the amount of ordinary income as regular wages either for the payroll period
in which the ordinary income was recognized or for the last preceding payroll
period. As with other wages, the Company may deduct the amount of
"supplemental wages" related to the exercise of NQOs when computing its
taxable income.
Upon sale of the purchased shares for which the Company had no right of
repurchase and the optionee was not subject to Section 16(b) of the Exchange
Act, or for which a valid Section 83(b) election was made (and other than
pursuant to the Company's right of repurchase) or after the lapse of the
Company's right of repurchase or the Section 16(b) restriction, the optionee
will recognize capital gain or loss to the extent of the difference between
the sale price of the purchased shares and the optionee's tax basis in the
shares. Capital gain or loss will be long-term if the shares are held more
than one year.
If an optionee uses other shares of the Company's Common Stock (other
than certain shares acquired by exercise of ISOs, see below) to pay all or
part of the option exercise price, the optionee will not recognize gain or
loss on the previously owned shares. Under applicable rulings and
regulations, shares acquired upon exercise of a NQO that are equal in value
to the fair market value of the shares surrendered in payment are treated as
if they had been exchanged for the surrendered shares, taking as their basis
and holding period the basis and holding period that the surrendered shares
had in the employee's hands. If the surrendered shares were acquired by
exercise of an ISO, and have not satisfied the one- and two-year holding
period requirements for favorable federal income tax treatment at the time of
the surrender, the newly acquired shares substituted for them will remain
subject to the federal income tax rules governing the surrendered shares.
See "Incentive Stock Options" below. Other tax consequences are as described
above, determined as if the optionee had exercised the option with cash equal
to the fair market value of the surrendered shares.
Incentive Stock Options. An optionee recognizes no income upon the
grant or exercise of an option granted pursuant to the Plan that qualifies
as an ISO under Section 422 of the Code. However, for purposes of
determining whether an optionee will be subject to the alternative minimum
tax, the ISO rules do not apply and the exercise of an ISO will be treated
under the general rules of Section 83. Generally, this means that the amount
by which the fair market value, measured at the exercise date, of the shares
received upon exercise of an ISO ("ISO shares") exceeds the exercise price
for such shares could subject the optionee to the "alternative minimum tax."
However, if the ISO shares are subject to a right of repurchase or if the
optionee is subject to restrictions imposed by Section 16(b) of the Securities
Exchange Act, and the optionee does not make a valid election under Section
83(b) of the Code, the amount by which the fair market value of the shares at
the time the restriction lapses exceeds the exercise price will be included
in "alternative minimum taxable income." In general, the alternative minimum
tax is equal to 26 percent of the excess of the optionee's "alternative
minimum taxable income" over a base amount (28 percent if the excess of
"alternative minimum taxable income" over the base amount exceeds $175,000)
and is payable only if it is more than the optionee's regular federal income
tax. "Alternative minimum taxable income" includes tax preference items and
is determined by making certain adjustments to regular taxable income. For
purposes of computing the alternative minimum tax, the optionee's basis in the
ISO shares will be determined under Section 83. In addition, any alternative
minimum tax paid as to certain tax preference items and adjustments
(including the ISO adjustment), for years after 1986 is generally creditable
against any excess of an individual's regular income tax over his or her
alternative minimum tax in later years.
An optionee generally will be entitled to long-term capital gain
treatment upon sale of ISO shares if the sale occurs after both (1) two years
from the grant date, and (2) one year from the date the optionee receives
the ISO shares. If the ISO shares are sold or disposed of (other than in
certain tax-free exchanges) before these holding periods have expired (a
"disqualifying disposition"), the excess of the fair market value of the
shares at the time of exercise over the exercise price (but generally not
more than the amount of gain) is taxable as ordinary income.If the ISO
shares are purchased subject to a right of repurchase by the Company or if
the optionee would be subject to Section 16(b) of the Exchange Act and the
optionee does not file an election under Section 83(b) of the Code within 30
days after the purchase date, the fair market value of the ISO shares will be
measured at the date of the repurchase right or the Section 16(b)
restriction lapses, not at the purchase date. If gain on a disqualifying
disposition exceeds the amount treated as ordinary income, the excess will be
capital gain, which will be long-term if the shares are held more than one
year. The holding period is measured from (i) the purchase date if the
shares were not subject to any restrictions or if a valid Section 83(b)
election has been filed or (ii) from the date the Company's repurchase right
or the Section 16(b) restriction, if any, lapses.
The Company receives no deduction upon grant or exercise of an ISO but
is entitled to a deduction equal to the ordinary income taxable to the optionee
upon a disqualifying disposition. To enable the Company to learn of a
disqualifying disposition and ascertain the amount of the deduction to which it
is entitled, an optionee is required to notify the Company in writing,
before the disqualifying disposition, of the intended date and terms of the
disposition and to comply with any other requirements that may be included in
the Option Agreement to ensure that the Company is able to secure any tax
deduction to which it is entitled and to report any compensation attributable
to the disqualifying disposition as may be required. The Company may also
give appropriate instructions, which may take the form of legends on share
certificates, to insure that such requirements are satisfied before stock
may be transferred.
If shares of Common Stock (other than certain "statutory option stock"
surrendered in a disqualifying disposition) are delivered in payment of the
exercise price of an ISO, appreciation in value of the surrendered shares is
generally not taxed at that time. Under proposed Treasury Regulations, shares
acquired upon exercise which are equal in value to the fair market value of
the surrendered shares take as their basis and holding period for capital
gain or loss purposes (but not for purposes of the ISO holding period
requirements) the basis and holding period which the surrendered shares had
in the optionee's hands, but otherwise are treated as newly acquired under
the ISO. Additional shares acquired by exercise of the ISO are treated as
shares newly acquired under the ISO with zero basis. In the event of a
disqualifying disposition, shares with the lowest basis are deemed disposed
of first.
If "statutory option stock" (ISO shares or shares acquired under a
qualified employee stock purchase plan) is surrendered to exercise an ISO
before the holding periods for favorable tax treatment for such stock have
been met, then the transferred statutory option stock is treated as sold in
a "disqualifying disposition" on the date of the surrender.
Proposal
The Company is requesting that stockholders approve the 1995 Plan. The
approval is required to permit the Plan to be qualified under Rule 16b-3 and
to permit grants of ISOs. Approval of the Plan requires an affirmative vote
by the holders of a majority of the outstanding shares.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding the
compensation for services in all capacities paid or accrued for the
Fiscal Years indicated by the Company (a) to the Chief Executive Officer of
the Company and (b) to the two executive officers of the Company whose
combined salary and bonuses exceeded $100,000 for Fiscal 1995. No other
executive officer of the Company received salary and bonus of more than
$100,000 during Fiscal 1995.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
------------------------------------------
Fiscal Awards
Year Other Securities Under- All Other
Name and Principal Ended Salary Bonus Annual lying Options/SARs Compensation
Position March 31, ($) ($) Compensation (#)<F1> ($)
- ------------------ --------- ------- ------ ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
David A. Derby, 1995 249,995 114,290 471<F2> 0 20,826<F3>
President and Chief 1994 227,507 219,050 2,049<F2> 0 95,858<F4>
Executive Officer 1993 212,000 0 1,105<F2> 0 0
Richard W. Pershing, 1995 119,995 57,145 3,552<F2> 0 20,826<F3>
Chairman of the 1994 108,525 109,525 2,624<F2> 0 20,858<F5>
Board 1993 100,000 0 1,433<F2> 0 0
William L. Stephan, 1995 120,016 57,145 2,236<F2> 0 20,826<F3>
Vice President, Chief 1994 52,622 33,000 656<F2> 20,000 0
Financial Officer and 1993 -- -- -- -- --
Treasurer<F6>
- ---------------------------------------------------------------------------------------------
<FN>
<F1> Options granted were ISOs with a term of ten years. The options vest in
substantially equal portions at the end of the first, second and third years
following the date of grant.
<F2> Amounts paid under an arrangement by which the Company reimburses officers
of the Company for medical expenses not paid for under the Company's regular
health insurance plan.
<F3> Represents a $20,826 contribution to the Company's Qualified Employee
Profit Sharing Plan.
<F4> Includes a $75,000 relocation allowance and a $20,858 contribution to the
Company's Qualified Employee Profit Sharing Plan.
<F5> Represents a $20,858 contribution to the Company's Qualified Employee
Profit Sharing Plan.
<F6> Mr. Stephan joined the Company as its Vice President, Chief Financial
Officer and Treasurer effective November 1, 1993.
</FN>
</TABLE>
Fiscal 1995 Option Grants
No options were granted during Fiscal 1995 to the Company's executive
officers.
Fiscal Year 1995 Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table sets forth information with respect to the options
held at the end of Fiscal 1995 by the Company's Chief Executive Officer and
both of the other executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options/SARs
Options/SARs at at Fiscal Year-End<F1>
Shares Value Fiscal Year-End (#) ($)
Acquired on Realized ------------------------- -------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Derby, CEO 12,556 51,794 52,500 0 276,750 0
Richard W. Pershing 7,336 30,261 16,000 0 77,000 0
William L. Stephan<F2> 0 0 6,600 13,400 18,975 38,525
<FN>
<F1> Market value of the underlying securities at fiscal year-end minus the exercise
price of "in the money" options.
<F2> Mr. Stephan joined the Company as its Vice President, Chief Financial Officer
and Treasurer effective November 1, 1993.
</FN>
</TABLE>
Employment Contracts and Indemnification Agreements
Employment Contracts
The Company has an employment agreement with Mr. Derby (the "Agreement")
providing for Mr. Derby's services as President and Chief Executive Officer of
the Company pursuant to which he is currently paid at an annual salary of
$250,000, with vacation, holidays, insurance and other benefits permitted
under policies established by the Board. The Agreement provides that,
upon an assignment of the Agreement by the Company, Mr. Derby has the right to
terminate the Agreement if any successor entity is not acceptable to him.
The Agreement will expire on April 30, 1998, unless sooner terminated under
the terms of the Agreement. The Company may terminate the Agreement if
Mr. Derby commits any material act of dishonesty in the discharge of his
duties. The Company has a substantially similar employment agreement, which
expires on April 30, 1998, with Mr. Pershing providing for Mr. Pershing's
services as Chairman of the Board pursuant to which he is currently paid at
an annual salary of $120,000.
Indemnification Agreements
Mr. Derby and both of the other executive officers identified in the
Summary Compensation Table (as well as the Company's other officers and
directors) are parties to Indemnification Agreements with the Company in
substantially the form approved by the stockholders at the 1992 Annual
Meeting.
Loans
In 1988, the Company established the Key Employee Stock Purchase Plan to
assist key employees in acquiring an equity stake in the Company. Pursuant to
the plan, Mr. Derby has been loaned money by the Company to acquire shares of
the Company's Common Stock. During Fiscal 1995, Mr. Derby had outstanding a
full recourse promissory note in the original principal amount of $164,000
payable to the Company, the proceeds of which he used to acquire 25,000 shares
of Common Stock on April 11, 1988.
In June 1995, Mr. Derby exercised an incentive stock option to acquire
15,000 shares of Common Stock granted to him under the 1985 Stock Option
Plan. As partial payment for the exercise price, Mr. Derby was loaned
$80,000 by the Company and he executed a full recourse promissory note in
the same amount payable to the Company on June 12, 1998.
Compensation Committee Report on Executive Compensation
Set forth below is a report of the Compensation Committee with respect
to the Company's compensation policies during Fiscal 1995 as they affect the
Company's Chief Executive Officer and the Company's other executive officers.
Compensation Policies For Executive Officers
The Company's compensation policies for its executive officers are
designed to provide compensation levels that are competitive with those of
other similar companies and thereby to enable the Company to attract and
retain qualified executives. More specifically, the Company's compensation
policies aim, through a combination of base salary, annual bonus and
equity-based compensation, to motivate officers to assist the Company in
meeting the Company's annual and long-range business objectives and thereby
to enhance stockholder value.
Each of the Company's executive officers receives a base salary. The
Company sets base salary for executive officers based upon a number of factors,
including the particular qualifications of the executive, levels of pay for
similar positions at public and private companies of comparable size and in
comparable businesses to that of the Company, the degree to which the
executive can help the Company achieve its goals, and direct negotiation with
the executive.
At present, the annual base salaries of Mr. Pershing as Chairman of the
Board and Mr. Derby as Chief Executive Officer are $120,000 and $250,000,
respectively. There was no proposal from the executive officers and no
discussions by the Compensation Committee with respect to changes in these
base salaries for Fiscal 1995. Accordingly, the base salaries were unchanged
from those paid in Fiscal 1994.
An important element of the Company's compensation for executive
officers are bonuses which are tied closely to the Company's annual financial
results. The executive officers named in the Summary Compensation Table
participate in two bonus plans. The first of these is the Company's Qualified
Employee Profit Sharing Plan (the "Qualified Plan"). The Qualified Plan
provides employees with supplemental retirement benefits through a plan
treated favorably for tax purposes. The Qualified Plan reflects the belief
that some portion of all employees' compensation should be tied to the
performance of the Company in order to provide a sound incentive to enhance
that performance and to keep the Company's compensation policies competitive
with those of other similar companies. All employees of the parent company,
Datron Systems Incorporated, are eligible to participate in the Qualified
Plan beginning on the April 1 following their date of employment. Annual
contributions to the plan are determined by the Board. Fiscal 1995
contributions were $20,826 each for Mr. Derby, Mr. Pershing and Mr. Stephan.
Contributions to the Qualified Plan vest over a seven-year period beginning
after three years of service.
The individuals identified in the Summary Compensation Table are also
participants in the Company's Key Employee Incentive Plan (the "Key Employee
Plan"). The Key Employee Plan further ties key executive compensation to
Company financial performance by providing a bonus to be allocated among
designated employees selected by the Board, upon recommendation by the
Compensation Committee, after pre-determined profit goals and other criteria
have been reached and after provision for the Qualified Profit Sharing Plan.
The income and profit goals for the Key Employee Plan, and the associated
contributions to the bonus pool, are determined annually by the Board.
Fiscal 1995 contributions were $114,290 for Mr. Derby, $57,145 for Mr.
Pershing and $57,145 for Mr. Stephan.
The third element in the Company's executive officer compensation
package is equity-based compensation. The Committee believes that by
providing executive officers with an equity interest in the Company those
officers are provided with additional incentives to work to maximize
stockholder value over the long term. Such incentives have been provided
principally by the granting of options under the Company's 1985 Stock Option
Plan and will continue to be provided under the Company's 1995 Stock Option
Plan assuming its approval by the stockholders of the Company. (The proposed
1995 Stock Option Plan is described under "Proposal 2 - Approval of 1995
Stock Option Plan" above). Under each plan, the options are designed to vest
over a three-year period, to encourage officers to continue in the employ of
the Company and reinforce the role of the options in providing a longer term
incentive than do the annual bonus plans. The Company also has a limited
stock purchase plan, the Key Employee Stock Purchase Plan, which has a
similar purpose and pursuant to which Mr. Derby acquired 25,000 shares of
Common Stock.
CEO Compensation
Mr. Derby has been President and Chief Executive Officer of the Company
since 1982. Mr. Derby's base salary for Fiscal 1995 remained at $250,000
pursuant to his employment agreement. Mr. Derby's participation in the
Company's Qualified Plan and Key Employee Plan, pursuant to which his bonus
is determined, provides an incentive to maximize Company profitability on an
annual basis. Through his equity ownership in the Company, consisting of
55,628 shares of Common Stock and options to purchase 37,500 shares of Common
Stock, Mr. Derby shares with the other stockholders of the Company a
significant stake in the long-range success of the Company's business.
Compensation Committee
Kent P. Ainsworth
Adrian C. Cassidy
Peter F. Scott
Compensation Committee Interlocks and Insider Participation
As noted above, during Fiscal 1995 executive compensation policy was
set by the Compensation Committee. Each member of the Compensation
Committee is a non-employee director of the Company.
COMPARATIVE STOCK PERFORMANCE
Set forth below are line graphs which illustrate for the purpose of
comparison the percentage change in the cumulative total stockholder return
on the Company's Common Stock from March 31, 1990 through March 31, 1995 with
the percentage change in the cumulative total return over the same period on
(i) the CRSP Index for the NASDAQ Stock Market - U.S. Companies, and (ii)
the CRSP Index for the NASDAQ Stock Market - Communications Equipment
Companies. This graph assumes an initial investment of $100 in each of the
Company's Common Stock, the CRSP Index for the NASDAQ Stock Market - U.S.
Companies and the CRSP Index for the NASDAQ Stock Market - Communications
Equipment Companies on March 31, 1990 and that all dividends, if any, were
reinvested.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
AMONG DATRON SYSTEMS INCORPORATED, CRSP NASDAQ-U.S. COMPANIES AND
COMMUNICATION EQUIPMENT COMPANIES
<CAPTION>
CRSP Index CRSP Index-NASDAQ
Datron Systems NASDAQ Communication Equipment
Measurement Point Incorporated U.S. Companies Companies
- --------------------- -------------- -------------- -----------------------
<S> <C> <C> <C>
3/31/90 $100 $100 $100
3/31/91 $105 $114 $ 95
3/31/92 $ 87 $146 $110
3/31/93 $ 48 $167 $141
3/31/94 $ 98 $181 $191
3/31/95 $121 $201 $255
</TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 16, 1995 certain information
concerning (a) each person known to the Company to own beneficially more
than 5% of the Common Stock, (b) each of the executive officers named in the
Summary Compensation Table, and (c) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Name/Address
of Beneficial Owner Shares of Common Stock<F1> % of Class
- -------------------------- ------------------------- ----------
<S> <C> <C>
Shufro, Rose & Ehrman 270,600 10.4%
745 Fifth Avenue
New York, NY 10151-0108
Fidelity Management & Resources Corp. 247,200 9.5%
82 Devonshire Street
Boston, MA 02109
Denise Hale 208,649<F2> 8.0%
835 Market Street, Room 300
San Francisco, CA 94103
Kennedy Capital Management, Inc. 165,225 6.4%
425 North New Ballas Road
St. Louis, MO 63141
Dimensional Fund Advisors 131,204<F3> 5.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
David A. Derby 93,128<F4> 3.5%
Richard W. Pershing 81,506<F4> 3.1%
William L. Stephan 7,600<F4> 0.3%
All directors and executive officers
as a group (8 persons) 299,884<F4> 11.1%
<FN>
<F1> Information with respect to beneficial ownership is based upon information
furnished by each stockholder or contained in filings made with the Securities
and Exchange Commission.
<F2> Includes 208,649 shares owned of record by a revocable trust of which
Mrs. Hale is the trustee. The shares were transfered to the trust by Mrs. Hale
in two separate transactions in 1995. The first transaction involved the
transfer of 8,649 shares on February 28, 1995, and the second involved the
transfer of 200,000 shares on May 16, 1995. Mrs. Hale reported both
transactions pursuant to Section 16(a) of the Securities Exchange Act of 1934 on
a Form 4 filed June 10, 1995, thereby making the reporting of the February
transaction late. Mrs. Hale's spouse, Prentis C. Hale, also reported both
transactions on a Form 4 filed June 10, 1995, thereby also making his report
of the February transaction late. The 208,649 figure excludes 90,091 shares
owned of record by Mr. Hale.
<F3> Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor,
is deemed to have beneficial ownership of 131,204 shares of the Company's Common
Stock as of March 31, 1995, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in series of
The DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and the DFA Participating Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
<F4> Includes 37,500, 11,000 and 6,600 shares obtainable upon the exercise of stock
options held by Messrs. Derby, Pershing and Stephan, respectively.
</FN>
</TABLE>
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has acted as the Company's independent auditors
since March 1983. A representative of Deloitte & Touche LLP will be present
at the Annual Meeting, will have an opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate
questions.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the year ended
March 31, 1995, containing the audited consolidated balance sheets as of
March 31, 1995 and March 31, 1994 and the related consolidated statements
of income, stockholders' equity and cash flows for each of the past three
fiscal years, is being mailed with this Proxy Statement to stockholders
entitled to notice of the Annual Meeting.
STOCKHOLDER PROPOSALS
The Company will, in future proxy statements of the Board, include
stockholder proposals complying with the applicable rules of the Securities
and Exchange Commission and any applicable state laws. In order for a
proposal by a stockholder to be included in the proxy statement of the Board
relating to the Annual Meeting of Stockholders to be held in 1996, the
proposal must be received in writing by the Secretary of the Company no later
than March 10, 1996.
OTHER MATTERS
The Board knows of no other matters that will be presented at the Annual
Meeting. If, however, any matter is properly presented at the Annual Meeting,
the proxy solicited hereby will be voted in accordance with the judgment of
the proxyholders.
By Order of the Board of Directors,
Victor A. Hebert
Secretary
Escondido, California
July 6, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTPAID ENVELOPE.
<PAGE>
PROXY
DATRON SYSTEMS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) DAVID A. DERBY and WILLIAM L.
STEPHAN, or either one of them, each with full power of substitution, the
lawful attorneys and proxies of the undersigned to vote as designated below,
and, in their discretion, upon such other business as may properly be
presented to the meeting, all of the shares of DATRON SYSTEMS INCORPORATED
which the undersigned shall be entitled to vote at the Annual Meeting of
Stockholders to be held on August 15, 1995, and at any adjournments or
postponements thereof.
1. To elect as director: Richard W. Pershing, David A. Derby,
Kent P. Ainsworth, Adrian C. Cassidy, Prentis C. Hale, Peter F. Scott and
Robert D. Sherer.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote
(except as indicated below) (as to all nominees)
To withhold authority to vote for one or more individual
nominees, write such name(s) on the line provided below:
___________________________________________________________
2. To approve the 1995 Stock Option Plan.
[ ] FOR approval of the [ ] AGAINST approval of the
1995 Stock Option Plan 1995 Stock Option Plan
[ ] WITHHOLD AUTHORITY to vote
on the approval of the
1995 Stock Option Plan
This proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder. WHEN NO CHOICE IS INDICATED, THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR THE ADOPTION OF THE 1995 STOCK
OPTION PLAN. This proxy may be revoked at any time prior to the time it is
voted by any means described in the accompanying Proxy Statement.
Date __________________, 1995
_______________________________
(Signature)
_______________________________
(Signature)
Please date and sign exactly as
name(s) appear(s) hereon. If
shares are held jointly, each
holder must sign. Please give full
title and capacity in which signing
if not signing as an individual.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED POSTPAID ENVELOPE.
