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 Rule 14a-11(c) or
Rule 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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 MONDAY, AUGUST 18, 1997 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 18, 1997 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 Employee Stock Purchase Plan;
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 23,
1997 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 8, 1997
__________________________________________________________________
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>1
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 Monday, August 18, 1997, 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 (760) 747-3734.
Only stockholders of record as of the close of business on June 23,
1997 are entitled to notice of, and to vote at, the Annual Meeting. At
the close of business on that date, 2,664,416 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 8, 1997. 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.
<PAGE>2
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 incumbent
directors. All of these directors were elected at the Company's last
annual meeting. If any nominee 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 19, 1997.
<TABLE>
<CAPTION>
Positions Common Stock Percentage
with Beneficially Ownership
Name Age the Company Owned<F1><F2>
- -------------- --- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Richard W. Pershing 69 Chairman of the 25,226<F3> 1.0%
Board; Director
David A. Derby 55 President and 89,194 3.3%
Chief Executive
Officer; Director
Kent P. Ainsworth 51 Director 12,088 0.5%
Michael F. Bigham 39 Director 1,650 0.1%
Adrian C. Cassidy 81 Director 17,700<F4> 0.7%
Peter F. Scott 70 Director 9,722<F5> 0.4%
Robert D. Sherer 61 Director 7,050 0.3%
_______________________________
<F1> Assumes the exercise of all outstanding options held by such
person to the extent exercisable on or before August 18, 1997 and
that no other person has exercised any outstanding options.
Includes 5,000, 22,500, 6,650, 1,650, 6,650, 6,650 and 6,650 shares
subject to options held by Messrs. Pershing, Derby, Ainsworth,
Bigham, Cassidy, Scott and Sherer, respectively.
<F2> The persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws
where applicable and to the information contained in the other
footnotes to this table.
<F3> Excludes 1,099 shares owned of record by Mr. Pershing's wife.
Mr. Pershing disclaims beneficial ownership of all such shares.
<F4> Includes 6,050 shares owned by a trust of which Mr. Cassidy is
co-trustee and a beneficiary.
<F5> Includes 3,072 shares owned by a trust of which Mr. Scott is a
co-trustee and a beneficiary.
</TABLE>
<PAGE>3
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. He has been a director of AML Communications, Inc.
since December 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. From January 1991 until
April 1996 he was Vice President and Chief Financial Officer of U.R.S.
Corporation. Since April 1996, he has been Executive Vice President and
Chief Financial Officer of U.R.S. Corporation.
Michael F. Bigham became a director of the Company in May 1996.
Since July 1, 1996, he has been President and Chief Executive Officer of
Coulter Pharmaceutical Inc. He previously was Chief Financial Officer
and Executive Vice President for Operations of Gilead Sciences, Inc.,
positions he held from 1989 and 1994, respectively. From July 1988
until April 1992 he was Vice President of Corporate Development of
Gilead Sciences, 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
four (4) meetings during the fiscal year ended March 31, 1997 ("Fiscal
1997"). During Fiscal 1997, each incumbent director attended 75% or
more of the meetings of the Board and of Board committees on which such
director served with the exceptions of Mr. Ainsworth, who attended 57%
of such meetings, and Mr. Bigham, who attended 67% of Board meetings
held after he became a director. 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 presently has two standing committees, the Audit
Committee and the Compensation Committee.
<PAGE>4
Audit Committee
During Fiscal 1997, 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 1997.
Compensation Committee
During Fiscal 1997, 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 and the Company's 1995 Stock Option
Plan (collectively, the "Stock Option Plans"). If approved by the
Shareholders, the Employee Stock Purchase Plan of the Company will be
administered by the Compensation Committee. The Compensation Committee
met one (1) time during Fiscal 1997.
The Company previously had an Administration Committee for Stock
Option Plans. The duties of that Committee were transferred to the
Compensation Committee effective November 7, 1996. The Administration
Committee consisted of Messrs. Derby and Pershing, and met one (1) time
in Fiscal 1997 prior to assumption of its duties by the Compensation
Committee.
PROPOSAL 2 - APPROVAL OF THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
General
On May 19, 1997, the Board of Directors approved the Employee Stock
Purchase Plan (the "Purchase Plan"), subject to the approval of the
Company's stockholders. The purposes of the Purchase Plan are to give
eligible employees an opportunity to share in the success of the Company
by purchasing common shares at a favorable price and to pay for the
purchases solely by means of payroll deductions, thereby encouraging
employees to focus on long-range objectives, to allow the Company to
attract and retain employees with exceptional qualifications, and to
link employee and stockholder interests through equity ownership.
Approximately 300 of the Company's employees may elect to participate in
the Purchase Plan.
Principal Features of the Purchase Plan
The text of the Purchase Plan is set forth in Appendix A to this
Proxy Statement. The following summary of the Purchase Plan's principal
features does not purport to be complete. It is subject to, and
qualified in its entirety by, the full text of the Purchase Plan in
Appendix A.
Administration.
The Purchase Plan is administered by the Board of Directors of the
Company, which may delegate administration of the Purchase Plan to a
Committee. Following establishment of the Purchase Plan and fixing
initial offering terms pursuant to the Purchase Plan, the Board of
Directors has delegated the administration of the Purchase Plan to the
Compensation Committee of the Board of Directors. References in this
description of the Purchase Plan to the "Board" also include the
Compensation Committee. The Board will prescribe guidelines and forms
for the implementation and administration of the Purchase Plan,
interpret the provisions of the Purchase Plan and make all other
substantive decisions regarding operation of the Purchase Plan.
<PAGE>5
Shares Reserved for the Purchase Plan.
The Company has reserved 200,000 shares for sale pursuant to rights
granted under the Purchase Plan, to be adjusted for the effect of any
stock split, stock dividend and the like.
Participation Periods.
The Board may provide for the grant of rights to purchase Common
Stock of the Company to eligible employees (an "Offering") on a date or
dates to be selected by the Board. The Board has initially provided for
successive Offerings (the "Planned Offerings"), each of six months
duration, commencing each July 1 and January 1, beginning July 1, 1997.
Unless otherwise provided herein, the terms of the Purchase Plan
described herein as applicable to an Offering under the Purchase Plan
are applicable to the Planned Offerings. The Board may suspend or
terminate the Planned Offerings, or make new Offerings, as it sees fit,
provided the terms of any such Offerings are consistent with the terms
of the Purchase Plan.
Eligibility.
Rights to purchase stock may be granted under the Purchase Plan
only to employees of the Company and its affiliates who have been
employed by the Company or its participating affiliates for such
continuous period preceding such grant as the Board may require, which
period will not equal or exceed two years, and whose customary
employment with the Company or its affiliates is at least 20 hours per
week and at least five months per calendar year, unless otherwise
determined by the Board. Officers of the Company are eligible to
participate in Offerings. No rights may be granted under the Purchase
Plan to any person who, at the time of the grant, owns stock possessing
five percent or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary.
The Board may provide that if an employee becomes eligible to
participate in the Purchase Plan during the course of an Offering, the
employee may receive a right under that Offering. Such right will have
the same characteristics as any rights originally granted under that
Offering, except that (i) the Offering date will be the date such right
is granted and (ii) the Offering period for such right will begin on its
Offering date and end coincident with the end of the Offering, and (iii)
the Board may provide that if such person first becomes an eligible
employee within a specified period of time before the end of the
Offering, he or she will not receive any right under that Offering.
An eligible employee may be granted rights under the Purchase Plan
only if such rights do not exceed such number of shares as has a fair
market value (determined as of the Offering Date for such Offering)
equal to (x) $25,000 multiplied by the number of calendar years in which
the right under such Offering has been outstanding at any time, minus
(y) the fair market value of any other shares of Common Stock
(determined as of the relevant Offering Date with respect to such
shares) which, for purposes of the limitation of Section 423(b)(8) of
the Internal Revenue Code of 1986, as amended (the "Code"), are
attributed to any of such calendar years in which the right is
outstanding.
For the Planned Offerings the Board has decided that all employees
who have been continuously employed by the Company or its subsidiaries
for six months at the commencement of the relevant Planned Offering, who
are not part-time employees or persons who hold five percent or more of
the Company's common stock, are eligible to participate. Employees will
not be able to join the Planned Offerings other than at the commencement
of each such Offering.
Rights; Purchase Price.
On each Offering Date, each eligible employee will be granted the
right to purchase shares of the Company's Common Stock with earnings
that the employee has decided to set aside pursuant to the Purchase
Plan. The number of shares purchasable depends on the amount of
earnings set aside by the employee and the value of the Company's Common
Stock at the commencement or purchase date, whichever is lower, provided
that in no event may an employee acquire more than the maximum number of
<PAGE>6
shares permitted by Section 423(b)(8) of the Code or the maximum number
fixed by the Board for a particular Offering. For the Planned
Offerings, the Board has limited participating employees to a maximum of
1,000 shares per Offering. The purchase price of stock acquired
pursuant to rights granted under the Purchase Plan will be the lesser of
(i) 85 percent of the fair market value of the stock on the Offering
date, or (ii) 85 percent of the fair market value of the stock on the
date such stock is purchased.
Transferability.
Rights granted under the Purchase Plan are nontransferable except
by will or the laws of descent and distribution, or to a designated
beneficiary in the event of a participant's death, and may be exercised
only by the person to whom such rights are granted.
Purchase.
On each Purchase Date, a participant's accumulated payroll
deductions (without any increase for interest) will be applied to the
purchase of whole shares of stock of the Company, up to the maximum
number of shares permitted pursuant to the terms of the Purchase Plan,
at the purchase price specified in the Offering. No fractional shares
will be issued upon the exercise of rights granted under the Purchase
Plan. "Purchase Date" is defined as the last day of each Offering
(i.e., June 30 or December 31) if a trading day, or the last trading day
immediately prior thereto. No rights granted under the Purchase Plan
may be exercised to any extent unless the shares subject to exercise are
covered by an effective registration statement pursuant to the
Securities Act of 1933, as amended.
Escrow of Shares.
During a period of three months following the last day of the
currently authorized Offering, all shares purchased under the Purchase
Plan on such day will be held in escrow by the Company or its designee
as agent for the participants who own such shares and will not be
transferable or assignable.
Participation, Withdrawal and Termination.
An eligible employee may become a participant in an Offering by
authorizing payroll deductions of up to the maximum percentage of such
employee's earnings during the purchase period, as specified by the
Board. Payroll deductions made for a participant will be credited to an
account for such participant under the Purchase Plan and deposited with
the general funds of the Company. A participant may reduce, increase or
begin payroll deductions after the beginning of any Offering only as
provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount
withheld during the purchase period. In connection with the Planned
Offerings, the Board has provided that a participant may not join an
Offering in progress, nor change his or her level of participation
during the Offering; however, the Board has decided to permit
participants to withdraw from the Purchase Plan during such an Offering
as described in the next paragraph.
A participant may terminate payroll deductions under the Purchase
Plan and withdraw from an Offering at any time during a purchase period
by delivering to the Company a notice of withdrawal. Upon such
withdrawal, the Company will distribute to such participant all of his
or her accumulated payroll deductions (reduced to the extent such
deductions have been used to acquire stock for the participant) under
the Offering, without interest, and the participant's interest in that
Offering will be automatically terminated. Such withdrawal will have no
effect upon such participant's eligibility to participate in any other
Offerings under the Purchase Plan, but the participant will be required
to deliver a new participation agreement in order to participate in
subsequent Offerings.
Rights granted under the Purchase Plan will terminate immediately
upon cessation of a participating employee's employment, and the Company
will distribute to such employee all of his or her accumulated payroll
deductions (reduced to the extent such deductions have been used to
acquire stock for the terminated employee) without interest.
<PAGE>7
Adjustment Provisions.
If there is any change in the stock subject to the Purchase Plan or
subject to any rights granted under the Purchase Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure
or other transaction not involving the receipt of consideration), the
Purchase Plan and rights outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to the
Purchase Plan and the class, number of shares and price per share of
stock subject to outstanding rights.
In the event of a dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving
corporation, a reverse merger in which the Company survives but shares
of Common Stock preceding the merger are converted into other property
(securities, cash or otherwise), or the sale of stock of the Company to
a single purchaser or single group of affiliated purchasers after which
less than 50 percent of the outstanding voting shares of the new or
continuing corporation are owned by stockholders of the Company
immediately before such transaction, then, as determined by the Board,
the successor corporation may assume such outstanding rights or
substitute similar rights, such rights may continue in full force and
effect, or participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described
above and the participants' rights under the ongoing Offering will be
terminated.
Amendment.
The Board may amend the Purchase Plan at any time. However, no
amendment will be effective unless approved by the stockholders of the
Company within 12 months before or after its adoption by the Board if
the amendment would: (i) increase the number of shares reserved for
rights; (ii) modify the provisions as to eligibility for participation
to the extent such modification requires stockholder approval in order
for the Purchase Plan to satisfy the requirements of Section 423 of the
Code or to comply with the requirements of Rule 16b-3 promulgated under
the Exchange Act; or (iii) modify the Purchase Plan in any other way if
such modification requires stockholder approval in order for the
Purchase Plan to satisfy the requirements of Section 423 of the Code or
to comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act.
Termination Or Suspension.
The Board may suspend or terminate the Purchase Plan at any time.
No rights may be granted under the Purchase Plan while the Purchase Plan
is suspended or after it is terminated.
Federal Income Tax Information.
The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code. A participant will be
taxed on amounts withheld for the purchase of stock as if such amounts
were actually received. Other than this, no income will be taxable to a
participant until disposition of the stock acquired, and the method of
taxation will depend upon the holding period of the purchased shares.
It the stock is disposed of at least two years after the beginning
of the Offering period and at least one year after the stock is
transferred to the participant, then the lesser of (a) the excess of the
fair market value of the stock at the time of such disposition over the
purchase price or (b) the excess of the fair market value of the stock
as of the beginning of the Offering period over the exercise price
(which will generally be 85 percent of the fair market value of the
stock at the beginning of the Offering period) will be treated as
ordinary income. Any further gain or any loss will be taxed as long-
term capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either
of the holding periods described above, then the excess of the fair
market value of the stock on the purchase date over the purchase price
will be treated as ordinary income at the time of such disposition, and
the Company may, in the future be required to withhold income taxes
relating to such ordinary income. The balance of any gain will be
treated as capital gain. Even if the stock is later disposed of for
<PAGE>8
less than its fair market value on the purchase date, the same amount of
ordinary income is taxable to the participant, and a capital loss is
recognized equal to the difference between the sales price and the fair
market value of the stock on such purchase date. Any capital gain or
loss will be long- or short-term depending on whether the stock has been
held for more than one year.
There are no federal income tax consequences to the Company by
reason of the grant or exercise of rights under the Purchase Plan. The
Company is entitled to a deduction to the extent amounts are taxed at
ordinary income to a participant (subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of its tax reporting obligation).
Required Vote
Approval of the Purchase Plan requires the affirmative vote of the
majority of shares present in person or represented by proxy and voting
at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
EMPLOYEE STOCK PURCHASE PLAN.
<PAGE>9
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding the compen
sation 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 other executive officers of the Company whose
combined salary and bonuses exceeded $100,000 for Fiscal 1997. No other
executive officer of the Company received salary and bonus of more than
$100,000 during Fiscal 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------ ------------
Salary Bonus Other
($) ($) Annual
Compen-
sation Awards
($) ---------
Fiscal Securities All Other
Name and Principal Year Underlying Compen-
Principal Ended Options/ sation
Position March SARs ($)
31, (#)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David A.Derby 1997 249,995 0 2,250<F2> 0 21,804<F1>
President and Chief 1996 249,995 0 1,463<F2> 0 362<F1>
Executive Officer 1995 249,995 114,290 471<F2> 0 20,826<F3>
Richard W. Pershing 1997 119,995 0 2,730<F2> 0 18,192<F1>
Chairman of the 1996 119,995 0 1,931<F2> 0 778<F1>
Board 1995 119,995 57,145 3,552<F2> 0 20,826<F3>
William L. Stephan 1997 135,371 0 329<F2> 0 20,024<F1>
Vice President, 1996 130,000 0 1,332<F2> 0 753<F1>
Chief Financial 1995 120,016 57,145 2,236<F2> 0 20,826<F3>
Officer and
Treasurer
- ------------------------------
<F1> Represents contributions to the Company's Non-Qualified
Supplemental Executive Profit Sharing Plan and earnings accrual
under that plan.
<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 $10,260 contribution to the Company's Qualified
Employee Profit Sharing Plan and a $10,566 contribution to the
Company's Non-Qualified Supplemental Executive Profit Sharing Plan.
</TABLE>
<PAGE>10
Fiscal 1997 Option Grants
No options were granted during Fiscal 1997 to the Company's
executive officers.
Fiscal Year 1997 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 1997 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 15,000 58,125 22,500 0 23,625 0
Richard W. Pershing 6,000 27,375 5,000 0 0 0
William L. Stephan 0 0 20,000 0 2,500 0
- --------------------------------------
<F1> Market value of the underlying securities at fiscal year-end minus
the exercise price of "in the money" options.
</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, 2000, 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, 2000, 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. Mr. Derby has
outstanding a full recourse promissory note in the original principal
amount of $164,000 payable to the Company on April 10, 1999, the
proceeds of which he used to acquire 25,000 shares of Common Stock on
April 11, 1988.
<PAGE>11
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 11,
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 1997 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. The cumulative
effect of the Company's compensation policies for executive officers is
to tie such compensation closely to the Company's performance. Because
net income recorded in Fiscal 1997 was low, there were no cash bonuses
awarded to the executive officers during the year.
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. These base salaries have not changed since
Fiscal 1995. The Company incurred a net loss in Fiscal 1996 and low net
income in Fiscal 1997. Because financial performance was below Company
objectives for those two fiscal years, the Compensation Committee
believes salary increases were not appropriate.
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 three 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. There were no
contributions to the Qualified Plan during Fiscal 1997. Participant
accounts in the Qualified Plan vest over a seven-year period beginning
after three years of service.
The second bonus plan is the Company's Non-Qualified Supplemental
Executive Profit Sharing Plan (the "Non-Qualified Plan"). The Non-
Qualified Plan was established to provide the executive officers named
in the Summary Compensation Table with retirement benefits in excess of
those permitted by the Qualified Plan. The benefits provided by the Non-
Qualified Plan are in the form of deferred compensation, which is not
treated favorably for tax purposes. The Non-Qualified Plan is designed
to supplement retirement benefits provided by the Qualified Plan, which
are limited by federal regulation and which the Compensation Committee
believes are not competitive with other similar companies. The Board
determines which executive officers are eligible to participate in the
Non-Qualified Plan and the amount of annual contributions. Fiscal 1997
contributions to the Non-Qualified plan were $16,772 for Mr. Pershing,
$20,500 for Mr. Derby and $18,546 for Mr. Stephan. Participant accounts
in the Non-Qualified Plan vest over a seven-year period beginning after
three years of service.
<PAGE>12
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 Plan and the Non-Qualified 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. There were no
contributions to the Key Employee Plan during Fiscal 1997.
The fourth element in the Company's executive officer compensation
package is equity-based compensation. The Compensation 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 1995 Stock Option Plan, which was approved by the stockholders
at the 1995 Annual Meeting. Under the 1995 Stock Option Plan, options
vest over a three-year period and are designed to encourage officers to
continue in the employ of the Company. As such, they provide a longer
term incentive than do the annual bonus plans. There were no stock
options granted to executive officers during Fiscal 1997; however, in
May 1997, the Compensation Committee granted 25,000 incentive stock
options to Mr. Derby and 10,000 incentive stock options to Mr. Stephan
under the 1995 Stock Option Plan. If the stockholders approve the
Employee Stock Purchase Plan, which is described in Proposal 2 on page
4, that plan will provide further equity-based incentive compensation to
Company employees, including its executive officers.
CEO Compensation
Mr. Derby has been President and Chief Executive Officer of the
Company since 1982. Mr. Derby's base salary for Fiscal 1997 remained at
$250,000 pursuant to his employment agreement. Mr. Derby's
participation in the Company's Qualified Plan, Non-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 66,694 shares
of Common Stock and options to purchase 47,500 shares of Common Stock
(and, if the plan is approved by the stockholders, his participation in
the Employee Stock Purchase Plan), 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 and Insider Participation
As noted above, during Fiscal 1997 executive compensation policy
was set by the Compensation Committee. Each member of the Compensation
Committee is a non-employee director of the Company.
<PAGE>13
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, 1992 through
March 31, 1997 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, 1992 and that all dividends, if any, were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
AMONG DATRON SYSTEMS INCORPORATED, CRSP NASDAQ-U.S. COMPANIES AND
CRSP NASDAQ-COMMUNICATIONS EQUIPMENT COMPANIES
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered)
- ---------------------
CRSP Index CRSP Index-NASDAQ
NASDAQ Communications
Measurement Datron Systems Equipment Equipment
Point Incorporated Companies Companies
- ------------ -------------- ----------- ----------------
<S> <C> <C> <C>
FYE 3/31/92 $100 $100 $100
FYE 3/31/93 $56 $115 $128
FYE 3/31/94 $113 $124 $174
FYE 3/31/95 $140 $138 $235
FYE 3/31/96 $140 $187 $343
FYE 3/31/97 $107 $208 $311
</TABLE>
<PAGE>14
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 23, 1997 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 Shares of
of Beneficial Owner Common Stock<F1> % of Class
- -------------------------- --------------- ----------
<S> <C> <C>
Heartland Advisors, Inc. 537,200<F2> 20.2%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors 151,304<F3> 5.7%
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401
Shufro, Rose & Ehrman 149,500 5.6%
745 Fifth Avenue
New York, NY 10151-0108
Denise Hale 136,594<F4> 5.1%
835 Market Street,
Room 300
San Francisco, CA 94103
David A. Derby 89,194<F5> 3.3%
Richard W. Pershing 25,226<F5> 1.0%
William L. Stephan 21,000<F5> 0.8%
All directors and 183,630<F5> 6.7%
executive officers
as a group (8 persons)
- ---------------------------------------
<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> The shares of common stock are held of record in various investment
advisory accounts of Heartland Advisors, Inc. ("Heartland"),
including 250,000 shares held by the Heartland Value Fund.
Heartland has sole voting and dispositive power as to 481,200
shares and sole dispositive, but no voting power as to 56,000
shares.
<F3> Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of
151,304 shares of the Company's Common Stock as of March 31, 1997,
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 54,091 shares owned of record by a revocable trust of
which Mrs. Hale is one of three trustees and the sole beneficiary,
and 82,503 shares owned of record by Mrs. Hale.
<F5> Includes 22,500, 5,000 and 20,000 shares obtainable upon the
exercise of stock options held by Messrs. Derby, Pershing, and
Stephan, respectively.
</TABLE>
<PAGE>15
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, 1997, containing the audited consolidated balance sheets as of
March 31, 1997 and March 31, 1996 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 1998, the proposal must be received in writing by the
Secretary of the Company no later than March 10, 1998.
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 8, 1997
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>A-1
APPENDIX A
DATRON SYSTEMS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
Adopted Effective July 1, 1997
Approved by Stockholders ____________, 1997
1. PURPOSE
(a) The purpose of the Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Datron Systems Incorporated,
a Delaware corporation (the "Company"), and its Affiliates, as defined
in subparagraph 1(b), which are designated as provided in subparagraph
2(b), may be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent or
subsidiary corporation of the Company, as those terms are defined in
Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code").
(c) The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new
employees, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an
"employee stock purchase plan" as that term is defined in Section 423(b)
of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company. The Board may delegate administration of the
Plan to a Committee, as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase Common
Stock of the Company shall be granted (each such grant of rights, an
"Offering") and the provisions governing each Offering (which need not
be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan (each, a
"Participating Affiliate").
(iii) To construe and interpret the Plan and each
Offering, and to establish, amend and revoke rules and regulations for
the administration of the Plan. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or
any Offering, in a manner and to the extent it shall deem necessary or
expedient to make the Plan or any Offering fully effective.
(iv) To amend the Plan as provided in paragraph 11.
<PAGE>A-2
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent
that the Plan be treated as an "employee stock purchase plan" within the
meaning of Section 423 of the Code and each Offering be treated as a
grant of options pursuant to such Plan.
(c) The Board may delegate administration of the Plan to a
committee of one or more members of the Board (the "Committee"). If
administration is delegated to a Committee (which may be a newly formed
or pre-existing committee of the Board), the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from
time to time by the Board. The Board may at any time revest in the
Board the administration of the Plan and may reverse or override any
decision of the Committee.
3. SHARES SUBJECT TO THE PLAN.
The number of shares of Common Stock that may be sold pursuant
to rights granted under the Plan shall not exceed two hundred thousand
(200,000) (appropriately adjusted for the effect of any stock split,
stock dividend or the like) of the Company's common stock (the "Common
Stock"). If any right granted under the Plan shall for any reason
terminate without having been exercised, the Common Stock not purchased
under such right shall again become available for issuance under the
Plan.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time provide for an
Offering on a date or dates (the "Offering Date(s)") selected by the
Board or the Committee. Each Offering shall be of rights to purchase
Common Stock, shall be only to Eligible Employees, as defined below,
shall comply with the requirement of Section 423(b)(5) of the Code that
all employees granted rights to purchase stock under the Plan shall have
the same rights and privileges and shall be in such form and shall
contain such terms and conditions as the Board or the Committee shall
deem appropriate, provided, that the terms of any such Offerings shall
be consistent with the Plan (including without limitation the provisions
of paragraphs 5 through 8 hereof). Each Offering shall specify the
period during which the Offering shall be effective, which period shall
not exceed twenty-seven (27) months beginning with the Offering Date.
The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan with respect to
such Offering.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or any
Participating Affiliate. Except as provided in subparagraph 5(b), an
employee of the Company or any Participating Affiliate shall not be
eligible to be granted rights under the Plan unless, on the Offering
Date, such employee has been in the employ of the Company or any
Affiliate for such continuous period preceding such grant as the Board
or the Committee may require for such Offering, but in no event shall
the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or
the Committee, no employee of the Company or any Participating Affiliate
shall be eligible to be granted rights under the Plan unless, on the
Offering Date, such employee's customary employment with the Company or
such Affiliate is for at least twenty (20) hours per week and at least
five (5) months per calendar year. Employees who meet the eligibility
requirements for a particular Offering shall be "Eligible Employees" for
purposes of such Offering.
(b) The Board or the Committee may provide in connection with any
Offering that each person who, during the course of such Offering, first
becomes an Eligible Employee, will, on a date or dates specified in the
Offering which occurs on or after the day on which such person becomes
an Eligible Employee, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right
shall have the same characteristics as any rights originally granted
under that Offering except that:
(i) the date on which such right is granted to such Eligible
Employee shall be the "Offering Date" of such right for all purposes,
including determination of the exercise price of such right;
<PAGE>A-3
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of the
then current Offering (or, if there is then more than one current
Offering, the end of the most recently commenced Offering); and
(iii) the Board or the Committee may provide that if each
such person first becomes an Eligible Employee within a specified period
of time before the end of the Offering, he or she will not receive any
right under that Offering.
(c) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such
employee owns stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or
of any Affiliate. For purposes of this subparagraph 5(c), the rules of
Section 424(d) of the Code shall apply in determining the stock
ownership of any employee, and stock which such employee may purchase
under all outstanding rights and options shall be treated as stock owned
by such employee.
(d) The number of shares of Common Stock an Eligible Employee may
purchase on any Purchase Date in an Offering shall not exceed such
number of shares as has a fair market value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the
number of calendar years in which the right under such Offering has been
outstanding at any time, minus (y) the fair market value of any other
shares of Common Stock (determined as of the relevant Offering Date with
respect to such shares) which, for purposes of the limitation of Section
423(b)(8) of the Code, are attributed to any of such calendar years in
which the right is outstanding. The amount in clause (y) of the
previous sentence shall be determined in accordance with regulations
applicable under Section 423(b)(8) of the Code based on (i) the number
of shares previously purchased with respect to such calendar years
pursuant to such Offering or any other Offering under the Plan, or
pursuant to any other Company plans intended to qualify as "employee
stock purchase plans" under Section 423 of the Code, and (ii) the number
of shares subject to other rights outstanding on the Offering Date for
such Offering pursuant to the Plan or any other such Company plan.
(e) Officers of the Company and any Participating Affiliate shall
be eligible to participate in Offerings under the Plan, provided,
however, that the Board may provide in connection with any particular
Offering that employees who are highly compensated employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate in such Offering.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, unless a lesser amount is set by the
Board or Committee for such Offering pursuant to paragraph 6(c) below,
and subject to the maximum set forth in paragraph 5(d) above, each
Eligible Employee for such Offering shall be granted the right to
purchase, for each 1% of such employee's Earnings designated by such
employee pursuant to Section 7 (but not exceeding ten percent (10%), the
number of shares of Company Common Stock determined by dividing $25,000
by the fair market value of a share of Common Stock on the Offering
Date, dividing the result by the maximum number of percentage points of
Earnings that an employee may designate for such Offering, and
multiplying the result by the number of calendar years included in whole
or in part in the period from the Offering Date to the end of the
Offering. The Board or Committee may define "Earnings" for purposes of
any Offering, consistently with the requirements of Section 423 of the
Code.
(b) The Board or the Committee shall establish one or more dates
during an Offering (the "Purchase Date(s)") on which rights granted
under the Plan shall be exercised and purchases of Common Stock carried
out in accordance with such Offering. If no Purchase Date for an
Offering is designated, such Offering shall have one Purchase Date
occurring on the last day that the Company's stock is traded during the
period of the Offering.
(c) In connection with each Offering made under the Plan, the
Board or the Committee may specify a maximum number of shares that may
be purchased by any employee as well as a maximum aggregate number of
shares that may be purchased by all eligible employees pursuant to such
Offering that is less than that provided in clause (a) above. The Board
or Committee may also limit the percentage of Earnings that can be
designated for withholding in connection with any Offering to a
<PAGE>A-4
percentage less than ten percent (10%). In addition, in connection with
each Offering that contains more than one Purchase Date, the Board or
the Committee may specify a maximum aggregate number of shares which may
be purchased by all eligible employees on any given Purchase Date under
the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum
aggregate number, the Board or the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as
shall be practicable and as it shall deem to be equitable.
(d) Unless a greater price is specified for an Offering, and
subject to the requirements of the Code in the event the Board or
Committee elects to permit Eligible Employees to receive rights during
an Offering pursuant to paragraph 5(b), the purchase price of stock
acquired pursuant to rights granted under the Plan shall be the lesser
of:
(i) eighty-five (85%) of the fair market value of the stock
on the Offering Date; or
(ii) eighty-five (85%) of the fair market value of the stock
on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering a participation agreement to the
Company within the time specified in the Offering, in such form as the
Company provides. Each such agreement shall authorize payroll
deductions of up to the maximum percentage specified by the Board or the
Committee of such employee's Earnings during the Offering (as defined by
the Board or Committee in each Offering). The payroll deductions made
for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds
of the Company and shall not bear interest. Participants may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any
Offering only as provided for in the Offering. Participants may make
additional payments into his or her account only if specifically
provided for in the Offering and only if the participant has not had the
maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate
his or her payroll deductions under the Plan and withdraw from the
Offering by delivering to the Company a notice of withdrawal in such
form as the Company provides. Such withdrawal may be elected at any time
prior to the end of the Offering except as provided by the Board or the
Committee in the Offering. Upon such withdrawal from the Offering by a
participant, the Company shall distribute to such participant all of his
or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire stock for the participant)
under the Offering, without interest, and such participant's interest in
that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but
such participant will be required to deliver a new participation
agreement in order to participate in subsequent Offerings under the
Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's
employment with the Company and any designated Affiliate, for any
reason, and the Company shall distribute to such terminated employee all
of his or her accumulated payroll deductions (reduced to the extent, if
any, such deductions have been used to acquire stock for the terminated
employee) under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and
distribution, or by a beneficiary designation as provided in paragraph
14 and, otherwise during his or her lifetime, shall be exercisable only
by the person to whom such rights are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant
Offering, each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without
any increase for interest) will be applied to the purchase of whole
<PAGE>A-5
shares of stock of the Company, up to the maximum number of shares
permitted pursuant to the terms of the Plan and the applicable Offering,
at the purchase price specified in the Offering. No fractional shares
shall be issued upon the exercise of rights granted under the Plan. The
amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than
the amount required to purchase one share of stock on the final Purchase
Date of an Offering shall be held in each such participant's account for
the purchase of shares under the next Offering under the Plan, unless
such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under
the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without
interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock
on the final Purchase Date of an Offering shall be distributed in full
to the participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any
extent unless shares under the Plan are covered by an effective
registration statement pursuant to the Securities Act of 1993, as
amended (the "Securities Act") and the Plan is in material compliance
with all applicable state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date in any Offering hereunder
the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date,
and the Purchase Date shall be delayed until the Plan is subject to such
an effective registration statement and in such compliance, except that
the Purchase Date shall not be delayed more than twelve (12) months and
the Purchase Date shall in no event be more than twenty-seven (27)
months from the Offering Date. If on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and in such compliance, no rights granted under the Plan or
any Offering shall be exercised and all payroll deductions accumulated
during the Offering (reduced to the extent, if any, such deductions have
been used to acquire stock) shall be distributed to the participants,
without interest.
(c) Shares of stock of the Company that are purchased may be
registered in the name of the participant or jointly in the name of the
participant and his or her spouse as joint tenants with right of
survivorship or community property or in the name of a living trust that
the participant has established on his own behalf.
9. RIGHTS AS A STOCKHOLDER; NO EFFECT ON EMPLOYMENT AT WILL.
A participant shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to
rights granted under the Plan unless and until the participant's
shareholdings acquired upon exercise of rights under the Plan are
recorded in the Stock records of the Company. Nothing herein shall
create any rights on the part of any employee to continuing employment.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, or other
transaction not involving the receipt of consideration by the Company),
then, subject to clause (b) below, the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible
securities of the Company or the issuance by or exercise of, options,
warrants or right to acquire Common Stock or convertible securities
shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock
<PAGE>A-6
outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash
or otherwise; or (4) the acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Exchange Act or any
comparable successor provisions (excluding any employee benefit plan, or
related trust sponsored or maintained by the Company or any Affiliate of
the Company) of the beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of
the combined voting power entitled to vote in the election of directors,
then, as determined by the Board in its sole discretion (i) any
surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated
payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights
under the ongoing Offering terminated.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12)
months before or after the adoption of the amendment, where the
amendment will:
(i) Increase the number of shares reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan
treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3); or
(iii) Modify the plan in any other way if such
modification requires stockholder approval in order for the Plan to
obtain employee stock purchase plan treatment under Section 423 of the
Code or to comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible
employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder
relating to employee stock purchase plans and/or to bring the Plan
and/or rights granted under it into compliance therewith.
(b) Subject to paragraph 12, rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except
as necessary to ensure that the Plan and/or rights granted under the
Plan comply with the requirements of Section 423 of the Code.
12. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's
account under the Plan in the event of such participant's death
subsequent to the end of an Offering but prior to delivery to the
participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash
from the participant's account under the Plan in the event of such
participant's death during an Offering.
(b) Such designation of a beneficiary may be changed by the
participant at any time by written notice. In the event of the death of
a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor
or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such shares and/or cash
to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
<PAGE>A-7
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan
at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan
is in effect shall not be impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of
the person to whom such rights were granted, or except as necessary to
comply with any laws or governmental regulation, or except as necessary
to ensure that the Plan and/or rights granted under the Plan comply with
the requirements of Section 423 of the Code.
14. EFFECTIVE DATE OF THE PLAN.
The Plan shall become effective on the date specified by the Board,
but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted by the
Board.
<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 18, 1997, and at
any adjournments or postponements thereof.
(Continued, and to be marked, dated and signed, on the other side)
- -----------------------------------------------------------------------
<PAGE>
Please mark your vote as indicated in this example [X]
1. To elect as director, Richard W. Pershing, David A. Derby, Kent P.
Ainsworth, Michael F. Bigham, Adrian C. Cassidy, Peter F. Scott and
Robert D. Sherer.
FOR all nominees listed (except as indicated below) [ ]
WITHOLD AUTHORITY to vote (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 Employee Stock Purchase Plan.
FOR approval of the Plan [ ]
AGAINST APPROVAL of the Plan [ ]
ABSTAIN with respect to the 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 OR PROPOSALS LISTED ABOVE. This proxy
may be revoked at any time prior to the time it is voted by any means
described in the accompanying Proxy Statement.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTPAID ENVELOPE.
(Signature)_______________(Signature)___________Date___________,1997
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.
