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:
-------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------
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):
-------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------
[ ] 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:
------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------
3) Filing Party:
--------------------------------------
4) Date Filed:
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<PAGE>
DATRON SYSTEMS INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, AUGUST 5, 1998 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 5, 1998 at
11:00 A.M. for the following purposes:
1. To elect eight directors to hold office until
the next annual meeting of stockholders and until their
successors are elected and qualified; and
2. 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 15,
1998 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, 1998
- ----------------------------------------------------------------------
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 Wednesday, August 5,
1998, 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
15, 1998 are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on that date, 2,679,284 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, 1998. 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>
PROPOSAL 1 - NOMINATION AND ELECTION OF DIRECTORS
Nominees
--------
Eight 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 eight
incumbent directors. All of these directors were elected at the
Company's last annual meeting with the exception of Mr. Copple and Mr.
Preston, who were elected by the Board on February 10, 1998. Mr.
Richard W. Pershing retired as Chairman of the Board and resigned his
directorship on March 31, 1998. 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, eight
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 eight 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 18, 1998.
<TABLE>
<CAPTION>
Common Stock
Positions with Beneficially Percentage
Name Age the Company Owned<F1><F2> Ownership
- ----------------- --- --------------------- ------------ ----------
<S> <C> <S> <C> <C>
David A. Derby 56 Chairman of the Board, 98,637 3.6%
President, Chief
Executive Officer,
Director
Kent P. Ainsworth 52 Director 13,700 0.5%
Michael F. Bigham 40 Director 3,300 0.1%
Adrian C. Cassidy 82 Director 19,350<F3> 0.7%
John R. Copple 43 Director - -
William A. Preston 62 Director 5,000 0.2%
Peter F. Scott 71 Director 11,372<F4> 0.4%
Robert D. Sherer 62 Director 8,700 0.3%
</TABLE>
- ------------------------
[FN]
<F1> Assumes the exercise of all outstanding options held by such
person to the extent exercisable on or before August 5, 1998 and that
no other person has exercised any outstanding options. Includes
30,750, 8,300, 3,300, 8,300, 8,300 and 8,300 shares subject to options
held by Messrs. 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> Includes 11,050 shares owned by a trust of which Mr. Cassidy is a
co-trustee and a beneficiary.
<F4> Includes 3,072 shares owned by a trust of which Mr. Scott is a co-
trustee and a beneficiary.
</FN>
<PAGE>
Business Experience of the Nominees
-----------------------------------
David A. Derby has been a director, President and Chief Executive
Officer of the Company since May 1982. Mr. Derby was elected Chairman
of the Board effective April 1, 1998. 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 and was President of its other wholly owned
subsidiary, Datron/Transco Inc., from August 1997 until March 1998.
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. Since April 1996, he has been Executive Vice President and
Chief Financial Officer of U.R.S. Corporation. From January 1991 until
April 1996 he was Vice President and Chief Financial Officer of U.R.S.
Corporation. From October 1987 through February 1990, he was Chief
Financial Officer of Di Giorgio Corporation.
Michael F. Bigham has been a director of the Company since May
1996. Since July 1, 1996, he has been President and Chief Executive
Officer of Coulter Pharmaceutical Inc. He served as Executive Vice
President of Operations from April 1994 to June 1996 and Chief
Financial Officer from April 1989 to June 1996 at Gilead Sciences,
Inc., a biotechnology company. While at Gilead, he also served as
Vice President of Corporate Development from July 1988 to March 1992.
He was Co-head of Healthcare Investment Banking for Hambrecht & Quist
LLC, an investment banking firm, where he was employed from 1984 to
1988. He has been a director of LJL Biosystems, Inc. since April 1997
and a director of Coulter Pharmaceutical Inc. since June 1996.
Adrian C. Cassidy has been a director of the Company since
September 1984. 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 was a director of Basic American Foods, Inc. from 1979
to 1988. He also works as a financial consultant.
John R. Copple became a director in February 1998. Since
December 1995, he has been Chief Executive Officer of Space Imaging
EOSAT. He previously was employed by E-Systems, Inc., where he served
as Vice President, Financial Operations from May 1994 to December
1995, Vice President, Finance and Quality from August 1991 to May
1994, and Controller, Garland Division from October 1988 to August
1991.
William A. Preston became a director in February 1998. Since
1977, he has been Chairman and Chief Executive Officer of APM, Inc.
He was a director of Pacific Scientific Corporation from 1979 to
January 1998, and has been a director of MATSI Inc. since 1988.
Peter F. Scott has been a director of the Company since September
1984. From July 1992 to October 1993, he was President and Chief
Executive Officer of Blue Shield of California. He was a director,
President, Chief Executive Officer and Chairman of Di Giorgio
Corporation from 1974, 1980, 1982 and 1984, respectively, through
February 1990.
Robert D. Sherer has been a director of the Company since May
1989. He is the President and owner of Quality Concepts, Inc., which
he founded in 1986. From 1959 to 1984 he was employed by A.M.
International, where his last position was National Vice President of
Sales.
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.
<PAGE>
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 meetings during the fiscal year ended March 31, 1998 ("Fiscal
1998"). During Fiscal 1998, each incumbent 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. Scott, who attended 69%
of such meetings. Mr. Copple and Mr. Preston attended 100% of Board
meetings held after they became directors. 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 three standing committees, the Audit
Committee the Compensation Committee and the Executive Committee.
Audit Committee
During Fiscal 1998, 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 1998.
Compensation Committee
During Fiscal 1998, 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 Company's 1995
Stock Option Plan (collectively, the "Stock Option Plans") and the
Employee Stock Purchase Plan. The Compensation Committee met five (5)
times during Fiscal 1998.
Executive Committee
The Executive Committee was formed in March 1998 and consists of
Messrs. Ainsworth, Bigham, Derby and Preston. The function of the
Executive Committee is to provide strategic direction to the Company.
This Committee held its first meeting in April 1998.
<PAGE>
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 1998.
No other executive officer of the Company received salary and bonus of
more than $100,000 during Fiscal 1998.
<TABLE>
<CAPTION>
================================================================================
Annual Compensation Long-Term
Compensation
----------------------- -----------
Awards
-----------
Other Securities All
Fiscal Annual Underlying Other
Name and Year Compen- Options/ Compen-
Principal Ended Salary Bonus sation<F1> SARs<F2> sation<F3>
Position March 31, ($) ($) ($) (#) ($)
- ---------------- --------- ------- ----- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
David A. Derby, 1998 249,999 0 2,269 25,000 10,111
President and 1997 249,995 0 2,250 0 21,804
Chief Executive 1996 249,995 0 1,463 0 362
Officer
- -------------------------------------------------------------------------------
Richard W. 1998 119,999 0 2,144 0 8,183
Pershing, 1997 119,995 0 2,730 0 18,192
Chairman of 1996 119,995 0 1,931 0 778
the Board
- -------------------------------------------------------------------------------
William L. 1998 138,307 0 564 30,000 8,097
Stephan, Vice 1997 135,371 0 329 0 20,024
President, 1996 130,000 0 1,332 0 753
Chief Financial
Officer and
Treasurer
================================================================================
</TABLE>
[FN]
<F1> 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.
<F2> 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. See "Fiscal
1998 Option Grants" for other material terms.
<F3> Represents contributions to the Company's Non-Qualified
Supplemental Executive Profit Sharing Plan and earnings accrual
under that plan.
</FN>
<PAGE>
Fiscal 1998 Option Grants
-------------------------
The following table sets forth information relating to options
granted during Fiscal 1998 to the Company's Chief Executive Officer
and each of its other two most highly compensated executive officers
whose salary and bonus compensation from the Company exceeded $100,000
during Fiscal 1998. In addition, and in accordance with the rules of
the Securities and Exchange Commission, the table shows hypothetical
gains or "option spreads" that would exist for such options based on
assumed rates of annual compound stock price appreciation of 5% and
10% per year from the date the options were granted over the full
option term.
<TABLE>
<CAPTION>
================================================================================
Potential
Realizable
Value at Assumed
Annual Rates
of Stock Price
Individual Grants Appreciation for
Option Term<F1>
---------------------------------------------- -----------------
Percent
of Total
Options
Number of Granted to
Securities Employees
Underlying in Exercise Expiration
Options/SARs Fiscal or Base Date of 5% per 10% per
Name Granted<F2> Year<F3> Price Option year year
- --------- ------------ -------- -------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
David A. 25,000 15% $9.25 May 18, 2007 $145,432 $368,553
Derby,CEO
Richard W. 0 - - - - -
Pershing
William L. 10,000 6% $9.25 May 18, 2007 $58,173 $147,421
Stephan
William L. 20,000 12% $8.125 March 22, 2008 $102,195 $258,983
Stephan
================================================================================
</TABLE>
[FN]
<F1> The amounts represent certain assumed rate of appreciation over
the exercise price per share. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on
future performance of the Common Stock. There can be no
assurance that any of the values reflected in the table will be
achieved.
<F2> For a description of the material terms of the options, see
footnote (2) to the Summary Compensation Table.
<F3> Based on the total number of options granted during Fiscal 1998.
</FN>
Fiscal Year 1998 Aggregated Option Exercises in Last Fiscal
Year and
Fiscal Year-End Option Values
The following table sets forth information with respect to the
options held at the end of Fiscal 1998 by the Company's Chief
Executive Officer and both of the other executive officers named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
======================================================================================
Value of Unexercised
Number of In-the-Money Options/
Unexercised SARs at Fiscal
Shares Options/SARs at Year-End<F1>
Acquired Fiscal Year-End (#) ($)
on Value --------------------- --------- ---------
Exercise Realized Exerci- Unexerci- Exerci- Unexerci-
Name (#) ($) sable sable sable sable
- ------------------- -------- -------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
David A. Derby, CEO 0 0 22,500 25,000 3,938 0
Richard W. Pershing 5,000 12,188 0 0 0 0
William L. Stephan 0 0 20,000 30,000 0 2,500
======================================================================================
</TABLE>
[FN]
<F1> Market value of the underlying securities at fiscal year-end
minus the exercise price of "in the money" options.
</FN>
<PAGE>
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 upon notice not less than two years from its
next anniversary date, unless sooner terminated under 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.
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.
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. The maturity date of that note was extended to June
11, 2001 by the Compensation Committee at its May 27, 1998 meeting.
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 1998 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, thereby permitting 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
executive officers to meet the Company's annual and long-range
business objectives, thereby enhancing 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 the Company incurred a net loss in Fiscal 1998,
there were no cash bonuses awarded to the executive officers during
the year.
<PAGE>
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 those 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 salary of Mr. Derby as Chief
Executive Officer is $250,000. His base salary has not changed since
Fiscal 1995. The Company incurred net losses in Fiscal 1996 and
Fiscal 1998 and low net income in Fiscal 1997. Because financial
performance was below Company objectives for those three 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 1998. 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. There were no contributions to the Non-Qualified Plan
in Fiscal 1998, but earnings accruals were $10,111 for Mr. Derby,
$8,183 for Mr. Pershing and $8,097 for Mr. Stephan. Participant
accounts in the Non-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 Plan and the Non-Qualified Plan. Income
and profit goals for the Key Employee Plan, and associated
contributions to the bonus pool, are determined annually by the Board.
There were no contributions to the Key Employee Plan during Fiscal
1998.
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.
In Fiscal 1998, the Compensation Committee granted 25,000 incentive
stock options to Mr. Derby and 30,000 incentive stock options to Mr.
Stephan under the 1995 Stock Option Plan.
<PAGE>
CEO Compensation
Mr. Derby has been President and Chief Executive Officer of the
Company since 1982. Mr. Derby's base salary for Fiscal 1998 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 67,887
shares of Common Stock and options to purchase 47,500 shares of Common
Stock (and 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 1998 executive compensation policy
was set by the Compensation Committee. Each member of the
Compensation Committee is a non-employee director of the Company.
<PAGE>
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, 1993
through March 31, 1998 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 - U.S. 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 - U.S. Communications
Equipment Companies on March 31, 1993 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 - U.S. COMMUNICATIONS EQUIPMENT COMPANIES
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered)
- ---------------------
CRSP Nasdaq - U.S.
CRSP Nasdaq - Communications
Measurement Datron Systems U.S. Equipment
Point Incorporated Companies Companies
<S> <C> <C> <C>
FYE 3/31/93 $100 $100 $100
FYE 3/31/94 $203 $108 $136
FYE 3/31/95 $250 $120 $183
FYE 3/31/96 $250 $163 $267
FYE 3/31/97 $192 $181 $243
FYE 3/31/98 $174 $275 $317
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 19, 1998 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. 638,900<F2> 23.8%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors 165,604<F3> 6.2%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Kennedy Capital Management 159,145 5.9%
10829 Olive Boulevard
St. Louis, MO 63141
Shufro, Rose & Ehrman 148,500 5.5%
745 Fifth Avenue
New York, NY 10151-0108
David A. Derby 98,637<F4> 3.6%
Richard W. Pershing 21,168 0.8%
William L. Stephan 24,765<F4> 0.9%
All directors and executive officers 205,992<F4> 7.4%
as a group (10 persons)
</TABLE>
[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> 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 69,000 shares and sole dispositive, but no voting power as to
569,900 shares.
<F3> Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of
165,604 shares of the Company's Common Stock as of June 15, 1998,
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 30,750 and 23,300 shares obtainable upon the exercise of
stock options held by Messrs. Derby and Stephan, respectively.
</FN>
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, 1998, containing the audited consolidated balance sheets as
of March 31, 1998 and March 31, 1997 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 1999, the proposal must be received in writing by the
Secretary of the Company no later than March 10, 1999.
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, 1998
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>
DATRON SYSTEMS INCORPORATED
PROXY
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 5,
1998, 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, David A. Derby, Kent P. Ainsworth, Michael
F. Bigham, Adrian C. Cassidy, John R Copple, William A. Preston,
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:
----------------------------------------------------------------
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 ,1998
--------------- ----------- --------
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.
