INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DIAGNOSTIC RETRIEVAL SYSTEMS, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DIAGNOSTIC RETRIEVAL SYSTEMS, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).
/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 1996
To the Stockholders of
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Diagnostic/Retrieval Systems, Inc., a Delaware corporation (the
"Company"), will be held at the offices of Skadden, Arps, Slate, Meagher & Flom,
919 Third Ave., New York, New York at 10:00 A.M., local time, on August 7, 1996,
for the following purposes:
(1) To elect three Class I directors, each to hold office for a term
of three years;
(2) To consider and act upon a proposal to adopt the 1996 Omnibus
Plan;
(3) To ratify the grant of options to non-employee directors of the
Company pursuant to the 1991 Stock Option Plan; and
(4) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 24, 1996 are
entitled to notice of and to vote at the Meeting and any adjournment thereof.
By Order of the Board of Directors,
Diagnostic/Retrieval Systems, Inc.
(signature cut)
NANCY R. PITEK
Secretary
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YOUR VOTE IS IMPORTANT
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE, EVEN IF YOU ARE CURRENTLY PLANNING
TO ATTEND THE MEETING. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON, BUT WILL
ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND THE MEETING.
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 7, 1996
This proxy statement and the accompanying proxy are to be mailed to holders
of Common Stock, $.01 par value (the "Common Stock"), of Diagnostic/Retrieval
Systems, Inc. (the "Company"), commencing on or about June 28, 1996 in
connection with the solicitation of proxies by the Board of Directors (the
"Board") for the 1996 Annual Meeting of Stockholders (the "Meeting") of the
Company to be held Tuesday, August 7, 1996 at 10:00 A.M., local time, at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Ave., New York, New
York.
The Board has fixed the close of business on June 24, 1996 as the record
date for determining the stockholders of the Company entitled to vote at the
Meeting. As of June 24, 1996, the Company had outstanding 5,505,207 shares of
Common Stock (exclusive of 463,859 shares held in the treasury, which will not
be voted at the Meeting).
VOTING AND REVOCATION OF PROXIES
If a proxy card is returned by a stockholder properly signed and is not
revoked, the shares of Common Stock represented will be voted by the persons
named on the proxy card, or their substitutes, in accordance with the
stockholder's directions. Stockholders are urged to grant or withhold authority
to vote for the nominees for election as directors and to specify their choice
between approval or disapproval of, or abstention with respect to, any other
matter by marking the appropriate boxes on the proxy card. If a proxy card is
signed and returned without instructions marked on it, it will be voted for the
nominees named on the card and as recommended by the Board of Directors with
respect to other matters.
The execution of a proxy does not affect the right of a stockholder to
attend the Meeting and vote in person. A stockholder giving a proxy may revoke
it at any time before it is voted by giving written notice of its revocation to
the Secretary of the Company at the address indicated above, by executing and
delivering to the Company another proxy dated after the proxy to be revoked or
by attending the Meeting and voting in person.
VOTING RIGHTS
The holders of Common Stock are entitled to one vote for each share held on
the record date to elect directors and one vote per share on all matters for
which a vote of stockholders is required by Delaware law. The presence at the
Meeting, in person or by proxy, of a majority of the shares of the Common Stock
shall constitute a quorum for the election of directors and for the transaction
of other business at the Meeting.
ELECTION OF DIRECTORS
The Board is divided into three classes: Class I directors, Class II
directors and Class III directors, with each class consisting of as nearly an
equal number of directors as possible. The members of one of the three classes
of directors are elected each year; such directors hold office for three-year
terms and until their successors are elected and qualified.
If a quorum of stockholders is present in person or by proxy at the
Meeting, the holders of Common Stock will elect three Class I directors by a
plurality of the votes cast by such holders. The Class II directors, Messrs.
Leonard Newman and Mark N. Kaplan, will continue to serve, in accordance with
their previous election, until the expiration of their terms in 1997, and the
Class III directors, Messrs. Jack Rachleff and Stuart F. Platt, will continue to
serve until the expiration of their terms in 1998.
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Set forth below is certain information concerning the persons nominated by
the Board of Directors for election at the Meeting, as well as the directors
whose terms of office will continue after the Meeting, including their ages, any
positions held with the Company and its subsidiaries, and their business
experience. If any of the nominees listed below are unavailable to stand for
election, an event which is not anticipated, the proxies named on the relevant
proxy card may vote for a substitute nominee(s) chosen by the Board of
Directors.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
Unless instructed otherwise, the proxies named on the enclosed proxy card
intend to vote the shares of Common Stock that they represent to elect the
following persons as Class I directors for three-year terms of office expiring
at the 1999 Annual Meeting of Stockholders of the Company.
MARK S. NEWMAN--
Chairman of the Board, President and Chief Executive Officer of the Company
Mark S. Newman, age 46, became a director of the Company in 1988. Mr.
Newman has been employed by the Company since 1973, was named Vice
President-Finance, Chief Financial Officer and Treasurer in 1980 and
Executive Vice President in 1987. In May 1994, Mr. Newman became the
President and Chief Executive Officer of the Company and in August 1995, he
became Chairman of the Board. Mr. Newman is the son of Leonard Newman, a
director of the Company, and the former Chairman of the Board and Chief
Executive Officer.
THEODORE COHN--
Management Consultant
Theodore Cohn, age 73, became a director of the Company in 1980. He
has been an independent management consultant since 1974.
DONALD C. FRASER--
Professor--Boston University
The Honorable Dr. Donald C. Fraser, age 55, became a director of the
Company in 1993. He currently serves as director of the Boston University
Center for Photonics Research and as professor of engineering and physics
at such university. From 1991 to 1993, Dr. Fraser was the Principal Deputy
Under Secretary of Defense, Acquisition, with primary responsibility for
managing the Department of Defense acquisition process, including setting
policy and executing programs. He also served as Deputy Director of
Operational Test and Evaluation for Command, Control, Communication and
Intelligence, from 1990 to 1991, a position which included top level
management and oversight of the operational test and evaluation of all
major Department of Defense communication, command and control,
intelligence, electronic warfare, space and information management system
programs. From 1981 to 1988, Dr. Fraser was employed as the Vice President,
Technical Operations at Charles Stark Draper Laboratory and, from 1988 to
1990, as its Executive Vice President.
CLASS II DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING AT THE 1997
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
LEONARD NEWMAN--
Former Chairman of the Board and Chief Executive Officer of the Company
Leonard Newman, age 72, has been a director since 1968 and from 1971
until August 1995, served as Chairman of the Board and Secretary of the
Company. He held the title of Chairman Emeritus from August 1995 until his
retirement in March 1996. From 1971 until May 1994, Mr. Newman also served
as the Company's Chief Executive Officer. He is the father of Mark S.
Newman, the Chairman of the Board, President and Chief Executive Officer of
the Company.
MARK N. KAPLAN--
Partner--Skadden, Arps, Slate, Meagher & Flom
Mark N. Kaplan, age 66, became a director of the Company in 1986. Mr.
Kaplan has been a member of the law firm of Skadden, Arps, Slate, Meagher &
Flom since 1979. Mr. Kaplan also serves as director of American
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Biltrite Inc., Grey Advertising Inc., MovieFone Inc., REFAC Technology
Inc., Congoleum Corporation and Volt Information Sciences, Inc.
CLASS III DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING AT THE 1998
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
JACK RACHLEFF--
President--Fablok Mills, Inc.
Jack Rachleff, age 82, became a director of the Company in 1968. Mr.
Rachleff has been employed since 1952 by Fablok Mills, Inc., a textile
manufacturer, and has been its President since February 1982.
STUART F. PLATT--
Vice President of the Company; President--DRS Media Technologies Group
RADM Stuart F. Platt, USN (Ret.), age 62, became a director of the
Company in 1991 and in July 1992 became the President of Precision Echo,
Inc., a wholly-owned subsidiary of the Company ("Precision Echo"). In May
1994, he became a Vice President of the Company and presently serves as the
President of the Company's Media Technologies Group of which Precision Echo
is a part. Rear Admiral Platt was a co-founder and a director of FPBSM
Industries, Inc., a holding company and management consulting firm for
defense, aerospace and other technology-based companies. He also serves as
director for Harding Associates, Inc. Rear Admiral Platt held various
positions as a military officer in the Department of the Navy, retiring as
Competition Advocate General of the Navy in 1986.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE STOCKHOLDERS VOTE
FOR THE ELECTION OF THE NOMINEES.
PROPOSAL TO ADOPT THE 1996 OMNIBUS PLAN (1)
The Diagnostic/Retrieval Systems, Inc. 1996 Omnibus Plan (the "Plan") was
approved by the Board on June 17, 1996, subject to approval by the stockholders
of the Company. The following summary of the Plan is qualified in its entirety
by reference to the complete text of the Plan, attached hereto as Exhibit A.
Capitalized terms used herein will, unless otherwise defined, have the meanings
assigned to them in the text of the Plan.
The Plan is intended to provide officers and other employees of
Diagnostic/Retrieval Systems, Inc. ("DRS") and each of its subsidiaries now held
or hereinafter acquired (collectively, the "Company") with appropriate
incentives and rewards to encourage them to enter into and continue in the
employ of the Company and to acquire a proprietary interest in the long-term
success of the Company; to compensate each member of the Board of DRS who is not
and has never been an employee of the Company (each "Non-Employee Director") and
provide incentives to Non-Employee Directors which are directly linked to
increases in stock value; and to reward the performance of individual officers,
other employees, consultants and Non-Employee Directors in fulfilling their
personal responsibilities for long-range achievements.
The Plan is intended to comply with the requirements of Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934, as amended. In
addition, the Plan is intended to provide performance-based compensation so as
to be eligible for compliance with Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended (the "Code") which, generally, limits
the deduction by an employer for compensation of certain covered officers. Under
Section 162(m), certain compensation, including compensation based on the
attainment of performance goals, may be disregarded for purposes of this
deduction limit if certain requirements are met. Among the requirements for
compensation to qualify for this exception is that the material terms pursuant
to which the compensation is to be paid be disclosed to and approved by the
stockholders in a separate vote prior to the payment. Accordingly, if the Plan
is approved by stockholders and the other conditions of Section 162(m) relating
to performance-based compensation are satisfied, compensation paid to Covered
Employees pursuant to the Plan will not fail to be deductible under Section
162(m).
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(1) For this section of the Proxy Statement only, the term the "Company" is
defined as set forth below.
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GENERAL
The Plan provides for the granting of awards to such employees (including
officers of the Company, whether or not they are directors of DRS) and
consultants of the Company as the Stock Option Committee of the Board (the
"Committee") may select from time to time. Approximately 850 employees and
consultants are eligible to participate in the Plan. The Plan also provides for
the mandatory granting of Non-Qualified Stock Options to Non-Employee Directors
of DRS. Currently, there are four such directors.
An aggregate of 500,000 shares of common stock of DRS, par value $.01 per
share ("Company Stock"), is reserved for issuance under the Plan, subject to
adjustment as described below. Such shares may be authorized but unissued
Company Stock or authorized and issued Company Stock held in DRS's treasury.
Generally, shares subject to an award that remain unissued upon expiration or
cancellation of the award will be available for other awards under the Plan. The
total number of shares of Company Stock subject to awards (including awards paid
in cash but denominated as shares of Company Stock) granted to any Participant
of the Plan during any tax year of the Company will not exceed 200,000. In the
event that the Committee determines that any dividend or other distribution,
stock split, recapitalization, reorganization, merger or other similar corporate
transaction or event affects the Company Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee will make such equitable changes
or adjustments as it deems necessary to the number and kind of shares of Company
Stock which may thereafter be issued in connection with awards, the limit on
individual awards, the number and kind of shares of Company Stock subject to
each outstanding award, and the exercise price, grant price or purchase price of
each award.
Awards under the Plan may be made in the form of (a) Incentive Stock
Options, (b) Non-Qualified Stock Options (Incentive and Non-Qualified Stock
Options are collectively referred to as "options"), (c) Stock Appreciation
Rights, (d) Restricted Stock, (e) Phantom Stock, (f) Stock Bonuses and (g) Other
Awards. Awards may be granted to such officers and other employees and
consultants of the Company and its subsidiaries (including employees who are
directors) as the Committee may select in its discretion. Non-Employee Directors
will be granted Non-Qualified Stock Options under the Plan in the manner
described below.
ADMINISTRATION
The Plan will be administered by the Committee. The Committee will, at all
times, consist of two or more persons, each of whom is an "outside director"
within the meaning of Section 162(m) and a "disinterested person" within the
meaning of Rule 16b-3. The Committee is authorized, among other things, to
construe, interpret and implement the provisions of the Plan, to select the
persons to whom awards will be granted, to determine the terms and conditions of
such awards and to make all other determinations deemed necessary or advisable
for the administration of the Plan; provided, however, that the Committee may
not exercise discretion under any provision of the Plan with respect to
Non-Qualified Stock Options granted to Non-Employee Directors to the extent that
such discretion is inconsistent with Rule 16b-3.
AWARDS UNDER THE PLAN
Stock Options
Unless the Committee expressly provides otherwise, an option will not be
exercisable prior to one year after the date of grant and will become
exercisable as to 25% of the shares subject thereto on each of the first through
fourth anniversaries of the date of grant. The Committee will determine each
option's expiration date; provided, however, that no incentive stock option may
be exercised more than ten years after the date of grant. The purchase price per
share payable upon the exercise of an option (the "option exercise price") will
be established by the Committee; provided, however, that in the case of an
Incentive Stock Option, the option exercise price may be no less than the Fair
Market Value of a share of Company Stock on the date of grant. The option
exercise price is payable by any one of the following methods or a combination
thereof: (a) cash; (b) personal, certified or bank cashier's check; (c) wire
transfer; (d) with the consent of the Committee, by surrender of shares of
Company Stock held at least six months by the Participant and having a Fair
Market Value on the date of the exercise equal to the option exercise price; or
(e) by such other payment method as the Committee may prescribe.
The Committee may specify at the time of grant or, with respect to
Non-Qualified Stock Options, at or after the time of grant, that a Participant
will be granted a new Non-Qualified Stock Option (a "Reload Option") for a
number
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of shares equal to the number of shares surrendered by the participant upon
exercise of all or part of an Option; provided, however, that no Reload Option
may be granted to a Non-Employee Director. Reload Options will be subject to
such conditions as may be specified by the Committee in its discretion, subject
to the terms of the Plan.
The Plan provides that a Non-Employee Director who becomes a member of the
Board subsequent to the Effective Date of the Plan (a "Subsequent Director")
will be granted automatically a Non-Qualified Stock Option to purchase 5,000
shares of Company Stock. On the date of each annual meeting subsequent to the
annual meeting immediately following the Effective Date (or, in the case of a
Subsequent Director, subsequent to such Subsequent Director becoming a member of
the Board), each Non-Employee Director will be granted automatically a
Non-Qualified Stock Option to purchase 2,500 shares of Company Stock; provided,
however, that in no event may a current Non-Employee Director be granted options
to purchase more than 2,500 shares of Company Stock during any tax year of the
Company under the Plan or any other stock option plan of the Company.
Non-Qualified Stock Options granted to Non-Employee Directors will become fully
exercisable on the first anniversary of the grant, and will expire ten years
from the date of grant.
Stock Appreciation Rights
Stock appreciation rights may be granted in connection with all or any part
of, or independently of, any option granted under the Plan, other than a
Non-Qualified Stock Option granted to a Non-Employee Director. A stock
appreciation right granted independently of any option will be subject to the
same vesting rules as described above for options. A stock appreciation right
granted in tandem with any stock option will be exercisable only when and to the
extent the option to which it relates is exercisable. The grantee of a stock
appreciation right has the right to surrender the stock appreciation right and
receive from the Company, in cash, an amount equal to the excess of the Fair
Market Value of a share of Company Stock over the exercise price of the stock
appreciation right for each share of Company Stock in respect of which such
stock appreciation right is being exercised.
Restricted Stock
The Committee may grant restricted shares of Company Stock to such persons,
in such amounts, and subject to such terms and conditions (including the
attainment of performance goals) as the Committee may determine it its
discretion. Awards of Restricted Stock granted to Executive Officers of the
Company will be contingent on the attainment by the Company of one or more
pre-established performance goals (the "Performance Goals") established by the
Committee. The Performance Goals may be based on the attainment by the Company
(and/or its subsidiaries or divisions if applicable) of any one or more of the
following criteria: (i) a specified percentage return on total stockholder
equity (before or after tax); (ii) a specified percentage increase in earnings
per share of Company Stock; (iii) a specified percentage increase in net income;
(iv) a specified percentage increase in earnings before interest, taxes,
depreciation and amortization: (v) a specified percentage increase in earnings
before interest and income taxes, as adjusted for corporate office overhead
expense allocation; (vi) a specified percentage increase in revenues; (vii) a
specified minimum return on assets; and (viii) such other criteria as the
stockholders of DRS may approve.
Phantom Stock
The Committee may grant shares of Phantom Stock to such persons, in such
amounts, and subject to such terms and conditions (including the attainment of
performance goals) as the Committee may determine in its discretion. If the
requirements specified by the Committee are met, the grantee of such an award
will receive a cash payment equal to the Fair Market Value of the shares covered
thereby plus the dividends that would have been paid on such shares had they
actually been outstanding following the grant date. Awards of Phantom Stock
granted to Executive Officers of the Company will be contingent on the
attainment by the Company of any one or more of the Performance Goals noted
above.
Stock Bonus
The Committee may grant bonuses comprised of shares of Company Stock free
of restrictions to such persons, in such amounts, as the Committee may determine
in its discretion. No Executive Officer will be eligible to receive a Stock
Bonus under the Plan unless a prior determination of eligibility is made by the
Committee.
Other Awards
Other awards valued in whole or in part by reference to, or otherwise based
on, Company Stock may be granted either alone or in addition to other awards
under the Plan. Subject to the provisions of the Plan, the Committee will
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have the sole and complete authority to determine the persons to whom and the
time or times at which such Other Awards will be granted, the number of shares
of Company Stock to be granted pursuant to such Other Awards and all other
conditions of such Other Awards.
OTHER FEATURES OF THE PLAN
The Plan provides for a stipulated period of exercisability for outstanding
options in the event of the termination of a Participant's employment with the
Company; this period varies depending on the form of award and reason for
termination.
In the event of a Change in Control, all outstanding awards will become
fully vested and/or immediately exercisable.
The Board may suspend, revise, terminate or amend the Plan at any time;
provided, however, that stockholder approval must be obtained if and to the
extent required by Rule 16b-3, and if and to the extent that the Board deems it
appropriate to satisfy Section 162(m); and provided further that no such action
may, without the consent of a Participant, reduce the Participant's rights under
any outstanding award.
NEW PLAN BENEFITS
Inasmuch as (a) awards (other than awards of Non-Qualified Stock Options to
Non-Employee Directors) under the Plan will be granted at the sole discretion of
the Committee and (b) performance goal criteria under the Plan may vary from
year to year and from Participant to Participant, it is not possible to
determine (except in the case of Non-Employee Directors) either the awards that
will be made thereunder during fiscal 1997 or the awards that would have been
made thereunder during fiscal 1996 had the Plan been in effect. The following
chart sets forth the name, position and grant information for currently eligible
Non-Employee Directors.
NEW PLAN BENEFITS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. 1996 OMNIBUS PLAN
NUMBER OF SHARES UNDERLYING
NAME AND POSITION EACH ANNUAL GRANT OF OPTIONS(2)
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Theodore Cohn, Director 2,500
Donald C. Fraser, Director 2,500
Mark N. Kaplan, Director 2,500
Jack Rachleff, Director 2,500
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to awards under the Plan. This summary is not intended to be exhaustive and,
among other things, does not describe state, local or foreign income and other
tax consequences.
Non-Qualified Stock Options
An optionee will not recognize any taxable income upon the grant of a
Non-Qualified Stock Option. The Company will not be entitled to a tax deduction
with respect to the grant of a Non-Qualified Stock Option. Upon exercise of a
Non-Qualified Stock Option, the excess of the Fair Market Value of the Company
Stock on the exercise date over the option exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction at
such time in the amount of such compensation income. The optionee's tax basis
for the Company Stock received pursuant to the exercise of a Non-Qualified Stock
Option will equal the sum of the compensation income recognized and the exercise
price.
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(2) As noted above, annual grants to current directors will commence on the
date of the annual meeting subsequent to the annual meeting immediately
following the Effective Date of the Plan; provided, however, that no
current director will be granted options to purchase more than 2,500 shares
of the Company Stock under the Plan or any other stock option plan of the
Company during any tax year of the Company.
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In the event of a sale of Company Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Company Stock is more than
one year.
Incentive Stock Options
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an Incentive Stock Option and the Company will not be
entitled to a tax deduction with respect to such grant or exercise. Exercise of
an Incentive Stock Option may, however, give rise to taxable compensation income
subject to applicable withholding taxes, and a tax deduction to the Company, if
the Incentive Stock Option is not exercised on a timely basis (generally, while
the optionee is employed by the Company or within 90 days after termination of
employment) or if the optionee subsequently engages in a "disqualifying
disposition" as described below.
A sale or exchange by an optionee of shares acquired upon the exercise of
an Incentive Stock Option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant of the Incentive
Stock Option will result in any difference between the net sale proceeds and the
exercise price being treated as long-term capital gain (or loss) to the
optionee. If such sale or exchange takes place within two years after the date
of grant of the Incentive Stock Option or within one year from the date of
transfer of the Incentive Stock Option shares to the optionee, such sale or
exchange will generally constitute a "disqualifying disposition" of such shares
that will have the following results: any excess of (a) the lesser of (i) the
Fair Market Value of the shares at the time of exercise of the Incentive Stock
Option and (ii) the amount realized on such disqualifying disposition of the
shares over (b) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable withholding taxes, and the Company
will be entitled to a tax deduction in the amount of such income. Any further
gain or loss after the date of exercise generally will qualify as capital gain
or loss and will not result in any deduction by the Company.
Restricted Stock
A grantee will not recognize any income upon the receipt of Restricted
Stock unless the holder elects under Section 83(b) of the Code, within thirty
days of such receipt, to recognize ordinary income in an amount equal to the
Fair Market Value of the Restricted Stock at the time of receipt, less any
amount paid for the shares. If the election is made, the holder will not be
allowed a deduction for amounts subsequently required to be returned to the
Company. If the election is not made, the holder will generally recognize
ordinary income, on the date that the restrictions to which the Restricted Stock
are subject are removed, in an amount equal to the Fair Market Value of such
shares on such date, less any amount paid for the shares. At the time the holder
recognizes ordinary income, the Company generally will be entitled to a
deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
Other Types of Awards
The grant of a stock appreciation right or Phantom Stock award will not
result in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a right or award, the grantee will recognize ordinary income
equal to the aggregate value of the payment received, and the Company generally
will be entitled to a tax deduction in the same amount. A Stock Bonus generally
will result in compensation income for the grantee, and a tax deduction for the
Company, equal to the Fair Market Value of the shares of Company Stock granted.
The affirmative vote of a majority of the outstanding shares of Company
Stock entitled to vote at the Meeting is required to approve the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE STOCKHOLDERS VOTE
FOR APPROVAL OF THE DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. 1996 OMNIBUS PLAN.
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PROPOSAL TO RATIFY THE GRANT OF OPTIONS TO NON-EMPLOYEE
DIRECTORS PURSUANT TO THE 1991 STOCK OPTION PLAN
On February 7, 1996, the Stock Option Committee and the Board adopted
resolutions (the "Resolutions"), subject to approval by the stockholders of the
Company. The following summary of the Resolutions is qualified in its entirety
by reference to the text of the Resolutions, attached hereto as Exhibit B.
The Resolutions instituted an arrangement under the 1991 Stock Option Plan
of the Company (the "1991 Plan") by which each member of the Board who was not,
as of February 7, 1996, and has not previously been an employee of the Company
("Non-Employee Directors") would be granted Non-Qualified Stock Options.
Under the Resolutions, each Non-Employee Director was immediately granted,
subject to stockholder approval, a Non-Qualified Stock Option to purchase 5,000
shares of common stock of the Company ("Company Stock"). Furthermore, on the
date of each annual meeting, commencing with the annual meeting following the
annual meeting at which the Resolutions are approved by the Company's
stockholders, each Non-Employee Director will be granted a Non-Qualified Stock
Option (as defined in the 1991 Plan) to purchase 2,500 shares of Company Stock.
The option price per share of Company Stock purchasable under the
Non-Qualified Stock Options granted to Non-Employee Directors will be the Fair
Market Value of a share of Company Stock on the date of grant. Each
Non-Qualified Stock Option will become fully exercisable on the first
anniversary of, and will expire ten years after, the date of grant. The
Resolutions provide for a stipulated period of exercisability for outstanding
options in the event of the termination of a Non-Employee Director's service
with the Company; the length of this period varies, depending on the reason for
such termination.
The Resolutions provide that a Non-Employee Director may not be granted
options to purchase more than 2,500 shares of Company Stock under the 1991 Plan
and any other stock option plan of the Company during any tax year of the
Company.
NEW PLAN BENEFITS
The following chart sets forth the grants that will be made to currently
eligible Non-Employee Directors during the current fiscal year under the
Resolutions if the Resolutions are approved by stockholders.
NEW PLAN BENEFITS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. 1991 STOCK OPTION PLAN
NUMBER OF SHARES UNDERLYING
NAME AND POSITION INITIAL GRANT OF OPTIONS
----------------- ------------------------
Theodore Cohn, Director 5,000
Donald C. Fraser, Director 5,000
Mark N. Kaplan, Director 5,000
Jack Rachleff, Director 5,000
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to awards of Non-Qualified Stock Options under the 1991 Plan. This summary is
not intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
An optionee will not recognize any taxable income upon the grant of a
Non-Qualified Stock Option. The Company will not be entitled to a tax deduction
with respect to the grant of a Non-Qualified Stock Option. Upon exercise of a
Non-Qualified Stock Option, the excess of the Fair Market Value of the Company
Stock on the exercise date over the option exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction at
such time in the amount of such compensation income. The Optionee's tax basis
for the Company Stock received pursuant to the exercise of a Non-Qualified Stock
Option will equal the sum of the compensation income recognized and the exercise
price.
In the event of a sale of the Company Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Company Stock is more than
one year.
8
<PAGE>
The affirmative vote of a majority of the outstanding shares of Company
Stock entitled to vote at the Meeting is required to approve the Resolutions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE STOCKHOLDERS VOTE
FOR RATIFICATION OF THE GRANTS.
SECURITY OWNERSHIP
The following table shows as of May 23, 1996, the number of shares of
Common Stock beneficially owned by each director and nominee, each executive
officer and by all directors, nominees and executive officers of the Company as
a group.
COMMON STOCK(A)
----------------------------------
PERCENT
SHARES OF CLASS
----------------- ------------
Mark S. Newman 194,149 (b)(c)(d) 3.5
Theodore Cohn 5,900 0.1
Donald C. Fraser -- --
Mark N. Kaplan 1,000 -- (e)
Leonard Newman 2,700 -- (e)
Stuart F. Platt 3,000 (c) 0.1
Jack Rachleff 1,000 -- (e)
Paul G. Casner, Jr. 31,000 0.6
Nancy R. Pitek 14,307 0.3
Richard Ross 3,000 (c) 0.1
All directors and executive
officers as a group (10 persons) 242,949 (b)(c)(d) 4.4
- ----------
(a) As of May 23, 1996, the Company had outstanding 5,467,632 shares of Common
Stock (excluding 498,434 shares held in the treasury). Unless otherwise
noted, each director and nominee had sole voting power and investment power
over the shares of Common Stock indicated opposite such director's and
executive officer's name.
(b) Includes 13,107 shares of Common Stock held by the trustee of the Company's
Retirement/Savings Plan. Mr. M. Newman and Ms. N. Pitek share the power to
direct the voting of such shares as members of the administrative committee
of such plan. Mr. M. Newman and Ms. N. Pitek disclaim beneficial ownership
as to and of such shares.
(c) Includes shares of Common Stock which might be purchased upon exercise of
options which were exercisable on May 23, 1996 or within 60 days
thereafter, as follows: Mr. M. Newman, 90,000 shares; Mr. P. Casner, Jr.,
30,000 shares; Ms. N. Pitek, 1,200 shares; Mr. S. Platt, 3,000 shares; Mr.
R. Ross, 3,000 shares; and all directors and executive officers as a group,
181,200 shares.
(d) Includes 3,200 shares of Common Stock held by Mr. M. Newman as custodian
for his daughter, over which Mr. M. Newman has sole voting and investment
power.
(e) Less than 0.1%.
9
<PAGE>
The following table sets forth certain information, as of May 23, 1996,
with respect to each person, other than executive officers and directors of the
Company, which has advised the Company that it may be deemed to be the
beneficial owner (within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended) of more than
five percent of a class of voting securities of the Company. Such information
has been derived from statements on Schedule 13D or 13G filed with the
Securities and Exchange Commission by the person(s) listed below.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- --------- --------
<S> <C> <C>
First Pacific Advisors, Inc. ................................................... 1,670,314(a) 27.5
10301 West Pico Blvd., Los Angeles, CA 90064
Palisade Capital Management L.L.C. ............................................. 885,924(b) 16.2
One Bridge Plaza, Suite 695, Fort Lee, NJ 07024
Michael N. Taglich ............................................................. 529,850(c) 9.7
Taglich Brothers, D'Amadeo, Wagner, & Company, Incorporated
100 Wall Street, New York, NY 10005
David E. Gross ................................................................. 335,701(d) 6.1
27 Cameron Road, Saddle River, NJ 07458
</TABLE>
- ----------
(a) Includes 508,475 shares of Common Stock from the assumed conversion of
$4,500,000 principal amount of the Company's 9% Senior Subordinated
Convertible Debentures due 2003, 104,739 shares of Common Stock from the
assumed conversion of $1,571,000 principal amount of the Company's 8-1/2%
Convertible Subordinated Debentures due 1998 and 1,057,100 shares of Common
Stock beneficially owned by First Pacific Advisors, Inc. ("First Pacific")
through control of FPA Capital Fund, Inc. ("FPA"), Source Capital, Inc.
("Source Capital") and FPA New Income, Inc. ("New Income") to which First
Pacific serves as investment advisor. The Company has been advised that
First Pacific has sole voting power with respect to 300,000 shares and
shared dispositive power with respect to 1,670,314 shares, FPA has sole
voting power and shared dispositive power with respect to 510,000 shares,
Source Capital has sole voting power and shared dispositive power with
respect to 273,925 shares and New Income has sole voting power and shared
dispositive power with respect to 282,792 shares.
(b) Represents shares of Common Stock held by Palisade Capital Management
L.L.C., acting as investment advisor to (i) Chrysler Corp. Emp. #1 Pension
Plan Dtd. 4-1-89, (ii) IBM Corp. Retirement Plan Trust Dtd. 12-18-45, (iii)
G.E. Pension Trust, and (iv) Nynex Master Pension Trust Dtd. 1-1-84.
(c) Consists of 312,450 shares of Common Stock held by Lancer Partners, Inc.
("Lancer Partners"), 11,500 shares of Common Stock held by Antrade, N.V.
("Antrade"), 15,200 shares of Common Stock held by Album N.V. ("Album"),
11,600 shares of Common Stock held by Ralco Investments Group ("Ralco"),
156,850 shares of Common Stock held by Lancer Offshore, Inc. ("Lancer
Offshore") and 22,250 shares of Common Stock held by Michael Lauer. The
Company has been advised that Michael Lauer has sole voting power and sole
dispositive power with respect to 22,250 shares. Michael N. Taglich and
Michael Lauer serve as general partners of Lancer Partners and managing
partners of Lancer Offshore. The Company has been advised that Messrs.
Taglich and Lauer also share voting and dispositive authority over the
shares held by Album, Antrade and Ralco resulting in shared voting and
shared dispositive power with respect to a total of 507,600 shares.
(d) Includes 282,381 shares of Common Stock held by Mr. Gross for which he has
sole voting and dispositive power. Also included are 26,000 shares of
Common Stock held by Mr. Gross' wife personally and 27,320 shares of Common
Stock held by her as custodian for her two children. Mr. Gross has neither
voting power nor investment power over the shares of Common Stock held by
his wife, either personally or as custodian for her children, and disclaims
any beneficial interest in such shares.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and
10
<PAGE>
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission ("SEC") and the American Stock Exchange. Officers, directors and
greater-than-ten-percent shareowners are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for the Company's most recent fiscal year, the
Company believes that all its officers, directors, and greater-than-ten-percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1996, except that: Leonard Newman, a
director of the Company, failed to file on a timely basis one report relating to
the common stock of the Company beneficially owned by him pursuant to an
exercise of incentive stock options, one report relating to common stock of the
Company beneficially owned by him used to satisfy the balance due on a loan from
the Company and one report relating to common stock of the Company beneficially
owned by him and transferred to certain family members; Stuart F. Platt, a
director and executive officer of the Company, failed to file on a timely basis
one report relating to common stock beneficially owned by him pursuant to a
grant of incentive stock options; and Richard Ross, an executive officer of the
Company, failed to file on a timely basis one report relating to common stock
beneficially owned by him pursuant to a grant of incentive stock options.
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors has appointed from its members an Audit Committee,
an Executive Compensation Committee and a Stock Option Committee with the
following areas of responsibility:
The Audit Committee oversees, and reports to the Board concerning the
general policies and practices of the Company and its subsidiaries with
respect to accounting, financial reporting and internal controls. It also
maintains a direct exchange of information between the Board and the
Company's independent auditors. Until August 8, 1995, the Audit Committee
consisted of Donald C. Fraser, Mark N. Kaplan and Jack Rachleff. At a
meeting of the Board on August 8, 1995, the composition of the Audit
Committee was changed to Theodore Cohn, Mark N. Kaplan, Leonard Newman and
Jack Rachleff. The Audit Committee held four meetings during fiscal 1996.
The function of the Executive Compensation Committee (the
"Compensation Committee") was to establish the compensation of the Chief
Executive Officer and the President of the Company and the other executive
officers of the Company. Until August 8, 1996, the Compensation Committee
consisted of Donald C. Fraser, Mark N. Kaplan, Leonard Newman and Jack
Rachleff. At a meeting of the Board on August 8, 1995, the composition of
the Compensation Committee was changed to Theodore Cohn, Donald C. Fraser,
Mark N. Kaplan and Jack Rachleff. While he served on the Compensation
Committee, Leonard Newman did not participate in compensation decisions
relating to himself or Mark S. Newman. The Compensation Committee met five
times during fiscal 1996.
The function of the Stock Option Committee is to administer the
Company's 1991 Stock Option Plan, the 1981 Incentive Stock Option Plan, as
amended, and the 1981 Non-Qualified Stock Option Plan, as amended. In
compliance with Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, no person appointed to the
Stock Option Committee, for at least one year prior to such appointment or
during such appointment, will be granted or awarded equity securities of
the Company or any of its affiliates pursuant to certain plans of the
Company or its affiliates. During fiscal 1996, the Stock Option Committee
consisted of Donald C. Fraser, Mark N. Kaplan and Jack Rachleff. The Stock
Option Committee met three times during fiscal 1996.
The Board held five meetings during the Company's fiscal year ended
March 31, 1996. In the same period, no director of the Company attended
fewer than 75% of the meetings of the Board or meetings of the committees
on which the director served during the period of his service as a
director.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or its subsidiaries do not
receive directors' fees. During fiscal 1996, each director who was not or has
never been an employee of the Company or one of its subsidiaries (a
"Non-Employee Director") received a retainer of $9,750 for his services, plus a
fee of $1,500 for each meeting of the Board attended. Non-Employee Directors who
served on committees of the Board received an additional $1,250 for
11
<PAGE>
services rendered in connection with committee meetings attended which were not
held on the same day as meetings of the full Board.
On February 7, 1996, the Stock Option Committee adopted and the Board
ratified resolutions, subject to approval by the stockholders of the Company,
which instituted an arrangement under the Company's 1991 Stock Option Plan by
which the Non-Employee Directors of the Company as of such date would be (a)
immediately granted a Non-Qualified Stock Option to purchase 5,000 shares of
Common Stock of the Company and (b) on the date of each annual meeting,
commencing with the annual meeting following the annual meeting at which these
resolutions are approved, granted a Non-Qualified Stock Option to purchase 2,500
shares of Common Stock. On June 17, 1996, the Diagnostic/Retrieval Systems, Inc.
1996 Omnibus Plan (the "Plan") was approved by the Board, subject to approval by
the stockholders of the Company. The Non-Employee Directors described above are
also eligible under the Plan to receive grants of options to purchase 2,500
shares of Common Stock on the dates described above. However, provisions in each
of the resolutions and the Plan state that a Non-Employee Director may not be
granted options to purchase more than 2,500 shares of Common Stock under the
Plan or any other stock option plan of the Company during any tax year of the
Company, thus avoiding any potential for overlap.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is currently occupying and leasing a building at 138 Bauer
Drive (the "LDR Building") owned by LDR Realty Co. ("LDR"), a partnership wholly
owned, in equal amounts, by Leonard Newman and David E. Gross, the former
President and Chief Technical Officer of the Company. The current renegotiated
lease agreement is for a ten-year term beginning June 1, 1988 at a monthly
rental of $19,439. The Company is required to pay all real estate taxes and is
responsible for all repairs and maintenance, structural and otherwise, subject
to no cumulative limits. The terms of the LDR lease were determined by the
Company and LDR, based on the formal appraisal of an appraisal firm and informal
appraisals from real estate brokers in the area. Such appraisals indicated that
the rental provided for in the LDR lease is not in excess of the range of fair
market rentals in the relevant area.
Skadden, Arps, Slate, Meagher & Flom, a law firm of which Mark N. Kaplan, a
director, is a member, provided legal services to the Company during its 1996
fiscal year.
In July 1993, the Company and Donald C. Fraser, a director, entered into a
consulting agreement pursuant to which Dr. Fraser will provide consultation to
the Company concerning defense technologies. Under the terms of the consulting
agreement, as amended, consulting services are to be provided to the Company on
an as-requested basis, for a fee of $1,500 per day plus approved travel and
miscellaneous expenses. During fiscal 1996, total remuneration paid to Dr.
Fraser under this agreement approximated $7,000.
In October 1993, the Company issued a Demand Grid Note (the "Grid Note") in
the principal amount of $100,000 to Paul G. Casner, Jr. The loan bears interest
at the applicable federal rate necessary under the Internal Revenue Code of
1986, as amended, to avoid an imputed rate of interest.
In May 1995, the Company became a party to a loan with Mark S. Newman, the
Chairman of the Board, President and Chief Executive Officer of the Company, to
provide an amount equal to the exercise price of incentive stock options which
had been granted to him under the Company's 1981 Incentive Stock Option Plan.
The loan is evidenced by a promissory note in the principal amount of $104,500
and bears interest at an annual rate of 8%. The loan is payable on the earlier
of (i) the sale or disposition of the shares of stock obtained pursuant to the
exercise of the stock options, (ii) cessation of Mr. M. Newman's employment by
the Company or (iii) May 25, 2005. Interest is payable on May 25 of each
calendar year or at such earlier time as the loan is repaid.
12
<PAGE>
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended March 31, 1996, 1995 and 1994, of those persons who were, at March 31,
1996 (i) the chief executive officer, (ii) the four most highly compensated
executive officers of the Company other than the chief executive officer and
(iii) an individual for whom disclosure would have been provided pursuant to
Item 402(a)(3)(ii) of Regulation S-K of the Securities and Exchange Commission
but for the fact that the individual was not serving as an executive officer of
the company at March 31, 1996 (the "Named Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------
ANNUAL COMPENSATION (L) AWARDS
--------------------------------- ----------------------------
RESTRICTED
STOCK
AWARD(S)($) ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) (J) OPTIONS (#) COMPENSATION ($)
- --------------------------- ----------- ---------- ---------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman ............... 1996 295,899 160,000 66,199 0 21,866(b)(c)(d)
Chairman of the Board, 1995 281,344 120,000 0 150,000(f) 19,440(b)(c)(d)
President & Chief 1994 230,767 52,993 0 0 86,728(b)(c)(d)(e)
Executive Officer
Nancy R. Pitek ............... 1996 111,466 29,750 8,688 0 5,577(b)(c)
Vice President, Finance
Treasurer & Secretary
Paul G. Casner, Jr. .......... 1996 198,000 64,000 26,480 0 57,887(b)(d)(i)
Vice President & 1995 198,000 40,000 0 0 32,201(b)(d)(i)
President--Electronic
Systems Group
Stuart F. Platt .............. 1996 255,008 80,000 33,099 50,000(h) 8,206(c)(d)
Vice President & 1995 256,970 50,000 0 0 4,414(c)(d)
President--Media 1994 262,854 21,597 0 5,000(g) 3,664(c)(d)
Technologies Group
Richard Ross ................. 1996 209,674 60,000 24,829 50,000(h) 9,740(b)(c)(d)
Vice President & 1995 198,618 36,000 0 0 9,070(b)(c)(d)
President--Electro-Optical 1994 155,596 27,237 0 5,000(g) 7,010(b)(c)(d)
Systems Group
Leonard Newman ............... 1996 328,833 0 0 0 (k)
Former Chairman of the 1995 321,910 0 0 0 57,000(a)(b)(c)(d)
Board, Chief Executive 1994 331,140 100,000 0 0 52,538(a)(b)(c)(d)
Officer & Secretary
</TABLE>
- ----------
(a) Includes deferred compensation of $25,000 pursuant to a Deferred
Compensation Agreement between the Company and Mr. L. Newman. See
"Termination of Employment and Change in Control".
(b) Includes the amounts of employer contributions which vested pursuant to the
Company's Retirement/Savings Plan (See "Retirement/Savings Plan") in the
fiscal years ended March 31, 1996, 1995 and 1994, respectively, in the
accounts of the Named Officers, as follows: Mr. M. Newman, $4,629, $4,838
and $3,530; Ms. N. Pitek, $1,275; Mr. P. Casner, Jr., $3,706 and $3,000;
Mr. S. Platt, $3,556; Mr. R. Ross, $3,696, $3,486 and $2,234; and Mr. L.
Newman, $4,939, $4,292 and $1,626.
(c) Includes the fixed annual amounts, computed on a fiscal year basis,
provided by the Company for the benefit of the Named Officers, to reimburse
such officers for the amounts of medical and hospital expenses actually
incurred by them, which are not covered or paid to them under the Company's
group medical and hospitalization
13
<PAGE>
plans during the fiscal years ended March 31, 1996, 1995 and 1994,
respectively, as follows: Mr. M. Newman, $7,000, $4,500, and $3,250; Ms. N.
Pitek, $4,250; Mr. P. Casner, Jr., $1,250; Mr. S. Platt, $4,250, $4,000,
and $3,250; Mr. R. Ross, $4,250, $4,000, and $3,250; and Mr. L. Newman,
$4,250, $4,000, and $3,250.
(d) The Company pays the cost of policies of life insurance and long-term
disability insurance, in excess of the amounts furnished under the group
coverage provided to all employees, for the benefit of the Named Officers.
Under certain of the life insurance policies, the Company is a beneficiary
to the extent of the premiums paid. The total amounts of the premiums paid
by the Company or the economic benefit to the Named Officers for such
insurance policies during the fiscal years ended March 31, 1996, 1995 and
1994, respectively, were as follows: Mr. M. Newman, $10,237, $10,102, and
$9,948; Mr. P. Casner, Jr., $531, and $124; Mr. S. Platt, $400, $414, and
$414; Mr. R. Ross, $1,794, $1,584, and $1,526; and Mr. L. Newman, $21,116,
$23,708, and $22,662.
(e) Includes $70,000 earned by Mark S. Newman as a consequence of his
involvement in the Company's October 1993 acquisition of Technology
Applications and Service Company.
(f) Represents non-qualified stock options to purchase 50,000 shares of Class B
Common Stock and incentive stock options to purchase 100,000 shares of
Class B Common Stock issued to Mr. M. Newman under the Company's 1991 Stock
Option Plan. Such options, granted on June 9, 1994, became exercisable six
months from the date of grant with respect to 20% of such options and are
further exercisable cumulatively at 20% per year on each of the first four
anniversaries of the date of grant.
(g) Represents incentive stock options to purchase shares of Class B Common
Stock issued to the Named Officers under the Company's 1991 Stock Option
Plan. Such options, granted on August 5, 1993, became exercisable six
months from the date of grant with respect to 20% of such options and are
further exercisable cumulatively at 20% per year on each of the first four
anniversaries of the date of grant.
(h) Represents incentive stock options to purchase shares of Class B Common
Stock issued to the Named Officers under the Company's 1991 Stock Option
Plan. Such options, granted on February 7, 1996, become exercisable six
months from the date of grant with respect to 20% of such options and are
further exercisable cumulatively at 20% per year on each of the first four
anniversaries of the date of grant.
(i) Includes forgiveness of principal and interest owed pursuant to the Grid
Note in an amount equal to $52,400 and $29,077, respectively.
(j) During fiscal 1996, a portion (15% to 20%) of the total bonus awarded to
the Named Officers was payable in shares of restricted stock of the
Company. The shares are restricted for a period of three years and may not
be sold or transferred until May 29, 1999. In the event a Named Officer
leaves the employ of the Company before such time as the restrictions
lapse, all rights to the shares may be forfeited.
(k) See "Termination of Employment and Change in Control".
(l) The dollar value of perquisites and other personal benefits provided for
the benefit of the Named Officers during the fiscal years ended March 31,
1996, 1995 and 1994, respectively, did not exceed the lesser of either
$50,000 or 10% of the total annual salary and bonus reported for the Named
Officers in those periods. There were no other amounts of compensation
required to be reported as "Other Annual Compensation" by Item 402 of
Regulation S-K of the Securities and Exchange Commission earned by the
Named Officers.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
On March 28, 1996, the Company entered into an Employment, Non-Competition
and Termination Agreement (the "Newman Agreement") with Leonard Newman, the
co-founder and former Chairman of the Board and Chief Executive Officer of the
Company. Pursuant to the Newman Agreement, Mr. L. Newman received a lump sum
payment of approximately $2.0 million. Under the terms of the Newman Agreement,
Mr. L. Newman has agreed to provide consulting services, as required from time
to time, to the Company for a five-year period and also has agreed not to
compete with the Company during this same period. This agreement supersedes a
previous deferred compensation agreement with Mr. L. Newman (the "Deferred
Compensation Agreement") whereby, in the event of termination of employment,
compensation equal to $25,000 multiplied by the number of complete years of
employment from July 1, 1969 through the date of termination of employment was
to be provided to Mr. L. Newman or, in the case of death, to his designated
beneficiary. In addition, pursuant to the terms of the Deferred Compensation
14
<PAGE>
Agreement, a keyman insurance policy owned by the Company for Mr. L. Newman was
transferred to him. Under the Newman Agreement, the Company will continue to be
required to provide Mr. L. Newman, on an annual basis, the sum sufficient to pay
the scheduled premium on such policy.
In March 1996, Leonard Newman and certain members of his immediate family
sold an aggregate of 885,924 shares of the Company's Common Stock to a buyer,
acting as an investment adviser to several accounts. In connection with such
sale, the Company entered into a registration rights agreement with the buyer
and the Company filed a registration statement at its expense.
In April 1994, the Company entered into an agreement with Richard Ross
which provided for a severance benefit in the event of i) termination of his
employment other than for cause, ii) diminution in compensation and/or
responsibilities and iii) the change in ownership of the Company or Photronics
Corp., a wholly-owned subsidiary of the Company. The severance benefit is equal
to 30 months of Mr. Ross' then current salary plus reimbursement of outplacement
expenses up to a maximum of $15,000.
RETIREMENT/SAVINGS PLAN
The Summary Compensation Table above includes amounts deferred by the Named
Officers pursuant to the Company's Retirement/Savings Plan under Section 401(k)
of the Internal Revenue Code of 1986. The value of a participant's contributions
to the Retirement/Savings Plan is fully vested at all times; the value of
employer contributions becomes 50% vested after the employee has completed three
years of service, 75% vested after completion of four years of service, and 100%
vested after completion of five years of service.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
On February 1, 1996, the Company established a Supplemental Executive
Retirement Plan (the SERP) for the benefit of certain key executives which
includes the Chief Executive Officer and the four most highly compensated
executive officers of the Company. Pursuant to the SERP, the Company will
provide retirement benefits to each key executive, based on years of service and
final average annual compensation as defined therein. In addition, the Company
will advance premiums for life insurance policies providing a death benefit
equal to five times the participants' salary at time of death. In the event of a
change in control, as defined therein, benefits become fully vested. The SERP is
non-contributory and unfunded.
MEDICAL REIMBURSEMENT PLAN
At the beginning of each calendar year, the Company accrues fixed annual
amounts for the benefit of certain officers to be paid as needed to reimburse
such officers for the amounts of medical and hospital expenses actually incurred
by such officers which are not covered, and until January 1, 1993, the excess of
the amounts of medical and hospital expenses actually incurred by such officers
over the amount paid to them, under the Company's group medical and
hospitalization plans. The amount accrued for the benefit of each such officer
is included in such officer's compensation for tax purposes regardless of
whether such accrued amount is actually paid to him. The excess of the amount
accrued over the amounts paid is used to offset the administrative expenses
payable by the Company to the medical insurance carrier.
STOCK OPTIONS
On March 26, 1996, the Company's stockholders approved the reclassification
of each share of Class A Common Stock, $.01 par value per share, and each share
of Class B Common Stock, $.01 par value per share, into one share of Common
Stock of the Company (the "Reclassification"). Each option issued or issuable
for either Class A or Class B Common Stock pursuant to the Company's 1991 Stock
Option Plan is exercisable for an equal number of shares of Common Stock.
15
<PAGE>
The following table contains information concerning the grant of stock
options under the Company's 1991 Stock Option Plan to the Named Officers during
the Company's last fiscal year.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM ($)
---------------------------------------------------- -------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL 1996 ($/SH) DATE 0% 5% (B) 10% (B)
---- ------- ----------- ------ ---- -- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Stuart F. Platt ........ 50,000 (a) 38.0% $7.75 02/06/06 $12,500 $264,100 $650,000
Richard Ross ........... 50,000 (a) 38.0% $7.75 02/06/06 $12,500 $264,100 $650,000
</TABLE>
- ----------
(a) The options granted were for shares of Class B Common Stock at an exercise
price equal to the fair market value of the Company's Class B Common Stock
on the date of grant. The options become exercisable over a five year
period in increments of 20% beginning six months from the date of grant and
continuing at an additional 20% per year on the anniversary of the date of
grant. The grant date of the options was February 7, 1996.
(b) The amounts shown under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission and are
not intended to forecast future appreciation of the Company's stock price.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the aggregate stock options
exercised by the Named Officers during fiscal 1996 as well as the unexercised
options to purchase the Company's Common Stock granted through March 31, 1996
under the Company's 1991 Stock Option Plan to the Named Officers and held by
them at that date.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 1996 MARCH 31, 1996 ($) (C)
-------------------------- --------------------------
SHARES COMMON STOCK COMMON STOCK
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman .................... 40,000(a) 104,500 90,000 60,000 $422,700 $281,800
Nancy R. Pitek .................... -- -- 1,200 800 $ 5,250 $ 3,500
Paul G. Casner, Jr. ............... -- -- 30,000 20,000 $239,700 $159,800
Stuart F. Platt ................... -- -- 3,000 52,000 $ 13,125 $ 21,250
Richard Ross ...................... -- -- 3,000 52,000 $ 13,125 $ 21,250
Leonard Newman .................... 25,000(b) 51,563 -- -- -- --
</TABLE>
- ----------
(a) Represents shares of Class A Common Stock.
(b) Represents shares of Class B Common Stock.
(c) Based on the difference between the exercise price of each grant and the
closing price on the American Stock Exchange-Composite Transactions of the
Company's Common Stock on that date, which was $8.00.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Leonard Newman, who served on the Board's Executive Compensation
Committee (the "Committee") from May 26, 1994 until August 8, 1995, served as
the Chairman of the Board and Secretary of the Company during part of fiscal
1996 and until his resignation from such offices in August 1995. During the
period in which he served on the Committee, Mr. Newman did not participate in
compensation decisions relating to himself or Mark S. Newman.
16
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal 1996, the Compensation Committee established the compensation
of the Chief Executive Officer and the President of the Company. The bonus
awards of the Named Officers in respect of the 1996 fiscal year were determined
at a meeting of the Compensation Committee as constituted on May 29, 1996. See
"The Board of Directors and Certain Committees." In determining the individual
elements of compensation, the Compensation Committee strives to enable the
Company to attract and retain key executives critical to the long-term success
of the Company and each of its subsidiaries, provide compensation opportunities
which are comparable to those offered by similar companies, reward long-term
strategic management and the enhancement of stockholder value and create a
performance-oriented environment.
In order to meet the foregoing objectives, the Compensation Committee has
attempted to design and choose components of compensation. The Compensation
Committee consulted with Compensation Resources, Inc. to assist in this process
and provide competitive information, advice, documentation and recommendations
relating to compensation issues. Compensation packages consist of cash, certain
benefits and equity-based compensation. The Company's compensation provides for
competitive base salaries which reflect individual performance, level of
responsibility and are based on compensation paid by companies of relatively
similar size in the same industry as that of the Company. Annual bonuses, when
given, are linked to the financial performance of the Company and its
subsidiaries as a whole, job performance and the meeting of specified goals.
Also included are plans which reward the enhancement of long-term values to the
Company's stockholders. The other components of the Company's compensation focus
on both short-term and long-term performance, rewarding profitability and growth
in stockholder value and delivering competitive levels of compensation.
The compensation of the Chief Executive Officer was based on the policies
described above. The Chief Executive Officer's compensation for the fiscal year
ending March 31, 1996 was based on a comparison of compensation provided to
chief executive officers and other members of senior management of companies of
relatively similar size within the same industry as that of the Company. The
bonus award for fiscal 1996 was computed on the basis of a formula that applied
a weighted performance factor to a target award established for the Chief
Executive Officer's salary level. The weighted performance factor was derived as
a result of the Chief Executive Officer's achievement of certain Company and
individual performance targets including, but not limited to, the achievement of
a certain level of consolidated earnings before interest and income taxes for
fiscal 1996.
For fiscal 1996, the Chief Executive Officer recommended the compensation,
excluding the bonus awards, for the other Named Officers, based on substantially
the same criteria as described above. Bonus awards for the other Named Officers
were computed by the Committee on a similar basis as that used for the Chief
Executive Officer using specific target awards that had been established for
each individual's salary level.
The Compensation Committee has not formally addressed the restrictions
under Section 162(m) of the Internal Revenue Code because the Compensation
Committee does not anticipate paying compensation to its executive officers in
an amount to which Section 162(m) would apply.
Mark N. Kaplan, Chairman
Theodore Cohn
Donald C. Fraser
Leonard Newman
Jack Rachleff
17
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Class A and Class B
Common Stock against the total return of the AMEX Market Index and a peer group
index consisting of companies comprising the Standard Industrial Classification
(SIC) Codes 3812, Search and Navigation Equipment and 3827, Optical Instruments
and Lenses. A listing of the companies included in these SIC Codes is available
through publications, such as the Standard Industrial Classification Manual, and
computer data bases, such as Dialog Information Systems. SIC Code 3812 includes
both the Company's Class A and Class B Common Stock. The line graph does not
reflect the Reclassification which became effective subsequent to the periods
presented below.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. ("DRS")
CLASS A AND CLASS B COMMON STOCK
AMEX MARKET INDEX AND PEER GROUP INDEX
--GRAPHICAL REPRESENTATION OF DATA TABLE BELOW--
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
DRS Class A Common Stock 100 58.06 95.16 96.77 135.48 206.45
DRS Class B Common Stock 100 53.33 90.00 103.33 146.67 213.33
Amex Market Index 100 112.58 141.25 165.29 188.85 264.32
Peer Group 100 107.21 115.32 118.84 125.34 151.53
- ----------
* Assumes that the value of the investment in Diagnostic/Retrieval Systems,
Inc. Class A and Class B Common Stock and each index was $100 on April 1,
1991 and that all dividends were reinvested.
18
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed KPMG Peat Marwick as
independent public accountants of the Company for the year ending March 31,
1997. The Company has been advised by KPMG Peat Marwick that neither that firm
nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. KPMG Peat Marwick will have a
representative at the Meeting who will have an opportunity to make a statement,
if he or she so desires, and who will be available to respond to appropriate
questions.
STOCKHOLDERS' PROPOSALS
Any stockholder who desires to submit a proposal for inclusion in the
Company's proxy materials for the 1997 Annual Meeting of Stockholders must
comply with the requirements concerning both the eligibility of the proponent
and the form and substance of the proposal established by applicable law and
regulations. Such proposal must be received by the Company at its offices at 5
Sylvan Way, Parsippany, New Jersey 07054 no later than the close of business on
February 28, 1997.
The Advance Notice Provisions of the By-Laws provide that stockholders are
required to give advance notice to the Company of (i) any stockholder-proposed
director nomination or (ii) any business to be introduced by a stockholder at
any annual meeting. The Advance Notice Provisions provide that any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as director or directors at an annual meeting only if
written notice of such stockholder's intent has been given to the Secretary of
the Company not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting. In the event the annual
meeting is called for a date that is not within 30 days before or after such
anniversary date, the stockholder's written notice of such intent must be given
within 10 days before or after such anniversary date. In the case of a special
meeting of stockholders called for the purpose of electing directors, to be
timely, a stockholder's notice must be delivered to or mailed and received not
later than the close of business on the tenth day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made by the Company, whichever first occurs. The
Chairman of the meeting may determine that the nomination of any person was not
made in compliance with the Advance Notice Provisions.
The Advance Notice Provisions further provide that, for business to be
properly introduced by a stockholder of the Company where such business is not
specified in the notice of meeting or brought by or at the direction of the
Board, the stockholder must have given notice not less than 60 nor more than 90
days prior to the anniversary date of the immediately preceding annual meeting
of the stockholders. In the event the annual meeting is called for a date that
is not within 30 days before or after such anniversary date, notice by the
stockholder must be given 10 days before or after such anniversary date. The
Chairman of the Board may, if the facts warrant, determine and declare that any
business was not properly brought before such meeting and such business will not
be transacted.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, the
proxies confer discretionary authority with respect to acting thereon, and the
persons named in such proxies intend to vote, act and consent in accordance with
their best judgment with respect thereto.
SOLICITATION EXPENSES
The costs of this solicitation will be paid by the Company. Proxies will be
solicited principally by mail, but some telephone, telegraph or personal
solicitations of stockholders may be made by officers and employees of the
Company. Officers or employees of the Company who make or assist in such
solicitations will receive no compensation for doing so other than their regular
salaries, but may be reimbursed for out-of pocket expenses in connection with
the solicitation. The Company will request brokers, banks and other custodians
or fiduciaries holding shares in their names or in the names of nominees to
forward copies of the proxy soliciting materials to the beneficial owners of the
shares, and the Company will reimburse them for their reasonable expenses
incurred in doing so.
19
<PAGE>
GENERAL
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 1996 AND THE EXHIBITS THERETO REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO PATRICIA
WILLIAMSON, ASSISTANT VICE PRESIDENT, CORPORATE COMMUNICATIONS,
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC., 5 SYLVAN WAY, PARSIPPANY, NEW JERSEY 07054.
THE FORM 10-K IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
Dated: June 28, 1996
By Order of the Board of Directors,
NANCY R. PITEK
Secretary
20
<PAGE>
EXHIBIT A
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
1996 OMNIBUS PLAN
1. ESTABLISHMENT AND PURPOSE.
There is hereby adopted the Diagnostic/Retrieval Systems, Inc. 1996 Omnibus
Plan (the "Plan"). This Plan is intended to promote the interests of the Company
(as defined below) and the stockholders of Diagnostic/Retrieval Systems, Inc.
("DRS") by providing officers and other employees of the Company (including
directors who are also employees of the Company) with appropriate incentives and
rewards to encourage them to enter into and continue in the employ of the
Company and to acquire a proprietary interest in the long-term success of the
Company; to compensate DRS's non-employee directors and provide incentives to
such non-employee directors which are directly linked to increases in stock
value; and to reward the performance of individual officers, other employees,
consultants and non-employee directors in fulfilling their personal
responsibilities for long-range achievements.
2. DEFINITIONS.
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Agreement" shall mean the written agreement between DRS and a
Participant evidencing an Incentive Award.
(b) "Board of Directors" shall mean the Board of Directors of DRS.
(c) "Cause" shall mean (1) the willful and continued failure by the
Participant substantially to perform his or her duties and obligations
to the Company (other than any such failure resulting from his or her
incapacity due to physical or mental illness); (2) the willful
engaging by the Participant in misconduct which is materially
injurious to the Company; (3) the commission by the Participant of a
felony; or (4) the commission by the Participant of a crime against
the Company which is materially injurious to the Company. For purposes
of this Section 2(c), no act, or failure to act, on a Participant's
part shall be considered "willful" unless done, or omitted to be done,
by the Participant in bad faith and without reasonable belief that his
or her action or omission was in the best interest of the Company.
Determination of Cause shall be made by the Committee in its sole
discretion.
(d) A "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
(1) any Person is or becomes the "Beneficial Owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of DRS (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the
Company) representing 25% or more of DRS's then outstanding
securities, excluding any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause (i) of
paragraph (3) below; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the Effective Date, constitute the Board of Directors and
any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of DRS) whose appointment
or election by the Board of Directors or nomination for election
by DRS's stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in office
who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously
so approved or recommended; or
(3) there is consummated a merger or consolidation of the Company
with any other corporation other than (i) a merger or
consolidation which would result in the voting securities of DRS
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof) at least 75% of the combined voting power of
the voting securities of DRS or such surviving entity or
A-1
<PAGE>
any parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of DRS (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of DRS (not including in the securities
Beneficially Owned by such Person any securities acquired
directly from the Company) representing 25% or more of the
combined voting power of DRS's then outstanding securities; or
(4) the stockholders of DRS approve a plan of complete liquidation or
dissolution of DRS or there is consummated an agreement for the
sale or disposition by DRS of all or substantially all of DRS's
assets, other than a sale or disposition by DRS of all or
substantially all of DRS's assets to an entity, at least 75% of
the combined voting power of the voting securities of which are
owned by Persons in substantially the same proportions as their
ownership of DRS immediately prior to such sale.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(f) "Committee" shall mean the Stock Option Committee of the Board of
Directors. The Committee shall consist of two or more persons, each of
whom is an "outside director" within the meaning of Section 162(m) of
the Code and a "disinterested person" within the meaning of Rule
16b-3.
(g) "Company" shall mean, collectively, DRS and each of its Subsidiaries
now held or hereinafter acquired.
(h) "Company Stock" shall mean the common stock of DRS, par value $.01 per
share.
(i) "Disability" shall mean: (1) any physical or mental condition that
would qualify a Participant for a disability benefit under the
long-term disability plan maintained by the Company and applicable to
him or her; (2) when used in connection with the exercise of an
Incentive Stock Option following termination of employment, disability
within the meaning of Section 22(e)(3) of the Code; or (3) such other
condition as may be determined in the sole discretion of the Committee
to constitute Disability.
(j) "Effective Date" shall mean the date upon which this Plan is adopted
by the Board of Directors.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(l) "Executive Officer" shall have the meaning set forth in Rule 3b-7
promulgated under the Exchange Act.
(m) The "Fair Market Value" of a share of Company Stock, as of a date of
determination, shall mean (1) the closing sales price per share of
Company Stock on the national securities exchange on which such stock
is principally traded for the last preceding date on which there was a
sale of such stock on such exchange, or (2) if the shares of Company
Stock are not listed or admitted to trading on any such exchange, the
closing price as reported by the NASDAQ Stock Market for the last
preceding date on which there was a sale of such stock on such
exchange, or (3) if the shares of Company Stock are not then listed on
the NASDAQ Stock Market, the average of the highest reported bid and
lowest reported asked prices for the shares of Company Stock as
reported by the National Association of Securities Dealers, Inc.
Automated Quotations System for the last preceding date on which there
was a sale of such stock in such market, or (4) if the shares of
Company Stock are not then listed on a national securities exchange or
traded in an over-the-counter market or the value of such shares is
not otherwise determinable, such value as determined by the Committee
in good faith.
(n) "Incentive Award" shall mean any Option, Tandem SAR, Stand-Alone SAR,
Restricted Stock, Phantom Stock, Stock Bonus or Other Award granted
pursuant to the terms of the Plan.
(o) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code, or any
successor provision, and that is designated by the Committee as an
Incentive Stock Option.
(p) "Initial Director" shall mean a Non-Employee Director of DRS who is a
member of the Board of Directors on the Effective Date.
(q) "Issue Date" shall mean the date established by DRS on which
certificates representing shares of Restricted Stock shall be issued
by DRS pursuant to the terms of Section 10(e).
A-2
<PAGE>
(r) "Non-Employee Director" shall mean a member of the Board of Directors
who is not and has never been an employee of the Company.
(s) "Non-Qualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(t) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 7 (or, with respect to a Non-Employee
Director, pursuant to Section 14 hereof).
(u) "Other Award" shall mean an award granted pursuant to Section 13
hereof.
(v) "Partial Exercise" shall mean an exercise of an Incentive Award for
less than the full extent permitted at the time of such exercise.
(w) "Participant" shall mean (1) an employee or consultant of the Company
to whom an Incentive Award is granted pursuant to the Plan, (2) with
respect to Non-Qualified Stock Options granted under Section 14
hereof, each Non-Employee Director and (3) upon the death of an
individual described in (1) or (2), his or her successors, heirs,
executors and administrators, as the case may be.
(x) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2)
a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, (4) a
corporation owned, directly or indirectly, by the stockholders of DRS
in substantially the same proportions as their ownership of stock of
DRS, (5) First Pacific Advisors, Inc., (6) Palisade Capital
Management, LLC, or (7) Taglich Brothers, D'Amadeo, Wagner and Co.,
Inc.
(y) "Phantom Stock" shall mean the right, granted pursuant to Section 11,
to receive in cash or shares the Fair Market Value of a share of
Company Stock.
(z) "Reload Option" shall mean a Non-Qualified Stock Option granted
pursuant to Section 7(c)(5).
(aa) "Restricted Stock" shall mean a share of Company Stock which is
granted pursuant to the terms of Section 10 hereof and which is
subject to the restrictions set forth in Section 10(c).
(bb) "Rule 16b-3" shall mean the Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time.
(cc) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(dd) "Stand-Alone SAR" shall mean a stock appreciation right which is
granted pursuant to Section 9 and which is not related to any Option.
(ee) "Stock Bonus" shall mean a bonus payable in shares of Company Stock
granted pursuant to Section 12.
(ff) "Subsequent Director" shall mean a Non-Employee Director of DRS who
becomes a member of the Board of Directors subsequent to the Effective
Date.
(gg) "Subsidiary" shall mean a "subsidiary corporation" within the meaning
of Section 424(f) of the Code.
(hh) "Tandem SAR" shall mean a stock appreciation right which is granted
pursuant to Section 8 and which is related to an Option.
(ii) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
(a) Shares Available for Awards
The maximum number of shares of Company Stock reserved for issuance
under the Plan shall be 500,000 shares (subject to adjustment as
provided herein). Such shares may be authorized but unissued Company
Stock or authorized and issued Company Stock held in DRS's treasury.
The Committee may direct that any stock certificate evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such
restrictions on transferability as may apply to such shares pursuant
to the Plan.
A-3
<PAGE>
The grant of a Tandem SAR, a Stand-Alone SAR or Phantom Stock shall
not reduce the number of shares of Company Stock with respect to which
Incentive Awards may be granted pursuant to the Plan.
(b) Individual Limitation
The total number of shares of Company Stock subject to Incentive
Awards (including Incentive Awards which may be payable in cash but
denominated as shares of Company Stock, i.e., Stand-Alone SARs and
Phantom Stock), awarded to any employee during any tax year of the
Company, shall not exceed 200,000 shares (subject to adjustment as
provided herein). Determinations under the preceding sentence shall be
made in a manner that is consistent with Section 162(m) of the Code.
(c) Adjustment for Change in Capitalization.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Company Stock, or
other property), recapitalization, Company Stock split, reverse
Company Stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Company Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement
of the rights of Participants under the Plan, then the Committee shall
make such equitable changes or adjustments as it deems necessary or
appropriate to any or all of (1) the number and kind of shares of
Company Stock which may thereafter be issued in connection with
Incentive Awards, (2) the number and kind of shares of Company Stock
issued or issuable in respect of outstanding Incentive Awards, (3) the
exercise price, grant price or purchase price relating to any
Incentive Award, and (4) the maximum number of shares subject to
Incentive Awards which may be awarded to any employee during any tax
year of the Company; provided that, with respect to Incentive Stock
Options, such adjustment shall be made in accordance with Section 424
of the Code.
(d) Re-use of Shares.
The following shares of Company Stock shall again become available for
Incentive Awards: except as provided below, any shares subject to an
Incentive Award that remain unissued upon the cancellation, surrender,
exchange or termination of such award for any reason whatsoever; and
any shares of Restricted Stock forfeited. Notwithstanding the
foregoing, upon the exercise of any Incentive Award granted in tandem
with any other Incentive Awards, such related Awards shall be
cancelled to the extent of the number of shares of Company Stock as to
which the Incentive Award is exercised and such number of shares shall
no longer be available for Incentive Awards under the Plan.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the persons to
whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Stock to which an Award may relate and the terms, conditions,
restrictions and performance criteria relating to any Incentive Award; to
determine whether, to what extent, and under what circumstances an Incentive
Award may be settled, cancelled, forfeited, exchanged, or surrendered; to make
adjustments in the performance goals in recognition of unusual or non-recurring
events affecting the Company or the financial statements of the Company (to the
extent not inconsistent with Section 162(m) of the Code, if applicable), or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan; provided, however,
that the Committee may not exercise discretion under any provision of the Plan
with respect to Non-Qualified Stock Options granted to Non-Employee Directors
pursuant to Section 14 of the Plan, to the extent that such discretion is
inconsistent with Rule 16b-3.
The Committee may, in its absolute discretion, without amendment to the
Plan, (a) except with regard to Non-Qualified Stock Options granted to
Non-Employee Directors pursuant to Section 14 hereof, accelerate the date on
which any Option or Stand-Alone SAR granted under the Plan becomes exercisable,
waive or amend the operation
A-4
<PAGE>
of Plan provisions respecting exercise after termination of employment or
otherwise adjust any of the terms of such Option or Stand-Alone SAR, and (b)
accelerate the Vesting Date or Issue Date, or waive any condition imposed
hereunder, with respect to any share of Restricted Stock, Phantom Stock or other
Incentive Award or otherwise adjust any of the terms applicable to any such
Incentive Award.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Delaware law and the bylaws of the Company) and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
5. ELIGIBILITY.
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such employees of the Company (including officers of the
Company, whether or not they are directors of DRS) and consultants of the
Company as the Committee shall select from time to time. Non-Qualified Stock
Options shall be granted to Non-Employee Directors in accordance with the
provisions of Section 14 hereof.
6. AWARDS UNDER THE PLAN; AGREEMENT.
The Committee may grant Options, Tandem SARs, Stand-Alone SARs, shares of
Restricted Stock, shares of Phantom Stock, Stock Bonuses and Other Awards in
such amounts and with such terms and conditions as the Committee shall
determine, subject to the provisions of the Plan. Non-Qualified Stock Options
shall be granted to Non-Employee Directors in accordance with Section 14 hereof.
Each Incentive Award granted under the Plan (except an unconditional Stock
Bonus) shall be evidenced by an Agreement which shall contain such provisions as
the Committee may in its sole discretion deem necessary or desirable. By
accepting an Incentive Award, a Participant thereby agrees that the award shall
be subject to all of the terms and provisions of the Plan and the applicable
Agreement.
7. OPTIONS.
(a) Identification of Options.
Each Option shall be clearly identified in the applicable Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option.
(b) Exercise Price.
Each Agreement with respect to an Option shall set forth the amount
(the "option exercise price") payable by the grantee to the Company
upon exercise of the Option. The option exercise price per share shall
be determined by the Committee; provided, however, that in the case of
an Incentive Stock Option, the option exercise price shall in no event
be less than the Fair Market Value of a share of Company Stock on the
date the Option is granted.
(c) Term and Exercise of Options.
(1) Unless the applicable Agreement provides otherwise, an Option
shall become cumulatively exercisable as to 25 percent of the
shares covered thereby on each of the first, second, third and
fourth anniversaries of the date of grant. The Committee shall
determine the expiration date of each Option; provided, however,
that no Incentive Stock Option shall be exercisable more than 10
years after the date of grant. Unless the applicable Agreement
provides otherwise, no Option shall be exercisable prior to the
first anniversary of the date of grant.
(2) An Option may be exercised for all or any portion of the shares
as to which it is exercisable, provided that no Partial Exercise
of an Option shall be for an aggregate exercise price of less
than $1,000. The Partial Exercise of an Option shall not cause
the expiration, termination or cancellation of the remaining
portion thereof.
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(3) An Option shall be exercised by delivering notice to DRS's
principal office, to the attention of its Secretary. Such notice
shall be accompanied by the applicable Agreement, shall specify
the number of shares of Company Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant or other person
then having the right to exercise the Option. Payment for shares
of Company Stock purchased upon the exercise of an Option shall
be made on the effective date of such exercise by one or a
combination of the following means: (i) in cash or by personal
check, certified check, bank cashier's check or wire transfer;
(ii) subject to the approval of the Committee, in shares of
Company Stock owned by the Participant for at least six months
prior to the date of exercise and valued at their Fair Market
Value on the effective date of such exercise; or (iii) subject to
the approval of the Committee, by such other provision as the
Committee may from time to time authorize. Any payment in shares
of Company Stock shall be effected by the delivery of such shares
to the Secretary of DRS, duly endorsed in blank or accompanied by
stock powers duly executed in blank, together with any other
documents and evidences as the Secretary of DRS shall require.
(4) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the
Participant or other person entitled to receive such shares, and
delivered to the Participant or such other person as soon as
practicable following the effective date on which the Option is
exercised.
(5) The Committee shall have the authority to specify, at the time of
grant or, with respect to Non-Qualified Stock Options, at or
after the time of grant, that a Participant shall be granted a
new Non-Qualified Stock Option (a "Reload Option") for a number
of shares equal to the number of shares surrendered by the
Participant upon exercise of all or a part of an Option in the
manner described in Section 7(c)(3)(ii) above, subject to the
availability of shares of Company Stock under the Plan at the
time of such exercise; provided, however, that no Reload Option
shall be granted to a Non-Employee Director. Reload Options shall
be subject to such conditions as may be specified by the
Committee in its discretion, subject to the terms of the Plan.
(d) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of shares of
Company Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under the Plan and any other stock option plan of
the Company (or any Subsidiary) shall exceed $100,000, such
Options shall be treated as Non-Qualified Stock Options. Such
Fair Market Value shall be determined as of the date on which
each such Incentive Stock Option is granted.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns (or is
attributed to own by virtue of the Code) stock possessing more
than ten percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary unless (i) the
exercise price of such Incentive Stock Option is at least 110
percent of the Fair Market Value of a share of Company Stock at
the time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration of
five years from the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment.
(1) Unless the applicable Agreement provides otherwise, in the event
that the employment of a Participant with the Company shall
terminate for any reason other than Cause, Disability or death,
(i) Options granted to such Participant, to the extent that they
are exercisable at the time of such termination, shall remain
exercisable until the date that is three months after such
termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the
close of business on the date of such termination. The
three-month period described in this Section 7(e)(1) shall be
extended to one year from the date of such termination in the
event of the Participant's death during such three-month period.
Notwithstanding the foregoing, no Option shall be exercisable
after the expiration of its term.
(2) Unless the applicable Agreement provides otherwise, in the event
that the employment of a Participant with the Company shall
terminate on account of the Disability or death of the
Participant,
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(i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain
exercisable until the first anniversary of such termination, on
which date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business
on the date of such termination; provided, however, that no
Option shall be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall
expire at the commencement of business on the date of such
termination.
(f) Acceleration of Exercise Date Upon Change in Control.
Upon the occurrence of a Change in Control, each Option granted under
the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation.
8. TANDEM SARs.
The Committee may grant in connection with any Option granted hereunder,
except a Non-Qualified Stock Option granted to a Non-Employee Director pursuant
to Section 14 hereof, one or more Tandem SARs relating to a number of shares of
Company Stock less than or equal to the number of shares of Company Stock
subject to the related Option. A Tandem SAR granted in connection with an Option
must be granted at the same time that such Option is granted; provided, however,
that a Tandem SAR granted in connection with a Non-Qualified Stock Option may be
granted subsequent to the time that such Non-Qualified Stock Option is granted.
(a) Benefit Upon Exercise.
The exercise of a Tandem SAR with respect to any number of shares of
Company Stock shall entitle the Participant to a cash payment, for
each such share, equal to the excess of (1) the Fair Market Value of a
share of Company Stock on the exercise date over (2) the option
exercise price of the related Option. Such payment shall be made as
soon as practicable after the effective date of such exercise.
(b) Term and Exercise of Tandem SAR.
(1) A Tandem SAR shall be exercisable only if and to the extent that
its related Option is exercisable.
(2) The exercise of a Tandem SAR with respect to a number of shares
of Company Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal
number of shares. The exercise of an Option, or the cancellation,
termination or expiration of an Option (other than pursuant to
this Section 8(b)(2)), with respect to a number of shares of
Company Stock shall cause the automatic and immediate
cancellation of any related Tandem SARs to the extent of the
number of shares of Company Stock subject to such Option which is
so exercised, cancelled, terminated or expired.
(3) A Tandem SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no Partial
Exercise of a Tandem SAR shall be for an aggregate exercise price
of less than $1,000.
(4) No Tandem SAR shall be assignable or transferable otherwise than
together with its related Option.
(5) A Tandem SAR shall be exercised by delivering notice to DRS's
principal office, to the attention of its Secretary. Such notice
shall be accompanied by the applicable Agreement, shall specify
the number of shares of Company Stock with respect to which the
Tandem SAR is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other
person then having the right to exercise the Option to which the
Tandem SAR is related.
9. STAND-ALONE SARs.
(a) Exercise Price.
The exercise price per share of a Stand-Alone SAR shall be determined
by the Committee at the time of grant, but shall in no event be less
than the Fair Market Value of a share of Company Stock on the date of
grant.
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(b) Benefit Upon Exercise.
The exercise of a Stand-Alone SAR with respect to any number of shares
of Company Stock shall entitle the Participant to a payment, for each
such share, equal to the excess of (1) the Fair Market Value of a
share of Company Stock on the exercise date over (2) the exercise
price of the Stand-Alone SAR. Such payments shall be made as soon as
practicable after such exercise, in cash and/or shares of Company
Stock, as determined by the Committee.
(c) Term and Exercise of Stand-Alone SARs.
(1) Unless the applicable Agreement provides otherwise, a Stand-Alone
SAR shall become cumulatively exercisable as to 25 percent of the
shares covered thereby on each of the first, second, third and
fourth anniversaries of the date of grant. The Committee shall
determine the expiration date of each Stand-Alone SAR. Unless the
applicable Agreement provides otherwise, no Stand-Alone SAR shall
be exercisable prior to the first anniversary of the date of
grant.
(2) A Stand-Alone SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no Partial
Exercise of a Stand-Alone SAR shall be for an aggregate exercise
price of less than $1,000.
(3) A Stand-Alone SAR shall be exercised by delivering notice to
DRS's principal office, to the attention of its Secretary. Such
notice shall be accompanied by the applicable Agreement, shall
specify the number of shares of Company Stock with respect to
which the Stand-Alone SAR is being exercised, and the effective
date of the proposed exercise, and shall be signed by the
Participant.
(d) Effect of Termination of Employment.
The provisions set forth in Section 7(e) with respect to the exercise
of Options following termination of employment shall apply as well to
such exercise of Stand-Alone SARs.
(e) Acceleration of Exercise Date Upon Change in Control.
Upon the occurrence of a Change in Control, any Stand-Alone SAR
granted under the Plan and outstanding at such time shall become fully
and immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation.
10. RESTRICTED STOCK.
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide
such shares into classes and assign a different Issue Date and/or
Vesting Date for each class. If the grantee is employed by the Company
on an Issue Date (which may be the date of grant), the specified
number of shares of Restricted Stock shall be issued in accordance
with the provisions of Section 10(e). Provided that all conditions to
the vesting of a share of Restricted Stock imposed pursuant to Section
10(b) are satisfied, and except as provided in Section 10(g), upon the
occurrence of the Vesting Date with respect to a share of Restricted
Stock, such share shall vest and the restrictions of Section 10(c)
shall lapse.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions to the vesting of such
shares as it, in its absolute discretion, deems appropriate.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, such share, and
all of the rights related thereto, shall be forfeited by the
Participant.
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(d) Dividends on Restricted Stock.
The Committee in its discretion may require that any dividends paid on
shares of Restricted Stock be held in escrow until all restrictions on
such shares have lapsed.
(e) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect to shares
of Restricted Stock, DRS shall cause to be issued a stock
certificate, registered in the name of the Participant to whom
such shares were granted, evidencing such shares; provided that
DRS shall not cause such a stock certificate to be issued unless
it has received a stock power duly endorsed in blank with respect
to such shares. Each such stock certificate shall bear the
following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND
RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. 1996 OMNIBUS PLAN AND AN
AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH
SHARES AND DRS. A COPY OF THE PLAN AND AGREEMENT IS ON FILE
IN THE OFFICE OF THE SECRETARY OF DRS, 5 SYLVAN WAY,
PARSIPPANY, NEW JERSEY 07054.
Such legend shall not be removed until such shares vest pursuant
to the terms hereof.
(2) Each certificate issued pursuant to this Section 10(e), together
with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be held by DRS unless the
Committee determines otherwise.
(f) Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 10(c) shall lapse with respect to
such share. Reasonably promptly after a share of Restricted Stock
vests, DRS shall cause to be delivered to the Participant to whom such
shares were granted, a certificate evidencing such share, free of the
legend set forth in Section 10(e).
(g) Effect of Termination of Employment.
(1) Subject to such other provision as the Committee may set forth in
the applicable Agreement, and to the Committee's amendment
authority pursuant to Section 4, upon the termination of a
Participant's employment for any reason other than Cause, any and
all shares to which restrictions on transferability apply shall
be immediately forfeited by the Participant and transferred to,
and reacquired by, DRS; provided that if the Committee, in its
sole discretion, shall within thirty (30) days after such
termination of employment notify the Participant in writing of
its decision not to terminate the Participant's rights in such
shares, then the Participant shall continue to be the owner of
such shares subject to such continuing restrictions as the
Committee may prescribe in such notice. In the event of a
forfeiture of shares pursuant to this section, DRS shall repay to
the Participant (or the Participant's estate) any amount paid by
the Participant for such shares. In the event that DRS requires a
return of shares, it shall also have the right to require the
return of all dividends paid on such shares, whether by
termination of any escrow arrangement under which such dividends
are held or otherwise.
(2) In the event of the termination of a Participant's employment for
Cause, all shares of Restricted Stock granted to such Participant
which have not vested as of the date of such termination shall
immediately be returned to DRS, together with any dividends paid
on such shares, in return for which DRS shall repay to the
Participant any amount paid by the Participant for such shares.
(h) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding shares of
Restricted Stock which have not theretofore vested shall immediately
vest and all restrictions on such shares shall immediately lapse.
(i) Special Provisions Regarding Awards.
Notwithstanding anything to the contrary contained herein, Restricted
Stock granted pursuant to this Section 10 to Executive Officers may be
based on the attainment by DRS or the Company (or a Subsidiary
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or division of DRS if applicable) of performance goals pre-established
by the Committee, based on one or more of the following criteria: (1)
the attainment of a specified percentage return on total stockholder
equity; (2) the attainment of a specified percentage increase in
earnings per share of Company Stock; (3) the attainment of a specified
percentage increase in net income (before or after taxes); and (4) the
attainment of a specified percentage increase in earnings before
interest, taxes, depreciation and amortization; (5) a specified
percentage increase in earnings before interest and income taxes, as
adjusted for corporate office overhead expense allocation; (6) a
specified percentage increase in revenues; (7) a specified minimum
return on assets; and (8) such other criteria as the stockholders of
DRS may approve; in each case, as determined in accordance with
generally accepted accounting principles. Such shares of Restricted
Stock shall be released from restrictions only after the attainment of
such performance measures have been certified by the Committee.
11. PHANTOM STOCK.
(a) Vesting Date.
At the time of the grant of shares of Phantom Stock, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a
different Vesting Date for each class. Provided that all conditions to
the vesting of a share of Phantom Stock imposed pursuant to Section
11(c) are satisfied, and except as provided in Section 11(d), upon the
occurrence of the Vesting Date with respect to a share of Phantom
Stock, such share shall vest.
(b) Benefit Upon Vesting.
Upon the vesting of a share of Phantom Stock, the Participant shall be
entitled to receive, within 30 days of the date on which such share
vests, an amount, in cash and/or shares of Company Stock, as
determined by the Committee, equal to the sum of (1) the Fair Market
Value of a share of Company Stock on the date on which such share of
Phantom Stock vests and (2) the aggregate amount of cash dividends
paid with respect to a share of Company Stock during the period
commencing on the date on which the share of Phantom Stock was granted
and terminating on the date on which such share vests.
(c) Conditions to Vesting.
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions to the vesting of such shares
as it, in its absolute discretion, deems appropriate.
(d) Effect of Termination of Employment.
Subject to such other provision as the Committee may set forth in the
applicable Agreement, and to the Committee's amendment authority
pursuant to Section 4, shares of Phantom Stock that have not vested,
together with any dividends credited on such shares, shall be
forfeited upon the Participant's termination of employment for any
reason.
(e) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding shares of
Phantom Stock which have not theretofore vested shall immediately vest
and payment in respect of such shares shall be made in accordance with
the terms of this Plan.
(f) Special Provisions Regarding Awards.
Notwithstanding anything to the contrary contained herein, the vesting
of Phantom Stock granted pursuant to this Section 11 to Executive
Officers may be based on the attainment by DRS or the Company (or a
Subsidiary or division of DRS if applicable) of one or more of the
performance criteria set forth in Section 10(i) hereof, in each case,
as determined in accordance with generally accepted accounting
principles. No payment in respect of any such Phantom Stock award will
be paid to an Executive Officer until the attainment of the respective
performance measures have been certified by the Committee.
12. STOCK BONUSES.
In the event that the Committee grants a Stock Bonus, a certificate for the
shares of Company Stock comprising such Stock Bonus shall be issued in the name
of the Participant to whom such grant was made and delivered to such
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Participant as soon as practicable after the date on which such Stock Bonus is
payable. Executive Officers shall be eligible to receive Stock Bonus grants
hereunder only after a determination of eligibility is made by the Committee, in
its sole discretion.
13. OTHER AWARDS.
Other forms of Incentive Awards ("Other Awards") valued in whole or in part
by reference to, or otherwise based on, Company Stock may be granted either
alone or in addition to other Incentive Awards under the Plan. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Awards
shall be granted, the number of shares of Company Stock to be granted pursuant
to such Other Awards and all other conditions of such Other Awards.
14. NON-EMPLOYEE DIRECTOR FORMULA STOCK OPTIONS.
The provisions of this Section 14 shall apply only to grants of
Non-Qualified Stock Options to Non-Employee Directors, and, to the extent
required by Rule 16b-3, shall not be amended more than every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations promulgated
thereunder.
(a) General.
Non-Employee Directors shall receive Non-Qualified Stock Options under
the Plan. The exercise price per share of Company Stock purchasable
under Non-Qualified Stock Options granted to Non-Employee Directors
shall be the Fair Market Value of a share of Company Stock on the date
of grant. No Non-Qualified Stock Option granted to a Non-Employee
Director may be subject to an acceleration of exercisability except
upon a Change in Control as described in Section 7(f).
(b) Initial Grants to Subsequent Directors.
Each Subsequent Director shall, at the time such director becomes a
member of the Board of Directors, be granted automatically a
Non-Qualified Stock Option to purchase 5,000 shares of Company Stock.
(c) Subsequent Grants to Directors.
On the date of each annual meeting of the stockholders of DRS
subsequent to the annual meeting immediately following the Effective
Date, each continuing Initial Director will be granted automatically a
Non-Qualified Stock Option to purchase 2,500 shares of Company Stock;
provided, however, that in no event shall a continuing Initial
Director be granted Non-Qualified Stock Options to purchase more than
2,500 shares of Company Stock under the Plan or any other stock option
plan of the Company during any tax year of the Company. On the date of
each annual meeting of the stockholders of DRS subsequent to a
Subsequent Director's becoming a member of the Board of Directors,
such Subsequent Director shall be granted automatically a
Non-Qualified Stock Option to purchase 2,500 shares of Company Stock.
(d) Method and Time of Payment.
The Option exercise price shall be paid in full, at the time of
exercise, in cash (including cash received from the Company as
compensation or, in the discretion of the Committee, cash borrowed
from the Company on such terms and subject to such conditions as the
Committee shall prescribe), in shares of Company Stock having a Fair
Market Value equal to such Option exercise price, in a combination of
cash and Company Stock or through a cashless exercise procedure.
(e) Term and Exercisability.
Each Non-Qualified Stock Option granted under this Section 14 shall
(1) be exercisable as to 100% of the shares of Company Stock covered
thereby on the first anniversary of the date that the Non-Qualified
Stock Option is granted and (2) expire ten years from the date of
grant.
(f) Termination.
In the event of the termination of a Non-Employee Director's service
with DRS other than for Cause, any Non-Qualified Stock Option granted
to such Non-Employee Director under this Section 14, to the extent
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that it is exercisable on the date of such termination, may be
exercised by such Non-Employee Director (or, if applicable, by his or
her executors, administrator, legatees or distributees) until the
earlier of (1) the date that is two years from the date of such
termination or (2) the expiration of such Non-Qualified Stock Option.
In the event of the termination of a Non-Employee Director's service
with DRS for Cause, all outstanding Non-Qualified Stock Options
granted to such Non-Employee Director shall expire at the commencement
of business on the date of such termination.
15. RIGHTS AS A STOCKHOLDER.
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award until the date of
issuance of a stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 3(c), no adjustment to any Incentive Award shall
be made for dividends or other rights for which the record date occurs prior to
the date such stock certificate is issued.
16. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD.
Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time or preclude the Committee from
making subsequent grants to such Participant or any other person.
17. SECURITIES MATTERS.
(a) DRS shall be under no obligation to effect the registration pursuant
to the Securities Act of any interests in the Plan or any shares of
Company Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary,
DRS shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan
unless and until DRS is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Company Stock are traded.
The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Company Stock pursuant to the
terms hereof, that the recipient of such shares make such agreements
and representations, and that such certificates bear such legends, as
the Committee, in its sole discretion, deems necessary or desirable.
(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to DRS shall have determined
that the issuance and delivery of such shares is in compliance with
all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Company
Stock are traded. The Committee may, in its sole discretion, defer the
effectiveness of any transfer of shares of Company Stock hereunder in
order to allow the issuance of such shares to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The
Committee shall inform the Participant in writing of its decision to
defer the effectiveness of a transfer. During the period of such
deferral in connection with the exercise of an Option, the Participant
may, by written notice, withdraw such exercise and obtain the refund
of any amount paid with respect thereto.
18. WITHHOLDING TAXES.
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy the
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foregoing requirement by electing to have the Company withhold from delivery
shares of Company Stock having a value equal to the amount of tax to be
withheld. Such shares shall be valued at their Fair Market Value on the date of
which the amount of tax to be withheld is determined (the "Tax Date").
Fractional share amounts shall be settled in cash. Such a withholding election
may be made with respect to all or any portion of the shares to be delivered
pursuant to an Incentive Award.
19. NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF THE CODE.
If any Participant shall, in connection with the acquisition of shares of
Company Stock under the Plan, make the election permitted under Section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in Section 83(b)), such Participant shall notify the
Company of such election within 10 days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and a notification
required pursuant to regulation issued under the authority of Section 83(b) of
the Code.
20. NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(B)
OF THE CODE.
Each Agreement with respect to an Incentive Stock Option shall require the
Participant to notify the Company of any disposition of shares of Company Stock
issued pursuant to the exercise of such Option under the circumstances described
in Section 421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition.
21. AMENDMENT OR TERMINATION OF THE PLAN.
The Board of Directors may, at any time, suspend or terminate the Plan or
revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent required by Rule
16b-3 or by any comparable or successor exemption under which the Board of
Directors believes it is appropriate for the Plan to qualify, or if and to the
extent the Board of Directors determines that such approval is appropriate for
purposes of satisfying Sections 162(m) or 422 of the Code. Incentive Awards may
be granted under the Plan prior to the receipt of such stockholder approval but
each such grant shall be subject in its entirety to such approval and no award
may be exercised, vested or otherwise satisfied prior to the receipt of such
approval. Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority pursuant to Section 4, which discretion may be exercised
without amendment to the Plan. No action hereunder may, without the consent of a
Participant, reduce the Participant's rights under any outstanding Incentive
Award.
22. TRANSFERS UPON DEATH; NONASSIGNABILITY.
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executor or administrator of the
Participant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgements made by the Participant in
connection with the grant of the Incentive Award.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option unless (y) such Option
is an Incentive Stock Option and the Committee and the Participant intends that
it shall retain such status, or (z) such Option is meant to qualify for the
exemptions available under Rule 16b-3, nontransferability is necessary under
Rule 16b-3 in order for the award to so qualify and the Committee and the
Participant intend that it shall continue to so qualify. Subject to any
conditions as the Committee may prescribe, a Participant may, upon providing
written notice to the Secretary of DRS, elect to transfer any or all Options
granted to such Participant pursuant to the Plan to members of his or her
immediate family, including, but not limited to, children, grandchildren and
spouse or to trusts for the benefit of such immediate family members or to
partnerships in which such family members are the only partners; provided,
however, that no such transfer by any Participant may be made in exchange for
consideration.
23. EXPENSES AND RECEIPTS.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
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<PAGE>
24. FAILURE TO COMPLY.
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the applicable Agreement, unless such failure is
remedied by such Participant (or beneficiary) within ten days after notice of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion, may determine.
25. EFFECTIVE DATE AND TERM OF PLAN.
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to stockholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of DRS. In the absence
of such approval, such Incentive Awards shall be null and void. Unless earlier
terminated by the Board of Directors, the right to grant Incentive Awards under
the Plan will terminate on the tenth anniversary of the Effective Date.
Incentive Awards outstanding at Plan termination will remain in effect according
to their terms and the provisions of the Plan.
26. APPLICABLE LAW.
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of
Delaware, without reference to its principles of conflicts of law.
27. PARTICIPANT RIGHTS.
No Participant shall have any claim to be granted any award under the Plan,
and there is no obligation for uniformity of treatment for Participants. Except
as provided specifically herein, a Participant or a transferee of an Incentive
Award shall have no rights as a stockholder with respect to any shares covered
by any award until the date of the issuance of a Company Stock certificate to
him or her for such shares.
28. UNFUNDED STATUS OF AWARDS.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Incentive Award, nothing contained in the Plan or any
Agreement shall give any such Participant any rights that are greater than those
of a general creditor of the Company.
29. NO FRACTIONAL SHARES.
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan. The Committee shall determine whether cash, other Incentive Awards,
or other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
30. BENEFICIARY.
A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the grantee's beneficiary.
31. INTERPRETATION.
The Plan is designed and intended to comply with Rule 16b-3 and, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply.
32. SEVERABILITY.
If any provision of the Plan is held to be invalid or unenforceable, the
other provisions of the Plan shall not be affected but shall be applied as if
the invalid or unenforceable provision had not been included in the Plan.
A-14
<PAGE>
EXHIBIT B
MINUTES OF A SPECIAL MEETING
OF THE STOCK OPTION COMMITTEE
OF DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
A special meeting of the Stock Option Committee (the "Committee") of the
Board of Directors of Diagnostic/Retrieval Systems, Inc., a Delaware corporation
(the "Company"), was convened on February 7, 1996, in the offices of the Company
located at 5 Sylvan Way, Parsippany, New Jersey. All of the members of the
Committee were present. Dr. Donald C. Fraser presided as Chairman of the meeting
and acted as secretary. Terms not defined herein shall have the meanings
ascribed to them in the Company's 1991 Stock Option Plan (the "Plan").
AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS
The Committee also discussed the granting of Options to non-employee
directors consistent with the terms of the Plan. Upon motion duly made and
seconded, the following resolutions were unanimously adopted:
RESOLVED, that each member of the Board of Directors who is not and
has never been an employee of the Company or any of its subsidiaries
(whether now held or hereinafter acquired) (a "Non-Employee Director")
shall receive Non-qualified Stock Options, the Option Price per share of
Common Stock purchasable under the Options granted to Non-Employee
Directors shall be Fair Market Value of a share on the date of grant; and
it was further
RESOLVED, that each Non-Employee Director serving as a member of the
Board on the date hereof is hereby granted an Option to purchase 5,000
shares of Common Stock, subject to stockholder approval at the next annual
meeting of stockholders, and that on the date of each annual meeting of
stockholders of the Company commencing with the annual meeting following
the annual meeting at which the granting of the foregoing Options is
approved, each Non-Employee Director will be granted automatically, without
action by the Committee, an Option to purchase 2,500 shares of Common
Stock; provided, however, that in no event shall a Non-Employee Director be
granted Options to purchase more than an aggregate of 2,500 shares of
Common Stock during any tax year of the Company under the Plan or any other
stock option plan of the Company; and it was further
RESOLVED, that each Option be exercisable as to 100 percent of the
shares covered by the Option on the first anniversary of the date that the
Option is granted and expire ten years from the date of grant; and it was
further
RESOLVED, that in the event of the termination of a Non-Employee
Director's service with the Company other than for Cause, any Option
granted to such Non-Employee Director hereby, to the extent that it is
exercisable on the date of such termination, may be exercised until the
earlier of (1) the date that is two years from the date of such termination
or (2) the expiration of such Option; provided, however, that in the event
of the termination of a Non-Employee Director's service with the Company
for Cause, all outstanding Options granted to such Non-Employee Director
shall expire at the commencement of business on the date of such
termination; "Cause" shall mean (1) the willful and continued failure by
the Non-Employee Director substantially to perform his or her duties and
obligations to the Company (other than any such failure resulting from his
or her incapacity due to physical or mental illness) or (2) the willful
engaging by the Non-Employee Director in misconduct which is materially
injurious to the Company, however, no act, or failure to act, on a
Non-Employee Director's part shall be considered "willful" unless done, or
omitted to be done, by the Non-Employee Director in bad faith and without
reasonable belief that his or her action or omission was in the best
interest of the Company, and the determination of Cause shall be made by
the Committee in it sole discretion; and it was further
RESOLVED, that the form, terms, provisions and conditions of the
letter granting an option to each non-employee director (each a "Grant
Letter") . . . is hereby in all respects adopted and approved; and it was
further
RESOLVED, that the Chief Executive Officer, the President and any Vice
President of the Company be, and each hereby is, authorized and directed to
execute and deliver, on behalf of and in the name of the Company, a Grant
Letter, with such changes or additions to the form attached hereto as such
officer or officers, with the
B-1
<PAGE>
advice of counsel, may approve, to each non-employee director to
evidence such non-employee director's option, and that such option
shall be exercisable as provided in such Grant Letter; and it was
further
RESOLVED, that the proper officers of the Company be, and they hereby
are, authorized and directed to execute and deliver all agreements and
documents necessary or appropriate and to take such further action as may
be necessary or proper to carry into effect the intentions of the foregoing
resolutions.
There being no further business to come before the Committee, upon motion
duly made and seconded the meeting was adjourned.
/s/ DONALD C. FRASER
-------------------------------
Donald C. Fraser
Secretary
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<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 18 contains a description in tabular form of a graph entitled
"Stockholder Return Performance Graph" which represents the comparison of the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Amex Market Index and the Peer Group for the
period of five years commencing December 31, 1991 and ending December 31, 1996,
which graph is contained in the paper format of this Proxy Statement being sent
to Stockholders.
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
Proxy Solicited on Behalf of the Board of Directors
For the Annual Meeting of Stockholders to Be held August 7, 1996
The undersigned, revoking all previous proxies, appointments Mark S. Newman
and Nancy R. Pitek, and each of them, acting unanimously if more than one be
present, attorneys and proxies of the undersigned, with power of substitution,
to represent the undersigned at the annual meeting of stockholders of
Diagnostic/Retrieval Systems, Inc. (the "Company") to be held on August 7, 1996,
and at any adjournments thereof, and to vote all shares of common stock of the
Company which the undersigned is entitled to vote, on all matters coming before
said meeting. Such proxies are instructed to vote as directed below with respect
to the matters listed hereon and in their discretion on all other matters coming
before the meeting.
<TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
<CAPTION>
<S> <C> <C>
1. Election of Class 1 [ ] For all nominees listed below [ ] WITHHOLD AUTHORITY
DIRECTORS: (except as marked to the contrary below) vote for all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any of the nominees, strike
a line through the nominee's name below.)
Nominees: MARK S. NEWMAN, THEODORE COHN, DONALD C. FRASER
2. PROPOSAL to adopt the 1996 Omnibus Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to ratify the grant of options to non-employee directors of the
Company pursuant to the 1991 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
"FOR" Items 1 through 3.
DATE:____________________________
_________________________________
Signature
_________________________________
Signature of Joint Holder, if any
Please sign exactly as your name
appears to the left. Executors,
administrators, trustees, etc.
should give full title as such. If
the signer is a corporation,
please sign full corporate name by
a duly authorized officer.
- --------------------------------------------------------------------------------
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
