SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DRS TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
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[DRS LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 1999
To the Stockholders of
DRS TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of DRS Technologies, Inc., a Delaware corporation (the "Company"),
will be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York at 10:00 A.M., local time, on Thursday, August
5, 1999, 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 vote upon a proposal to ratify and approve the
designation of KPMG LLP as the independent certified public
accountants for the Company; and
(3) 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 28, 1999 are
entitled to notice of and to vote at the Meeting and any adjournment thereof.
By Order of the Board of Directors,
DRS Technologies, Inc.
/s/ NINA LASERSON DUNN
-----------------------------------
Nina Laserson Dunn
Secretary
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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DRS LOGO
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PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 5, 1999
This proxy statement and the accompanying proxy are to be mailed to
holders of Common Stock, $.01 par value (the "Common Stock"), of DRS
Technologies, Inc. (the "Company"), commencing on or about July 6, 1999 in
connection with the solicitation of proxies by the Board of Directors (the
"Board") for the 1999 Annual Meeting of Stockholders (the "Meeting") of the
Company to be held Thursday, August 5, 1999, at 10:00 A.M., local time, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York.
The Board has fixed the close of business on June 28, 1999 as the record
date for determining the stockholders of the Company entitled to vote at the
Meeting. As of June 21, 1999, the Company had outstanding 9,231,669 shares of
Common Stock (exclusive of 385,164 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 thereby 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 Company's offices, 5 Sylvan Way, Parsippany,
New Jersey 07054, 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. 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.
Mark N. Kaplan and Ira Albom, will continue to serve until the expiration of
their terms in 2000. The Class III directors,
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Messrs. Stuart F. Platt, William F. Heitmann, Eric J. Rosen and C. Shelton
James, will continue to serve until the expiration of their terms in 2001.
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 2002 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 49, became a director of the Company in 1988.
Mr. Newman, who 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.
DONALD C. FRASER--
Professor, Boston University
The Honorable Dr. Donald C. Fraser, age 58, became a director of the
Company in 1993. He currently serves as Director of the Boston University
Photonics Center 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 Vice President,
Technical Operations at Charles Stark Draper Laboratory and, from 1988 to
1990, as its Executive Vice President.
STEVEN S. HONIGMAN--
Partner, Thelen Reid & Priest LLP
The Honorable Steven S. Honigman, age 51, became a director of the
Company in 1998. Mr. Honigman is a partner of the law firm of Thelen Reid
& Priest LLP. Previously, Mr. Honigman served as General Counsel to the
Department of the Navy for five years. As chief legal officer of the
Department of the Navy and the principal legal advisor to the Secretary of
the Navy, Mr. Honigman was recognized as a leader in acquisition reform,
procurement related litigation and the accomplishment of national security
objectives in the context of environmental law compliance. He also
exercised Secretariat oversight of the Naval Criminal Investigative
Service and served as the Department's Designated Agency Ethics Officer
and Contractor Suspension and Debarment Official. For his service, Mr.
Honigman received the Department of the Navy Distinguished Public Service
Award. Prior to that, he was a partner of the law firm of Miller, Singer,
Raives & Brandes.
CLASS II DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING AT THE 2000
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
MARK N. KAPLAN--
Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP
Mark N. Kaplan, age 69, became a director of the Company in 1986.
Mr. Kaplan was a member of the law firm of Skadden, Arps, Slate, Meagher &
Flom LLP from 1979 to 1998 and is now of counsel to the firm. Mr.
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Kaplan also serves as a director of American Biltrite Inc., Autobytel.com,
Grey Advertising Inc., REFAC Technology Inc., Congoleum Corporation and
Volt Information Sciences, Inc.
IRA ALBOM--
Senior Vice President, Teleflex, Inc.
Ira Albom, age 70, became a director of the Company in February
1997. Mr. Albom has been employed since 1977 by Teleflex, Inc., a defense
and aerospace company, and has been Senior Vice President at Teleflex
since 1987. Mr. Albom has over forty years of operations and management
experience in the defense and aerospace industry. Since 1987, he has been
actively involved in leading diligence teams and negotiating terms of
mergers and acquisitions, as well as negotiating major contracts for
Teleflex's Defense/Aerospace Group. Mr. Albom also serves as a director of
Klune Industries, Inc.
CLASS III DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING AT THE 2001
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
STUART F. PLATT--
President and Chief Executive Officer, Western Marine Electronics Company
RADM Stuart F. Platt, USN (Ret.), age 65, became a director of the
Company in 1991 and in July 1992 became the President of DRS Precision
Echo, Inc., a wholly-owned subsidiary of the Company ("Precision Echo").
In May 1994, he became a Vice President of the Company and also served as
the President of the Company's Data Systems Group, of which Precision Echo
is a part. He currently is the President and Chief Executive Officer of
WESMAR (Western Marine Electronics Company), a Washington State based
company. Rear Admiral Platt held various high level positions as a
military officer in the Department of the Navy, retiring as Competition
Advocate General of the Navy in 1987. He also serves as a director of
Harding Lawson Associates.
WILLIAM F. HEITMANN--
Vice President and Treasurer, Bell Atlantic Corp.
William F. Heitmann, age 50, became a director of the Company in
February 1997. Mr. Heitmann has been employed by Bell Atlantic Corp. and
its predecessors since 1971, and has been a Vice President since 1996 and
Treasurer since June 1999. Mr. Heitmann was involved in the merger
integration activities of NYNEX and Bell Atlantic. Previously, he was
President and Chief Investment Officer of NYNEX Asset Management Co. Prior
to that, he was Corporate Director of Finance and President of NYNEX
Credit Co. Mr. Heitmann also serves as a director of Bell Atlantic Asset
Management Co. and is Chairman of Bell Atlantic Credit Corp. and Exchange
Indemnity Corp. He is a member of the Real Estate Advisory Board of the
New York Common Fund.
ERIC J. ROSEN--
Managing Director, Onex Investment Corp.
Mr. Rosen, age 38, is a Managing Director of Onex Investment Corp.
and has been with Onex Investment Corp. since 1989. Previously, he worked
at Kidder, Peabody & Co. in both the Mergers and Acquisitions and Merchant
Banking Groups. Mr. Rosen also serves as a director of Caterair
International, Dura Automotive Systems, Tower Automotive, Inc., Ripplewood
Holdings, Phoenix Pictures and Worldbridge Broadband Services. Mr. Rosen
and Mark S. Newman, the Chairman of the Board, President and Chief
Executive Officer of the Company, are first cousins.
C. SHELTON JAMES--
President, Fundamental Management Corporation
C. Shelton James, age 59, became a director of the Company in
February 1999. Mr. James currently serves as President of Fundamental
Management Corporation, an investment management company. Mr. James is
also Chairman of the Board of Elcotel, Inc., a public communications
company and serves as a director of Concurrent Computer Systems, Inc., SK
Technologies, CSPI, Inc., Cyberguard Corporation and Technisource, Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ELECTION OF THE NOMINEES.
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PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed KPMG LLP as independent
public accountants of the Company for the fiscal year ending March 31, 2000. The
Company has been advised by KPMG LLP 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.
The Board of Directors of the Company is submitting the selection of KPMG
LLP for ratification by the stockholders at the Meeting. If a majority of the
shares of the Common Stock of the Company represented in person or by proxy at
the Meeting is not voted for ratification (which is not expected), the Board of
Directors of the Company will reconsider its appointment of KPMG LLP as
independent certified public accountants for the fiscal year ending March 31,
2000.
KPMG LLP 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE TO RATIFY THE APPOINTMENT OF THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of May 23, 1999, 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.
<TABLE>
<CAPTION>
Common Stock(a)
--------------------------------------
Percent
Shares of Class
---------------------- --------
<S> <C> <C>
Mark S. Newman ........................................ 290,258(b)(c)(d)(e) 3.1
Ira Albom ............................................. 19,500(c) 0.2
Donald C. Fraser ...................................... 7,500(c) 0.1
William F. Heitmann ................................... 8,500(c) 0.1
Steven S. Honigman .................................... -- --
C. Shelton James ...................................... 3,100 --
Mark N. Kaplan ........................................ 7,500(c) 0.1
Stuart F. Platt ....................................... 50,650(c) 0.5
Eric J. Rosen ......................................... -- --
Paul G. Casner, Jr. ................................... 42,230(c)(e) 0.5
Nina Laserson Dunn .................................... 32,142(c)(e) 0.3
Nancy R. Pitek(f) ..................................... 2,000(c)(e) --
Richard Ross .......................................... 46,623(c)(e) 0.5
All directors, nominees and executive
officers as a group (13 persons) ..................... 510,003(b)(c)(d)(e) 5.3
</TABLE>
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(a) As of May 23, 1999, the Company had outstanding 9,231,669 shares of Common
Stock (excluding 385,164 shares held in the treasury). Unless otherwise
noted, each beneficial owner had sole voting power and investment power
over the shares of Common Stock indicated opposite such beneficial owner's
name.
(b) Includes 8,065 shares of Common Stock held by the trustee of the Company's
Retirement/Savings Plan. Mr. M. Newman shares the power to direct the
voting of such shares with members of the administrative committee of such
plan. Mr. M. Newman disclaims beneficial ownership as to and of such
shares.
(c) Includes shares of Common Stock that might be purchased upon exercise of
options that were exercisable on May 23, 1999 or within 60 days
thereafter, as follows: Mr. M. Newman, 175,000 shares; Mr. I. Albom, 7,500
shares; Dr. D. Fraser, 7,500 shares; Mr. W. Heitmann, 7,500 shares; Mr. C.
S. James, 3,100 shares; Mr. M. Kaplan, 7,500 shares; Mr. S. Platt, 40,000
shares; Ms. N. Dunn, 30,000 shares; Mr. R. Ross, 40,000 shares; and all
directors, nominees and executive officers as a group, 318,100 shares.
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(d) Includes 4,800 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) Includes restricted shares of Common Stock awarded to the following
officers: Mr. M. Newman, 16,151 shares; Mr. P. Casner, Jr., 6,230 shares;
Ms. N. Dunn, 2,142 shares; and Mr. R. Ross, 5,623 shares. The shares are
restricted for a period of three years from the effective grant date,
during which time they may not be sold or transferred. In the event an
officer leaves the employ of the Company before the restrictions lapse,
all rights to the shares may be forfeited. The officers disclaim
beneficial ownership as to and of such shares.
(f) Ms. N. Pitek's employment with the Company terminated on April 14, 1999.
The following table sets forth certain information, as of May 23, 1999,
with respect to each person, other than directors, nominees and executive
officers 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.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ------------ ----------
First Pacific Advisors, Inc. ................ 1,565,575(a) 16.1
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Palisade Capital Management, L.L.C. ......... 813,251(b) 8.7
One Bridge Plaza, Suite 695,
Fort Lee, NJ 07024
Forest Investment Management LLC ............ 622,260(c) 6.7
53 Forest Avenue, Greenwich, CT 06870
Michael N. Taglich .......................... 529,850(d) 5.7
Taglich Brothers, D'Amadeo, Wagner, &
Company, Incorporated
100 Wall Street, New York, NY 10005
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(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 and 1,057,100 shares of Common Stock
beneficially owned by First Pacific Advisors, Inc. ("First Pacific")
through management of FPA Capital Fund, Inc. ("Capital Fund") and other
investment companies and institutional accounts to which First Pacific
serves as investment advisor. The Company has been advised that First
Pacific has shared voting power with respect to 300,000 shares and shared
dispositive power with respect to 1,565,575 shares and Capital Fund has
sole voting power and shared dispositive power with respect to 510,000
shares.
(b) Includes 71,751 shares of Common Stock from the assumed conversion of
$635,000 principal amount of the Company's 9% Senior Subordinated
Convertible Debentures due 2003. The Company has been advised that
Palisade Capital Management, L.L.C., acting as investment advisor to (i)
DaimlerChrysler Corp. Retirement Plan, (ii) IBM Corp. Retirement Plan,
(iii) GE Pension Trust Equity Account and (iv) Bell Atlantic Master
Pension Trust, has sole voting power and dispositive power with respect to
the shares.
(c) Represents 622,260 shares of Common Stock held by (i) Forest Investment
Management LLC ("Forest"), (ii) Founders Financial Group, L.P.
("Founders"), in its capacity as the owner of a controlling interest in
Forest, (iii) Michael A. Boyd, Inc. ("MAB, Inc."), in its capacity as the
general partner of Founders, and (iv) Michael A. Boyd ("Mr. Boyd"), in his
capacity as the sole director and shareholder of MAB, Inc. The Company has
been advised that Mr. Boyd has sole voting and dispositive power with
respect to the shares.
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(d) 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.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the outstanding shares
of the Company's Common Stock, to file initial reports of beneficial ownership
and reports of changes in beneficial ownership of shares of Common Stock with
the Securities and Exchange Commission (the "Commission") and each securities
exchange on which the Company's Common Stock is traded. Such persons are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the fiscal year ended March 31, 1999 ("fiscal
1999") and upon a review of Forms 5 and amendments thereto furnished to the
Company with respect to fiscal 1999, or upon written representations received by
the Company from certain reporting persons that no Forms 5 were required for
those persons, the Company believes that no director, executive officer or
holder of more than 10% of the outstanding shares of Common Stock failed to file
on a timely basis the reports required by Section 16(a) of the Exchange Act
during, or with respect to, fiscal 1999, except the following: (i) Messrs.
Steven S. Honigman, Eric J. Rosen and C. Shelton James, directors of the
Company, who inadvertently failed to file a Form 3 on a timely basis with
respect to their election as directors of the Company; (ii) Messrs. Ira Albom,
Donald C. Fraser, Mark N. Kaplan and Stuart F. Platt, directors of the Company,
who inadvertently failed to file a Form 5 on a timely basis with respect to
stock options granted pursuant to the provisions of the 1996 Omnibus Plan; (iii)
Mr. Richard A. Schneider, an officer of the Company, who inadvertently failed to
file on a timely basis a Form 3 upon his appointment as an officer of the
Company; (iv) Mr. Mark S. Newman and Ms. Nina Laserson Dunn, officers of the
Company, who inadvertently failed to file on a timely basis a Form 5 in
connection with stock and stock options granted; (v) Mr. Paul G. Casner, Ms.
Nancy R. Pitek and Mr. Richard Ross, officers of the Company, who inadvertently
failed to file on a timely basis (a) a Form 5 in connection with stock and stock
options granted to them in fiscal 1999 and (b), a Form 4 in connection with
stock options exercised by each of them in July 1998; (vi) William F. Heitmann,
a director of the Company, who inadvertently failed to file on a timely basis
(a) a Form 4 in connection with an open market purchase of stock and (b) a Form
5 with respect to stock options granted pursuant to the provisions of the 1996
Omnibus Plan, and (vii) First Pacific Advisors, Inc., a beneficial owner, which
inadvertently failed to file in a timely basis a Form 5 with respect to its
ownership interests in DRS. The grant transactions referenced above were exempt
transactions as defined under Rule 16(b)-3 and, as such, were not reportable on
Form 4 during fiscal 1999.
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 5, 1998, the Audit Committee
consisted of Theodore Cohn, William F. Heitmann, Mark N. Kaplan and Jack
Rachleff. At a meeting of the Board on August 5, 1998, the composition of
the Audit Committee was changed to include William F. Heitmann, Mark N.
Kaplan, Steven S. Honigman and Stuart Platt. The Audit Committee held four
meetings during fiscal 1999.
The function of the Executive Compensation Committee (the
"Compensation Committee") is to establish the compensation of the Chief
Executive Officer and the other executive officers of the Company. Until
August 5, 1998, the Compensation Committee consisted of Theodore Cohn,
Donald C. Fraser, Mark N. Kaplan and Jack Rachleff. At a meeting of the
Board on August 5, 1998, the composition of the Compensation Committee was
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changed to include Mark N. Kaplan, Ira Albom, Donald C. Fraser and Eric J.
Rosen. The Compensation Committee held three meetings during fiscal 1999.
The function of the Stock Option Committee is to administer the
Company's 1991 Stock Option Plan and the 1996 Omnibus Plan. 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, except as permitted by Rule 16b-3. Until August 5, 1998, the
Stock Option Committee consisted of Ira Albom, Donald C. Fraser and Jack
Rachleff. At a meeting of the Board on August 5, 1998, the composition of
the Stock Option Committee was changed to include Ira Albom, Donald C.
Fraser, Mark N. Kaplan and Eric J. Rosen. The Stock Option Committee met
one time during fiscal 1999.
The Board held seven meetings during fiscal 1999. 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 1999, each director who was not an
employee of the Company or one of its subsidiaries received a retainer of
$15,000 for his services, plus a fee of $2,500 for each meeting of the Board
attended. Such directors who also served on committees of the Board received an
additional $1,250 for services rendered in connection with committee meetings
attended that 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 that instituted an arrangement under the Company's 1991
Stock Option Plan by which each director who was not or has never been an
employee of the Company or one of its subsidiaries (a "Non-Employee Director")
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 were approved, granted a Non-Qualified Stock Option
to purchase 2,500 shares of Common Stock. These resolutions were approved by the
stockholders of the Company on August 7, 1996. The Company's 1996 Omnibus Plan
(the "Plan") was approved by the Board on June 17, 1996 and approved by the
stockholders of the Company on August 7, 1996. 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 currently is occupying and leasing a building at 138 Bauer
Drive (the "LDR Building") owned by LDR Realty Co. ("LDR"), a partnership that
was wholly owned, in equal amounts, by David E. Gross, a co-founder and the
former President and Chief Technical Officer of the Company, and Leonard Newman,
a co-founder and the former Chairman of the Board, Chief Executive Officer and
Secretary of the Company and the father of Mark S. Newman, the current Chairman
of the Board, President and Chief Executive Officer of the Company. The
renegotiated lease agreement at a monthly rental of $19,439 expires on June 30,
2002. 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 Company believes that this lease was consummated on terms
no less favorable than those that could have been obtained by the Company from
an unrelated third party in a transaction negotiated on an arm's-length basis.
Mr. L. Newman died on November 24,1998. Ruth Newman, the mother of Mark S.
Newman, succeeded to Mr. L. Newman's interest in LDR Realty Co.
Skadden, Arps, Slate, Meagher & Flom LLP, a law firm to which Mark N.
Kaplan, a director, is of counsel, provided legal services to the Company during
its 1999 fiscal year.
During fiscal 1999, but prior to the date he became a director, the
Company paid Steven S. Honigman to provide consultation to the Company
concerning company policies and international business. During fiscal 1999,
total remuneration paid to Mr. Honigman under this arrangement approximated
$5,466.
7
<PAGE>
Thelen Reid & Priest LLP, a law firm of which Mr. Honigman is a partner,
provided legal services to the Company during its 1999 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 1999, total remuneration paid to Dr.
Fraser under this agreement approximated $2,082.
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., Executive Vice
President, Operations of the Company. Interest on the Grid Note was computed at
the applicable federal rate necessary under the Internal Revenue Code of 1986,
as amended, to avoid an imputed rate of interest. As of January 1997, all
balances and accrued interest on the Grid Note had been forgiven. See "Executive
Compensation."
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 that
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 currently bears interest at the applicable federal rate necessary under the
Internal Revenue Code of 1986, as amended, to avoid an imputed rate of interest.
One-half of the outstanding principal and accrued interest will be forgiven
during fiscal 2000. The balance of the outstanding principal and accrued
interest will be forgiven during fiscal 2001.
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 and the father of Mark S. Newman, the current Chairman of the Board,
President 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, in consideration for payment
of $6,000 per annum, Mr. L. Newman agreed to provide consulting services, as
required from time to time, to the Company for a five-year period terminating on
March 30, 2001 and also agreed not to compete with the Company during this same
period. The Newman Agreement also provided that upon Mr. L. Newman's death, his
estate would be entitled to receive such payments until the termination date.
Due to Mr. L. Newman's death in November 1998, the Company temporarily
discontinued such payments pending instructions from his estate. In addition,
upon his death, the Company received $1,528,494, which represents the net
death benefits from various life insurance policies with respect to Mr. L.
Newman.
During fiscal 1999, the Company paid Ira Albom, a director of the Company,
to provide consulting services to the Company regarding strategic planning. Such
consulting services were provided to the Company on an as-requested basis, for a
fee of $1,000 per day plus approved travel and miscellaneous expenses. Total
remuneration paid to Mr. Albom under this arrangement approximated $2,250.
On June 4, 1999, the Company became a party to a loan with Mr. P. Casner,
Jr. The loan is evidenced by a promissory note in the principal amount of
$100,000 and bears interest at the annual rate of 6.375%. The loan is payable on
September 4, 1999 with monthly payments of interest until the loan is repaid.
The loan can be extended for an additional three months at the discretion of the
Company upon receipt of a written request for such extension. The loan is
secured by a second mortgage on real property owned by Mr. Casner and his wife
located in Cliffside Park, New Jersey.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended March 31, 1999, 1998 and 1997, of those persons who were, at
March 31, 1999, (i) the chief executive officer and (ii) the four most highly
compensated executive officers of the Company other than the chief executive
officer (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(a) LONG-TERM COMPENSATION
---------------------- ----------------------
RESTRICTED
STOCK ALL OTHER
AWARD(S) ($) COMPENSATION ($)
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) (b) OPTIONS (#) (c)(d)(e)
- --------------------------- ----------- ---------- --------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman ................. 1999 499,336 248,480 37,120 450,000(f) 35,568
Chairman of the Board, 1998 365,512 228,480 57,120 20,000(g) 30,782
President & Chief 1997 342,739 192,000 48,000 50,000(h) 30,699
Executive Officer
Nina Laserson Dunn(i) .......... 1999 259,423 69,280 15,720 30,000(j) 16,676
Executive Vice President, 1998 191,875 118,880 29,720 50,000(k) 10,465
General Counsel & Secretary
Paul G. Casner, Jr. ............ 1999 245,116 103,060 21,940 30,000(j) 19,421
Vice President & 1998 225,865 105,120 26,280 10,000(g) 15,424
President--Electronic 1997 209,139 56,000 14,000 10,000(l) 39,621(m)
Systems Group
Nancy R. Pitek(n) .............. 1999 180,479 0 0 12,500(j) 10,141
Vice President, Finance & 1998 156,290 68,080 17,020 7,500(g) 8,894
Treasurer 1997 134,127 60,000 15,000 5,000(l) 8,476
Richard Ross ................... 1999 241,441 56,000 14,000 15,000(j) 13,346
Vice President & 1998 210,000 72,800 18,200 10,000(g) 14,985
President--Electro-Optical 1997 211,808 63,200 15,800 10,000(l) 12,723
Systems Group
</TABLE>
- ----------
(a) The dollar value of perquisites and other personal benefits provided for
the benefit of the Named Officers during the fiscal years ended March 31,
1999, 1998 and 1997, 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.
(b) During the fiscal years ending March 31, 1999, 1998 and 1997, a portion 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 the end of such
period. In the event a Named Officer leaves the employ of the Company
before the restrictions lapse, all rights to the shares may be forfeited.
(c) 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, 1999, 1998 and 1997, respectively, in the
accounts of the Named Officers, as follows: Mr. M. Newman, $5.151, $4,442
and $4,920; Ms. N. Dunn, $4,857 and $1,295; Mr. P. Casner, Jr., $5,037,
$5,188 and $3,820; Mr. R. Ross, $4,914, $5,703 and $3,890; and Ms. N.
Pitek, $4,184, $2,966 and $2,536.
(d) 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 plans during the fiscal years
ended March 31, 1999, 1998 and 1997, respectively, as follows: Mr. M.
Newman, $10,000, $10,000 and $10,000; Ms. N. Dunn, $7,500 and $7,500; Mr.
P. Casner, Jr., $5,625, $5,000 and $5,000; Mr. R. Ross, $5,000, $5,000 and
$5,000; and Ms. N. Pitek, $5,000, $5,000 and $5,000.
9
<PAGE>
(e) 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.
In addition, the Company pays premiums on policies maintained in
connection with its Supplemental Executive Retirement Plan (see
"Supplemental Executive Retirement Plan"). 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, 1999, 1998 and 1997, respectively,
were as follows: Mr. M. Newman, $20,417, $16,340 and $15,779; Ms. N. Dunn,
$4,319 and $1,670; Mr. P. Casner, Jr., $8,759, $5,236 and $4,685; Mr. R.
Ross, $3,432, $4,282 and $3,833; and Ms. N. Pitek, $957, $928 and $940.
(f) Represents non-qualified stock options to purchase 90,000 and 110,000
shares of Common Stock issued to Mr. M. Newman under the Company's 1996
Omnibus Plan. Those options, with a grant date of February 11, 1999,
become exercisable on the first four anniversaries of the date of grant at
25% per year. Also represents options to purchase 70,000 and 180,000
shares of Common Stock issued to Mr. M. Newman by the Board of Directors
as other performance related compensation. Those options, with a grant
date of October 26, 1998, become exercisable on the first four
anniversaries of the date of grant at 25% per year.
(g) Represents incentive stock options to purchase shares of Common Stock
issued to the Named Officers under the Company's 1996 Omnibus Plan. Such
options, granted on May 20, 1997, become exercisable three years from the
date of grant.
(h) Represents non-qualified stock options to purchase shares of Common Stock
issued to Mr. M. Newman under the Company's 1996 Omnibus Plan. Such
options, granted on November 26, 1996, become exercisable cumulatively at
25% per year on each of the first four anniversaries of the date of grant.
(i) Ms. N. Dunn was hired by the Company effective July 1, 1997.
(j) Represents incentive stock options to purchase shares of Common Stock
issued to the Named Officers under the Company's 1996 Omnibus Plan. Such
options, granted on October 26, 1998, become exercisable three years from
the date of grant.
(k) Represents non-qualified and incentive stock options to purchase 20,000
and 30,000 shares, respectively, of Common Stock issued to Ms. N. Dunn
under the Company's 1996 Omnibus Plan. Such options, granted on April 30,
1997, were exercisable as to 20% upon the date of grant and become
exercisable cumulatively at 20% per year on each of the first four
anniversaries of the date of grant.
(l) Represents total incentive and non-qualified stock options to purchase
shares of Common Stock issued to the Named Officers under the Company's
1996 Omnibus Plan. Such options, granted on November 26, 1996, become
exercisable three years from the date of grant.
(m) Includes forgiveness of principal and interest owed pursuant to the Grid
Note in an amount equal to $26,125 during the fiscal year ended March 31,
1997. See "Certain Relationships and Related Transactions."
(n) Ms. N. Pitek's employment with the Company terminated on April 14, 1999.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
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 DRS
Photronics, Inc., 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.
In November 1996, the Company entered into an agreement with Mark S.
Newman (the "Employment Agreement"), which provides for severance benefits in
the event of (i) termination of his employment by the Company other than for
cause, (ii) termination of the Employment Agreement by Mr. Newman for good
reason, as defined therein, or (iii) a change in control of the Company.
Severance benefits in the event of termination include continuation of salary
and certain benefits for the remaining term of the Employment Agreement or
twelve (12) months, whichever is greater, plus payment of a pro rata portion of
the bonus earned for the previous fiscal year. In the
10
<PAGE>
event of a change in control, the severance benefit would be equal to 2.99 times
Mr. Newman's base salary plus the bonus earned in the previous fiscal year. In
either case, the Company also would be required to provide outplacement
assistance to Mr. Newman. In addition, all stock options granted to Mr. Newman
would immediately vest and would become exercisable during the twelve (12) month
period following termination.
In April 1997, the Company entered into an agreement with Nina Laserson
Dunn (the "Dunn Employment Agreement"), which provides for severance benefits in
the event of (i) termination of her employment by the Company other than for
cause, (ii) termination of the Dunn Employment Agreement by Ms. Dunn for good
reason, as defined therein, or (iii) a change in control of the Company.
Severance benefits in the event of termination include continuation of salary
and certain benefits for the remaining term of the Dunn Employment Agreement or
twenty-four (24) months, whichever is greater, plus payment of a pro rata
portion of the current year's bonus, which could have been paid for the year of
termination. In the event of a change in control, the severance benefit would be
equal to 2.99 times Ms. Dunn's base salary plus the bonus earned in the previous
fiscal year. In either case, the Company also would be required to provide
outplacement assistance to Ms. Dunn. In addition, all stock options granted to
Ms. Dunn would immediately vest and would become exercisable during the twelve
(12) month period following termination.
In February 1999, the Company entered into an agreement with Richard A.
Schneider (the "Schneider Employment Agreement"), which provides for severance
benefits in the event of (i) termination of his employment by the Company other
than for cause, (ii) termination of the Schneider Employment Agreement by Mr.
Schneider for good reason, as defined therein, or (iii) a change in control of
the Company. Severance benefits in the event of termination include continuation
of salary and certain benefits for twelve (12) months, plus payment of a pro
rata portion of the current year's bonus, which could have been paid for the
year of termination. In the event of a change in control, the severance benefit
would be equal to 2.0 times Mr. Schneider's base salary plus the bonus earned in
the previous fiscal year. In either case, the Company would also be required to
provide outplacement assistance to Mr. Schneider. In addition, all stock options
granted to Mr. Schneider would immediately vest and would become exercisable
during the twelve (12) month period following termination.
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
include 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
advances premiums for life insurance policies, which provide 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 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 or her. 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.
11
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to the Named Officers during the Company's last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<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 1999 ($/Sh) DATE 0% 5% (a) 10% (a)
- -------------------------- ------------- -------------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark S. Newman ........... 90,000(b) 10.07% $ 7.75 10/25/08 $ 22,500 $475,304 $1,169,995
110,000(b) 12.31% $ 9.00 10/25/08 ($110,000) $443,427 $1,292,493
70,000(c) 7.83% $ 9.00 10/25/08 ($ 70,000) $282,181 $ 822,496
180,000(d) 20.14% $11.00 10/25/08 ($540,000) $365,608 $1,754,989
Paul G. Casner ........... 30,000(b) 3.36% $ 7.75 10/25/08 $ 7,500 $158,435 $ 389,998
Nina Laserson Dunn ....... 30,000(b) 3.36% $ 7.75 10/25/08 $ 7,500 $158,435 $ 389,998
Nancy R. Pitek(e) ........ 12,500(b) 1.40% $ 7.75 10/25/08 $ 3,125 $ 66,014 $ 162,499
Richard Ross ............. 15,000(b) 1.68% $ 7.75 10/25/08 $ 3,750 $ 79,217 $ 194,999
</TABLE>
- ----------
(a) 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.
(b) The options granted were for shares of the Company's Common Stock under
the Company's 1996 Omnibus Plan at an exercise price below the fair market
value of the Company's Common Stock on the date of grant. The options
become exercisable on the first four anniversaries of the date of grant at
25% per year. The grant date of the options is February 11, 1999.
(c) The options granted were for shares of the Company's Common Stock at an
exercise price below the fair market value of the Company's Common Stock
on the date of grant. The options were granted by the Board of Directors
and become exercisable over the first four anniversaries at 25% per year.
The grant date of the option is October 26, 1998.
(d) The options granted were for shares of the Company's Common Stock at an
exercise price above the fair market value of the Company's Common Stock
on the date of the grant. The options were granted by the Board of
Directors and become exercisable on the first four anniversaries of the
date of the grant at 25% per year. The grant date of the options is
October 26, 1998.
(e) Ms. N. Pitek's employment with the Company terminated on April 14, 1999.
12
<PAGE>
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 1999 as well as the unexercised
options to purchase the Company's Common Stock granted through March 31, 1999 to
the Named Officers and held by them at that date.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 1999 MARCH 31, 1999 ($) (A)
-------------------------- ---------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman ................... -- -- 175,000 495,000 $704,500 $ 22,500
Paul G. Casner ................... 30,000 $314,700 -- 50,000 $ -- $ 7,500
Nina Laserson Dunn ............... -- -- 20,000 60,000 $ 63,920 $103,380
Nancy R. Pitek(b) ................ 2,000 $ 16,125 -- 25,000 $ -- $ 3,125
Richard Ross ..................... 1,000 $ 7,000 40,000 45,000 $ 10,000 $ 6,250
</TABLE>
- ----------
(a) 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.
(b) Ms. N. Pitek's employment with the Company terminated on April 14, 1999.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until August 5, 1998, the Compensation Committee consisted of Theodore
Cohn, Donald C. Fraser, Mark N. Kaplan and Jack Rachleff. At a meeting of the
Board on August 5, 1998, the composition of the Compensation Committee was
changed to include Mark N. Kaplan, Ira Albom, Donald C. Fraser and Eric J.
Rosen. Until August 5, 1998 the Stock Option Committee consisted of Ira Albom,
Donald C. Fraser and Jack Rachleff. At a meeting of the Board on August 5, 1998,
the composition of the Stock Option Committee was changed to include Ira Albom,
Donald C. Fraser, Mark N. Kaplan and Eric J. Rosen. Mr. Rosen and Mark S.
Newman, the Chairman of the Board, President and Chief Executive Officer of the
Company, are first cousins. Skadden, Arps, Slate, Meagher & Flom LLP, a law firm
to which Mr. Kaplan is of counsel, provided legal services to the Company during
its 1999 fiscal year.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal 1999, the Compensation Committee established the
compensation of the Chief Executive Officer of the Company. The bonus awards of
the Named Officers in respect of the 1999 fiscal year were determined at a
meeting of the Compensation Committee as constituted on May 12, 1999. 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. and Lyons, Benenson and
Company, 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 and level of responsibility and are based
on compensation paid by
13
<PAGE>
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 that 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, 1999 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 1999 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 extraordinary items, interest
and income taxes for fiscal 1999.
For fiscal 1999, the Chief Executive Officer recommended the compensation,
including 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 Company's 1996 Omnibus Plan is designed to give the Compensation
Committee the flexibility to make annual incentive awards that are comparable to
those found in the marketplace in which the Company competes for executive
talent. The 1996 Omnibus Plan permits the payment of incentive awards that are
intended to qualify as deductible, performance-based compensation under Section
162(m) of the Internal Revenue Code. The Board may, at its discretion, grant
equity-based compensation awards, subject to certain regulatory restrictions.
Mark N. Kaplan, Chairman
Ira Albom
Donald C. Fraser
Eric Rosen
14
<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 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 databases, such as Dialog Information Systems. Prior to the start of
the Company's 1997 fiscal year, the Company had two classes of common stock:
Class A Common Stock and Class B Common Stock. At the start of the Company's
1997 fiscal year, the Class A Common Stock and the Class B Common Stock were
reclassified into a single class of stock, the Common Stock. The information in
the line graph for the cumulative total stockholder return on the Company's
Common Stock for fiscal years prior to the 1997 fiscal year represents the
weighted average of the cumulative total stockholder returns for both the Class
A Common Stock and the Class B Common Stock for those fiscal years.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG DRS TECHNOLOGIES, INC. ("DRS") COMMON STOCK,
AMEX MARKET INDEX AND PEER GROUP INDEX
[GRAPHICAL REPRESENTATION OF PERFORMANCE GRAPH]
DRS AMEX
Common Stock Market Index Peer Group
------------ ------------ ----------
1994 100.00 100.00 100.00
1995 140.95 105.47 113.41
1996 210.62 127.51 160.93
1997 281.94 128.79 152.42
1998 368.18 168.22 222.16
1999 212.28 159.20 192.97
- ----------
* Assumes that the value of the investment in DRS Common Stock and each
index was $100 on April 1, 1994 and that
dividends, if any, were reinvested.
15
<PAGE>
STOCKHOLDERS' PROPOSALS
Any stockholder who desires to submit a proposal for inclusion in the
Company's proxy materials for the 2000 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, 2000.
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 Company will pay the costs of this solicitation. 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.
16
<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, 1999 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, VICE PRESIDENT, CORPORATE COMMUNICATIONS, DRS TECHNOLOGIES, INC., 5
SYLVAN WAY, PARSIPPANY, NEW JERSEY 07054. THE FORM 10-K IS NOT PART OF THE PROXY
SOLICITATION MATERIALS.
By Order of the Board of Directors,
/s/ NINA LASERSON DUNN
-----------------------------------
NINA LASERSON DUNN
Secretary
Dated: June 29, 1999
17
<PAGE>
DRS TECHNOLOGIES, INC.
PROXY SOLICITED IN BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 5, 1999
The undersigned, revoking all previous proxies, appoints Mark S. Newman
and Nina Laserson Dunn, 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 DRS
Technologies, Inc. (the "Company") to be held on August 5, 1999, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. To approve the election of all [ ] FOR all nominees listed below
director nominees listed below: (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to
vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any of the nominees, strike a
line through the nominee's name below.)
Nominees: Mark S. Newman, Donald C. Fraser and Steven S. Honigman
2. To approve the Auditor Ratification. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on reverse side)
<PAGE>
(continued from reverse side)
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 and 2.
Date: ____________________________________, 1999
________________________________________________
Signature
________________________________________________
Signature of joint holder, if any
Please sign as your name appears on 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.
