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. __)
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
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DRS TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)
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[DRS LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 9, 2000
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 Mellon Bank, N.A., Metropolitan Life Building,
200 Park Avenue, Seventh Floor, Room 7G, New York, New York at 10:00 A.M., local
time, on Wednesday, August 9, 2000, for the following purposes:
(1) To consider and vote upon an amendment to the Company's By-Laws to
increase the minimum and maximum number of directors so that the whole
Board of Directors shall be constituted of not less than seven nor more
than eleven members;
(2) To elect three Class II directors, each to hold office for a term of
three years;
(3) To consider and vote upon an amendment to DRS' 1996 Omnibus Plan to
increase the number of shares of DRS Common Stock reserved for issuance
under DRS' plan by 975,000 shares of Common Stock;
(4) 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
(5) 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 23, 2000 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
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NINA LASERSON DUNN
Secretary
Parsippany, New Jersey
June ___, 2000
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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[LOGO]
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 9, 2000
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, 2000 in connection with the
solicitation of proxies by the Board of Directors (the "Board") for the 2000
Annual Meeting of Stockholders (the "Meeting") of the Company to be held
Wednesday, August 9, 2000, at 10:00 A.M., local time, at the offices of Mellon
Bank, N.A., Metropolitan Life Building, 200 Park Avenue, Seventh Floor, Room 7G,
New York, New York.
The Board has fixed the close of business on June 23, 2000 as the record
date for determining the stockholders of the Company entitled to vote at the
Meeting. As of May 31, 2000, the Company had outstanding 9,276,081 shares of
Common Stock (exclusive of 440,939 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 persons named on the proxy card, or their substitutes, will vote
the shares of Common Stock represented thereby 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 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.
AMENDING THE COMPANY'S BY-LAWS TO INCREASE THE
MINIMUM AND MAXIMUM NUMBERS OF DIRECTORS
THAT SHALL CONSTITUTE THE WHOLE BOARD
The Company's By-Laws provide that the number of directors of the Company
be not less than five nor more than nine. At a duly convened meeting held May
18, 2000, the Board unanimously adopted a resolution proposing to amend Article
III, Section 2 of the By-Laws to provide that the number of directors be not
less than seven nor more than eleven, and, in accordance with Delaware law,
directed that such proposal be submitted to the stockholders for their approval.
The Board has also determined that, if this amendment is approved by the
shareholders, the number of directors that will constitute the Board of
Directors will be fixed at ten.
The Board believes that the proposed change is advisable for several
reasons. As the Company has grown, its customer base and scope of business have
also expanded. By enlarging the size of the Board, the Company will be able to
draw from a broader range of knowledge, expertise and experience and will
benefit from the greater scope of talent and diversity among directors. In the
opinion of the directors, increasing the minimum and maximum numbers of
directors as proposed in the amendment is desirable and in the Company's best
interests. Accordingly, it is proposed that the stockholders of the Company
approve the amendment of Article III, Section 2 of the By-Laws so that, as
amended, it shall read as follows:
"The number of directors which shall constitute the whole Board shall
be such number, not less than seven nor more than eleven, as shall be
determined from time to time by a resolution adopted by the directors then
in office or by the remaining director if there be only one. Directors need
not be stockholders of the Corporation, citizens of the United States, or
residents of the State of Delaware."
The Company's Amended and Restated Certificate of Incorporation requires
that an amendment to the By-Laws be approved by not less than sixty-six and
two-thirds (66 2/3%) percent of all of the votes entitled to be cast at the
meeting.
If the amendment is adopted by the requisite vote of stockholders, the
amendment so adopted will be made effective immediately.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE PROPOSAL TO AMEND ARTICLE III, SECTION 2 OF THE BY-LAWS.
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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. The Board is currently
comprised of nine directors. If the proposal to amend the By-Laws to increase
the maximum number of directors to eleven is approved, the number of directors
that will constitute the whole Board will be ten. If the proposal to amend the
By-Laws to increase the number of directors is approved by the stockholders, the
stockholders will elect three Class II directors at the Meeting. If the proposal
is not approved, the stockholders will elect two Class II directors.
If a quorum of stockholders is present in person or by proxy at the
Meeting, the holders of Common Stock will elect directors by a plurality of the
votes cast by such holders. The Class I directors, Messrs. Mark S. Newman,
Donald C. Fraser and Steven S. Honigman, will continue to serve until the
expiration of their terms in 2002. The Class III directors, 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 II 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 II directors for three-year terms of office expiring
at the 2003 Annual Meeting of Stockholders of the Company:
MARK N. KAPLAN--
Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP
Mr. Kaplan, age 70, 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.
Kaplan also serves as a director of American Biltrite Inc.,
auto-by-tel.com, inc., Grey Advertising Inc., REFAC Technology Inc.,
Congoleum Corporation and Volt Information Sciences, Inc.
IRA ALBOM--
Senior Vice President, Teleflex, Inc.
Mr. Albom, age 71, 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 of 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.
If the stockholders approve the amendment to the By-Laws to increase the
maximum number of directors, unless instructed otherwise, the proxies on the
enclosed proxy card intend to vote the shares of Common Stock that they
represent to elect the following person as Class II director for a three year
term of office expiring at the 2003 Annual Meeting of Stockholders of the
Company:
GENERAL DENNIS J. REIMER, USA (RET.)--
Director, National Memorial Institute for the Prevention of Terrorism
General Reimer, age 61, became the Director of the National Memorial
Institute for the Prevention of Terrorism, located in Oklahoma City,
OK on April 1, 2000. General Reimer served as the 33rd Chief of Staff,
U.S. Army from June 20, 1995 until June 21, 1999. Prior to that he was
Commanding General of United States Army Forces Command, Fort
McPherson, Georgia. From August 1, 1999 until March 31, 2000 General
Reimer served as Distinguished Fellow of the Association of the U.S.
Army. He is a member of the Editorial Board of the Armed Forces
Journal and the Advisory Committee for Media and Security of the Fund
for Peace Project. General Reimer also serves as a director of
Microvision, Inc., Mutual of America and Plato Learning, Inc.
CLASS I DIRECTORS CONTINUING IN OFFICE FOR TERMS 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
Mr. Newman, age 50, 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. Mr. Newman is a director
of the American Electronics Association and is Chairman of its New
Jersey/Pennsylvania Council. He also serves as a director of the New
Jersey Technology Council.
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THE HONORABLE DR. DONALD C. FRASER--
Professor, Boston University
Dr. Fraser, age 59, 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.
THE HONORABLE STEVEN S. HONIGMAN--
Partner, Thelen Reid & Priest LLP
Mr. Honigman, age 52, became a director of the Company in 1998. Mr.
Honigman has been a partner of the law firm of Thelen Reid & Priest
LLP since August 1998. 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 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 III DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING AT THE
2001 ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
RADM STUART F. PLATT, USN (RET.)--
Former President and Chief Executive Officer, Western Marine
Electronics Company
Admiral Platt, age 66, became a director of the Company in 1991. From
May 1994 until 1999, he served as a Vice President of the Company and
also as the President of the Company's Data Systems Group. Admiral
Platt also served as President of DRS Precision Echo, Inc., a
wholly-owned subsidiary of the Company from July 1992 to August 1998.
He currently is the Chairman of Discover RV, an Arizona based dealer
network company and Chairman of CDCOM, a Washington State based data
storage company. 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 and Hydro Wing Hawaii.
WILLIAM F. HEITMANN--
Vice President and Treasurer, Bell Atlantic Corp.
Mr. Heitmann, age 51, 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. He has been designated as Senior Vice
President and Treasurer of Verizon, the company that will be formed
through the merger of Bell Atlantic and GTE. Previously, he was
President and Chief Investment Officer of NYNEX Asset Management
Company and President of NYNEX Credit Company. Mr. Heitmann also
serves as a director for Bell Atlantic Asset Management Company 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 and The Financial Executives Institute.
ERIC J. ROSEN
Managing Director, Onex Investment Corp.
Mr. Rosen, age 39, became a director of the Company in August 1998. He
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 Dura Automotive
Systems. 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, C.S. James and Associates
Mr. James, age 60, became a director of the Company in February 1999.
Mr. James is currently President of C.S. James and Associates,
business advisors, and has served in that position since May 2000.
Until June 1999 he served as President of Fundamental Management
Corporation, an investment management company. Mr. James was Chairman
of the Board of Elcotel, Inc., a public communications company until
February 2000. He serves as a director of Concurrent Computer Systems,
Inc, SK Technologies, CSPI, Inc. 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 AMEND DRS' 1996 OMNIBUS PLAN TO INCREASE
THE NUMBER OF SHARES OF DRS COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE 1996 OMNIBUS PLAN
Capitalized terms used in this section of the proxy statement will, unless
otherwise defined, have the meanings assigned to them in the text of DRS' 1996
Omnibus Plan ("plan").
DRS' plan was approved by the DRS Board on June 17, 1996 and approved by
the DRS stockholders on August 7, 1996 at the 1996 Annual Meeting of
Stockholders.
An amendment to DRS' plan was approved by the DRS Board on November 29,
1998 and approved by the DRS stockholders on February 11, 1999 at a Special
Meeting of Stockholders. Under the amendment the number of shares of DRS Common
Stock reserved for issuance under the plan was increased by 900,000 shares of
DRS Common Stock to an aggregate of 1,400,000 shares of DRS Common Stock.
On May 18, 2000 the DRS Board adopted a resolution proposing a further plan
amendment to increase the number of shares of DRS Common Stock reserved for
issuance under the plan by 975,000 shares of DRS Common Stock to an aggregate of
2,375,000 shares of DRS Common Stock. The increase is required because the
number of shares currently available under the plan is insufficient to satisfy
the Company's anticipated incentive compensation needs for current and future
employees. The Board believes that the adoption of the plan amendment would,
among other things, enhance the long-term stockholder value of the Company by
offering opportunities to the Company's employees, directors, officers and
consultants to participate in the Company's growth and success, and would
encourage them to remain in the service of the Company and its subsidiaries and
to acquire stock ownership in the Company. The Board believes that existing
option grants and stock awards have contributed to the successful achievement of
the Company and that the granting of stock options and stock awards for these
purposes is comparable with the practices of companies engaged in similar
businesses.
The plan amendment is being presented for approval of the DRS stockholders.
An amendment to the plan requires approval of a majority of votes cast by
holders of all outstanding standing shares of DRS Common Stock entitled to vote
at the meeting. In all other respects the provisions of DRS' plan will remain as
approved and adopted by the DRS stockholders at the 1996 Annual Meeting of
Stockholders. If approved by DRS stockholders, the plan amendment would cause
the first paragraph of Section 3(a) of DRS' plan to read as follows:
(a) Shares Available for Awards
The maximum number of shares of Company Stock reserved for
issuance under the Plan shall be 2,375,000 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' 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.
The following summary of the material features of DRS' plan (which assumes
adoption of the plan amendment) is qualified in its entirety by reference to the
complete text of DRS' plan (as proposed to be amended), a copy of which is
available by writing to Patricia Williamson, Vice President, Corporate
Communications, DRS Technologies, Inc., 5 Sylvan Way, Parsippany, New Jersey
07054.
DRS' plan is intended to provide officers and other employees of DRS and
each of its subsidiaries now held or hereinafter acquired with appropriate
incentives and rewards to encourage them to enter into and continue in the
employ of DRS and such subsidiaries and to acquire a proprietary interest in the
long-term success of DRS and such subsidiaries; to compensate each member of the
DRS Board who is not and has never been an employee of DRS or such subsidiaries
and to provide to such members of the DRS Board incentives which are directly
linked to increases in the value of DRS Common Stock; and to reward the
performance of individual officers, other employees, consultants and such
members of the DRS Board in fulfilling their personal responsibilities for
long-range achievements. The DRS Board believes that the plan amendment is in
the best interests of the DRS stockholders because approval of the plan
amendment will enable DRS to continue to implement effectively its plan and
attain the stated goals of its plan. If the plan amendment is not approved, DRS
will soon deplete the number of shares available for grant under its plan.
It is intended that the awards made under DRS' plan will be eligible for
the exception provided by Rule 16b-3 promulgated under the Exchange Act. In
addition, DRS' plan is intended to allow the grant of awards of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, and, in the
case of Executive Officers, Restricted Stock and Phantom Stock that comply with
the performance-based compensation exception under Section 162(m) of the
Internal Revenue Code, which generally limits the deduction by an employer for
compensation of certain covered officers.
GENERAL
DRS' plan provides for the granting of awards to such employees (including
officers of DRS, whether or not they are directors of DRS) and consultants of
DRS as the Stock Option Committee of the DRS Board may select from time to time
(the Executive Compensation Committee of the Board functions as the Stock Option
Committee under the plan and shall hereinafter be referred to as the
"Committee"). Approximately 2,200 employees and consultants are eligible to
participate in DRS' plan. DRS' plan also provides for the mandatory granting of
Non-Qualified Stock Options to Non-Employee Directors of DRS. Currently, there
are eight such directors; however, if the proposal to increase the number of
directors is approved by the stockholders, then the number of eligible directors
will be nine.
Assuming adoption of the plan amendment, an aggregate of 2,375,000 shares
of DRS Common Stock will be reserved for issuance under DRS' plan, subject to
adjustment as described below. Such shares may be authorized but unissued DRS
Common Stock or authorized and issued DRS Common Stock held in DRS' treasury.
Generally, shares subject to an award that remain unissued upon expiration or
cancellation of the award will be available for other awards under DRS' plan.
The total number of shares of DRS Common Stock subject to awards (including
awards paid in cash but denominated as shares of DRS Common Stock) granted to
any Participant of DRS' plan during any tax year of DRS 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
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corporate transaction or event affects the DRS Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under DRS' plan, then the Committee will make such
equitable changes or adjustments as it deems necessary to the number and kind of
shares of DRS Common Stock which may thereafter be issued in connection with
awards, the limit on individual awards, the number and kind of shares of DRS
Common Stock subject to each outstanding award, and the exercise price, grant
price or purchase price of each award.
Awards under DRS' plan may be made in the form of:
o Incentive Stock Options;
o Non-Qualified Stock Options (Incentive and Non-Qualified Stock Options
are collectively referred to as "options" in this section);
o Stock Appreciation Rights;
o Restricted Stock;
o Phantom Stock;
o Stock Bonuses; and
o Other Awards.
Awards may be granted to such officers and other employees and consultants
of DRS 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 DRS' plan in the manner described below.
ADMINISTRATION
The Committee administers DRS' plan. DRS' plan requires that the Committee,
at all times, consist of two or more persons, each of whom is an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code 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 DRS' 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 DRS'
plan; provided, however, that the Committee may not exercise discretion under
any provision of DRS' 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, options granted under
DRS' plan are not exercisable prior to one year after the date of grant and
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 determines 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 exercise of an option (the "option exercise price") is
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 DRS Common Stock on the date of grant. The option
exercise price is payable by any one of the following methods or a combination
thereof:
o cash;
o personal, certified or bank cashier's check;
o wire transfer;
o with the consent of the Committee, by surrender of shares of DRS
Common 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
o 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 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 DRS' plan.
DRS' plan provides that a Non-Employee Director who becomes a member of the
DRS Board subsequent to the Effective Date of DRS' plan (a "Subsequent
Director") will be granted automatically a Non-Qualified Stock Option to
purchase 5,000 shares of DRS Common 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 DRS Board), each Non-Employee Director will be granted
automatically a Non-Qualified Stock Option to purchase 2,500 shares of DRS
Common Stock; provided, however, that in no event may a current Non-Employee
Director be granted options to purchase more than 2,500 shares of DRS Common
Stock during any tax year of DRS under DRS' plan or any other stock
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option plan of DRS. 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 DRS' 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 DRS, in cash and/or shares of DRS Common Stock, an amount equal to
the excess of the Fair Market Value of a share of DRS Common Stock over the
exercise price of the stock appreciation right for each share of DRS Common
Stock in respect of which such stock appreciation right is being exercised.
RESTRICTED STOCK
The Committee may grant restricted shares of DRS Common Stock to such
employees and consultants of DRS, in such amounts, and subject to such terms and
conditions as the Committee may determine in its discretion. Awards of
Restricted Stock granted to Executive Officers of DRS may be contingent on the
attainment by DRS of one or more pre-established performance goals established
by the Committee based on the attainment by DRS (and/or its subsidiaries or
divisions if applicable) of any one or more of the following performance
criteria:
o a specified percentage return on total stockholder equity;
o a specified percentage increase in earnings per share of DRS Common
Stock;
o a specified percentage increase in net income (before or after taxes);
o a specified percentage increase in earnings before interest, taxes,
depreciation and amortization;
o a specified percentage increase in earnings before interest and income
taxes, as adjusted for corporate office overhead expense allocation;
o a specified percentage increase in revenues;
o a specified minimum return on assets; or
o such other criteria as the DRS stockholders may approve.
PHANTOM STOCK
The Committee may grant shares of Phantom Stock to such employees and
consultants of DRS, in such amounts, and subject to such terms and conditions 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 an amount of
cash and/or shares of DRS Common Stock 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 DRS may be contingent on the
attainment by DRS of any one or more pre-established performance goals
established by the Committee based on the attainment by DRS (and/or its
subsidiaries or divisions if applicable) of any one or more of the performance
criteria described above under "--Awards Under the Plan--Restricted Stock."
STOCK BONUS
The Committee may grant bonuses comprised of shares of DRS Common Stock to
such employees and consultants of DRS, in such amounts and subject to such
conditions as the Committee may determine in its discretion. No Executive
Officer will be eligible to receive a Stock Bonus under DRS' plan unless the
Committee makes a prior determination of eligibility.
OTHER AWARDS
Other Awards valued in whole or in part by reference to, or otherwise based
on, DRS Common Stock may be granted either alone or in addition to other awards
under DRS' plan. Subject to the provisions of DRS' plan, the Committee will have
the sole and complete authority to determine the employees and consultants of
DRS to whom and the time or times at which such Other Awards will be granted,
the number of shares of DRS Common Stock to be granted pursuant to such Other
Awards and all other conditions of such Other Awards. Upon a Participant's
termination of employment with DRS for any reason, all of such Participant's
unvested shares of Restricted Stock are forfeited to DRS, unless, if the
termination is for any reason other than Cause, the Committee determines to
permit the Participant to retain such unvested shares. In the event of a
forfeiture of shares of Restricted Stock, DRS will repay the Participant the
amount paid, if any, by the Participant for such forfeited shares. Upon a
Participant's termination of employment with DRS for any reason, all of such
Participant's unvested shares of Phantom Stock are forfeited.
OTHER FEATURES OF THE PLAN
DRS' plan provides for a stipulated period of exercisability for
outstanding options and stock appreciation rights in the event of the
termination of a Participant's employment with DRS; 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.
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The DRS Board may suspend, revise, terminate or amend DRS' plan at any
time; provided, however, that DRS stockholder approval must be obtained if and
to the extent required by Rule 16b-3 and if and to the extent that the DRS Board
deems it appropriate so as to allow the granting of awards that satisfy the
requirements of the performance-based compensation exception under Section
162(m) of the Internal Revenue Code and the requirements applicable to incentive
stock options under Section 422 of the Internal Revenue Code; and provided,
further, that no such action may, without the consent of a Participant, reduce
the Participant's rights under any outstanding award.
Upon a Participant's death, awards may be exercised only by the executor or
administrator of the Participant's estate or by a person who acquired such
exercise right by will or by the laws of descent or distribution. During a
Participant's lifetime, subject to the approval of the Committee and such
conditions as the Committee may prescribe, options may, in certain
circumstances, be transferred, assigned or encumbered.
NEW PLAN BENEFITS
Inasmuch as awards (other than awards of Non-Qualified Stock Options to
Non-Employee Directors) under DRS' plan will be granted at the sole discretion
of the Committee, it is not possible to determine (except in the case of
Non-Employee Directors) the awards that will be made thereunder during fiscal
2001. The following chart sets forth the name, position and grant information
for currently eligible Non-Employee Directors:
NEW PLAN BENEFITS
DRS TECHNOLOGIES, INC. 1996 OMNIBUS PLAN
Number of Shares Underlying
Name and Position Annual Grant of Options during Fiscal 2000
----------------- ------------------------------------------
Ira Albom, Director 2,500
Donald C. Fraser, Director 2,500
William F. Heitmann, Director 2,500
Steven S. Honigman, Director 2,500
C. Shelton James, Director 2,500
Mark N. Kaplan, Director 2,500
Stuart F. Platt, Director 2,500
Eric J. Rosen, 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 DRS' PLAN. THIS SUMMARY IS NECESSARILY GENERAL IN NATURE AND
DOES NOT PURPORT TO BE EXHAUSTIVE. AMONG OTHER THINGS, THE SUMMARY DOES NOT
DESCRIBE STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX CONSEQUENCES. IN ADDITION,
STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR INTERPRETATIONS, AND
THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
NON-QUALIFIED STOCK OPTIONS
An optionee will not recognize income at the time of grant of a
Non-Qualified Stock Option. At the time of exercise of a Non-Qualified Stock
Option, an optionee will recognize ordinary income equal to the excess of the
Fair Market Value of the shares at the time of exercise over the aggregate
exercise price paid for the shares, regardless of whether the exercise price is
paid in cash, in stock, or in part with a note. DRS will be entitled to a
deduction in the amount of ordinary income so recognized; provided, that certain
income tax reporting requirements are satisfied.
INCENTIVE STOCK OPTIONS
In general, an optionee will not recognize income on the grant or exercise
of an Incentive Stock Option. However, the difference between the exercise price
and the Fair Market Value of the stock on the date of exercise is an adjustment
item for purposes of the alternative minimum tax. If an optionee does not
exercise an Incentive Stock Option within certain specified periods after
termination of employment, the optionee will recognize ordinary income on the
exercise of an Incentive Stock Option in the same manner as on the exercise of a
Non-Qualified Stock Option, as described above.
The general rule is that gain or loss from the sale or exchange of shares
acquired on the exercise of an Incentive Stock Option will be treated as capital
gain or loss. If certain holding period requirements are not satisfied, however,
the optionee generally will recognize ordinary income at the time of the
disposition. Gain recognized on the disposition in excess of the ordinary income
resulting therefrom will be capital gain, and any loss recognized will be
capital loss. If an optionee recognizes ordinary income on exercise of an
Incentive Stock Option or as a result of a disposition of the shares acquired on
exercise, DRS will be entitled to a deduction in the same amount; provided, that
certain income tax reporting requirements are satisfied.
RESTRICTED STOCK
A grantee of Restricted Stock is not required to include the value of such
shares of DRS Common Stock in ordinary income until the shares are no longer
subject to a substantial risk of forfeiture (i.e., they become vested), unless
the grantee elects under Section 83(b) of the Internal Revenue Code to be taxed
on receipt of the shares. In either case, the amount of such income will be
equal to the excess, if any, of (i) the Fair Market Value of the shares at the
time the income is recognized over (ii) the amount, if any, paid for such
shares. DRS will be entitled to a deduction in the amount of ordinary income so
recognized, provided certain income tax reporting requirements are satisfied.
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STOCK APPRECIATION RIGHTS, PHANTOM STOCK AND STOCK BONUSES
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 DRS at the time of
grant. Upon the settlement of such a right or award, the grantee will recognize
ordinary income equal to the aggregate value of the cash and/or shares received,
and DRS generally will be entitled to a tax deduction in the same amount,
provided that certain income tax reporting requirements are satisfied. A Stock
Bonus generally will result in compensation income for the grantee, and a tax
deduction for DRS, equal to the Fair Market Value of the shares of DRS Common
Stock granted; provided, that certain income tax reporting requirements are
satisfied.
OTHER AWARDS
The tax treatment of an Other Award depends on the terms of such award. In
general, if the award is payable in cash, the grantee will recognize ordinary
income at the time of payment. In general, if the award is payable in shares of
DRS Common Stock, the grantee will recognize ordinary income at the time such
shares are no longer subject to a substantial risk of forfeiture in an amount
equal to the Fair Market Value of the shares on that date, unless the grantee
elects under Section 83(b) of the Internal Revenue Code to be taxed on receipt
of the shares in an amount equal to the Fair Market Value of the shares on the
date of receipt. In general, DRS will be entitled to a deduction in the same
amount, and at the same time, as ordinary income is recognized, provided, that
certain income tax reporting requirements are satisfied.
CAPITAL GAIN OR LOSS ON SALE OR EXCHANGE OF PLAN SHARES
In general, gain or loss from the sale or exchange of shares granted or
awarded under DRS' plan will be treated as capital gain or loss, provided that
the shares are held as capital assets at the time of the sale or exchange.
However, if certain holding period requirements are not satisfied at the time of
a sale or exchange of shares acquired upon exercise of an Incentive Stock Option
(a "disqualifying disposition"), an optionee generally will be required to
recognize ordinary income upon such disposition.
PARACHUTE PAYMENTS
Where payments to certain employees that are contingent on a change in
control exceed limits specified in the Internal Revenue Code, the employee
generally is liable for a 20% excise tax on, and the corporation or the entity
making the payment generally is not entitled to any deduction for, a specified
portion of such payments. If the Committee, in its discretion, grants an
Incentive Award, the vesting or exercisability of which is accelerated by a
change in control of DRS, such accelerated vesting or exercisability would be
relevant in determining whether the excise tax and deduction disallowance rules
would be triggered with respect to certain DRS employees.
PERFORMANCE BASED COMPENSATION
Subject to certain exceptions, Section 162(m) of the Internal Revenue Code
disallows federal income tax deductions for compensation paid by a publicly-held
corporation to certain executives to the extent the amount paid to an executive
exceeds $1 million for the taxable year. DRS' plan has been designed to allow
the Committee to make awards under DRS' plan of Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, and, in the case of
Executive Officers, Restricted Stock and Phantom Stock that qualify under an
exception to the deduction limit of Section 162(m) for "performance-based
compensation."
Performance goals under DRS' plan for purposes of the performance-based
compensation exception are based upon the performance criteria described under "
- Awards Under the Plan - Restricted Stock."
The affirmative vote of a majority of votes cast by holders of all
outstanding shares of DRS Common Stock entitled to vote at the meeting is
required to approve the plan amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND THE 1996 OMNIBUS PLAN.
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 year ending March 31, 2001. 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 year ending March 31, 2001.
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 FOR RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of May 31, 2000, 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.............................. 379,483(b)(c)(d)(e) 3.5
Ira Albom................................... 22,000(c) 0.2
Donald C. Fraser............................ 10,000(c) 0.1
William F. Heitmann......................... 11,000(c) 0.1
Steven S. Honigman.......................... 5,000(c) 0.1
C. Shelton James............................ 8,100(c) 0.1
Mark N. Kaplan.............................. 10,000(c) 0.1
Stuart F. Platt............................. 83,150(c) 0.9
Eric J. Rosen............................... 5,000(c) 0.1
Paul G. Casner, Jr.......................... 49,730(c)(e) 0.5
Nina Laserson Dunn.......................... 49,642(c)(e) 0.5
Richard A. Schneider........................ 46,260(c) 0.5
Richard Ross(f)............................. 80,373(c)(e) 0.9
All directors, nominees and executive
officers as a group (13 persons)......... 709,738(b)(c)(d)(e) 7.6
(a) As of May 31, 2000, the Company had outstanding 9,276,081 shares of
Common Stock (excluding 440,939 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. Newman shares the power to direct the
voting of such shares with members of the administrative committee of such plan.
Mr. 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 31, 2000 or within 60 days thereafter,
as follows: Mr. Newman, 170,000 shares; Mr. Albom, 10,000 shares; Dr. Fraser,
10,000 shares; Mr. Heitmann, 10,000 shares; Mr. Honigman, 5,000 shares; Mr.
James, 8,100 shares; Mr. Kaplan, 10,000 shares; RADM Platt, 72,500 shares; Mr.
Rosen, 5,000 shares; Mr. Casner, 27,500 shares; Ms. Dunn, 47,500 shares; Mr.
Schneider, 38,750 shares; Mr. Ross, 73,750 shares; and all directors, nominees
and executive officers as a group, 488,100 shares.
(d) Includes 4,800 shares of Common Stock held by Mr. Newman as custodian
for his daughter, over which Mr. Newman has sole voting and investment power,
and 50,000 shares of Common Stock the receipt of which has been deferred by Mr.
Newman.
(e) Includes restricted shares of Common Stock awarded to the following
officers: Mr. Newman, 8,531 shares; Mr. Casner, 3,182 shares; Ms. Dunn, 2,142
shares; and Mr. Ross, 2,765 shares. The shares are restricted for a period of
three years 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) Mr. Ross' employment with the Company terminated on March 3, 2000.
The following table sets forth certain information, as of May 31, 2000,
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.
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AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------- --------
Lancer Partners, Limited Partnership
(f/k/a Lancer Partners, .................... 1,728,900(a) 18.6
L.P., a New York limited partnership)
475 Steamboat Road
Greenwich, CT 06930
First Pacific Advisors, Inc.................. 1,606,574(b) 16.4
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Forest Investment Management LLC............. 739,661(c) 8.0
53 Forest Avenue
Old Greenwich, CT 06870
Palisade Capital Management, L.L.C........... 642,000(d) 6.9
One Bridge Plaza, Suite 695,
Fort Lee, NJ 07024
(a) Consists of 1,151,350 shares of Common Stock held by Lancer Offshore,
Inc. ("Lancer Offshore"), a private investment company, 549,750 shares of Common
Stock held by Lancer Partners, LP ("Lancer Partners"), a private investment
limited partnership, and 27,800 shares of Common Stock held by Michael Lauer.
The Company has been advised that Mr. Lauer has sole voting power and sole
dispositive power with respect to 27,800 shares. Mr. Lauer serves as the general
partner of Lancer Partners and is the managing partner of Lancer Offshore. The
Company has been advised that Mr. Lauer also has sole voting and dispositive
authority over the shares held by Lancer Partners and Lancer Offshore with
respect to a total of 1,701,100 shares.
(b) 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 1,098,099 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 422,300
shares and shared dispositive power with respect to 1,606,574 shares and Capital
Fund has sole voting power and shared dispositive power with respect to 428,700
shares.
(c) Represents 739,661 shares of Common Stock, held by (i) Forest
Investment Management LLC ("Forest"), an investment advisor, (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, 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.
(d) 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 with
respect to 548,000 shares and dispositive power with respect to 642,000 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 10% of the outstanding
shares of the Company's Common Stock, to file 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 on the Company's review of Forms 3 and 4 and amendments
thereto furnished to the Company during fiscal 2000 and upon a review of Forms 5
and amendments thereto furnished to the Company with respect to fiscal 2000, 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
2000, except Mr. Casner, an officer of the Company, who inadvertently failed to
file a Form 4 in connection with an open market sale of stock, but who reported
such transaction in a timely filed Form 5.
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors has appointed from its members an Audit Committee,
an Executive Compensation Committee and an Ethics 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
10
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the Board and the Company's independent auditors. Until August 5, 1999, the
Audit Committee consisted of Messrs. Heitmann, Honigman and Kaplan, and
RADM Platt. At a meeting of the Board on August 5, 1999, the composition of
the Audit Committee was changed to include Messrs. Fraser, Heitmann, James
and Rosen. The Audit Committee held two meetings during fiscal 2000.
The function of the Executive Compensation Committee is to establish
policies and programs that govern the compensation of the Chief Executive
Officer and the other executive officers of the Company and to administer
the Company's 1991 Stock Option Plan and the 1996 Omnibus Plan. At a
meeting of the Board on August 5, 1999, the Board consolidated the
Compensation Committee and the Stock Option Committee into the Executive
Compensation Committee. Prior to August 5, 1999 the Compensation Committee
and the Stock Option Committee consisted of Messrs. Albom, Kaplan and Rosen
and Dr. Fraser. At the meeting of the Board on August 5, 1999, Messrs.
Albom, Honigman and Kaplan and RADM Platt were appointed to the Executive
Compensation Committee. The Executive Compensation Committee held four
meetings during fiscal 2000.
The Ethics Committee provides oversight with respect to issues
involving compliance with law and the Company's ethics program. During
fiscal 2000 the Ethics Committee was comprised of Mr. Newman, Nina Laserson
Dunn, Executive Vice President, General Counsel and Secretary of the
Company, and Mr. Honigman.
The Board held five meetings during fiscal 2000. 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 2000, each director who was not an
employee of the Company or one of its subsidiaries received a retainer of
$22,500 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 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 which 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. The stockholders of the Company
approved these resolutions on August 7, 1996. Under the Company's 1996 Omnibus
Plan the Non-Employee Directors described above are eligible 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 1996 Omnibus 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 the late
Leonard Newman ("Mr. L. Newman"), a co-founder and the former Chairman of the
Board, Chief Executive Officer and Secretary of the Company and the father of
Mr. 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. Following Mr. L. Newman's death in November
1998, Mrs. Ruth Newman, the mother of Mr. Newman, succeeded to Mr. L. Newman's
interest in LDR Realty Co.
Skadden, Arps, Slate, Meagher & Flom LLP, a law firm of which Mr. Kaplan is
of counsel, provided legal services to the Company during its 2000 fiscal year.
In June, 1999, the Company and Mr. Honigman entered into a consulting
agreement pursuant to which Mr. Honigman agreed to provide consultation to the
Company concerning international business opportunities. Under the terms of the
consulting agreement, consulting services are to be provided to the Company on
an as-requested basis, for a fee of $250 per hour to a maximum of $2,000 per day
plus approved travel and miscellaneous expenses. During fiscal 2000, total
remuneration paid to Mr. Honigman under this arrangement approximated $31,942.
Thelen Reid & Priest LLP, a law firm of which Mr. Honigman is a partner,
provided legal services to the Company during its 2000 fiscal year.
In July 1993, the Company and Dr. Fraser 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 2000, there was no remuneration paid to
Dr. Fraser under this agreement.
In May 1995, the Company became a party to a loan with Mr. Newman 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 $104,100
and, effective April 1, 1998, bears interest at the applicable federal rate
necessary under the Internal Revenue Code of
11
<PAGE>
1986, as amended, to avoid an imputed rate of interest. One-half of the
outstanding principal balance ($52,050) was 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 "L. Newman Agreement") with the late Mr. L.
Newman. Pursuant to the L. Newman Agreement, Mr. L. Newman received a lump sum
payment of approximately $2.0 million. Under the terms of the L. 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 L. Newman Agreement
also provided that upon Mr. L. Newman's death, his estate would be entitled to
receive such payments until the termination date. After Mr. L. Newman's death in
November 1998, the Company entered into an agreement with Mrs. Ruth Newman,
Executrix of the estate of Mr. L. Newman, pursuant to which on March 30, 2000
the Company paid to the estate $12,816.90 in full satisfaction of all such
annual payments due under the L. Newman Agreement. In addition, upon his death,
the Company received $1,528,494.01, which represents the net death benefits from
various life insurance policies with respect to Mr. L. Newman.
On June 4, 1999, the Company became a party to a loan with Mr. Casner in
connection with Mr. Casner's relocation to New Jersey. The loan was evidenced by
a promissory note in the principal amount of $100,000 and bore interest at the
annual rate of 6.375%. The loan was secured by a second mortgage on real
property owned by Mr. Casner and his wife located in Cliffside Park, New Jersey.
As of November 19, 1999, the loan was paid in full and the mortgage was
cancelled of record.
During fiscal 2000, the Company paid RADM Platt, a director of the Company,
to provide consulting services to the Company in connection with new business
initiatives. Such consulting services were provided to the Company on an
as-requested basis, for a fee of $2,000 per day plus approved travel and
miscellaneous expenses. During fiscal 2000, total remuneration paid to Admiral
Platt under this arrangement approximated $8,895.
During fiscal 2000, the Company paid to General Reimer, a nominee as
director of the Company, to provide consulting services to the Company in
connection with strategic planning. Such consulting services were provided to
the Company on an as-requested basis, for a fee of $2,500 per day plus approved
travel and miscellaneous expenses. During fiscal 2000, total remuneration paid
to General Reimer under this arrangement approximated $10,225.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended March 31, 2000, 1999 and 1998, of those persons who were, at
March 31, 2000, (i) the chief executive officer and (ii) the four most highly
compensated executive officers of the Company other than the chief executive
officer (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(a) LONG-TERM COMPENSATION
---------------------- ----------------------
RESTRICTED
STOCK ALL OTHER
AWARD(S)($) COMPENSATION($)
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) (b) OPTIONS(#) (c)(d)(e)
--------------------------- ----------- --------- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman................... 2000 523,262 415,000 -- 90,000 (f) 31,655
Chairman of the Board, 1999 499,336 285,600 (k) -- 450,000 (g) 35,568
President & Chief 1998 365,512 228,480 57,120 20,000 (h) 30,782
Executive Officer
Paul G. Casner, Jr............... 2000 306,335 175,000 -- 30,000 (f) 18,049
Executive Vice President, 1999 245,116 125,000 (k) -- 30,000 (i) 19,421
Chief Operating Officer 1998 225,865 105,120 26,280 10,000 (h) 15,424
Nina Laserson Dunn............... 2000 271,500 154,200 -- 30,000 (f) 17,076
Executive Vice President, 1999 259,423 85,000 (k) -- 30,000 (i) 16,676
General Counsel & 1998 191,875 118,880 29,720 50,000 (j) 10,465
Secretary
Richard A. Schneider (l)......... 2000 221,694 154,200 -- 30,000 (f) 9,358
Executive Vice President,
Chief Financial Officer
Richard Ross (m)................. 2000 179,512 47,100 -- -- 12,093
Vice President 1999 241,441 70,000 (k) -- 15,000 (i) 13,346
1998 210,000 72,800 18,200 10,000 (h) 14,985
</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,
2000, 1999 and 1998, 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 year ending March 31, 1998, 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.
12
<PAGE>
(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, 2000, 1999 and 1998, respectively, in the
accounts of the Named Officers, as follows: Mr. Newman, $5,089, $5,151 and
$4,442; Ms. Dunn, $5,060, $4,857 and $1,295; Mr. Casner, $5,320, $5,037 and
$5,188; Mr. Schneider, $5,914; and Mr. Ross, $3,714, $4,914 and $5,703.
(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, 2000, 1999 and 1998, respectively, as follows: Mr. Newman, $10,000,
$10,000 and $10,000; Ms. Dunn, $7,500, $7,500 and $7,500; Mr. Casner,
$5,625, $5,625 and $5,000; Mr. Schneider, $1,877; and Mr. Ross, $5,000,
$5,000 and $5,000.
(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" below). 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, 2000, 1999 and 1998, respectively, were as follows:
Mr. Newman, $16,566, $20,417 and $16,340; Ms. Dunn, $4,516, $4,319 and
$1,670; Mr. Casner, $7,104, $8,759 and $5,236; Mr. Schneider, $1,569; and
Mr. Ross, $3,339, $3,432 and $4,282.
(f) Represents non-qualified stock options to purchase shares of Common Stock
under the Company's 1996 Omnibus Plan. Those options, with a grant date of
November 10, 1999, become exercisable on the first four anniversaries of
the date of grant at 25% per year.
(g) Represents non-qualified stock options to purchase 90,000 and 110,000
shares of Common Stock issued to Mr. 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. Newman by the Board of Directors. 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.
(h) 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.
(i) 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.
(j) Represents non-qualified and incentive stock options to purchase 20,000 and
30,000 shares, respectively, of Common Stock issued to Ms. 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.
(k) A portion of the fiscal year 1999 cash bonus awards include amounts
originally intended to be paid out in shares of restricted stock of the
Company as follows: Mr. Newman, $37,120; Ms. Dunn, $15,720; Mr. Casner,
$21,940 and Mr. Ross, $14,000. Participants vest, in equal amounts, over
three years and are paid their respective amounts as they become vested. In
the event a Named Officer leaves the employ of the Company before the end
of the vesting period, all rights to remaining unvested cash awards may be
forfeited.
(l) Mr. Schneider's employment with the Company commenced on February 19, 1999.
(m) Mr. Ross' employment with the Company terminated on March 3, 2000.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
In April 1994, the Company entered into an agreement with Mr. 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. Mr. Ross
ceased being an officer of the Company effective October 15, 1999 but remained
an employee of the Company until March 3, 2000. Under a Release Agreement dated
November 12, 1999 given by Mr. Ross to the Company, the Company agreed to pay
Mr. Ross severance benefits granted under the April 1994 agreement from October
15, 1999 and certain of Mr. Ross' equity awards will be accelerated.
In November 1996, the Company entered into an agreement with Mr. 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 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 Ms. 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
13
<PAGE>
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 Mr. 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.
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 2000 ($/SH) DATE 5%(a) 10%(a)
---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark S. Newman 90,000(b) 20.64% $7.06 11/10/09 $821,291 $1,684,270
Paul G. Casner, Jr 30,000(b) 6.88% $7.06 11/10/09 $273,764 $561,423
Nina Laserson Dunn 30,000(b) 6.88% $7.06 11/10/09 $273,764 $561,423
Richard A. Schneider 30,000(b) 6.88% $7.06 11/10/09 $273,764 $561,423
</TABLE>
-------------
(a) The amounts shown under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission and are
not intended to forecast future appreciation of the Company's stock price.
(b) The options granted were for shares of the Company's Common Stock under the
Company's 1996 Omnibus Plan at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. The options
become exercisable on the first four anniversaries of the date of grant at
25% per year. The grant date of the options is November 10, 1999.
14
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the aggregate stock options
exercised by the Named Officers during fiscal 2000 as well as the unexercised
options to purchase the Company's Common Stock granted through March 31, 2000
under the Company's 1991 Stock Option Plan and the 1996 Omnibus Plan to the
Named Officers and held by them at that date.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 2000 MARCH 31, 2000 ($) (a)
---------------------- -----------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Newman 150,000 $817,000 150,000 460,000 $96,146 $534,684
Paul G. Casner, Jr. -- -- 17,500 62,500 $17,665 $135,495
Nina Laserson Dunn -- -- 37,500 72,500 $135,546 $214,919
Richard A. Schneider -- -- 38,750 41,250 $22,273 $96,818
Richard Ross(b) -- -- 63,750 21,250 $118,860 $24,615
</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 $9.94.
(b) Mr. Ross' employment with the Company terminated on March 3, 2000.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until August 5, 1999, the Compensation Committee and the Stock Option
Committee consisted of Messrs. Albom, Kaplan and Rosen and Dr. Fraser. At a
meeting of the Board on August 5, 1999, the Compensation Committee and the Stock
Option Committee were consolidated into one committee called the Executive
Compensation Committee. At that meeting Messrs. Albom, Honigman and Kaplan and
RADM Platt were appointed to the Executive Compensation Committee. None of the
foregoing individuals is an employee of the Company. Mr. Rosen and Mr. 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 of which
Mr. Kaplan is of counsel, provided legal services to the Company during its 2000
fiscal year. Thelen Reid & Preist LLP, a law firm of which Mr. Honigman is a
partner, provided legal services to the Company during its 2000 fiscal year.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal 2000, the Executive Compensation Committee established the
compensation of the Chief Executive Officer and other Named Officers of the
Company. The bonus awards of the Chief Executive Officer and other Named
Officers in respect of the 2000 fiscal year were determined at a meeting of the
Executive Compensation Committee as constituted on May 17, 2000. See "The Board
of Directors and Certain Committees."
In determining the individual elements of compensation, the Executive
Compensation Committee seeks 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 Executive Compensation
Committee consulted with 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 packages provide competitive base salaries which reflect individual
performance and level of responsibility and are based on compensation paid by
companies of 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.
The other components of the Company's compensation packages focus on 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, 2000 was based on a comparison of compensation provided to
chief executive officers and other members of senior management of companies of
similar size within the same industry as that of the Company. The bonus award
for fiscal 2000 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 2000.
For fiscal 2000, the Chief Executive Officer, in consultation with the
Committee's outside consultants, 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 basis similar to that used for the Chief
Executive Officer using specific target awards that had been established for
each individual's salary level.
15
<PAGE>
The Company's 1996 Omnibus Plan is designed to give the Executive
Compensation Committee (functioning as the Stock Option Committee under the 1996
Omnibus Plan) the flexibility to make annual incentive awards that are
comparable to those found in the marketplace in which the Company competes for
executive talent. Such awards are integral components of the Company's
compensation packages for the Named Officers. The 1996 Omnibus Plan permits the
payment of certain incentive awards that are intended to qualify as deductible,
performance-based compensation under Section 162(m) of the Internal Revenue
Code.
Mark N. Kaplan, Chairman
Ira Albom
Steven S. Honigman
Stuart F. Platt
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
[Graphic Representation of Data Chart]
1995 1996 1997 1998 1999 2000
--- ------ ------ ------ ------ ------
DRS Common Stock ...... 100 149.43 200.03 349.65 201.61 250.44
AMEX Market Index ..... 100 120.90 122.11 161.10 152.45 215.59
Peer Group ............ 100 141.90 134.40 187.85 163.26 325.52
----------
* Assumes that the value of the investment in DRS Common Stock and each index
was $100 on April 1, 1995 and that dividends, if any, were reinvested.
STOCKHOLDERS' PROPOSALS
Any stockholder who desires to submit a proposal for inclusion in the
Company's proxy materials for the 2001 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. The Company must receive such proposal at its offices at 5 Sylvan
Way, Parsippany, New Jersey 07054 no later than the close of business on
February 28, 2001.
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
16
<PAGE>
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 officers and employees of the Company may
make some telephone, telegraph or personal solicitations of stockholders.
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.
17
<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, 2000 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 __, 2000
18
<PAGE>
ANNEX A
DRS TECHNOLOGIES, INC.
1996 OMNIBUS PLAN
(as proposed to be amended)
1. Establishment and Purpose.
There is hereby adopted the DRS Technologies, Inc. 1996 Omnibus Plan (the
"Plan"). This Plan is intended to promote the interests of the Company (as
defined below) and the stockholders of DRS Technologies, 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
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(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 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-
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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).
(r) "Non-Employee Director" shall mean a member of the Board of Directors
who is not 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.
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(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 2,375,000 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.
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
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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 maybe 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 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 or 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
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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.
(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
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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.
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(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, (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.
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(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.
(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.
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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.
(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 DRS TECHNOLOGIES, 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.
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(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 or
division of DRS if applicable) of performance goals pre-established by
the Committee, based on one or more of the following criteria: (1) a
specified percentage return on total stockholder equity; (2) a
specified percentage increase in earnings per share of Company Stock;
(3) a specified percentage increase in net income (before or after
taxes); (4) 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.
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Such shares of Restricted Stock shall be released from restrictions
only after the attainment of such performance measures has 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
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<PAGE>
delivered to such 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.
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<PAGE>
(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
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
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<PAGE>
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 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 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
A-15
<PAGE>
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.
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
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<PAGE>
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 l6b-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.
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APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 16 contains a description in tabular form of a graph entitled
"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 April 1, 1995 and ending March 31, 2000, which graph is contained in
the paper format of this Proxy Statement being sent to Stockholders.
<PAGE>
DRS TECHNOLOGIES, INC.
Proxy Solicited in Behalf of the Board of Directors
For the Annual Meeting of Stockholders to Be Held August 9, 2000
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 9, 2000, 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 proposal to amend the Company's By-Laws.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<TABLE>
<S> <C> <C>
2. To approve the election of all [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
director nominees listed below: (except as marked to the vote for all nominees
contrary below) listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any of the nominees, strike a
line through the nominee's name below.)
Nominees: Ira Albom, Mark N. Kaplan, Dennis J. Reimer
3. To approve the proposal to amend the Company's 1996 Omnibus Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve the Auditor Ratification. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on reverse side)
===========================
(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, 2, 3 and 4.
Date: ____________________________________
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.
