<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party Other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DREXLER TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule, or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[LOGO OF DREXLER TECHNOLOGY CORPORATION]
1077 Independence Avenue
Mountain View, California 94043-1601
------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
Friday, September 26, 1997
2:00 p.m.
To the Stockholders:
The 1997 Annual Meeting of Stockholders of Drexler Technology Corporation
will be held in the Stanford Room at Hyatt Rickeys, 4219 El Camino Real, Palo
Alto, California, on Friday, September 26, 1997, at 2:00 p.m., for the following
purposes:
1. to elect directors;
2. to approve a 450,000 share increase in the number of shares reserved for
issuance under the 1991 Stock Option Plan; and
3. to transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on Friday, August 1,
1997, are entitled to vote at this meeting and at any continuation or
adjournment thereof.
By Order of the Board of Directors
JERALD E. ROSENBLUM
Secretary
Mountain View, California
August 19, 1997
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD, AS PROMPTLY AS POSSIBLE, IN THE ENCLOSED ENVELOPE. IF A
QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF RE-ISSUING
THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING, AND SO DESIRE, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
- --------------------------------------------------------------------------------
<PAGE> 3
DREXLER TECHNOLOGY CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 26, 1997
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Drexler Technology Corporation, a Delaware corporation (the "Company"), for use
at the 1997 Annual Meeting of Stockholders of the Company to be held at 2:00
p.m. on Friday, September 26, 1997. Only stockholders of record on Friday,
August 1, 1997, will be entitled to vote. At the close of business on that date,
the Company had outstanding 9,238,066 shares of Common Stock.
Stockholders are entitled to one vote for each share held. In the election
of directors, votes can be cast only for persons whose names have been placed in
nomination prior to the voting. Any stockholder giving a proxy in the form
accompanying this Proxy Statement has the power to revoke it prior to its
exercise. A proxy may be revoked by filing with the Secretary of the Company,
prior to the meeting, an instrument revoking it, by duly executing a proxy
bearing a later date which is presented to the meeting, or by attending the
meeting and electing to vote in person. The shares represented by a duly
executed and unrevoked proxy in the form accompanying this Proxy Statement will
be voted in accordance with the instructions contained therein, and in the
absence of instructions, will be voted for the nominees for directors, for
Proposal No. 2, and according to the discretion of the proxy holder(s) on any
other matters that properly come before the meeting or any adjournment thereof.
The address of the Company's principal executive offices and the approximate
date on which this Proxy Statement is being mailed to stockholders are shown on
the accompanying Notice of Annual Meeting of Stockholders.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Nominees
The authorized number of directors to be elected at this meeting is three.
Management's nominees are Messrs. Jerome Drexler, Arthur H. Hausman, and William
E. McKenna, all of whom are presently directors of the Company. Each director
will hold office until the next annual meeting of stockholders and until his
successor is elected and qualified. As explained above, all proxies solicited
hereby will be voted for the election of the three nominees unless authority to
vote for one or more nominees is withheld in accordance with the instructions on
the proxy card. If any nominee should unexpectedly become unavailable to act as
a director, the proxies may be voted for a substitute nominee to be designated
by the Board of Directors.
No nominations for director of the Company by any person other than the
Board of Directors shall be presented at the meeting unless the person making
the nomination is a stockholder as of the record date and shall have given
timely notice to the Secretary. In order to be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal offices of the
Company no later than the close of business on August 29, 1997. Such notice
shall (i) set forth the name and address of the person making the nomination and
of the nominee, together with such information concerning the nomination and the
nominee as is required by the appropriate rules and regulations of the
Securities and Exchange Commission to be included in a proxy statement
soliciting proxies for the election of the nominee, and (ii) include the duly
executed written consent of the nominee to serve as a director if elected.
<PAGE> 4
The table below contains information respecting the number of shares and
percentage of the Company's Common Stock beneficially owned by each of the
Company's three directors, by each executive officer of the Company, and by all
executive officers and directors as a group, as of July 15, 1997. The beneficial
owners of the shares have full voting and investment power, except as indicated
in the table, and have addresses in care of the Company. There are no family
relationships among any directors or executive officers of the Company. As of
the close of business on July 15, 1997, the Company had outstanding 9,213,066
shares of Common Stock.
STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Director Common Percentage
Name, Principal Occupation, and Other Directorships Age Since Shares of Class
- -------------------------------------------------- --- -------- ------ ----------
<S> <C> <C> <C> <C>
JEROME DREXLER . . . . . . . . . . . . . 69 1968 1,415,098(1) 15.4%
Chairman of the Board of Directors and
Chief Executive Officer of the Company
and its wholly owned subsidiary,
LaserCard Systems Corporation
ARTHUR H. HAUSMAN . . . . . . . . . . . . 73 1981 37,500(2) .4%
Director; private investor. Retired
Chairman, President, and Chief Executive
Officer of Ampex Corporation
(manufacturer of professional
audio-video systems, data/memory
products, and magnetic tape); Director
of California Amplifier, Inc. (low-noise
amplifiers); Director of California
Microwave, Inc. (commercial
telecommunications and defense elec-
tronics); and Director Emeritus of
Technology for Communications
International (high-frequency antenna
systems and electronic recon- naissance
systems)
WILLIAM E. McKENNA . . . . . . . . . . . 77 1970 51,000(2) .6%
Director; private investor. Director of
California Amplifier, Inc. (low- noise
amplifiers); Safeguard Health
Enterprises, Inc. (healthcare services);
Midway Games, Inc. (interactive
entertainment software for the coin-
operated and home markets), and WMS
Industries, Inc. (coin-operated and home
video and other games)
RICHARD M. HADDOCK . . . . . . . . . . . 45 N/A 64,000(3) .7%
President and Chief Operating Officer
of the Company and its wholly owned
subsidiary, LaserCard Systems
Corporation
CHRISTOPHER J. DYBALL . . . . . . . . . 46 N/A 85,747(4) .9%
Executive Vice President of the Company
and General Manager, Card Manufacturing
STEVEN G. LARSON . . . . . . . . . . . . 46 N/A 85,747(4) .9%
Vice President of Finance and
Treasurer of the Company and its wholly
owned subsidiary, LaserCard Systems
Corporation.
All Executive Officers And Directors As 1,706,441(6) 18.5%
A Group (The Six Persons Named Above)..
</TABLE>
- ------------------
(1) Includes 162,000 Shares Purchasable By Exercise Of Option Within 60 Days.
Does Not Include 172,100 Shares Owned by Mr. Drexler's wife and 15,300
shares held indirectly by his wife as custodian, as to all of which shares
Mr. Drexler disclaims any beneficial ownership. Does not include 21,500
shares held by The Drexler Foundation, the assets of which are perpetually
dedicated to charity. The power to vote and to dispose of the shares held
by The Drexler Foundation is shared by the Foundation's directors,
consisting of Mr. Drexler and his wife.
(2) Includes 18,000 shares purchasable by exercise of option within 60 days.
(3) Includes 64,000 shares purchasable by exercise of option within 60
days.
(4) Includes 85,000 shares purchasable by exercise of option within
60 days.
(5) Includes 52,950 shares purchasable by exercise of option within 60 days,
including options for 26,450 shares subject to trust in favor of Marsha
Larson.
(6) Includes 399,950 shares purchasable by exercise of option within 60 days.
-2-
<PAGE> 5
Board Meetings and Committees
The Board of Directors held six meetings during the 1997 fiscal year ended
March 31, 1997. The Board has standing Audit, Compensation, and Stock Option
Committees. There is no Nomination Committee. The Audit Committee is composed of
Messrs. McKenna and Hausman. The Compensation Committee is composed of Messrs.
McKenna and Drexler. The Stock Option Committee is composed of Messrs. McKenna
and Hausman. During the 1997 fiscal year, the Compensation Committee held no
meetings, the Stock Option Committee held four meetings, and the Audit Committee
held two meetings. During the 1997 fiscal year, all Board and committee meetings
were attended by all members.
The Audit Committee has functions both as to the Company's independent
public accountants and internal accounting. Its functions as to the Company's
independent public accountants are to (1) recommend engagement and discharge,
(2) review the plan and results of the auditing engagement, (3) approve
additional professional services, (4) review the accountants' independence, and
(5) consider the range of audit and nonaudit fees. Its functions as to the
Company's internal accounting are to (1) review the scope and results of
procedures for internal auditing and (2) consider comments from the independent
public accountants with respect to internal accounting controls. The function of
the Compensation Committee is to approve the salaries of executive officers
(other than the Chief Executive Officer) and certain other management employees.
The function of the Stock Option Committee is to administer the Company's 1991
Stock Option Plan.
Director Compensation
Each of the three directors receives a fee of $1,200 per month for serving
as a director, the standard fee in effect since July of 1995. The Company also
reimburses reasonable out-of-pocket expenses incurred by directors performing
services for the Company.
The Company's 1991 Stock Option Plan provides for the automatic grant of a
five-year, non-statutory stock option to purchase 15,000 shares of the Company's
Common Stock on the date any person first becomes a director. These grants to
newly elected directors become exercisable in cumulative increments of one-third
each at the end of 24 months, 36 months, and 48 months from the date of grant.
The 1991 Stock Option Plan further provides that on the date of the Company's
annual meeting of stockholders, each director who has served as a director of
the Company for the preceding nine-month period, who is also a member of the
Stock Option Committee, and who is re-elected at such annual meeting, is
automatically granted a five-year, non-statutory stock option to purchase 6,000
shares of the Company's Common Stock. The option share grants to such re-elected
directors are exercisable in full at the time of grant. The exercise price for
options granted to newly elected directors and re-elected directors is the fair
market value of the Company's Common Stock on the effective date of the grant of
the option.
Required Vote for Approval of Proposal No. 1
The election of each nominee to the Board of Directors requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present in person or represented by proxy at the meeting. While
there is no definitive statutory or case law in Delaware as to the proper
treatment of abstentions in the counting of votes with respect to election of
directors, the Company believes that abstentions should be counted for purposes
of determining both the presence or absence of a quorum for the transaction of
business and in determining the total number of shares present or represented
and
-3-
<PAGE> 6
entitled to vote for the election of directors. In light of the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
in this manner. In accordance with applicable rules, brokers vote shares in
accordance with instructions received from the beneficial owners of the shares;
in the absence of specific voting instructions from the beneficial owners,
brokers vote such shares in accordance with their own discretion.
Management recommends a vote FOR election of the nominees
listed in Proposal No. 1.
PROPOSAL NO. 2: AMENDMENT TO 1991 STOCK OPTION PLAN
Amendment to Increase Authorized Number of Shares under 1991 Stock Option Plan
Proposal No. 2 seeks shareholder approval of an amendment to the Company's
1991 Stock Option Plan (the "1991 Option Plan") to increase the total number of
shares in the 1991 Option Plan by 450,000, from 1,920,000 to 2,370,000 shares.
As of August 1, 1997, options covering a total of 606,630 shares have been
exercised under the 1991 Option Plan, and the shares are no longer available for
option grants.
On May 12, 1997, the Board of Directors approved, subject to stockholder
approval, an amendment to the 1991 Option Plan to increase the aggregate number
of shares available thereunder by 450,000 shares in order to have an adequate
number of shares available for future option grants. On that date, of the
1,920,000 shares of the Company's Common Stock reserved for issuance under the
1991 Option Plan, 98,840 shares remained available for future grants, prior to
giving effect to the proposed increase.
The Board of Directors believes that it is in the best interest of the
Company to be able to continue to create equity incentives to assist in
attracting, retaining, and motivating the key employees and consultants of the
Company and its subsidiaries. Although in September of 1996, the Company's
stockholders approved an amendment to the 1991 Stock Option Plan to increase the
number of shares reserved thereunder by 250,000 shares, the Board of Directors
believes that the 98,840 shares remaining available as of May 12, 1997 for
granting options pursuant to the 1991 Option Plan are insufficient for that
purpose. The 450,000 share increase sought under Proposal No. 2 represents less
than 5 percent of the Company's 9,238,066 total outstanding shares as of its
proxy solicitation record date of August 1, 1997.
Required Vote for Approval of Proposal No. 2
Approval of the foregoing amendment to the 1991 Option Plan requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present in person or represented by proxy at the meeting. Votes
against are counted for the purposes of determining the presence or absence of a
quorum for the transaction of business. Votes against are also counted for
purposes of determining the total number of votes required to pass the proposal
and whether such number of votes has been obtained. Refer to the discussion on
pages 3 and 4 with respect to the effect of abstentions. In accordance with
applicable rules, brokers vote shares in accordance with instructions received
from the beneficial owners of the shares; in the absence of specific voting
instructions from the beneficial owners, brokers vote such shares in accordance
with their own discretion.
Management recommends a vote FOR approval of Proposal No. 2 --
Amendment to the 1991 Option Plan.
-4-
<PAGE> 7
Summary of 1991 Option Plan
The 1991 Option Plan provides for the granting to key employees, officers,
directors, and consultants to the Company and its subsidiaries (47 persons as of
July 15, 1997) of options to purchase shares of the Company's $0.01 par value
Common Stock.
The purpose of the 1991 Option Plan is to enhance the concern of the
Company's key employees and consultants (including officers and directors) in
the success of the Company by giving them an ownership interest in the Company
and to give such persons an incentive to continue their service to the Company.
The plan also affords a means of providing additional recognition for services
previously rendered. With the exception of options to be granted to themselves,
the Stock Option Committee determines in its sole discretion which of the
eligible persons are granted options and the number of shares subject to such
options. Members of the Stock Option Committee and newly elected directors are
automatically granted non-statutory stock options as more particularly described
on page 3 of this document.
Options granted to employees may be designated as incentive stock options
(ISOs) or as non-statutory stock options (NSOs), whereas only NSOs may be
granted to consultants. The Internal Revenue Code, as presently in effect,
limits the number of ISOs which can become exercisable by any employee in any
one year and provides that the Company and optionees receive different tax
treatment upon exercise of NSOs and ISOs. No tax consequences result to the
Company or an ISO grantee upon the issuance and exercise of an ISO. No tax
consequences result to the Company or an NSO grantee upon the issuance of an NSO
pursuant to the 1991 Option Plan having an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant of the NSO. Upon
the exercise of the NSO, a grantee realizes income in an amount equal to the
difference between the option exercise price and the fair market value of the
Company's Common Stock on the date of exercise of the NSO, and the Company is
entitled to a compensation deduction for the same amount.
ISOs can be exercised only if the optionee is still an employee of the
Company and its subsidiaries, and for a limited time period after termination of
employment (or within one year after the death or disability of the optionee).
All of the presently outstanding options under the 1991 Option Plan have
five-year terms, with the exception of five ten-year options. In general, the
options are not immediately exercisable upon grant, but become exercisable in
installments upon the passage of time or the occurrence of certain events.
Options granted under the 1991 Option Plan typically have become exercisable in
installments of one-third each after two, three, and four years from the date of
grant, although one NSO granted in June of 1996 becomes exercisable in
installments of 20 percent each after six, 18, 30, 42, and 54 months from the
date of grant. However, the 1991 Option Plan allows the Board of Directors
and/or Stock Option Committee discretion to modify the terms of outstanding
options within certain limits, including accelerating the vesting of outstanding
options; and certain options are immediately exercisable upon grant.
All options granted under the 1991 Option Plan must have an exercise price
not less than the fair market value of the Company's Common Stock on the date
the option is granted. Fair market value per share is the average of the high
and low trading prices as reported by The Nasdaq Stock Market on the date of
grant. Payment for the shares upon the exercise of options is in cash unless
payment by promissory note is directed by the full Board of Directors or payment
by utilization of outstanding Company stock owned by the optionee is directed by
the Stock Option Committee or by the full Board of Directors. The Company
receives no cash consideration upon the granting of options. The number of
shares remaining available in the 1991 Option Plan is proportionately adjusted
in the case of a stock split or dividend, as is the number of shares subject to
outstanding options and the exercise price of such options.
-5-
<PAGE> 8
In the event of a merger or sale of assets or like event, the Board of
Directors is empowered to make appropriate adjustments to options under the 1991
Option Plan. The Board of Directors has adopted guidelines specifying the
following as adjustments that it would consider appropriate upon the occurrence
of such an event:
(1) permitting optionees no less than thirty days to exercise the vested
portion of their options;
(2) having the successor corporation either (a) issue to optionees
replacement options for the unvested portions of options, or else (b)
pay deferred compensation on the spread between the value of Company
stock upon the occurrence of such event and the option exercise price at
the time such unvested portion would have vested; and
(3) providing for vesting of 100 percent of the unvested portion for
optionees employed by the Company for at least two years prior to such
event if their employment is terminated within one year of such event by
the successor corporation other than by resignation or for acts of moral
turpitude.
The Company cannot now determine the number of options to be received in the
future by all current executive officers as a group, all current directors who
are not also executive officers as a group, or all employees including current
officers who are not executive officers as a group.
Executive Officers
The table below lists the names and ages of the Company's current executive
officers, the position held, and the year when first appointed. It is
anticipated that each such executive officer will continue in his position,
although there is no understanding or arrangement to that effect. Any executive
officer could resign or be replaced or removed by the Board of Directors at any
time.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Officer
Name Age Position with Company Since
---- --- --------------------- -------
<S> <C> <C> <C>
Jerome Drexler 69 Chairman of the Board of Directors and Chief Executive Officer 1968
of the Company and its wholly owned subsidiary, LaserCard
Systems Corporation
Richard M. Haddock (1) 45 President and Chief Operating Officer of the Company and its 1997
wholly owned subsidiary, LaserCard Systems Corporation
Christopher J. Dyball 46 Executive Vice President of the Company and General Manager, 1992
Card Manufacturing
Steven G. Larson 47 Vice President of Finance and Treasurer of the Company and 1987
its wholly owned subsidiary, LaserCard Systems Corporation
</TABLE>
(1) Richard M. Haddock became an executive officer of the Company on February
22, 1997. He has worked for the Company in management positions since 1981,
and has been President and Chief Operating Officer of the Company's wholly
owned subsidiary, LaserCard Systems Corporation, since 1990.
-6-
<PAGE> 9
Executive Compensation
The following table discloses the total compensation paid to each of the
Company's four executive officers for the three fiscal years ended March 31,
1997, for services rendered in all capacities to the Company and its
subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Fiscal Shares Underlying
Name and Principal Position Year Salary ($) Bonus ($ Option Grants (#)
- --------------------------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Jerome Drexler 1997 $160,755 $ 0 45,000
Chairman of the Board and 1996 $146,956 $ 0 30,000
Chief Executive Officer 1995 $122,308 $ 0 17,000
Richard M. Haddock 1997 $113,456 $ 0 51,000
President and 1996 $107,345 $ 0 105,000
Chief Operating Officer 1995 $102,979 $ 0 17,000
Christopher J. Dyball
Executive Vice President 1997 $111,052 $ 0 36,000
and General Manager, 1996 $107,206 $ 0 75,000
Card Manufacturing 1995 $102,979 $ 0 17,000
Steven G. Larson 1997 $114,502 $ 0 51,000
Vice President of Finance 1996 $ 97,202 $ 0 60,000
and Treasurer 1995 $ 93,396 $ 0 17,000
</TABLE>
Stock Option Grants to Executive Officers
The following table sets forth the stock options granted to each of the
Company's four executive officers under the Company's 1991 Option Plan during
the 1997 fiscal year ended March 31, 1997. The table sets forth hypothetical
dollar gains or "option spreads" for the options at the end of their respective
terms, as calculated in accordance with the rules of the Securities and Exchange
Commission. Each gain is based on arbitrarily assumed annualized rates of
compounded appreciation of the market price at the date of grant of 5 percent
and 10 percent from the date the option was granted to the end of the option
term. However, no gain to the optionee is possible without an increase in stock
price, which will benefit all stockholders commensurately. A zero percent gain
in stock price appreciation will result in zero dollars for the optionee. Actual
gains, if any, on option exercises are dependent on the future performance of
the Company's Common Stock.
-7-
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------------
Percent of Potential Realizable Value at
Shares Total Options Exercise Assumed Annual Rates of
Underlying Granted to Price Expiration Stock Price Appreciation for
Options All Optionees ($/Share) Date 5- or 10-Year Option Term
-------------------------
Name Granted(#) in Fiscal Year (1) (2) 5% 10%
---- ---------- -------------- ------- ------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 30,000 8.4% $12.625 9/20/06 $238,194 $603,630
15,000 4.2% $13.0625 2/21/07 $123,224 $312,274
Richard Haddock 21,000 5.9% $12.625 9/20/01 $ 73,249 $161,861
30,000 8.4% $13.0625 2/21/02 $108,268 $239,244
Christopher Dyball 21,000 5.9% $12.625 9/20/01 $ 73,249 $161,861
15,000 4.2% $13.0625 2/21/02 $ 54,134 $119,622
Steven Larson 36,000 10.1% $12.625 9/20/01 $125,570 $277,477
15,000 4.2% $13.0625 2/21/02 $ 54,134 $119,622
</TABLE>
(1) At the discretion of the Board of Directors and/or Stock Option Committee,
the optionee may pay the exercise price to the Company in cash, by
promissory note, or by delivering already owned shares, subject to certain
conditions.
(2) Mr. Drexler's options have ten-year terms. Options granted to Messrs.
Haddock, Dyball, and Larson have five-year terms. These options are subject
to earlier termination in certain events.
Aggregated Option Exercises and Options Held by Executive Officers
The following table sets forth the value of options exercised by the
Company's executive officers during the 1997 fiscal year and remaining
unexercised at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value of Unexercised
Acquired on Value Unexercised Options at In-the-Money Options at
Exercise Realized Fiscal Year-End (#) Fiscal Year-End ($)(2)
------------------- ----------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 50,000 $215,405 187,000 0 $589,700 $ 0
Richard Haddock 47,500 $306,343 64,000 96,000 $194,875 $53,437
Christopher Dyball 25,000 $177,433 85,000 81,000 $308,125 $53,437
Steven Larson (3) 36,950 $248,407 52,950 81,000 $171,912 $35,624
</TABLE>
(1) Market value of underlying securities (based on the fair market value of
the Company's Common Stock on The Nasdaq Stock Market) at the time of their
exercise, minus the exercise price.
(2) Market value of securities underlying in-the-money options at fiscal year
end (based on $10.25 per share, the average of the high and low trading
prices of the Company's Common Stock on The Nasdaq Stock Market as of March
31, 1997) minus the exercise price.
(3) Includes options subject to trust in favor of Marsha Larson, for whose
benefit 15,000 shares were acquired upon exercise in fiscal 1997 (for value
realized of $111,581). At fiscal year end, 26,450 shares remained
underlying those options that were exercisable (for value of $85,850) and
2,031 shares remained underlying those options that were unexercisable (for
value of $2,411).
-8-
<PAGE> 11
Principal Stockholder
The table below shows the name, address, number of shares held, nature of
ownership, and percentage of shares held as of July 15, 1997, by the only person
or entity known to the Company to be the beneficial owner of more than 5 percent
of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of Shares and Percentage
Name and Address Nature of Ownership of Class
---------------- -------------------- ----------
<S> <C> <C>
Jerome Drexler 1,415,098(1) 15.4%
c/o Drexler Technology Corporation Full dispositive
1077 Independence Avenue and voting power
Mountain View, CA 94043
</TABLE>
- ---------------------
(1) Includes 162,000 shares purchasable by exercise of option within 60 days.
Does not include 172,100 shares owned by Mr. Drexler's wife and 15,300
shares held indirectly by his wife as custodian, as to all of which shares
Mr. Drexler disclaims any beneficial ownership. Does not include 21,500
shares held by The Drexler Foundation, the assets of which are perpetually
dedicated to charity. The power to vote and to dispose of the shares held
by The Drexler Foundation is shared by the Foundation's directors,
consisting of Mr. Drexler and his wife.
Compensation Committee Interlocks and Insider Participation
Jerome Drexler, the Company's Chief Executive Officer, is a member of the
Compensation Committee. The Compensation Committee is responsible for setting
the salaries of the Company's executive officers, other than the Chief Executive
Officer, and for certain other management employees of the Company and its
subsidiaries.
Employment Contracts, Termination of Employment, and Change of Control
Arrangements
None of the Company's executive officers has employment or severance
arrangements with the Company. Under the terms of the 1991 Stock Option Plan,
the Board of Directors and/or Stock Option Committee retains discretion, subject
to certain limits, to modify the terms of outstanding options. In the event of a
merger or sale of assets or like event, the Board of Directors is empowered to
make appropriate adjustments to options under the 1991 Option Plan. See the
summary of the 1991 Option Plan on pages 5 and 6 of this Proxy Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and beneficial owners of more than
10 percent of the Company's Common Stock to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Based on its review of Forms 3, 4, 5, if
any, and periodic written representations from reporting persons, the Company
believes that during the 1997 fiscal year, its officers, directors, and holder
of more than 10 percent of the Company's Common Stock complied with all Section
16(a) filing requirements.
With reference to the next two sections, headed "Compensation Policy" and
"Stock Performance Chart," and notwithstanding anything to the contrary set
forth in any of the Company's previous filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate future filings, including this Proxy Statement, in whole or part,
the Compensation Policy and the Stock Performance Chart shall not be
incorporated by reference in any such filings, nor shall they be deemed to be
soliciting material or deemed filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or under the Securities Exchange
Act of 1934, as amended.
-9-
<PAGE> 12
Compensation Policy
The Board of Directors, in coordination with the Compensation Committee and
Stock Option Committee, establishes the general compensation policies of the
Company and specific compensation levels for the Company's Chief Executive
Officer and other executive officers. The Company's compensation policy, as
adopted and revised from time to time, is to provide total compensation
opportunities that are competitive with the pay practices of other companies and
thereby enable the Company to attract and retain superior performing managers.
This is accomplished through a combination of cash incentives and equity
incentives which are granted to the Company's executive officers as well as to a
broad range of the Company's employees. The Company believes that this closely
aligns employee interests with those of its stockholders.
The Board considered a total package for the Company's Chief Executive
Officer in the context of the Company's objectives and business strategy. The
analysis included reviewing compensation of chief executive officers of
comparable companies within similar industries. The Company's overall financial
performance was considered by the Board in determining the Chief Executive
Officer's compensation; however, the specific performance of the Company's
Common Stock was not a factor. In addition, the Board considered factors such as
the individual's past performance and future potential. The same factors and
considerations were used in determining the compensation of the Company's other
executive officers as were used in setting the compensation of the Chief
Executive Officer.
The Company also maintains a Management Bonus Plan for its management
employees. The Board determines the Company contribution to a bonus pool. This
contribution is usually related to performance criteria such as pre-tax,
pre-bonus Company earnings and licensing revenues, with various adjustments. The
Chief Executive Officer then has sole discretion to allocate this bonus pool
among the employees of the Company, excluding himself. The Company made no
contribution to the bonus pool during fiscal 1997.
Compensation Committee Stock Option Committee
---------------------- ----------------------
Jerome Drexler Arthur H. Hausman
William E. McKenna William E. McKenna
Stock Performance Chart
The following stock performance chart compares the cumulative total return
for the Company's Common Stock over the past five fiscal years, to the Standard
& Poor's 500 Stock Index ("S&P 500") and the University of Chicago Center for
Research in Security Prices (CRSP) Total Return Index for Nasdaq Stock Market
Computer Manufacturing Companies, which includes manufacturers of computer
storage devices. The chart assumes that the value of the investment in the
Company and each index was $100 on March 31, 1992, and that any dividends were
reinvested.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN*
*Total Return Assumes Reinvestment of Dividends
[STOCK PERFORMANCE CHART APPEARS HERE]
-10-
<PAGE> 13
The stock performance chart was plotted using the following data:
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
---------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Drexler Technology Corporation....... $100.00 $ 84.78 $102.17 $102.17 $ 210.87 $ 178.26
S&P 500.............................. $100.00 $115.23 $116.93 $135.13 $ 178.51 $ 213.89
CRSP Nasdaq Computer Manufacturers... $100.00 $113.98 $110.68 $132.16 $ 203.54 $ 223.02
</TABLE>
PAST RESULTS ARE NOT AN INDICATOR OF FUTURE INVESTMENT RETURNS
Independent Public Accountants
Arthur Andersen LLP are the Company's independent public accountants for
the current fiscal year and first held this position for the fiscal year ended
March 27, 1981. The independent public accountants are appointed by the Board of
Directors. During the fiscal year ended March 31, 1997, Arthur Andersen LLP
performed audit services including examination of annual financial statements,
assistance on accounting and financial reporting matters, and performed tax
services including the preparation of returns and the rendering of planning
advice. Representatives of Arthur Andersen LLP are expected to be present at the
stockholders' meeting. The representatives will have an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions by stockholders.
Proxy Cost and Solicitation
The Company will bear the entire cost of preparing, assembling, printing,
and mailing proxy materials furnished by the Board of Directors to the
stockholders. Copies of proxy materials will be furnished to brokers, dealers,
banks, voting trustees, and their nominees for forwarding to the beneficial
owners. The Company has retained Corporate Investor Communications, Inc.
("CICI") to assist, if necessary, in the solicitation of proxies from banks,
brokers and nominees at an approximate cost of $4,500 plus out-of-pocket
expenses. In addition to the solicitation of proxies by use of the mails and by
CICI, some of the officers, directors, and regular employees of the Company may
(without additional compensation) solicit proxies by telephone or personal
interview, the cost of which the Company will bear.
Other Matters; Stockholder Proposals for 1998 Annual Meeting
The Board of Directors knows of no other matters which will be brought
before the meeting, but if any such matters are properly presented, the proxies
solicited hereby will be voted in accordance with the judgment of the proxy
holders.
Subject to Securities and Exchange Commission regulations, stockholder
proposals intended to be presented at the 1998 Annual Meeting of Stockholders
must be received at the Company's principal executive offices not later than
April 21, 1998 in order to be included in the 1998 Proxy Statement.
Financial Statements
The Company's Annual Report for the 1997 fiscal year ended March 31, 1997,
is being sent concurrently to the Company's stockholders. If you have not
received or had access to the fiscal 1997 Annual Report, please notify the
Corporate Office, Drexler Technology Corporation, 1077 Independence Avenue,
Mountain View, California 94043-1601, and a copy will be sent to you.
This Proxy Statement was printed on recycled paper.
-11-
<PAGE> 14
PROXY
DREXLER TECHNOLOGY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS--
FOR ANNUAL MEETING SEPTEMBER 26, 1997
The undersigned hereby appoints Jerome Drexler and Jerald E. Rosenblum, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated on the reverse
side, all the shares of Common Stock of Drexler Technology Corporation held of
record by the undersigned on Friday, August 1, 1997 at the Annual Meeting of
Stockholders to be held on Friday, September 26, 1997, or any continuation or
adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS.
IF YOU ATTEND THE MEETING, AND SO DESIRE, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE> 15
Please mark
your vote as /X/
indicated in
this example.
WITHHELD
ITEM 1 -- ELECTION OF DIRECTORS. FOR FOR ALL
/ / / /
Nominees: Jerome Drexler
Arthur H. Hausman
William E. McKenna
WITHHELD FOR: (Write that nominee's name in the space provided below):
- ----------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2 -- APPROVAL OF AN AMENDMENT TO 1991
STOCK OPTION PLAN. / / / / / /
FOR AGAINST ABSTAIN
ITEM 3 -- OTHER MATTERS. In their discretion,
the Proxies are authorized to vote / / / / / /
upon such other matters as may
properly come before the meeting
or any adjournment or continuation
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF THE PROXY IS SIGNED AND RETURNED WITHOUT
VOTING INSTRUCTIONS, THE SHARES WILL BE VOTED FOR ELECTION OF DIRECTORS, FOR
PROPOSAL 2, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDER(S) ON ANY OTHER
MATTERS THAT PROPERLY COME BEFORE THIS MEETING.
Signature(s) ___________________________________________ Date ___________ , 1997
Please sign exactly as your name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give the full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign the partnership name by the
authorized person.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
THANK YOU.
