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
|X| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
DREXLER TECHNOLOGY CORPORATION
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(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>
[LOGO OF DREXLER TECHNOLOGY CORPORATION]
1077 Independence Avenue
Mountain View, California 94043-1601
------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
Friday, September 25, 1998
2:00 p.m.
To the Stockholders:
The 1998 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 25, 1998, at 2:00 p.m., for the following
purposes:
1. to elect directors;
2. to approve a 480,000 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 Wednesday, July 29,
1998, 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, 1998
- --------------------------------------------------------------------------------
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.
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<PAGE>
DREXLER TECHNOLOGY CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 25, 1998
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 1998 Annual Meeting of Stockholders of the Company to be held at 2:00
p.m. on Friday, September 25, 1998. Only stockholders of record on Wednesday,
July 29, 1998, will be entitled to vote. At the close of business on that date,
the Company had outstanding 9,721,397 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 4.
Management's nominees are Messrs. Jerome Drexler, Arthur H. Hausman, Dan Maydan,
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 4 nominees unless
authority to vote for one or more nominees is withheld in accordance with the
instructions on the proxy card.
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 31, 1998. The notice shall
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 include the duly
executed written consent of the nominee to serve as a director if elected.
-1-
<PAGE>
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 4 directors, by each executive officer of the Company, and by all
executive officers and directors as a group, as of July 1, 1998. 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 1, 1998, the Company had outstanding 9,718,897
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 1968 1,424,548(1) 14.7%
Chairman of the Board of Directors and Chief Executive Officer of the Company
and its wholly owned subsidiary, LaserCard Systems Corporation.
ARTHUR H. HAUSMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 1981 43,500(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 electronics); and Director Emeritus of Technology
for Communications International (high-frequency antenna systems and electronic
reconnaissance systems).
DAN MAYDAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 1998 -- --
Director. President (since December 1993), Director (since 1992), and formerly
Executive Vice President (from 1990 to December 1993) of Applied Materials, Inc.
(semiconductor manufacturing equipment); and Co-Chairman (since 1991) of Applied
Komatsu Technology, Inc. (flat-panel display pro-duction systems). Director of
Electronics for Imaging, Inc. (software).
WILLIAM E. McKENNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 1970 57,000(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 N/A 66,800(3) .7%
President and Chief Operating Officer of the Company and its wholly owned
subsidiary, LaserCard Systems Corporation.
CHRISTOPHER J. DYBALL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 N/A 46,727(4) .5%
Executive Vice President of the Company; General Manager, Card Manufacturing.
STEVEN G. LARSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 N/A 22,304(5) .2%
Vice President of Finance and Treasurer of the Company and its wholly owned
subsidiary, LaserCard Systems Corporation.
All executive officers and directors as a group (the 7 persons named above) . . . 1,660,879(6) 17.1%
</TABLE>
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(1) Includes 194,000 shares purchasable by exercise of option within 60 days.
Does not include 172,100 shares owned by Mr. Drexler's wife and 12,850
shares held indirectly by his wife as custodian, as to all of which shares
Mr. Drexler disclaims any beneficial ownership. Does not include 15,000
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 24,000 shares purchasable by exercise of option within 60 days.
(3) Includes 66,800 shares purchasable by exercise of option within 60 days.
(4) Includes 45,000 shares purchasable by exercise of option within 60 days.
(5) Includes 21,400 shares purchasable by exercise of option within 60 days,
including options for 937 shares subject to trust in favor of Marsha
Larson.
(6) Includes 375,200 shares purchasable by exercise of option within 60 days.
-2-
<PAGE>
Board Meetings and Committees
The Board of Directors held 5 meetings during the 1998 fiscal year ended
March 31, 1998. 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 1998 fiscal year, the Compensation Committee held 1
meeting, the Stock Option Committee held 6 meetings, and the Audit Committee
held 2 meetings. During the 1998 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 (a) recommend engagement and discharge,
(b) review the plan and results of the auditing engagement, (c) approve
additional professional services, (d) review the accountants' independence, and
(e) consider the range of audit and nonaudit fees. Its functions as to the
Company's internal accounting are to (a) review the scope and results of
procedures for internal auditing and (b) 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 4 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
5-year 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 (1/3) 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 non-employee director who has served as a director
of the Company for the preceding 6-month period and who is re-elected at the
annual meeting, is automatically granted a 5-year option to purchase 6,000
shares of the Company's Common Stock. The option share grants to the 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>
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 shares in 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 480,000, from 2,370,000 to 2,850,000 shares.
As of June 2, 1998, a total of 880,730 shares had been issued upon the
previous exercise of options under the 1991 Option Plan and were no longer
available for option grants; 1,396,380 of the shares in the 1991 Option Plan
were reserved for issuance upon the exercise of currently outstanding options;
and a total of 92,890 shares remained available for additional option grants,
prior to giving effect to the proposed increase. On June 2, 1998, 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
480,000 shares in order to have an adequate number of shares available for
future option grants.
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 1997, the Company's
stockholders approved an amendment to the 1991 Stock Option Plan to increase the
number of shares reserved thereunder by 450,000 shares, the Board of Directors
believes that the 92,890 shares remaining available as of June 2, 1998 for
granting options pursuant to the 1991 Option Plan are insufficient for that
purpose.
The 480,000 share increase sought under Proposal No. 2 represents less than
5 percent of the Company's 9,721,397 total outstanding shares as of its proxy
solicitation record date of July 29, 1998.
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 also are 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 shares in their own
discretion.
Management recommends a vote FOR approval of Proposal No. 2 --
Amendment to the 1991 Option Plan.
-4-
<PAGE>
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 (74 persons as of
June 2, 1998) 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 interest 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 them 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 its members, 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.
Non-employee directors 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). 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 5-year
terms, with the exception of six 10-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 (1/3) each after 2, 3, and 4 years from the date of grant, although
one NSO granted in June of 1996 becomes exercisable in installments of 20
percent each after 6, 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 defined for this purpose
as the average of the high and low trading prices as reported by The Nasdaq
Stock Market on the applicable date. 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>
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:
-- permitting optionees no less than 30 days to exercise the vested
portion of their options;
-- 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
-- providing for vesting of 100 percent of the unvested portion for
optionees employed by the Company for at least 2 years prior to such
event if their employment is terminated within 1 year of such event by
the successor corporation other than by resignation or for acts of
moral turpitude.
Recent Amendments to the 1991 Option Plan
On March 5, 1998, under authority provided in the 1991 Option Plan, the
Company's Board of Directors adopted amendments to the plan whereby:
-- The Stock Option Committee is composed of at least two Members of the
Board, each of which is a "Non-Employee Director," as defined in Rule
16b-3 under the Securities Exchange Act of 1934.
-- The automatic annual option grant to re-elected directors, which
previously applied only to directors who had served on the Stock
Option Committee during the previous year, is extended to apply to all
non-employee directors.
-- The requisite time in office preceding an automatic annual option
grant to an incumbent director upon re-election is shortened from 9
months to 6 months.
-- The Board is empowered to alter option terms which relate to the
persons eligible to participate in the automatic grant program and the
timing, pricing, and amounts of automatic option grants.
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 on the following page 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.
-6-
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Officer
Name Age Position with Company Since
---- --- --------------------- -----
<S> <C> <C> <C>
Jerome Drexler 70 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 46 President and Chief Operating Officer of the Company and its 1997
wholly owned subsidiary, LaserCard Systems Corporation
Christopher J. Dyball 47 Executive Vice President of the Company and General Manager, 1992
Card Manufacturing
Steven G. Larson 48 Vice President of Finance and Treasurer of the Company and 1987
its wholly owned subsidiary, LaserCard Systems Corporation
</TABLE>
Executive Compensation
The following table discloses the total compensation paid to each of the
Company's 4 executive officers for the 3 fiscal years ended March 31, 1998, 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 1998 $ 164,647 $ 0 45,000
Chairman of the Board and 1997 $ 160,755 $ 0 45,000
Chief Executive Officer 1996 $ 146,956 $ 0 30,000
Richard M. Haddock 1998 $ 173,720 $ 0 20,000
President and 1997 $ 113,456 $ 0 51,000
Chief Operating Officer 1996 $ 107,345 $ 0 105,000
Christopher J. Dyball
Executive Vice President 1998 $ 150,036 $ 0 45,000
and General Manager, 1997 $ 111,052 $ 0 36,000
Card Manufacturing 1996 $ 107,206 $ 0 75,000
Steven G. Larson 1998 $ 129,662 $ 0 20,000
Vice President of Finance 1997 $ 114,502 $ 0 51,000
and Treasurer 1996 $ 97,202 $ 0 60,000
</TABLE>
Stock Option Grants to Executive Officers
The following table sets forth the stock options granted to each of the
Company's 4 executive officers under the Company's 1991 Option Plan during the
1998 fiscal year ended March 31, 1998. 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
-7-
<PAGE>
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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------- Potential Realizable Value at
Percent of Assumed Annual Rates of
Shares Total Options Exercise Stock Price Appreciation for
Underlying Granted to Price Expiration 5- or 10-Year Option Term
Options All Optionees ($/Share) Date ------------------------
Name Granted(#) in Fiscal Year (1) (2) 5% 10%
---- ---------- -------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 45,000 11.3% $10.75 9/19/07 $ 304,228 $ 770,973
Richard Haddock 20,000 5.0% $10.75 9/19/02 $ 59,401 $ 131,260
Christopher Dyball 45,000 11.3% $10.75 9/19/02 $ 133,651 $ 295,334
Steven Larson 20,000 5.0% $10.75 9/19/02 $ 59,401 $ 131,260
</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 10-year terms. Options granted to Messrs.
Haddock, Dyball, and Larson have 5-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 1998 fiscal year and remaining
unexercised at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value Fiscal Year-End (#) Fiscal Year-End ($)(2)
Exercise Realized ------------------------------ -------------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 53,000 $225,768 179,000 0 $1,187,594 $ 0
Richard Haddock 0 0 79,000 101,000 $ 620,031 $412,156
Christopher Dyball 47,500 $228,750 52,500 111,000 $ 398,516 $493,406
Steven Larson (3) 37,950 $210,224 25,000 91,000 $ 181,719 $355,281
</TABLE>
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(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 $15.40625 per share, the average of the high and low trading
prices of the Company's Common Stock on The Nasdaq Stock Market as of
fiscal year end) minus the exercise price.
(3) Includes options subject to trust in favor of Marsha Larson, for whose
benefit 26,450 shares were acquired upon exercise in fiscal 1998 (for value
realized of $139,262). At fiscal year end, 937 shares remained underlying
those options that were exercisable (for value of $5,944) and 1,094 shares
remained underlying those options that were unexercisable (for value of
$6,940).
-8-
<PAGE>
Principal Stockholder
The table below shows the name, address, number of shares held, nature of
ownership, and percentage of shares held as of July 1, 1998, 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.
Number of Shares and Percentage
Name and Address Nature of Ownership of Class
---------------- ------------------- --------
Jerome Drexler 1,424,548(1) 14.7%
c/o Drexler Technology Corporation Full dispositive
1077 Independence Avenue and voting power
Mountain View, CA 94043
- ----------
(1) Includes 194,000 shares purchasable by exercise of option within 60 days.
Does not include 172,100 shares owned by Mr. Drexler's wife and 12,850
shares held indirectly by his wife as custodian, as to all of which shares
Mr. Drexler disclaims any beneficial ownership. Does not include 15,000
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. The Company believes that for the 1998
fiscal year, these requirements were satisfied except for Dr. Dan Maydan's
initial Form 3 filing, which was 1 day late due to a delivery delay. The Company
believes, based on its review of Forms 3, 4, 5, if any, and periodic written
representations from reporting persons, that all other officers, directors, and
holder of more than 10 percent of the Company's Common Stock complied with all
Section 16(a) filing requirements for the 1998 fiscal year.
----------
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>
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 1998.
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 5 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, 1993, and that any dividends were
reinvested.
[STOCK PERFORMANCE CHART APPEARS HERE]
The stock performance chart was plotted using the following data:
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
-----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Drexler Technology Corporation............... $ 100.00 $ 120.51 $ 120.51 $ 248.72 $ 210.26 $ 320.51
S&P 500...................................... $ 100.00 $ 101.47 $ 117.27 $ 154.92 $ 185.63 $ 274.73
CRSP Nasdaq Computer Manufacturers........... $ 100.00 $ 97.10 $ 115.95 $ 178.58 $ 195.53 $ 346.59
</TABLE>
PAST RESULTS ARE NOT AN INDICATOR OF FUTURE INVESTMENT RETURNS
-10-
<PAGE>
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, 1998, Arthur Andersen LLP
performed audit services including examination of annual financial statements,
assisted 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; Timely Proposals
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. The proxy will be deemed to confer discretionary authority on the proxy
holders to vote on the following matters: (a) shareholder proposals of which the
Company had no notice prior to July 6, 1998; (b) approval of the minutes of the
1997 Annual Meeting (without ratification of the actions taken at that meeting);
(c) election of a substitute for a nominee who is unable to serve or who will
not serve for good cause; (d) shareholder proposals which the Company was
entitled to exclude from this Proxy Statement under Securities and Exchange
Commission regulations; and (e) matters incident to the conduct of the meeting.
Pursuant to the Company's Bylaws, proposals submitted by any person other
than the Company's Board of Directors, received by the Company after August 31,
1998, will be considered untimely and will not be submitted for approval of the
stockholders at the 1998 Annual Meeting.
Subject to Securities and Exchange Commission regulations, stockholder
proposals intended to be presented at the 1999 Annual Meeting of Stockholders
must be received at the Company's principal executive offices not later than
April 21, 1999 in order to be included in the 1999 Proxy Statement.
This Proxy Statement was printed on recycled paper.
-11-
<PAGE>
PROXY
DREXLER TECHNOLOGY CORPORATION
This Proxy Is Solicited On Behalf Of The Board Of Directors
For The Annual Meeting September 25, 1998
The undersigned hereby appoints Jerome Drexler and Jerald C. 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 Wednesday, July 29, 1998, at the Annual Meeting of
Stockholders to be held on Friday, September 25, 1998, 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 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>
Please mark
your votes as
indicated in |X|
this example
WITHHELD
ITEM 1.-ELECTION OF DIRECTORS. FOR FOR ALL
Nominees: Jerome Drexier | | | |
Arthur H. Hausman
Dan Maydan
William E. McKenna
WITHHELD FOR: (Write that nominee's name on the space provided below):
_____________________________________________________________________
ITEM 2.- APPROVAL OF AN AMENDMENT TO 1991 FOR AGAINST ABSTAIN
STOCK OPTION PLAN. | | | | | |
ITEM 3.- OTHER MATTERS. In their discretion, the FOR AGAINST ABSTAIN
Proxies are authorized to vote upon such | | | | | |
other matters as may properly come before
the meeting or any adjoumment or
continuation thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF THIS 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 THE MEETING.
Signature(s)__________________________________________________Date_________,1998
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 PROMTLY USING THE ENCLOSED ENVELOPE.
THANK YOU.
