SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
|X| Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2)
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.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)(4) and 0-11.
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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 transaction:
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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 number, or the
Form or Schedule and the date of its filing.
1. Amount previously paid:
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<PAGE>
DREXLER TECHNOLOGY CORPORATION
1077 Independence Avenue
Mountain View, California 94043-1601
------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, SEPTEMBER 24, 1999
2:00 P.M.
To the Stockholders:
The 1999 Annual Meeting of Stockholders of Drexler Technology Corporation
will be held in the Edwards Room at Hyatt Rickeys hotel, 4219 El Camino Real,
Palo Alto, California, on Friday, September 24, 1999, at 2:00 p.m., for the
following purposes:
1. to elect directors;
2. to approve a 300,000 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 Tuesday, July 27,
1999, 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 12, 1999
- --------------------------------------------------------------------------------
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>
DREXLER TECHNOLOGY CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1999
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 1999 Annual Meeting of Stockholders of the Company to be held at 2:00
p.m. on Friday, September 24, 1999. Only stockholders of record on Tuesday, July
27, 1999, will be entitled to vote. At the close of business on that date, the
Company had outstanding 9,796,480 shares of Common Stock.
Stockholders are entitled to one vote for each share held. 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.
All duly executed proxy cards received prior to the meeting will be voted
in accordance with the choices specified thereon. As to any matter in which no
choice has been specified, the shares represented thereby will be voted FOR the
election of the Board's nominees as directors and FOR the increase in the number
of shares reserved for issuance under the Company's 1991 Stock Option Plan, and
in the discretion of the proxy holders on all other matters that may come before
the meeting.
The required quorum for the transaction of business at the annual meeting
is a majority of the shares of the corporation entitled to vote, represented in
person or by proxy. Shares that are duly voted "FOR," "AGAINST," or "ABSTAIN" on
any matter are treated as being present at the meeting for purposes of
establishing a quorum.
The Company intends to count abstentions and broker non-votes (which occur
when shares held by brokers or nominees for beneficial owners are voted on some
matters but not on others in the absence of instructions from the beneficial
owners) for the purpose of establishing the presence or absence of a quorum for
the transaction of business, but not as votes cast with respect to the election
of directors or for or against any other proposal that may come before the
meeting. Abstentions and broker non-votes would therefore have no effect on the
outcome of the election of directors or the vote on any proposal.
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 Stock holders.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees
The authorized number of directors to be elected at this meeting is five.
Management's nominees are: Jerome Drexler, Arthur H. Hausman, Dan Maydan,
William E. McKenna, and Walter F. Walker, 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 five
nominees unless authority to vote for one or more nominees is withheld in
accordance with the instructions on the proxy card.
The Company's By-Laws provide that any stockholder wishing to nominate one
or more candidates for election as directors must give advance written notice of
such intention substantially in advance of the date of the
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<PAGE>
stockholder meeting at which such election is to be held. The text of the
Company's By-Law provisions governing stockholder nominations and proposals is
set forth on page 12 of this Proxy Statement. Eli Shapiro, a stockholder in the
Company, has given notice that he intends to nominate his son, Brad J. Shapiro,
for election as a director of the Company. Your Board of Directors unanimously
opposes the possible nomination of Brad J. Shapiro for election asa director
and, therefore, no proxy held by the Board's designated proxy holders will be
voted in his favor if he is nominated. No other timely notices of intention to
nominate candidates have been received by the Company, and accordingly no other
nominations will be presented for the stockholders' consideration at the
meeting.
The table on the following page contains information respecting the number
of shares and percentage of the Company's Common Stock beneficially owned by
each of the Company's five directors, by each executive officer of the Company,
and by all executive officers and directors as a group, as of June 18, 1999. 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 June 18, 1999, the Company had outstanding
9,794,180 shares of Common Stock.
Board Meetings and Committees
The Board of Directors held four meetings during the 1999 fiscal year
ended March 31, 1999. 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, Maydan, and Drexler. The Stock Option Committee is composed
of Messrs. McKenna and Hausman. During the 1999 fiscal year, the Compensation
Committee held no meetings, the Stock Option Committee held two meetings, and
the Audit Committee held two meetings. During the 1999 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 and the Employee Stock Purchase Plan.
Director Compensation
Each of the five 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 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 six-month period and who is re-elected at the
annual meeting, is automatically granted a five-year option to purchase 6,000
shares of the Company's Common Stock. (In the case of Mr. Walker's election as a
director on March 16, 1999, effective May 27, 1999, the six-month qualification
period began on the date of election.) 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 option
grant.
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<PAGE>
STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Director Common Shares Percentage
Name, Principal Occupation, and Other Directorships Age Since As of 6/18/99 of Class
--------------------------------------------------- --- ----- ------------- --------
<S> <C> <C> <C> <C>
JEROME DREXLER, Director ..................................... 71 1968 1,320,548(1) 13.5%
Chairman of the Board of Directors and Chief Executive Officer
of the Company and its wholly owned subsidiary, LaserCard
Systems Corporation.
ARTHUR H. HAUSMAN, Director .................................. 76 1981 47,392(2) .5%
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 Emeritus of Technology for Com
munications International (high-frequency antenna systems and
electronic reconnaissance systems). Director of California
Amplifier, Inc. (low-noise amplifiers).
DAN MAYDAN, Director ......................................... 63 1998 6,000(3) .1%
President (since 1993) and Director (since 1992) of Applied
Materials, Inc. (semiconductor manufacturing equipment).
Director of Electronics for Imaging, Inc. (software).
WILLIAM E. McKENNA, Director ................................. 79 1970 61,207(2) .6%
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).
WALTER F. WALKER, Director ................................... 44 1999 18,750 .2%
President (since September 1994) of Seattle SuperSonics
National Basketball Association basketball team, a subsidiary
of Ackerley Communications, Inc. Previously, was President
(from March to September 1994) of Walker Capital, Inc. (money
management firm) and Vice President (from July 1987 to March
1994) of Goldman Sachs & Co. (a registered broker-dealer).
Director of Redhook Ale Brewery, Advanced Digital Information
Corporation (archival and backup data-storage peripherals), and
Washington Special Olympics. Also is a Chartered Financial
Analyst (CFA).
RICHARD M. HADDOCK ........................................... 47 N/A 99,768(4) 1.0%
President and Chief Operating Officer of the Company and its
wholly owned subsidiary, LaserCard Systems Corporation.
CHRISTOPHER J. DYBALL ........................................ 48 N/A 75,182(5) .8%
Executive Vice President of the Company; General Manager, Card
Manufacturing.
STEVEN G. LARSON ............................................. 49 N/A 49,555(6) .5%
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 8 persons
named above) ................................................. 1,678,402(7) 17.1%
</TABLE>
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(1) Includes 244,000 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 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 27,000 shares purchasable by exercise of option within 60 days.
(3) Includes 6,000 shares purchasable by exercise of option within 60 days.
(4) Includes 98,800 shares purchasable by exercise of option within 60 days.
(5) Includes 72,000 shares purchasable by exercise of option within 60 days.
(6) Includes 48,400 shares purchasable by exercise of option within 60 days.
(7) Includes 523,200 shares purchasable by exercise of option within 60 days.
-3-
<PAGE>
Required Vote for Approval of Proposal 1
The election of each nominee to the Board of Directors requires the
affirmative vote of the holders of a plurality of the shares of the Company's
Common Stock present in person or represented by proxy at the meeting. With
respect to the election of directors, stockholders may (1) vote "FOR" all five
nominees, (2) "WITHHOLD" authority to vote for all such nominees, or (3)
"WITHHOLD" authority to vote for any individual nominee or nominees, but vote
for all other nominees. Because directors are elected by a plurality of the
votes cast, broker non-votes and shares for which authority to vote has been
withheld will have no effect on the outcome of the election.
On Proposal 1, Management recommends a vote FOR
election of the Company's nominees:
Jerome Drexler, Director
Arthur H. Hausman, Director
Dan Maydan, Director
William E. McKenna, Director
Walter F. Walker, Director
PROPOSAL 2: AMENDMENT TO 1991 STOCK OPTION PLAN
Amendment to Increase Authorized Number of Shares under 1991 Stock Option Plan
Proposal 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 300,000 shares, from 2,850,000 to 3,150,000
shares.
As of May 27, 1999, a total of 949,080 shares had been issued upon the
previous exercise of options under the 1991 Option Plan and were no longer
available for option grants; 1,733,662 of the shares in the 1991 Option Plan
were reserved for issuance upon the exercise of currently outstanding options;
and a total of 167,258 shares remained available for additional option grants,
prior to giving effect to the proposed increase. On May 27, 1999, 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
300,000 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 1998, the Company's
stockholders approved an amendment to the 1991 Stock Option Plan to increase the
number of shares reserved thereunder by 480,000 shares, the Board of Directors
believes that the 167,000 shares remaining available as of May 27, 1999 for
granting options pursuant to the 1991 Option Plan are insufficient for that
purpose.
The 300,000 share increase sought under Proposal 2 represents less than 5
percent of the Company's 9,796,480 total outstanding shares as of its proxy
solicitation record date of July 27, 1999.
Required Vote for Approval of Proposal 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. With
respect to Proposal 2, stockholders may (1) vote "FOR," (2) vote "AGAINST," or
(3) "ABSTAIN"
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<PAGE>
from voting on this proposal. The affirmative vote of a majority of the votes
cast is required for ratification of Proposal 2. Abstentions and broker
non-votes are not considered to be votes cast and therefore will have no effect
on the outcome of this proposal.
Management recommends a vote FOR approval of Proposal 2 -
Amendment to the 1991 Option Plan.
Summary of 1991 Stock Option Plan
The 1991 Option Plan provides for the granting to key employees, officers,
directors, and consultants to the Company and its subsidiaries (75 persons as of
May 27, 1999) 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 2 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
five-year terms, with the exception of eight 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 (1/3) 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 defined for this purpose
as the average of the high and low trading prices as reported by The Nasdaq
Stock Market(R) on the applicable date. Payment for the shares upon the exercise
of options is in cash or payment by utilization of outstanding Company stock
owned by the optionee, unless payment by promissory note is directed by the full
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<PAGE>
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.
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:
o permitting optionees no less than 30 days to exercise the vested portion
of their options;
o 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
o 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 following table lists the names and ages of the Company's current
executive officers, the positions 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 71 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 47 President and Chief Operating Officer of the Company and its 1997
wholly owned subsidiary, LaserCard Systems Corporation
Christopher J. Dyball 48 Executive Vice President of the Company and General Manager, 1992
Card Manufacturing
Steven G. Larson 49 Vice President of Finance and Treasurer of the Company and 1987
its wholly owned subsidiary, LaserCard Systems Corporation
</TABLE>
Executive Compensation
The Summary Compensation Table on the following page discloses the total
compensation paid to each of the Company's four executive officers for the three
fiscal years ended March 31, 1999, for services rendered in all capacities to
the Company and its subsidiaries.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Fiscal Shares Underlying
Name and Principal Position Year Salary Salary ($) Bonus ($) Option Grants (#)
--------------------------- ----------- ---------- --------- -----------------
<S> <C> <C> <C> <C>
Jerome Drexler 1999 $ 179,168 $ 0 65,000
Chairman of the Board and 1998 $ 164,647 $ 0 45,000
Chief Executive Officer 1997 $ 160,755 $ 0 45,000
Richard M. Haddock 1999 $ 191,931 $ 0 65,000
President and 1998 $ 173,720 $ 0 20,000
Chief Operating Officer 1997 $ 113,456 $ 0 51,000
Christopher J. Dyball 1999 $ 174,130 $ 0 65,000
Executive Vice President; General 1998 $ 150,036 $ 0 45,000
Manager, Card Manufacturing 1997 $ 111,052 $ 0 36,000
Steven G. Larson 1999 $ 154,141 $ 0 65,000
Vice President of Finance 1998 $ 129,662 $ 0 20,000
and Treasurer 1997 $ 114,502 $ 0 51,000
</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 1999 fiscal year ended March 31, 1999. 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 five percent
and ten 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.
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 in ($/Share) Date -------------------------
Name Granted(#) Fiscal Year (1) (2) 5% 10%
---- ---------- ----------- --- --- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 15,000 2.9% $14.750 6/02/08 $139,143 $352,616
30,000 5.7% $11.156 9/25/08 210,484 533,408
20,000 3.8% $10.906 9/15/08 137,178 347,637
Richard Haddock 15,000 2.9% $14.750 6/02/03 61,127 135,075
30,000 5.7% $11.156 9/25/03 92,468 204,331
20,000 3.8% $10.906 9/15/03 60,264 133,168
Christopher Dyball 15,000 2.9% $14.750 6/02/03 61,127 135,075
30,000 5.7% $11.156 9/25/03 92,468 204,331
20,000 3.8% $10.906 9/15/03 60,264 133,168
Steven Larson 15,000 2.9% $14.750 6/02/03 61,127 135,075
30,000 5.7% $11.156 9/25/03 92,468 204,331
20,000 3.8% $10.906 9/15/03 60,264 133,168
</TABLE>
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(1) At the discretion of the Board of Directors and/or Stock Option Committee,
the optionee may pay the exercise price to the Company in cash, by
promissory note, or by delivering already owned shares, subject to certain
conditions.
(2) Mr. Drexler's options have ten-year terms. Options granted to Messrs.
Haddock, Dyball, and Larson have five-year terms. These options are
subject to earlier termination in certain events.
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<PAGE>
Aggregated Option Exercises and Options Held by Executive Officers
The following table sets forth the value of options exercised by the
Company's executive officers during the 1999 fiscal year and remaining
unexercised at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value Fiscal Year-End (#) Fiscal Year-End ($)(2)
Exercise Realized ------------------ ----------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 0 $ 0 244,000 0 $372,708 $ 0
Richard Haddock 12,200 121,450 98,800 134,000 162,888 13,163
Christopher Dyball 7,500 76,875 72,000 149,000 98,850 13,163
Steven Larson 3,600 35,100 48,400 129,000 43,238 8,775
</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(R)) 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 $9.94 per share, the average of the high and low trading
prices of the Company's Common Stock on The Nasdaq Stock Market(R) as of
fiscal year end) minus the exercise price.
Principal Stockholder
The table below shows the name, address, number of shares held, nature of
ownership, and percentage of shares held as of June 18, 1999, by the only person
or entity known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock.
Number of Shares and Percentage
Name and Address Nature of Ownership of Class
---------------- ------------------- --------
Jerome Drexler 1,320,548(1) 13.5%
c/o Drexler Technology Corporation Full dispositive
1077 Independence Avenue and voting power
Mountain View, CA 94043
- ----------
(1) Includes 244,000 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 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.
-8-
<PAGE>
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
ten 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 1999
fiscal year, these requirements were satisfied except for one Form 4 that was
filed 14 days late for Dr. Dan Maydan due to his overseas travel. 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
holders of more than ten percent of the Company's Common Stock complied with all
Section 16(a) filing requirements for the 1999 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.
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 pretax,
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 1999.
Compensation Committee Stock Option Committee
---------------------- ----------------------
Jerome Drexler Arthur H. Hausman
Dan Maydan William E. McKenna
William E. McKenna
-9-
<PAGE>
Stock Performance Chart
In the stock performance chart below, the cumulative total return on
investment for the Company's common stock over the past five fiscal years is
compared to the Russell 2000 Stock Index ("Russell 2000") and the University of
Chicago Center for Research in Security Prices (CRSP) Total Return Index for the
Nasdaq Stock Market Electronic Components industry group ("Nasdaq Electronic
Components"). The chart assumes that the value of the investment in the Company
and each index was $100 on March 31, 1994, and that any dividends were
reinvested.
Previously, the Company has compared its stock performance to the Standard
& Poor's 500 Stock Index ("S&P 500") and the CRSP Total Return Index for Nasdaq
Computer Manufacturers industry group ("Nasdaq Computer Manufacturers").
Cumulative total returns for these two indexes are included in the stock
performance chart below.
The Russell 2000 is a benchmark index for small capitalization stocks, and
the Company's market valuation more closely relates in size to the companies in
the Russell 2000 than to companies in the S&P 500.
There is no industry index or product peer group specifically for the
Company's products, namely optical memory cards and equipment. The U.S.
Department of Labor lists "Magnetic and Optical Recording Media" in Standard
Industrial Classification (SIC) Code 3695 under the broad heading of Electronic
and Other Electrical Equipment and Components. The Company's equipment product
classification, SIC Code 3572, "Computer Storage Devices," is listed under the
heading of Computer Equipment. The Nasdaq Electronic Components industry index
was chosen because the majority of the Company's revenues currently are derived
from the sale of optical recording media (optical memory cards).
[STOCK PERFORMANCE CHART APPEARS HERE]
The stock performance chart was plotted using the following data:
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
----------------------------------------------------------
...................................... 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Drexler Technology Corporation........ $100.00 $100.00 $206.38 $174.47 $265.96 $170.21
Russell 2000.......................... $100.00 $105.50 $136.19 $143.15 $203.01 $170.02
S&P 500............................... $100.00 $115.57 $152.68 $182.94 $270.75 $320.49
CRSP Nasdaq Computer Manufacturers.... $100.00 $119.41 $183.83 $201.02 $356.01 $705.58
CRSP Nasdaq Electronic Components..... $100.00 $130.86 $172.10 $301.82 $345.45 $505.54
</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, 1999, 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
Proxies may be solicited by mail, in person, by telephone, or by other
methods. Solicitations may be made by directors, officers, and employees of the
Company, none of whom will receive additional compensation for such
solicitations. The Company will request banks, brokerage houses, and other
custodians, nominees, and fiduciaries to forward all of its solicitation
materials to the beneficial owners of the shares of common stock they hold of
record. The Company will reimburse these record holders for clerical and mailing
expenses incurred by them in forwarding these materials to their customers.
The Company has retained Corporate Investor Communications, Inc. ("CICI")
for solicitation and advisory services, if necessary, in connection with the
solicitation, for which CICI would receive a fee estimated at $5,000, together
with reimbursement for its reasonable out-of-pocket expenses.
The cost of soliciting proxies on behalf of the Board of Directors for the
annual meeting is being borne by the Company. Costs incidental to these
solicitations include expenditures for printing, postage, legal, soliciting, and
related expenses and could include accounting and other consulting services in
addition to the fees and costs of CICI described above.
Other Matters; Timely Proposals
The Company's management does not intend to bring any business before the
meeting other than the matters referred to in the accompanying Notice. If any
other matters are properly presented at the meeting, however, all proxies
solicited hereby will be voted in accordance with the discretion of the proxy
holders. The proxy holders will be deemed to have discretionary authority to
vote on the following matters, among others: (a) all stockholder proposals,
including but not limited to any which may be submitted by Eli Shapiro or others
affiliated with him; (b) approval of the minutes of the 1998 Annual Meeting (but
without ratification of the actions taken at that meeting); (c) election of a
substitute for any nominee who is unable or unwilling to serve as a director of
the Company, and (d) all matters incident to the conduct of the meeting.
In accordance with the Company's By-Laws, stockholder proposals submitted
by any person or group (other than the Company's Board of Directors) after May
27, 1999 will be considered untimely and will not be submitted for approval of
the stockholders at the 1999 Annual Meeting.
Stockholder Proposals for the 2000 Annual Meeting
Subject to Securities and Exchange Commission regulations, stockholder
proposals intended to be presented at the year 2000 Annual Meeting of
Stockholders must be received at the Company's principal executive offices not
later than May 26, 2000.
-11-
<PAGE>
Advance Notice Required for Stockholder Nominations and Proposals
The Company's By-Laws require timely advance written notice of all
stockholder nominations of candidates for director, and of any other proposals
to be presented at an annual meeting for the vote of the stockholders.
Following is the text of Article 2, Section 13, of the By-Laws:
(a) The Board of Directors of the Corporation may nominate candidates for
election as directors of the corporation and may propose such other matters for
approval of the stockholders as the Board deems necessary or appropriate.
(b) Nominations for election of members of the Board of Directors may also
be made by any holder of any outstanding class of capital stock of the
corporation entitled to vote for the election of directors. Notice of intention
to make any such nominations under this paragraph must be made in writing and
must be received by the Secretary, at the principal offices of the corporation,
by the close of business on a date which is not less than one hundred twenty
(120) days prior to the meeting; provided, however, that if less than one
hundred twenty (120) days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the meeting was mailed to
stockholders of record or such public disclosure was made; and provided,
further, that public disclosure shall in all cases be deemed to have been made
of any annual meeting held on the date specified in these By-Laws. Such
notification must contain the following information: (i) the name and address of
each proposed nominee, (ii) the principal occupation of each proposed nominee,
(iii) the number of shares (if any) of capital stock of the corporation owned of
record or beneficially by each proposed nominee, (iv) the name and residence
address of the notifying stockholder, (v) the number of shares of capital stock
of the corporation owned by the notifying stockholder, (vi) whether the proposed
nominee has ever been convicted of or pleaded nolo contendere to any criminal
offense involving dishonesty or breach of trust, filed a petition in bankruptcy,
or been adjudged bankrupt, and (vii) any other information relating to such
nominee that is required to be disclosed in a proxy statement soliciting proxies
for the election of directors or is otherwise required to be provided by the
stockholder pursuant to Section 14A of the Securities Exchange Act of 1934, as
amended. The notification shall (1) be signed by the nominating stockholder and
by each nominee, (2) be accompanied by a written consent to be named as a
nominee for election as a director from each proposed nominee, and (3) confirm
the accuracy of all of the above-described information contained in the notice.
Nominations not made in accordance with these procedures shall be disregarded by
the chairman of the meeting, and upon his or her instructions, the Inspector(s)
of Election shall disregard all votes cast for each such nominee.
(c) No proposal by any person other than the Board of Directors shall be
submitted for the approval of the stockholders at any regular or special meeting
of the stockholders of the corporation unless written notice of such proposal
shall have been given by the person advancing such proposal and actually
received by the Secretary of the corporation, at the principal offices of the
corporation, by the close of business on a date which is not less than one
hundred twenty (120) days prior to the meeting; provided, however, that if less
than one hundred twenty (120) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
meeting was mailed to stockholders of record or such public disclosure was made;
and provided, further, that public disclosure shall in all cases be deemed to
have been made of any annual meeting which is held on the date specified in
these By-Laws. Such notice must be either delivered to the Secretary or mailed
to and received by the Secretary, shall be signed and dated by the person
advancing the proposal (the "Proposing Stockholder"), and shall disclose (i) the
name and address(es) of the person or group advancing the proposal, (ii) the
number of shares of stock in the corporation owned of record or beneficially by
the Proposing Stockholder, (iii) any material interest of such person or
persons, or of persons affiliated with them, in the proposal, and (iv) such
other information concerning the person making such proposal and the proposal
itself as would be required by the appropriate Rules and Regulations of the
Securities and Exchange Commission to be included in a proxy statement
soliciting proxies for the proposal.
-12-
<PAGE>
[Back cover]
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
This Proxy Statement was printed on recycled paper.
<PAGE>
PROXY
[LOGO] DREXLER
TECHNOLOGY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING SEPTEMBER 24, 1999
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 Tuesday, July 27, 1999, at the Annual Meeting of
Stockholders to be held on Friday, September 24, 1999, 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>
Please mark
your votes as
indicated in
this example |X|
WITHHELD
FOR FOR ALL
ITEM 1.- ELECTION OF DIRECTORS. |_| |_|
Nominees: Jerome Drexler
Arthur H. Hausman
Dan Maydan
William E. McKenna
Walter F. Walker
WITHHELD FOR: (Write that nominee's name on 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 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_________________, 1999
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.
