<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Engineered Support Systems, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
NOTICE OF THE ANNUAL MEETING OF
THE SHAREHOLDERS OF
ENGINEERED SUPPORT SYSTEMS, INC.
St. Louis, Missouri
February 4, 1997
TO: THE SHAREHOLDERS OF
ENGINEERED SUPPORT SYSTEMS, INC.
The Annual Meeting of Shareholders of Engineered Support Systems, Inc.
will be held at the offices of Engineered Support Systems, Inc., ("Company")
1270 North Price Road, St. Louis, Missouri 63132, on Thursday, March 6, 1997
at 10:00 a.m. for the purpose of considering and voting upon the following
matters:
1. The election of three (3) directors to hold office for three
(3) years;
2. The approval of the Engineered Support Systems, Inc. 1997
Stock Option Plan for Nonemployee Directors and the allocation of
50,000 shares of Engineered Support Systems, Inc. Common Stock to the
Stock Option Plan; and,
3. To transact such other business, if any, as lawfully may be brought
before the meeting, or any adjournment thereof.
A proxy statement, proxy, and a copy of the Company's Annual Report for
the year ended October 31, 1996, accompany this Notice of the Annual Meeting
of the Shareholders.
We encourage all shareholders to attend the 1997 Annual Meeting of
Shareholders at the offices of the Company. For security purposes, if you
plan to attend, you must notify the Corporate Secretary of your intent to do
so by Friday, February 28, 1997.
ENGINEERED SUPPORT SYSTEMS, INC.
/s/ Michael F. Shanahan, Sr.
By Michael F. Shanahan, Sr.
Chairman and Chief Executive Officer
/s/ Gary C. Gerhardt
Gary C. Gerhardt
Secretary
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE EXECUTE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY. A RETURN ENVELOPE WHICH DOES NOT REQUIRE
POSTAGE, IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR YOUR CONVENIENCE.
1
<PAGE> 3
ENGINEERED SUPPORT SYSTEMS, INC.
1270 NORTH PRICE ROAD
ST. LOUIS, MISSOURI, 63132
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON MARCH 6, 1997
This proxy statement, which is being mailed to Shareholders on, or
about, February 4, 1997, is provided in conjunction with the solicitation of
proxies by the Board of Directors of Engineered Support Systems, Inc. ("ESSI"
or "Company") for use at the 1997 Annual Meeting of the Shareholders of the
Company to be held on March 6, 1997, at 10:00 a.m., at the offices of the
Company, 1270 North Price Road, St. Louis, Missouri, 63132. The Notice of
Meeting, the proxy, and the Annual Report are enclosed in this package. The
proxy should be returned by March 5, 1997, in the enclosed self-addressed,
postage prepaid, envelope.
PROXY
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company to be used at the 1997 Annual Meeting of the
Shareholders.
The shares represented by each executed proxy will be voted at the
meeting in accordance with the instructions contained in the proxy subject to
the conditions hereinafter set forth. In the event the Company receives an
executed proxy that contains no instructions, the proxy shall be voted in
accordance with the Board of Directors' recommendations as follows:
1. "FOR" the election of three (3) directors to hold office for three
(3) years;
2. "FOR" the approval of the Engineered Support Systems, Inc. 1997 Stock
Option Plan for nonemployee directors and the allocation of 50,000 shares
of Engineered Support Systems, Inc. Common Stock to the Stock Option
Plan; and,
3. At the discretion of those individuals named in the enclosed proxy,
on any other matter that may lawfully be brought before the meeting or
any adjournment thereof.
The Company will pay the reasonable expenses associated with its
solicitation of the proxies for the meeting. These expenses include the cost
of preparing, assembling, and mailing the notice of the Annual Meeting of the
Shareholders, the proxy, the proxy statement, the return envelopes, the cost
of handling and tabulating the number of proxies received, and the reasonable
fees which brokerage houses, other institutions, nominees, or fiduciaries
customarily charge to forward the aforementioned material to the beneficial
owners.
RIGHT OF REVOCATION
Any Shareholder executing a proxy for the meeting may revoke the proxy
by written notice of revocation delivered or mailed to, and received by, the
Secretary of the Company at 1270 North Price Road, St. Louis, Missouri,
63132, prior to the time the proxy is voted.
VOTING RIGHTS
The Shareholders of record at the close of business on January 15,
1997, are entitled to vote at the 1997 Annual Meeting of the Shareholders.
Proxies properly executed by the Company's Shareholders of record on January
15, 1997, will be voted as specified on the proxy and will be voted on all
business to be voted upon at the Annual Meeting of the Shareholders and any
adjournment thereof. Generally, each share is entitled to one vote.
However, with the election of Directors, each Shareholder has the right to
cast as many total cumulative votes that equals the number of shares held by
that Shareholder multiplied by the number of Directors to be elected. Each
Shareholder may also cast the whole number of votes for each nominee or
distribute them among some or all nominees. If authority is withheld to vote
for an individual nominee on the proxy, the total cumulative votes will be
allocated equally among the remaining nominees. As of January 15, 1997,
there were 3,189,460 shares of common stock outstanding and entitled to vote.
2
<PAGE> 4
BENEFICIAL OWNERSHIP OF COMMON STOCK OF THE COMPANY
The table below sets forth the number of shares of common stock (the
only class of outstanding securities of the Company) known by the Company to
be beneficially owned by the officers and directors of the Company as a
group, and each five percent (5%) Shareholder as of January 15, 1997. Except
as otherwise indicated in the footnotes to the table, the individuals listed
in the table possess sole voting and investment power with respect to the
shares opposite their name.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OF COMMON STOCK PERCENTAGE OF SHARES
OR IDENTITY OF GROUP BENEFICIALLY OWNED OUTSTANDING<F1>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael F. Shanahan, Sr. <F2>
1270 N. Price Road
St. Louis, MO 63132
(Business Address) 857,461 24.9%
All officers and directors as a
group (15 individuals including
Mr. Shanahan, Sr.) <F3> 1,263,918 36.7%
<FN>
<F1>For purposes of this table, the calculation of the Percentage of Shares
Outstanding is based on the number of shares of common stock outstanding
as of January 15, 1997, as increased by the assumed exercise of all of
the 255,000 outstanding options.
<F2>Mr. Shanahan holds substantially all of these shares as nominee of the
Michael F. Shanahan, Sr. First Amended and Restated Revocable Living
Trust dated August 10, 1990. This Trust may be revoked by Mr. Shanahan
at any time prior to his death and Mr. Shanahan has all rights to vote,
sell, and otherwise dispose of the stock.
<F3>Includes options granted to certain key employees and directors of the
Company as well as those shares allocated to the officers and directors
under the Engineered Support Systems, Inc. Employee Stock Ownership Plan.
</TABLE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The By-laws of the Company provide for staggered terms for the
Directors. The election of the Directors for staggered terms maintains
management continuity, discourages undesirable mergers, unwanted tender
offers, unwelcome proxy contests, and the ill-favored exertion of control by
a large block of common stock.
The nominees, Michael F. Shanahan, Sr., Michael F. Shanahan, Jr., and
Earl E.Walker, are each proposed to be elected at the Annual Meeting of the
Shareholders on March 6, 1997, for a three (3) year term that will expire in
March of 2000. The shares of common stock represented by properly executed
proxies will be voted for the nominees. All nominees have consented to be
named and serve, if elected. If any nominee is unable to serve (which
management has no reason to expect) the individuals named in the proxy intend
to vote for the balance of those named and for a substitute nominee, if
management recommends a vote for the substitute nominee.
THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE "FOR" THE THREE
(3) NOMINEES TO THE BOARD.
3
<PAGE> 5
The following table sets forth the principal occupation, the year in
which their current term ends, the year in which they were first elected a
director, the number of shares of common stock they beneficially owned as of
January 15, 1997, the percent of the total shares outstanding which they
own, and the age of each director and nominee.
<TABLE>
<CAPTION>
CURRENT PERCENTAGE OF
NAME AND PRINCIPAL TERM FIRST STOCK BENEFICIALLY SHARES<F1>
OCCUPATION OR EMPLOYMENT ENDS ELECTED OWNED AS OF 1/15/97 OUTSTANDING AGE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael F. Shanahan, Sr. March December 857,461 24.9% 57
Chairman of the Board, 1997 1983
President, and
Chief Executive Officer ESSI;
Chairman, Engineered Air
Systems, Inc. ("EASI"); Chairman
Engineered Specialty
Plastics, Inc. ("ESPI")
John J. Wichlenski March March 75,989 2.2% 53
Chief Executive Officer 1998 1992
and President EASI
W. Raymond Barrett March December 8,125 <F2> 64
President 1999 1984
Bio-Medical Systems, Inc.
LTG Kenneth E. Lewi March March 14,300 <F2> 66
US Army, Retired 1998 1992
Earl W. Wims, Ph.D. March March 12,500 <F2> 57
Chairman 1998 1992
Marketing Horizons, Inc.
Thomas J. Guilfoil March March 56,500 1.6% 77
Attorney at Law 1999 1993
Guilfoil, Petzall & Shoemake
Alexander M. Cornwell March March 6,500 <F2> 70
President 1999 1993
Cornwell Consulting
Earl E. Walker<F3> March March 3,500 <F2> 76
Chairman of the Board and President 1997 1996
Carr Lane Manufacturing Company
Michael F. Shanahan, Jr.<F4> March December 46,061 1.3% 30
Producer 1997 1994
Lockton Companies
<FN>
<F1>See footnote (1) to Beneficial Ownership of Common Stock of the Company
table.
<F2>The percentage of shares is less than one percent (1%).
<F3>The Board appointed Earl E. Walker to serve the remaining term of former
director John J. Quinn on March 6, 1996.
<F4>The board appointed Michael F. Shanahan, Jr. to serve the remaining term
of former director Jerome V. LaBarbera on December 15, 1994.
</TABLE>
Michael F. Shanahan, Sr. has been a Director of both ESSI and
Engineered Air Systems, Inc. ("EASI") since their formation. Mr. Shanahan
was elected Chairman of the Board of ESSI and EASI in July of 1987. He has
served as Chief Executive Officer of ESSI since 1985. Mr. Shanahan is also
the Chairman of ESSI's commercial subsidiary, Engineered Specialty Plastics,
Inc. ("ESP").
John J. Wichlenski has been President and Chief Executive Officer of
EASI since July, 1992. He served as EASI's Executive Vice President from
March, 1990 to July, 1992 and as Group Vice President of Operations from
March, 1988 to March, 1990. Mr. Wichlenski joined EASI as the Vice President
of Engineering in August, 1986.
4
<PAGE> 6
W. Raymond Barrett has been the President and principal shareholder of
Bio-Medical Systems, Inc., a manufacturer of medical monitoring equipment,
since January, 1975. W. Raymond Barrett is the brother-in-law of Mr.
Shanahan, Sr.
Alexander M. Cornwell, Jr. is a licensed professional engineer. Mr.
Cornwell was the Chairman and Chief Executive Officer of Street Industries,
Inc. of St. Louis, from 1985 through 1988. Mr. Cornwell has extensive
experience with respect to the overall operation and management of
manufacturing concerns dating back to 1950. Mr. Cornwell has provided
consulting services to ESSI and EASI since 1988.
Thomas J. Guilfoil is the Senior and Founding Partner of the St. Louis
law firm, Guilfoil, Petzall & Shoemake. Mr. Guilfoil's distinguished legal
career of over 50 years began in St. Louis in 1941.
LTG Kenneth E. Lewi (U.S. Army, Retired) served in the United States
Army for more than 34 years until his retirement in August, 989. General
Lewi performs consulting services for various individuals and entities
including ESSI and its subsidiaries.
Earl W. Wims, Ph.D., has been Chairman of Marketing Horizons, Inc., a
marketing research and consulting firm, since 1986. Dr. Wims is nationally
recognized for his work in market strategy and focus.
Earl E. Walker, has been President and principal shareholder of Carr
Lane Manufacturing Company since he founded the company in 1952. Carr Lane
is a global leader in tooling, jig, and fixture components.
Michael F. Shanahan, Jr. has been a producer for Lockton Companies, an
Insurance concern, since October, 1994. Prior thereto, he served as
Assistant to the Chairman of the Board of ESSI since 1991. Mr. Shanahan, Jr.
joined EASI in January, 1990, as a Marketing Representative.
DIRECTOR MEETINGS AND COMMITTEES
During the fiscal year ended October 31, 1996, the Board of Directors
of the Company met five (5) times. The Board has three committees,
Executive, Compensation and Audit.
The Executive Committee for fiscal year 1996 was Michael F. Shanahan,
Sr., W. Raymond Barrett, John J. Wichlenski, and Michael F. Shanahan, Jr.
The principal function of the Executive Committee is to execute all the
authority and power of the full Board of Directors in the management and
operation of the Company and to act on behalf of the Board between regular
meetings of the Board of Directors. The Executive Committee met on several
occasions, as needed, throughout the course of fiscal year 1996.
The Audit Committee for fiscal year 1996 was Thomas J. Guilfoil, Earl
E. Walker, Alexander M. Cornwell., and Michael F. Shanahan, Jr. The Audit
Committee met twice during fiscal year 1996 with representatives of the
Company and representatives of the Company's independent accountants. The
function of the Audit Committee is to: review, from time to time, the
financial statements of the Company; meet, together and separately, with
management of the Company and its independent accountants to discuss the
financial statements and general accounting policies of the Company; and,
review the management letter issued by the independent accountants and the
Company's responses thereto.
The Compensation Committee for fiscal year 1996 was Kenneth E. Lewi,
W. Raymond Barrett, Earl W. Wims, Ph.D., and Michael F. Shanahan, Jr. The
purpose of the Compensation Committee is to review and approve the Company's
and its subsidiaries' compensation policies and arrangements as well as to
administrate the Company's stock option plans. Members of the Compensation
Committee are restricted from voting on matters which affect them. The
Compensation Committee met twice during fiscal year 1996.
5
<PAGE> 7
DIRECTORS FEES
Directors who are not full-time employees of the Company are paid $500
for each meeting of the Board of Directors or of committees for which they
attend, and $250 per month during their term. The outside directors are also
reimbursed for expenses incurred in attending such meetings.
AFFILIATION OF DIRECTORS
The Company has a consulting agreement with LTG Kenneth E. Lewi (U.S.
Army, Retired) that may be terminated upon thirty (30) days written notice by
either party. LTG Lewi received $12,000 pursuant to this agreement during
the year ended October 31, 1996.
The Company has a consulting agreement with Michael F. Shanahan, Jr.
that may be terminated upon ninety (90) days written notice. This agreement
provides for payments of $2,000 per month.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The following report is provided by the Compensation Committee of the
Board of Directors. The Committee supervises the Company's Executive
Compensation Program ("Program") and is directly responsible for compensation
actions affecting the Chairman, Chief Executive Officer, President, and other
executive officers of the Company. The Committee, which consists entirely of
non-employee directors, met twice in fiscal year 1996.
EXECUTIVE COMPENSATION PHILOSOPHY
The Program is designed and administered to relate executive
compensation to the four basic objectives of competitive position, Company
performance, Shareholder return, and individual performance. With respect to
competitive position, the Program is designed to pay competitive compensation
so the Company can attract and retain highly qualified executives. To assist
in determining competitive compensation practices, the Committee frequently
utilizes information about other companies' compensation levels, including
information provided by qualified independent consultants.
The Program is designed to reflect overall Company performance in
determining compensation levels and compensation changes. The Committee
considers the Company's overall performance in meeting both short-term and
long-term objectives. The Committee considers achievement of operating
objectives in areas such as contract backlog, earnings, and cash management
as well as progress towards long term strategic objectives. With respect to
Shareholder return, the Program is designed to establish a direct link
between the interests of the Company's executives and its Shareholders. This
is accomplished by allocating a portion of executive compensation to
performance based equity compensation. The Committee also considers the
executive's performance and contribution to the Company's results in
determining appropriate compensation levels.
THE EXECUTIVE COMPENSATION PROGRAM
To achieve its objectives, the Program consists of three basic
elements, base salary, incentive cash compensation, and performance equity
compensation. Base salaries are reviewed annually. Salary changes reflect
overall Company performance, pay competitiveness, and the individual's
performance.
A substantial portion of each executive's annual cash compensation is
tied to Company performance through the Company's Executive Incentive Plan
("Plan"), an annual incentive cash compensation plan which was amended by the
Board of Directors, effective November 1, 1993. The aims of the Plan are:
focusing attention of personnel on profits and the continuing growth of the
Company; increasing efficiency, lowering costs, and enhancing profits;
encouraging teamwork throughout the organization in the achievement of a
common task; encouraging continuity of management thinking and action over
the years; and, improving the Company's ability to attract and retain
competent personnel.
Under the Plan, a yearly Incentive Plan Pool is created and distributed
in accordance with a Bonus Plan. The Bonus Plan is based on successful
financial performance by the Company and its subsidiaries, Engineered Air
Systems, Incorporated ("EASI") and Engineered Specialty Plastics,
Incorporated ("ESP"). The Bonus Plan is based on a combination of ESSI's
earnings and the earnings of the subsidiary in which the individual is
employed. Bonuses will only be paid if minimum earnings for both the Company
and the participant's subsidiary are achieved.
6
<PAGE> 8
The Incentive Plan Pool is allocated among the Participants of the Plan
according to a formula which splits aggregate incentive compensation into two
components: fixed and discretionary. The fixed portion is allocated to the
Plan Participant's Incentive Account according to the achievement of
designated earnings per share benchmarks. The discretionary portion is
allotted to the Compensation Committee of Board of Directors for allocation
to individual Participants as merited by their performance.
Consistent with the Plan, the Committee determines the annual Incentive
Compensation payment for each executive at the end of each fiscal year on the
basis of the Company's performance in key areas such as earnings, contract
backlog, and cash management. The Committee also considers the executive's
individual contribution to the Company's performance and the executive's
contribution to the Company's progress towards the Company's long term
strategic objectives. Even though based on objective measures, a proportion
of the Incentive Compensation payment is subjective in that a proportion of
the amount is left to the discretion of the Compensation Committee.
To ensure that management's interests are directly tied to Shareholder
return, a substantial portion of executive total compensation is provided by
equity compensation. To place emphasis on Shareholder return, the Company,
pursuant to Shareholder approval, adopted the 1992 and 1993 Stock Option
Plans ("Option Plans"). As of October 31, 1996, there were 310,325 options
reserved for issuance under the Option Plans. All options granted, to date,
have been awarded or reissued at an exercise price equal to the fair market
value of the stock on either the date of the award or reissue. The Option
Plans are administered by the Compensation Committee and option awards are
either made subjectively based upon the evaluations of the Company's
performance in key areas such as earnings, contract backlog, and cash
management, or as an incentive to promote Shareholder return by raising stock
price from a specified level. The Committee also considers the executive's
contribution to the Company's progress towards long term strategic objectives
in the award of stock options.
FISCAL YEAR 1996 EXECUTIVE OFFICER COMPENSATION
In determining the fiscal year compensation for the executive officers,
the Committee considered information in an executive compensation survey from
a nationally recognized independent consulting firm. The comparison
companies in the compensation survey were selected on the basis of their
size, products, and markets served. With respect to base salary, bonus, and
total compensation, the Chairman and Chief Executive Officer's and the other
executives officers' compensation was significantly below the median levels
for the chairman and chief executive officers and other executive officers in
the comparable group of companies.
In determining the fiscal year 1996 Performance Compensation payments
for the Chief Executive Officer and the other executive officers, the
Committee considered the Company's operating performance and return to
Shareholders. On a per share basis, fiscal year 1996 net income, net
revenues, and book value increased 35%, 25%, and 19%, respectively, over
fiscal year 1995. Share price also increased forty-eight percent (48%) from
$6.50 per share on October 31, 1995 to $9.625 per share on October 31, 1996.
Based on the subjective evaluation of the above factors, the Committee
approved the base annual salary of $356,600 and an Executive Incentive Plan
payment of $350,000 for the Chairman and Chief Executive Officer of the
Company which resulted in fiscal year 1996 total cash compensation at a level
comparable to the median levels for the chairman and chief executive officers
of the comparable companies in 1996. Based on the subjective evaluation of
the above factors, the Committee approved the base annual salary of $131,600
and an Executive Incentive Plan payment of $88,400 for the President and
Chief Executive Officer of Engineered Air Systems, Inc. which resulted in
fiscal year 1996 total cash compensation at a level that was comparable to
median levels for the president and chief executive officers of comparable
companies in 1996. Based on the subjective evaluation of the above factors,
the Committee approved the base annual salary of $85,400 and an Executive
Incentive Plan payment of $48,850 for the Executive Vice President and Chief
Financial Officer of Engineered Support Systems, Inc. which resulted in
fiscal year 1996 total cash compensation at a level that was comparable to
median levels for the executive vice presidents and chief financial officers
of comparable companies in 1996. The Committee also awarded 15,000, 10,000,
and 7500 executive options under stock option plans to Mr. Shanahan, Mr.
Wichlenski, and Mr. Gerhardt, respectively.
The Company does have employment agreements with its Chairman and Chief
Executive Officer, the President and Chief Executive Officer of EASI, and the
Executive Vice President and Chief Financial Officer of ESSI. These
Employment Agreements are discussed in detail in the next section of this
proxy statement.
7
<PAGE> 9
SUMMARY
Through the design and management of the Executive Compensation
Program, as described above, the Committee believes total compensation of the
Company's executives is linked directly to Company performance, individual
performance, and Shareholder return. The Committee will continue to
emphasize performance based and stock based compensation that is consistent
with individual performance and that links management and Shareholder
interests. We conclude that the Company's performance, Mr. Shanahan, Sr.'s
performance, and the competitive market warrant the compensation package
approved for Mr. Shanahan. Sr. and the other executive officers.
The Compensation Committee:
Kenneth E. Lewi, Chairman
W. Raymond Barrett
Earl W. Wims, Ph.D.
Michael F. Shanahan, Jr.
EMPLOYMENT AGREEMENTS
ESSI and its subsidiaries, EASI and ESP, have entered into employment
agreements with certain executive officers. The following represents a
summary of the terms and conditions of those agreements with the Chairman and
Chief Executive Officer of ESSI, the President and Chief Executive Officer of
EASI, and the Executive Vice President and Chief Financial Officer of ESSI.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF ESSI. The employment
agreement with Michael F. Shanahan, Sr. was executed on November 1, 1989, and is
for a term of five (5) years. Unless terminated by either party upon thirty
(30) days prior written notice or for cause upon seven (7) days notice, this
employment agreement continues on a year-to-year basis. On November 1, 1995 the
employment agreement was continued for three (3) years. The current base salary
under this agreement is $356,600.
If the agreement is terminated by ESSI, for other than cause, Mr.
Shanahan is entitled to termination pay equal to twice his total annual
compensation for the fiscal year of the Company ending immediately prior to
the date of termination, payable in 24 equal monthly payments. The
employment agreement prohibits Mr. Shanahan from competing with the Company
for a period of one year after termination of his employment. The employment
agreement further provides that he shall be entitled to a bonus in accordance
with the terms and conditions of a bonus plan which is based on the net
income per share of ESSI.
The Company entered into a split dollar life insurance agreement with
the Michael F. Shanahan, Sr. Irrevocable Life Insurance Trust. Under this
arrangement, the Company will continue to make annual premium payments for
Mr. Shanahan, but the Company will be reimbursed for premiums paid out of the
cash surrender value in the event such policies are surrendered or out of the
proceeds at death. As provided for by the insurance policy, the Company can
and has borrowed funds against the cash surrender value. The life insurance
trust is the owner and beneficiary of the policy, subject to the assignment
of proceeds and the cash surrender value to the Company to reimburse the
Company for the premiums paid by it. The Company has agreed to keep such
policies in existence during the tenure of the employment agreement which
provides that a life insurance policy must be maintained in full force and
effect during the term of the agreement.
The employment agreement provides that ESSI will pay Mr. Shanahan an
expense allowance, the cost of membership in clubs, a car allowance, and
reimbursement for other expenses on behalf of the ESSI and its subsidiaries.
The employment agreement also provides for deferred compensation to be
paid in the event of the retirement, disability, or death of Mr. Shanahan.
For disability, the benefit is $12,000 per month for a maximum of sixty (60)
consecutive months. For retirement or death, the benefit is $12,000 per
month for twenty-four (24) months. Although Mr. Shanahan may vote on such
employment agreement upon the recommendation of the Compensation Committee,
he has abstained from voting on such matters.
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF EASI. Under the terms of John
J. Wichlenski's employment agreement with EASI, effective November 1, 1995,
Mr. Wichlenski is paid a base annual salary of $131,600. Under the terms of
the ESSI Amended and Restated Executive Incentive Plan, Mr. Wichlenski also
receives a bonus that is based upon ESSI's and EASI's profitability. Mr.
Wichlenski has also been granted a club membership and he is reimbursed for
expenses associated with performing his duties on behalf of the Company and
EASI. The Company has also entered into a split dollar life insurance
agreement with Mr. Wichlenski similar to its agreement with Mr. Shanahan.
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF ESSI. Under
the terms of Gary C. Gerhardt's employment agreement with ESSI, effective
August 1, 1995, Mr. Gerhardt is paid a base annual salary of $85,400. Under
the terms of the ESSI Amended and Restated Executive Incentive Plan, Mr.
Gerhardt also receives a bonus that is based upon ESSI's and EASI's
profitability. Mr. Gerhardt is reimbursed for expenses associated with
performing his duties on behalf of the Company. The Company has also entered
into a split dollar life insurance agreement with Mr. Gerhardt similar to its
agreement with Mr. Shanahan.
8
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the Company's Chief
Executive Officer and all other Executives whose compensation in 1996
exceeded $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------------
AWARDS PAYOUTS
-------------------------- -------
LTIP
SALARY OTHER ANNUAL RESTRICTED NUMBER OF PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR <F1> BONUS COMPENSATION STOCK AWARDS OPTIONS <F2> COMPENSATION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael F. Shanahan Sr. 1996 $357,400 $350,000 $0 $0 15,000 $0 $24,500<F3>
Chairman of the Board, 1995 $212,100 $250,000 $0 $0 10,000 $0 $25,100
President, Chief 1994 $186,400 $0 $0 $0 0 $0 $24,200
Executive Officer (ESSI)
John J. Wichlenski 1996 $131,700 $88,400 $0 $0 10,000 $0 $6,200<F4>
President and Chief 1995 $133,100 $50,000 $0 $0 5,000 $0 $5,000
Executive 1994 $118,000 $12,000 $0 $0 0 $0 $2,800
Officer (EASI)
Gary C. Gerhardt 1996 $85,400 $48,850 $0 $0 7,500 $0 $4,300<F5>
Executive Vice 1995 $83,533 $27,500 $0 $0 5,000 $0 $2,200
President 1994 ---- ---- ---- ---- ---- ---- ----
and Chief Financial
Officer (ESSI)<F6>
<FN>
<F1>This amount includes base salary, expenses, and automobile reimbursement
allowances. Mr. Shanahan's expenses for fiscal year 1996 were $800. Mr.
Wichlenski's expenses for fiscal year 1996 were $100.
<F2>There were no long-term incentive plan awards granted during the three
year period ending October 31, 1996.
<F3>This amount includes $14,000 accrued pursuant to Mr. Shanahan's
employment agreement which provides for deferred compensation to be paid
in the event of retirement, disability, or death; $6,300 pursuant to the
benefit of life insurance premiums paid by the Company; and, $4,200
pursuant to the Engineered Support Systems, Inc. Employee Stock Ownership
Plan.
<F4>This amount includes $2,100 pursuant to the benefit of life insurance
premiums paid by the Company and $4,100 pursuant to the Engineered
Support Systems, Inc. Employee Stock Ownership Plan.
<F5>This amount includes $1,600 pursuant to the benefit of life insurance
premiums paid by the Company and $2,700 pursuant to the Engineered
Support Systems, Inc. Employee Stock Ownership Plan.
<F6>Compensation for Mr. Gerhardt is not presented for 1994 because the SEC's
criteria for inclusion were not met.
</TABLE>
9
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the
Company's cumulative total Shareholder return on its common stock with (i)
the cumulative total return on the S&P 500 composite index and with (ii) the
cumulative total return of the S&P Manufacturing (Diversified Industry) index
for the period October 31, 1991 through October 31, 1996.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE
RETURN AMONG ENGINEERED SUPPORT SYSTEMS, INC., S&P 500 INDEX
AND S&P MANUFACTURING (DIVERSIFIED INDUSTRY) INDEX
<CAPTION>
S&P
Measurement Period Engineered Manufacturing
- ------------------ Support S&P (Diversified
(Fiscal Year Covered) Systems, Inc. 500 Index Industry) Index
- --------------------- ------------- --------- ---------------
<S> <C> <C> <C>
Measurement Pt 10/31/91 $100 $100 $100
FYE 10/31/92 $89 $110 $109
FYE 10/31/93 $215 $126 $132
FYE 10/31/94 $237 $131 $146
FYE 10/31/95 $386 $166 $184
FYE 10/31/96 $573 $206 $254
</TABLE>
10
<PAGE> 12
EMPLOYEE EQUITY PLANS
The Company has reserved 310,325 shares of common stock for issuance
under two (2) stock option plans adopted in 1992, and 1993 ("option plans").
The option plans provide for the award of stock options to employees and
non-employee directors of the Company. The option plan for the employees is
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has the authority, subject to the terms of the option
plans, to determine optionees and the number of shares subject to each option
granted. The option plan for the nonemployee directors is admistered by the
Chairman of the Board. Subject to continuation of employment, options
granted under the option plans must be exercised by the optionee within five
(5) years from the date of grant. The exercise price for options granted on,
or after, August 21, 1985, is equal to the fair market value of the common
stock at the date of grant. As of October 31, 1996, fifty (50) employees
and directors held options under these plans.
The following tables show, as to executive officers previously listed,
the options granted, aggregate options exercised, and option values during
the fiscal year ended October 31, 1996.
<TABLE>
THE OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
------------------------------------------
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
Potential realizable value at assumed
annual rates of stock price
PERCENT OF appreciation for option term
TOTAL OPTIONS EXERCISE ----------------------------
OPTIONS GRANTED IN PRICE EXPIRATION 5% ASSUMED 10% ASSUMED
GRANTED FISCAL YEAR PER SHARE DATE RATE RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Shanahan, Sr. 15,000 15.5% $6.125 12/7/00 $25,400 $56,100
John J. Wichlenski 10,000 10.4% $6.125 12/7/00 $16,900 $37,400
Gary C. Gerhardt 7,500 7.8% $6.125 12/7/00 $12,700 $28,000
<FN>
Note: No stock appreciation rights have ever been granted by the Company.
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS/SAR VALUES
------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF NUMBER OF
NUMBER OF OPTIONS AT OPTIONS AT
SHARES 10/31/96 10/31/96
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael F. Shanahan, Sr. 59,500 $210,900 0/0 $0/$0
John J. Wichlenski 22,000 $130,900 35,000/0 $200,600/$0
Gary C. Gerhardt 0 $0 30,500/0 $189,900/$0
<FN>
Note: No stock appreciation rights have ever been granted by the Company.
</TABLE>
11
<PAGE> 13
PROPOSAL TWO
APPROVAL OF THE ENGINEERED SUPPORT SYSTEMS, INC. 1997 STOCK OPTION PLAN FOR
NONEMPLOYEE DIRECTORS ALLOCATION OF 50,000 SHARES OF COMMON STOCK TO THE
PLAN.
The Company is seeking shareholder approval of the Engineered Support
Systems, Inc. 1997 Stock Option Plan for Nonemployee Directors (the "1997
Plan") and allocation of 50,000 shares of Engineered Support Systems, Inc.
Common Stock to the Plan. If approved, the Company proposes to implement
after March 6, 1997. The 1997 Plan is being proposed in order to maintain the
Company's compliance with Rule 16b-3 of the Securities and Exchange Act of
1934 ("Act"). Rule 16b-3 provides that certain stock transactions by
executive officers and directors of public companies ("Reporting Persons"),
pursuant to the stock based benefit plans of such companies, will be exempt
from certain provisions of Section 16 of the Act if the plans conform to
certain requirements. Generally, these requirements impose restrictions on
the timing of such transactions and restrictions on how the plans may award
benefits or who may make decisions as to the amount, timing, and recipients
of awards under such plans.
Rule 16b-3 provides that persons having discretion as to awards under
the Company's plans, in which Reporting Persons participate, may not
themselves be eligible to receive awards under such plans and, therefore,
must be "disinterested". The members of the Company's Compensation Committee
are ineligible to receive awards under the plans they administrate.
The 1997 Plan for Nonemployee Directors, as proposed, is intended to
meet the requirements of Rule 16b-3. The persons eligible to participate in
the 1997 Plan will be nonemployee members of the Board of Directors. The
Plan provides for the granting of stock options of the Company's common stock
to Nonemployee Directors. Under the terms of the Plan, an initial grant of
2,500 shares will be awarded to each Nonemployee Director immediately
following the first Annual Shareholders Meeting after such Director is first
elected or appointed. Subsequent annual grants of 1,000 shares will be made
immediately following each Annual Shareholders Meeting to all Nonemployee
Directors who have previously received initial grants. The Chairman of the
Board, or his designee, will administer the Plan.
The complete text of the 1997 Stock Option Plan for Nonemployee Directors is
included in the proxy statement. The options shall be granted at the fair
market value of the common stock at the date it is awarded. The options
expire five (5) years from the date of grant, unless ended sooner due to the
termination of service or death of the optionee. In the event of death, the
estate of the deceased has the right, for six (6) months after the date of
death, to exercise the options. The options granted are not transferable or
assignable. The foregoing summary of the 1997 Stock Option Plan for
Nonemployee Directors is qualified by reference to the text of the Plan.
THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE
STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP, independent certified public accountants, have
been the auditors of the accounts of the Company since 1991, including the
fiscal year ended October 31, 1996. ESSI anticipates that representatives of
Price Waterhouse LLP will be present at the 1997 Annual Meeting of the
Shareholders and Price Waterhouse LLP will have the opportunity to make a
statement if they so desire at that time. Price Waterhouse LLP will also be
available to respond to appropriate questions raised at the 1997 Annual
Meeting of the Shareholders.
Price Waterhouse LLP has informed the Company that it does not have any
direct financial interest in the Company and that it has not had any direct
connection with the Company as either a promoter, an underwriter, a director,
an officer, or an employee.
As is customary, accountants for the current fiscal year will, upon the
recommendation of the Audit Committee, be appointed by the Board of Directors
at their meeting immediately following the Annual Meeting of the
Shareholders.
12
<PAGE> 14
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 Annual
Meeting of the Shareholders must be received by the Company no later that
October 31, 1997, for inclusion in the Company's proxy statement and proxy
for that meeting. The proposals should be submitted to the Company at 1270
North Price Road, St. Louis, MO, 63132, Attention: Corporate Secretary.
OTHER MATTERS
Other than the foregoing, the Board of Directors does not intend to
bring any other matter before the meeting and does not know of any matter
which anyone else proposes to present for action at the meeting. However, if
any other matters properly come before such meeting, the individuals named in
the accompanying proxy, or their duly qualified substitutes acting at the
meeting, will be deemed authorized to vote or otherwise act in accordance
with their judgment on such matters.
By order of the Board of Directors
/s/ Gary C. Gerhardt
Gary C. Gerhardt, Secretary
Dated: February 4, 1997
NOTICE: Upon written request from any Shareholder of record as of January
15, 1997 (or any beneficial owner representing they are or were entitled to
vote at the 1997 Annual Meeting), the Company will furnish to such
Shareholder, without charge, its Annual Report on Form 10-K for the year
ended October 31, 1996, as filed with the Securities and Exchange Commission,
including financial statements. The Company may impose a reasonable fee for
its expense in connection with providing exhibits referred to in such form
10-K, if the full text of such exhibits are specifically requested. Requests
should be directed to: Investor Relations, Engineered Support Systems, Inc.,
1270 North Price Road, St. Louis, MO, 63132
13
<PAGE> 15
ENGINEERED SUPPORT SYSTEMS, INC.
1997 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
ARTICLE I. GENERAL PROVISIONS
Section 1. Purpose of Plan. The purpose of the Engineered Support
Systems, Inc. 1997 Stock Option Plan for Nonemployee Directors (the "Plan")
is to enhance the profitability and value of Engineered Support Systems, Inc.
(the "Company") and its shareholders by strengthening the Company's ability
to attract and retain the services of experienced and knowledgeable
nonemployee directors and by encouraging such directors to acquire an
increased proprietary interest in the Company.
Section 2. Definitions of Terms as Used in the Plan.
(a) "Affiliate" means any subsidiary or parent of the Company.
(b) "Award" means a Stock Option granted under Article II.
(c) "Plan Administrator" means the Chairman of the Board of Engineered
Support Systems, Inc.
(d) "Company" means Engineered Support Systems, Inc.
(e) "Director" means a member of the Board of Directors of Engineered
Support Systems, Inc.
(f) "Plan" means the Engineered Support Systems, Inc. 1997 Stock Option
Plan for Nonemployee Directors.
(g) "Stock" means the $.0l par value common stock of Engineered Support
Systems, Inc.
Section 3. Authorization and Reservation. There shall be established a
reserve of 50,000 shares of Stock of authorized and unissued shares, which
shall be the total number of shares of Stock that may be issued pursuant to
Awards. The Board of Directors may, from time to time, increase the number
of shares allocated to the Plan as approved by the Board of Directors. The
reserve may consist of authorized but unissued shares of Stock or of
reacquired shares, or both. Upon the cancellation or expiration of an Award,
all shares of Stock not issued thereunder shall become available for the
granting of additional Awards.
Section 4. Administration of the Plan. The Chairman of the Board of
Engineered Support Systems, Inc. shall administer the Plan. Subject to the
terms of the Plan, the Plan Administrator shall have full power to grant
Awards, construe and interpret the Plan, establish rules and regulations and
perform all other acts Plan Administrator believes reasonable and proper,
including the power to delegate responsibility to others to assist in
administering the Plan.
Section 5. Participation in the Plan. Each member of the Company's
Board of Directors (a "Director") who is not otherwise an employee of the
Company or any subsidiary of the Company (an "Eligible Director") shall be
eligible to participate in the Plan.
ARTICLE II. STOCK OPTIONS
Section 1. Description. All options granted under the Plan shall be
nonstatutory options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended.
Section 2. Terms and Conditions.
(a) Each Stock Option shall be set forth in a written Notice
containing such terms and conditions as the Plan Administrator may determine,
subject to the provisions of the Plan.
(b) The purchase price of any shares exercised under any Stock
Option must be paid in full upon such exercise. The payment shall be made in
such form, which may be in cash or stock, as the Plan Administrator may
determine.
(c) No Stock Option may be exercised after the expiration of
five (5) years from the date such Option is granted unless such term is
extended by the Plan Administrator as evidenced in writing.
14
<PAGE> 16
Section 3. Option Grant Size and Grant Dates.
(a) Initial Grants. An option to purchase 2,500 Shares (as
adjusted pursuant to Article VI, Section 6) shall be granted to each Eligible
Director immediately following the Annual Meeting at which such Director is
first elected or immediately following the first Annual Meeting after such
Eligible Director is first elected or appointed by the Board to be a
Director, whichever is applicable; provided, that if an Eligible Director who
previously received an Initial Grant terminates service as a Director and is
subsequently elected or appointed to the Board, such Director shall not be
eligible to receive a second Initial Grant, but shall be eligible to receive
only Annual Grants as provided in Section 3 (b), beginning with the Annual
Meeting held during the fiscal year immediately following the year in which
such Director was reelected or appointed.
(b) Annual Grants. An option to purchase 1,000 Shares (as
adjusted pursuant to Article VI, Section 6) shall be granted automatically
each year, immediately following the Annual Meeting, to each Director who is
an Eligible Director at such time and who has received an Initial Grant, such
grants to begin with the Annual Meeting held during the fiscal year
immediately following the year in which the Eligible Director receives an
Initial Grant.
Section 4. Option Exercise Price. The option exercise price per share
for an Initial or Annual Grant shall be the closing price of the Stock on the
date that the Stock Option is granted.
ARTICLE III. FORFEITURE OF AWARDS
Section 1. Termination Other Than By Retiremement, Disability, or
Death. In the event of the termination of an optionee's service as a
Director, other than by reason of retirement, total and permanent disability,
or death, the then-outstanding options of such optionee shall automatically
expire on the effective date of such termination. For purposes of the Plan,
the term "by reason of retirement" means (i) mandatory retirement pursuant to
Board policy or (ii) termination of service at a time when the optionee would
be entitled to a retirement benefit under the Engineered Air System, Inc.
Employee Stock Ownership Plan as then in effect, if the Eligible Director
were an employee of the Company.
Section 2. Termination By Retirement or Disability. In the event of
the termination of an optionee's service as a Director by reason of
retirement or total and permanent disability, the then-outstanding options of
such optionee shall become exercisable, to the full extent of the number of
Shares remaining covered by such options, regardless of whether such options
were previously exercisable, and each such option shall expire four years
after the date of such termination or on the stated grant expiration date,
whichever is earlier.
ARTICLE IV. DEATH OF AWARDEE
Section 1. Death Of Optionee. Upon the death of an Award recipient, a
Stock Option, to the extent exercisable on the date of his death, may be
exercised at any time within six (6) months after the recipient's death, but
not after the expiration of the term of the option, by the recipient's
personal representative or the person or persons entitled thereto by will or
in accordance with the laws of descent and distribution for the State of
Missouri.
ARTICLE V. EXERCISE OF OPTION AND ISSUANCE OF STOCK
Section 1. Exercise of Option. The holder of an Award shall exercise
its right to acquire the Stock pursuant to the Award by written notice to the
Secretary of the Company at 1270 North Price Road, St. Louis, Missouri,
63132. Written notice shall set forth the number of shares for which the
exercise is applicable together with a check for the purchase price for the
Stock. If the holder of the Award exercises his option for less than the
total number of Shares awarded, he will execute such documents as required by
the Corporate Secretary for the remaining number of shares subject to the
Award.
Section 2. Endorsement on Stock Certificates.
(a) The Stock issued pursuant to an Award shall be restricted
before Stock is issued until the Plan is registered in accordance with the
provisions of the applicable Securities Act and the provisions of applicable
state securities laws or until the Stock may be transferred in accordance
with an exemption from registration.
15
<PAGE> 17
(b) Until registered, the certificate or certificates
representing the shares issued by the Company to any of the parties hereto
shall have endorsed upon them the following legend:
"The shares represented by this certificate have not been registered
pursuant to the Securities Act of 1934 or the Missouri Uniform
Securities Act, and therefore are 'restricted securities' within the
meaning of the Act. These shares have been acquired for investment and
not with a view to distribution or resale and may not be made subject
to a security interest, pledge, hypothecation, or otherwise transferred
without an effective registration statement for such shares under the
Securities Act of 1934 or the Missouri Uniform Securities Act or an
opinion of counsel for the corporation that registration is not
required under the Acts."
ARTICLE VI. OTHER GOVERNING PROVISIONS
Section 1. Transferability. No Award shall be transferable other than
by will or the laws of descent and distribution as set out in Article V, and
any right granted under an Award may be exercised during the lifetime of the
holder thereof only by him or at his death by his legal representative within
six (6) months after such date.
Section 2. Rights as a Shareholder. A recipient of an Award shall,
unless the terms of the Award provide otherwise, have no rights as a
shareholder with respect to any options or shares which may be issued in
connection with the Award until the issuance of a Stock certificate for such
shares, and no adjustment shall be made for dividends or other rights for
which the record date is prior to the issuance of such stock certificate.
Section 3. General Conditions of Awards. No employee or other person
shall have any right with respect to this Plan, the shares reserved or in any
Award, contingent or otherwise, until written evidence of the Award shall
have been delivered to the recipient and all the terms, conditions and
provisions of the Plan applicable to such recipient have been met.
Section 4. Limitation as to Directorship. Neither the Plan, nor the
granting of an option, nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or
implied, that an Eligible Director has a right to continue as a Director for
any period of time or at any particular rate of compensation.
Section 5. Acceleration. The Plan Administrator may in its sole
discretion accelerate the date of exercise of any Award.
Section 6. Adjustments. Upon any Stock split-up, Stock dividend,
combination or reclassification of shares of Stock, or consolidation, merger
or sale of all or substantially all of the assets of the Company, appropriate
adjustments shall be made to the shares reserved under Article I of the Plan
and the terms of the outstanding Awards.
Section 7. Withholding of Taxes. The Company shall deduct from any
payment, or otherwise collect from the recipient, any taxes required to be
withheld by federal, state or local governments in connection with any Award.
Section 8. No Warranty of Tax Effect. Except as may be contained in
the terms of any Award, no opinion is expressed nor warranties made as to the
effect for federal, state, or local tax purposes of any Awards.
Section 9. Amendment of Plan. The Board of Directors of the Company
may from time to time amend, suspend or terminate the Plan, in whole or in
part, and if terminated may reinstate any or all of the provisions of the
Plan, except that (1) no amendment, suspension or termination may apply to
the terms of any Award (contingent or otherwise) granted prior to the
effective date of such amendment, suspension or termination without the
recipient's consent; (2) no amendment may withdraw the authority from the
Plan Administrator to administer the Plan; (3) no amendment may change the
persons who may be eligible; and (4) no amendment may change the restrictions
in the Plan against the transferability of Awards.
Section 10. Construction of Plan. The place of administration of the
Plan shall be in the State of Missouri, and the validity, construction,
interpretation, administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Missouri.
ARTICLE VII. EFFECTIVE DATE AND TERM
This Plan shall be effective upon approval by the Stockholders of the
Company. The Plan shall continue until October 31, 2002 unless extended by
the Board of Directors, when it shall terminate. Any balances in the Share
Reserve shall be canceled, and no Awards shall be granted under the Plan
thereafter. The Plan shall continue in effect, however, insofar as is
necessary to complete all of the Company's obligations under outstanding
Awards and to conclude the administration of the Plan.
16
<PAGE> 18
(Detach Proxy Form Here)
- --------------------------------------------------------------------------------
PROXY ENGINEERED SUPPORT SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF SHAREHOLDERS MARCH 6, 1997
The undersigned hereby appoints Michael F. Shanahan, Sr. proxy, with full power
of substitution, to represent the undersigned at the annual meeting of
shareholders of Engineered Support Systems, Inc. to be held at the offices of
the Company, 1270 North Price Road, St. Louis, Missouri 63132 on Thursday, March
6, 1997, and at any adjournments thereof, on all matters coming before said
meeting.
You are encouraged to specify your choices by marking the appropriate boxes on
the REVERSE SIDE. The Proxy cannot vote your shares unless you sign and return
this card.
/ / Attend meeting
DATE
------------------
SIGNATURE(S)
-------------------------------------
-------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
See Reverse Side
<PAGE> 19
(Detach Proxy Form Here)
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE.
1. Election of Directors for a term of three years. Nominees: Michael F.
Shanahan, Sr., Michael F. Shanahan, Jr., Earl E. Walker.
FOR WITHHELD
/ / / / To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided. Your
total cumulative votes will be allocated equally among
the remaining nominees.
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------------
2. Engineered Support Systems, Inc. 1997 Stock Option Plan for Non-employee
Directors and the allocation of 50,000 shares of Engineered Support Systems,
Inc. Common Stock to the Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(change of address)
------------------------------------------------
------------------------------------------------
------------------------------------------------
<PAGE> 20
APPENDIX
The printed proxy contains a stock performance graph.
The information contained in the graph is depicted in the table that
immediately follows the graph.
