<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
/X/ Definitive Proxy Statement Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
ENGINEERED SUPPORT SYSTEMS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(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:
- ------------------------------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTIONS APPLIES:
- ------------------------------------------------------------------------------
(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):
- ------------------------------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
- ------------------------------------------------------------------------------
(5) TOTAL FEE PAID:
- ------------------------------------------------------------------------------
/ / 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:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
- ------------------------------------------------------------------------------
<PAGE> 2
NOTICE OF THE ANNUAL MEETING OF
THE SHAREHOLDERS OF
ENGINEERED SUPPORT SYSTEMS, INC.
St. Louis, Missouri
February 5, 1998
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, Incorporated
("Company"), 1270 North Price Road, St. Louis, Missouri 63132, on Tuesday,
March 10, 1998 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. 1998 Stock
Option Plan and the allocation of 400,000 shares of Engineered Support
Systems, Incorporated 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, 1997, accompany this Notice of the Annual Meeting
of the Shareholders.
We encourage all shareholders to attend the 1998 Annual Meeting of the
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, March 6, 1998.
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.
<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 10, 1998
This proxy statement, which is being mailed to Shareholders on, or
about, February 5, 1998, 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 1998 Annual Meeting of the Shareholders of the
Company to be held on March 10, 1998, 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 9, 1998, 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 1998 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. 1998
Stock Option Plan and the allocation of 400,000 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 19,
1998, are entitled to vote at the 1998 Annual Meeting of the Shareholders.
Proxies properly executed by the Company's Shareholders of record on January
19, 1998, 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 19, 1998,
there were 3,166,715 shares of common stock outstanding and entitled to vote.
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 19, 1998. Except
as otherwise indicated in the
2
<PAGE> 4
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> 827,593 24.5%
1270 N. Price Road
St. Louis, MO 63132
(Business Address)
All officers and directors as a 1,237,441 36.6
Group (17 individuals including
Mr. Shanahan, Sr.)<F3>
<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 19, 1998, as increased by the assumed exercise of all of the
214,900 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, LTG Kenneth E. Lewi, John J. Wichlenski, and Earl W.
Wims, are each proposed to be elected at the Annual Meeting of the
Shareholders on March 10, 1998, for a three (3) year term that will expire in
March, 2001. The shares of common stock represented by properly executed
proxies will be voted for the nominees. All nominees have consented to be
named and to 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.
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 19, 1998, 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 Owned as Shares<F1>
Occupation or Employment Ends Elected of 1/19/98 Outstanding Age
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael F. Shanahan, Sr. March December 827,593 24.5% 58
Chairman, President & Chief 2000 1983
Executive Officer, ESSI;
Chairman, EASI; Chairman, ESP
John J. Wichlenski March March 71,087 2.1% 54
Chief Executive Officer 1998 1992
and President EASI
W. Raymond Barrett March December 9,125 <F2> 65
President 1999 1984
Bio-Medical Systems, Inc.
LTG Kenneth E. Lewi March March 14,500 <F2> 67
US Army, Retired 1998 1992
Earl W. Wims, Ph.D. March March 13,500 <F2> 58
Chairman 1998 1992
Marketing Horizons, Inc.
Thomas J. Guilfoil March March 57,500 1.7% 78
Attorney at Law 1999 1993
Guilfoil, Petzall & Shoemake
3
<PAGE> 5
Alexander M. Cornwell March March 7,500 <F2> 71
President 1999 1993
Cornwell Consulting
Earl E. Walker March March 4,500 <F2> 77
President 2000 1996
Carr Lane Manufacturing
Company
Michael F. Shanahan, Jr.
Producer March December 46,956 1.4% 31
Lockton Companies 2000 1994
<FN>
<F1> See footnote <F1> to Beneficial Ownership of Common Stock of the Company table.
<F2> The percentage of shares is less than one percent (1%).
</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.
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 1989. 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. Doctor 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 worldwide manufacturer of 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 ESSI's Chairman 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, 1997, 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 1997 was Michael F. Shanahan,
Sr., Dr. Earl W. Wims, 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 1997.
The Audit Committee for fiscal year 1997 was Kenneth E. Lewi, W.
Raymond Barrett, and Dr. Earl W. Wims. The Audit Committee met twice during
fiscal year 1997 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
4
<PAGE> 6
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 1997 was Thomas J. Guilfoil,
Earl E. Walker, Alexander M. Cornwell, 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 that affect them. The
Compensation Committee met twice during fiscal year 1997.
DIRECTORS FEES
Directors who are not full-time employees of the Company are paid $500
for each meeting of the Board or meeting of the committee on which they
serve. They are also paid $250 per month during their term. Outside
directors are reimbursed for expenses incurred in attending 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 was paid $12,000 pursuant to this consulting
agreement during fiscal year 1997.
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 $2,200 per month.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report is provided by the Compensation Committee. 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 1997.
The Executive Compensation Philosophy
The Program is designed and managed to link executive compensation to
four basic objectives: Company performance; Shareholder return; individual
performance; and, competitive position. With respect to competitive position,
the Program is designed to pay competitive compensation so the Company is
able to attract and retain highly qualified executives. In determining
competitive compensation practices, the Committee frequently utilizes
information about other companies' compensation levels, as well as
information from qualified compensation consultants.
The Program uses 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 the Company's operating achievements in
typical performance measures such as earnings, cash management, and contract
backlog. The Committee also considers the Company's progress towards
long-term strategic objectives that cannot be easily quantified.
The Program also links the interests of the Company's executives with
the interests of its Shareholders. This is accomplished by allocating a
portion of executive compensation to performance based equity compensation.
The Executive Compensation Program
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"). The Plan is an annual incentive cash compensation plan and has been
in place in its current form since November 1, 1993. The aims of the Plan
are: focusing attention of personnel on profits; continuing Company growth;
increasing efficiency, lowering costs, enhancing profits; encouraging
teamwork; encouraging the continuity of management thinking; 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. The Bonus Plan is
5
<PAGE> 7
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.
The Incentive Plan Pool is allocated among the Participants of the Plan
according to a formula, which splits aggregate incentive compensation into
fixed and discretionary components. 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 based
on 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.
Although based on objective measures, a portion of the Incentive Compensation
payment is subjective in that a proportion of the gross amount paid 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 an executive's total compensation is equity
compensation. To place emphasis on Shareholder return, the Company, pursuant
to Shareholder approval, adopted various Stock Option Plans ("Option Plans").
As of October 31, 1997, there were 275,025 options reserved for issuance
under the Option Plans. All options granted to date have been awarded 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 1997 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 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 1997 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 1997 net income, net
revenues, and book value increased 38%, 7%, and 23%, respectively, over
fiscal year 1996. Share price also increased one hundred thirty-one percent
(131%) from $9.625 per share on October 31, 1996 to $22.25 per share on
October 31, 1997.
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 which
resulted in fiscal year 1997 total cash compensation at a level comparable to
the median levels for the chairman and chief executive officers of the
comparable companies in 1997. 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 $128,400 for the President and Chief
Executive Officer of Engineered Air Systems, Inc. which resulted in fiscal
year 1997 total cash compensation at a level that was comparable to median
levels for the president and chief executive officers of comparable companies
in 1997. Based on the subjective evaluation of the above factors, the
Committee approved the base annual salary of $110,000 and an Executive
Incentive Plan payment of $96,350 for the Executive Vice President and Chief
Financial Officer of Engineered Support Systems, Inc. which resulted in
fiscal year 1997 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 1997. Based on the subjective evaluation of the
above factors, the Committee approved the base annual salary of $90,000 and
an Executive Incentive Plan payment of $22,500 for the Vice President and
General Manager of ESP which resulted in fiscal year 1997 total cash
compensation at a level comparable to median levels for equivalent positions
of comparable companies in 1997. The Committee also awarded 30,000, 10,000,
7,500 and 3,000 executive options under stock option plans to Mr. Shanahan,
Mr. Wichlenski, Mr. Gerhardt, and Mr. Capeless, respectively.
6
<PAGE> 8
The Company does have employment agreements with its Chairman and Chief
Executive Officer, the President and Chief Executive Officer of EASI, the
Executive Vice President and Chief Financial Officer of ESSI and the Vice
President and General Manager of ESP. These Employment Agreements are
discussed in detail in the next section of this proxy statement.
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 and the competitive
market warrant the compensation package approved for Mr. Shanahan, Sr. and
the other executive officers.
The Compensation Committee
Thomas J. Guilfoil, Chairman
Alexander M. Cornwell, Jr.
Earl E. Walker
Michael F. Shanahan, Jr.
EMPLOYMENT AGREEMENTS
ESSI and its subsidiaries, EASI and ESP, have 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,
the Executive Vice President and Chief Financial Officer of ESSI and the Vice
President and General Manager of ESP.
Chairman of the Board and Chief Executive Officer of ESSI. The
employment agreement with Michael F. Shanahan, Sr. was executed on November
1, 1995 for a term of three (3) 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. 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 the
cost of membership in clubs 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
7
<PAGE> 9
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 $110,000. 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, EASI and ESP. The Company has
a split dollar life insurance agreement with Mr. Gerhardt similar to its
agreement with Mr. Shanahan
Vice President and General Manager of ESP. Under the terms of John E.
Capeless' employment agreement with ESSI, effective April 1, 1996, Mr.
Capeless is paid a base annual salary of $90,000. Under the terms of the ESSI
Amended and Restated Executive Incentive Plan, Mr. Capeless also receives a
bonus that is based upon ESSI's and ESP's profitability. Mr. Capeless has
also been granted a club membership and he is reimbursed for expenses
associated with performing his duties on behalf of ESP.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the Company's Chief
Executive Officer and all other Executives whose compensation in 1997
exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------
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. 1997 $356,600 $350,000 $0 $0 30,000 $0 $29,300<F3>
Chairman, 1996 $357,400 $350,000 $0 $0 15,000 $0 $24,500
President & Chief Executive 1995 $212,100 $250,000 $0 $0 10,000 $0 $25,100
Officer (ESSI)
John J. Wichlenski 1997 $134,700 $128,400 $0 $0 10,000 $0 $9,500<F4>
President & Chief Executive 1996 $131,700 $88,400 $0 $0 10,000 $0 $6,200
Officer (EASI) 1995 $133,100 $50,000 $0 $0 5,000 $0 $5,000
Gary C. Gerhardt 1997 $110,000 $96,400 $0 $0 7,500 $0 $7,500<F5>
Executive Vice President 1996 $85,400 $48,900 $0 $0 7,500 $0 $4,300
& Chief Financial Officer 1995 $83,500 $27,500 $0 $0 5,000 $0 $2,200
(ESSI)
John E. Capeless 1997 $92,300 $22,500 $0 $0 3,000 $0 $1,500<F6>
Vice President &
General Manager (ESP)<F7>
<FN>
<F1> This amount includes base salary and expense reimbursement allowances.
Mr. Wichlenski's expenses for fiscal year 1997 were $3,100. Mr. Capeless'
expenses for fiscal year 1997 were $2,300.
<F2> There were no long-term incentive plan awards granted during the three
year period ending October 31, 1997.
<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; $6,800 pursuant to the benefit of
life insurance premiums paid by the Company; and, $8,500 pursuant to the
Engineered Support Systems, Inc. Employee Stock Ownership Plan.
<F4> This amount includes $2,600 pursuant to the benefit of life insurance
premiums paid by the Company and $6,900 pursuant to the Engineered Support
Systems, Inc. Employee Stock Ownership Plan.
<F5> This amount includes $2,400 pursuant to the benefit of life insurance
premiums paid by the Company and $5,100 pursuant to the Engineered Support
Systems, Inc. Employee Stock Ownership Plan.
<F6> This amount includes $1,000 pursuant to the benefit of life insurance
premiums paid by the company and $500 pursuant to the Engineered Support
Systems, Inc. Employee Stock Ownership Plan.
<F7> Compensation for Mr. Capeless is not presented for 1995 and 1996 because
the SEC's criteria for inclusion were not met.
</TABLE>
8
<PAGE> 10
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, 1992 through October 31, 1997.
<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 10/31/92 $ 100 $100 $100
FYE 10/31/93 $ 242 $115 $121
FYE 10/31/94 $ 267 $119 $134
FYE 10/31/95 $ 434 $151 $169
FYE 10/31/96 $ 645 $187 $233
FYE 10/31/97 $1,493 $247 $291
</TABLE>
9
<PAGE> 11
EMPLOYEE EQUITY PLANS
The Company has reserved 275,025 shares of common stock for issuance
under four (4) stock option plans adopted in 1991, 1992, 1993 and 1997
("option plans"). The option plans provide for the award of stock options to
employees and non-employee directors of the Company. Option plans for the
employees are 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 non-employee directors is
administered 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 an option granted is equal to the fair market value of the common stock
at the date of grant. As of October 31, 1997, thirty-three (33) 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, 1997.
<TABLE>
THE OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
- ------------------------------------------
<CAPTION>
Individual Grants
------------------------------------------------------------
Potential realizable value at assumed annual
rates of stock price
appreciation for option term
----------------------------
Percent of
total options
Options granted in Exercise price per Expiration 5% assumed 10% assumed
Name granted fiscal year share date rate rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Shanahan, Sr. 30,000 31.3% $9.75 12/1/01 $80,700 $178,500
John J. Wichlenski 10,000 10.4% $9.75 12/1/01 $26,900 $59,500
Gary C. Gerhardt 7,500 7.8% $9.75 12/1/01 $20,200 $44,600
John E. Capeless 3,000 3.1% $9.75 12/1/01 $8,100 $17,900
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 options Value of
at 10/31/97 unexercised options
Number of shares exercisable/ at 10/31/97
acquired on exercise unexercisable exercisable/
Name Value Realized unexercisable
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael F. Shanahan, Sr. 0 $0 30,000/0 $375,000/$0
John J. Wichlenski 10,000 $120,000 35,000/0 $563,800/$0
Gary C. Gerhardt 10,000 $81,900 28,000/0 $461,200/$0
John E. Capeless 0 $0 8,000/0 $114,400/$0
Note: No stock appreciation rights have ever been granted by the Company.
</TABLE>
PROPOSAL TWO
APPROVAL OF ENGINEERED SUPPORT SYSTEMS, INC. 1998 STOCK OPTION PLAN AND
ALLOCATION OF 400,000 SHARES OF COMMON STOCK TO THE PLAN.
The Company is seeking shareholder approval of the Engineered Support
Systems, Inc. 1998 Stock Option Plan ("Plan") for officers, key employees and
consultants, and the allocation of 400,000 shares of ESSI Common Stock to the
Plan, which if approved, the Company proposes to implement after March 10,
1998. The purpose of the Plan is to increase motivation on the part of
officers, key employees and consultants, by creating an incentive for them to
remain in the employ of the Company and to work for the achievement of the
Company's strategic objectives. To accomplish this purpose, the Compensation
Committee may award Stock Options of the Company's Common Stock to eligible
officers, key employees and consultants to be earned by achieving performance
objectives and service requirements.
The complete text of the Plan is included in this proxy statement. The
following summary of certain provisions of the Plan is qualified by reference
to the text of the Plan.
10
<PAGE> 12
Participants of the Plan are any employee or consultant selected by the
Compensation Committee as eligible for any award contemplated under the Plan.
The Compensation Committee shall administer the Plan and, in connection
therewith, it shall have full power to grant awards, construe and interpret
the Plan, determine those eligible to receive awards, and the amount and type
of each award shall rest in the sole discretion of the Compensation
Committee, subject to the provisions of the Plan.
The options shall be granted at the fair market value of the Common
Stock on 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 case of death, the estate of the deceased will have the
right for six (6) months after the date of death to exercise the options. The
options granted are not transferable or assignable. The members of the
Company's Compensation Committee are ineligible to receive awards under the
Plan. Hence, the Plan, as proposed, is intended to meet the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934.
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, 1997. ESSI anticipates that representatives of
Price Waterhouse LLP will be present at the 1998 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 1998 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.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholder proposals for the 1999 Annual Meeting of the Shareholders
must be received by the Company no later that October 31, 1998, 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
that 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 5, 1998
Notice: Upon written request from any Shareholder of record as of January
19, 1998 (or any beneficial owner representing they are or were entitled to
vote at the 1998 Annual Meeting), the Company will furnish to such
Shareholder, without charge, its Annual Report on Form 10-K for the year
ended October 31, 1997, 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.
11
<PAGE> 13
ENGINEERED SUPPORT SYSTEMS, INC.
1998 STOCK OPTION PLAN
ARTICLE I. GENERAL PROVISIONS
Section 1. Purpose of Plan. The purpose of the Engineered Support
Systems, Inc. 1998 Stock Option Plan (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,
retain and motivate officers, other key employees, and consultants of the
Company who make important contributions to the success of 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 Compensation Committee of the Board
of Engineered Support Systems, Inc.
(d) "Company" means Engineered Support Systems, Inc.
(e) "Consultant" shall mean such party or entity or employee of such
Consultant which has a written agreement with the company to
provide consulting services.
(f) "Plan" means the Engineered Support Systems, Inc. 1998 Stock Option
Plan.
(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 400,000 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 Compensation Committee,
subject to the approval of the Chairman, 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 the 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. Any employee or consultant 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.
(d) The option price of shares subject to any Stock Option
shall be closing price of the Stock on the date that the Stock Option is
granted.
ARTICLE III. FORFEITURE OF AWARDS
(a) The recipient of an Award shall forfeit all amounts due or rights
not exercised upon the occurrence of any of the following events:
12
<PAGE> 14
(i) The recipient is discharged for cause.
(ii) The recipient voluntarily terminates his employment other
than by Normal Retirement as defined in the Engineered Support
Systems, Inc. Employee Stock Ownership Plan.
(iii) The recipient engages in competition with the Company or
any affiliate.
(iv) The recipient engages in any activity or conduct contrary
to the best interest of the Company or Affiliate.
(b) The Plan Administrator may include in any Award any additional or
different conditions of forfeiture he may deem appropriate. The Plan
Administrator may also, after taking into account the relevant circumstances,
waive any condition of forfeiture stated above or in the Award.
(c) In the event of forfeiture, the recipient shall lose all rights
in and to the Award. This provision, however, shall not be invoked to force any
recipient to return any Stock already received or due under an Award at the
time of the event of forfeiture.
(d) Such determinations as may be necessary for application of this
section, including any grant of authority to others to make determinations
under this section, shall be at the sole discretion of the Plan Administrator
and his determinations shall be conclusive.
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
their 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.
(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
13
<PAGE> 15
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, in 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 Service. 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 participant has a right to continue as an employee
or consultant 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, 2003 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.
14
<PAGE> 16
(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 10, 1998
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 Tuesday, March
10, 1998, 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.
DATE / / Attend meeting
-----------------
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> 17
(Detach Proxy Form Here)
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE.
1. Election of Directors for a term of three years. Nominees: LTG Kenneth E.
Lewi, John J. Wichlenski and Earl W. Wims.
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. 1998 Stock Option Plan and the allocation
of 400,000 shares of Engineered Support Systems, Inc. Common Stock to the
Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(change of address)
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
<PAGE> 18
Appendix
Page 9 of the printed proxy contains a performance graph. The information
contained in the graph is depicted in the table that immediately follows
the graph.
