Edgar Filing: ENGINEERED SUPPORT SYSTEMS INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

Filed by the Registrant |X|
Filed by a Party other than the Registrant | |

ENGINEERED SUPPORT SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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|X| No fee required.

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| | Check box if any part of the fee is offset as provided by Exchange Act
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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.:
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NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF
ENGINEERED SUPPORT SYSTEMS, INC.

St. Louis, Missouri
January 31, 2005

To the Shareholders of
Engineered Support Systems, Inc.:

The Annual Meeting of the Shareholders of Engineered Support Systems,
Inc. will be held at the headquarters of the Company, 201 Evans Lane, St.
Louis, Missouri 63121 on Tuesday, March 1, 2005 at 10:00 a.m., local time,
for the purpose of considering and voting upon the following matters:

1. The election of six directors to hold office for three years;

2. The approval of the Engineered Support Systems, Inc. 2005
Non-Executive Stock Option Plan and the reservation of 400,000
shares of Engineered Support Systems, Inc. common stock for future
issuance under the 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 fiscal year ended October 31, 2004 accompany this Notice of Annual
Meeting of Shareholders.

We encourage all shareholders to attend the 2005 Annual Meeting at the
headquarters of the Company, 201 Evans Lane, St. Louis, Missouri 63121.
For security purposes, if you plan to attend, you must notify the
Secretary of the Company of your intent to do so by Friday, February 25,
2005.

ENGINEERED SUPPORT SYSTEMS, INC.

/s/ Gerald A. Potthoff

Gerald A. Potthoff
Vice Chairman, Chief Executive
Officer and President

/s/ David D. Mattern

David D. Mattern
Secretary and General Counsel

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.
THE PROXY SHOULD BE RETURNED BY FEBRUARY 25, 2005 IN THE ENCLOSED ENVELOPE
TO ENSURE THAT YOUR VOTE IS COUNTED AT THE 2005 ANNUAL MEETING.

ENGINEERED SUPPORT SYSTEMS, INC.
201 EVANS LANE
ST. LOUIS, MISSOURI 63121

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 1, 2005

THIS PROXY STATEMENT, WHICH IS BEING MAILED TO SHAREHOLDERS ON, OR
ABOUT, JANUARY 31, 2005, 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 2005 ANNUAL MEETING OF SHAREHOLDERS
OF THE COMPANY TO BE HELD ON MARCH 1, 2005 AT 10:00 A.M. LOCAL TIME AT THE
HEADQUARTERS OF THE COMPANY, 201 EVANS LANE, ST. LOUIS, MISSOURI 63121.
THE NOTICE OF MEETING, THE PROXY AND THE ANNUAL REPORT FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2004 ARE ENCLOSED IN THIS PACKAGE. THE PROXY SHOULD BE
RETURNED BY FEBRUARY 25, 2005 IN THE ENCLOSED SELF-ADDRESSED, POSTAGE
PREPAID, ENVELOPE. FOR SECURITY PURPOSES, IF YOU PLAN TO ATTEND THE 2005
ANNUAL MEETING, YOU MUST NOTIFY THE SECRETARY OF THE COMPANY OF YOUR
INTENT TO DO SO BY FRIDAY, FEBRUARY 25, 2005.

PROXY

The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company to be used at the 2005 Annual Meeting of
Shareholders.

The shares represented by each executed proxy will be voted at the
meeting in accordance with the instructions contained in the proxy. 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 six directors to hold office for three years;

2. "FOR" the approval of the Engineered Support Systems, Inc. 2005
Non-Executive Stock Option Plan and the reservation of 400,000
shares of Engineered Support Systems, Inc. common stock for future
issuance under the plan; and

3. To transact such other business, if any, as lawfully may 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 Annual Meeting,
the proxy, the proxy statement and the return envelopes, as well as 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 201 Evans Lane, St. Louis, Missouri 63121
prior to the time the proxy is voted.

VOTING RIGHTS

The shareholders of record at the close of business on January 17,
2005 are entitled to vote at the 2005 Annual Meeting of Shareholders.
Proxies properly executed by the Company's shareholders of record on
January 17, 2005 will be voted as specified on the proxy and will be voted
on all business to be voted upon at the Annual Meeting and any adjournment
thereof. Generally, each share is entitled to one vote. However, in the
election of directors, cumulative voting applies in which each shareholder
has the right to cast as many votes as equals the number of shares held by
that shareholder multiplied by the number of directors to be elected. Each
shareholder also may cast the whole number of votes for one nominee or
distribute them among some or all nominees. If authority is withheld to
vote for one or more individual nominees on the proxy, the total
cumulative votes will be allocated equally among the remaining nominees.
As of January 17, 2005, there were 26,866,962 shares of common stock
outstanding and entitled to vote.

VOTE REQUIRED

A quorum is required for the transaction of business at the Annual
Meeting. A majority of the issued and outstanding shares entitled to vote
at the Annual Meeting will constitute a quorum. Shares represented by
properly executed proxies, including proxies which direct that the shares
be voted to abstain or withhold a vote on a matter, will be counted for
purposes of determining whether a quorum exists. Broker non-votes will be
counted for purposes of determining whether a quorum exists only if such
shares are voted on a matter presented at the meeting. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does not vote
a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions
from the beneficial owner. Every decision of a majority of such quorum
shall be valid as a corporate act unless a greater vote is required under
Missouri law.

At all elections of directors of the Company, each shareholder shall
have the right to cast as many votes in the aggregate as shall equal the
number of voting shares so held by him or her in the Company, multiplied
by the number of directors to be elected at such election; and each
shareholder may cast the whole number of votes either in person or by
proxy for one nominee or distribute them among two or more nominees. The
approval of any other matter lawfully brought before the Annual Meeting
will require the approval of holders of a majority of the shares
represented at the Annual Meeting.

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) held by each person
known to beneficially own 5% or more of the Company's outstanding common
stock as of January 17, 2005.

NAME AND ADDRESS OF SHARES OF COMMON STOCK PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
------------------- ---------------------- --------------------

Neuberger Berman, Inc.......................... 3,110,289(2) 11.6%
605 Third Avenue
New York, NY 10158

Barclays Global Investors, N.A................. 2,315,324(3) 8.6%
45 Fremont Street
San Francisco, CA 94105

--------

(1) 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 17, 2005.

(2) The information provided herein is based on a Schedule 13G,
dated February 13, 2004, filed jointly by Neuberger Berman,
Inc., Neuberger Berman, LLC, Neuberger Berman Management,
Inc. and Neuberger Berman Genesis Fund. The filing parties
reported sole voting power with respect to 42,562 shares,
shared voting power with respect to 2,274,800 shares and
shared dispositive power with respect to 3,110,289 shares
reported as beneficially owned.

(3) The information provided herein is based on a Schedule 13G,
dated February 17, 2004, filed jointly by Barclays Global
Investors N.A., Barclays Global Fund Advisors, Barclays
Global Investors, Ltd., Barclays Global Investors Japan
Trust and Banking Company Limited, Barclays Life Assurance
Company Limited, Barclays Bank PLC, Barclays Capital
Securities Limited, Barclays Capital Inc., Barclays Private
Bank & Trust (Isle of Man) Limited, Barclays Private Bank &
Trust (Jersey) Limited, Barclays Bank Trust Company Limited,
Barclays Bank (Suisse) SA, and Barclays Private Bank
Limited. The filing parties reported sole voting and sole
dispositive power with respect to 2,124,714 shares.

The following table sets forth the number of shares of common stock
beneficially owned by (a) each director, (b) each nominee for director,
(c) each executive officer named in the Summary Compensation Table, and
(d) all directors and executive officers as a group as of January 17, 2005:

SHARES OF COMMON STOCK PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) OUTSTANDING(3)
------------------------ ------------------------ --------------------

Michael F. Shanahan, Sr................................. 475,976 1.8%

Gerald A. Potthoff...................................... 617,667 2.2%

Gary C. Gerhardt........................................ 833,637 3.0%

Ronald W. Davis......................................... 246,829 (5)

Daniel A. Rodrigues..................................... 56,622 (5)

William H. T. Bush...................................... 61,876 (5)

General Michael P.C. Carns.............................. 56,367 (5)
U.S. Air Force, Retired

MG George E. Friel...................................... 8,692 (5)
U.S. Army, Retired

Thomas J. Guilfoil...................................... 87,216 (5)

S. Lee Kling............................................ 68,069 (5)

LTG Kenneth E. Lewi..................................... 48,978 (5)
U.S. Army, Retired

General Charles T. Robertson, Jr........................ 11,250 (5)
U.S. Air Force, Retired

James A. Schaefer....................................... 0 (5)

General Crosbie E. Saint................................ 8,063 (5)
U.S. Army, Retired

Michael F. Shanahan, Jr................................. 76,933 (5)

Earl W. Wims, Ph.D...................................... 42,889 (5)

Gerald E. Daniels(4).................................... 53,120 (5)

All directors and executive officers as a group
(40 persons).......................................... 3,506,558 11.9%

--------

(1) Except as otherwise noted, each individual has sole voting
and investment power with respect to shares listed above.

(2) Totals include the following shares issuable upon exercise
of stock options that either are presently exercisable or
exercisable within 60 days after January 17, 2005:
Mr. Potthoff (555,938), Mr. Gerhardt (719,063), Mr. Davis
(243,438), Mr. Rodrigues (55,000), Mr. Bush (53,438),
General Carns (53,438), MG Friel (5,625), Mr. Guilfoil
(11,250), Mr. Kling (30,938), LTG Lewi (5,625), General
Robertson, Jr. (11,250), General Saint (8,063),
Mr. Shanahan, Jr. (5,625), Mr. Wims (28,125), Mr. Daniels
(50,000) and all directors and executive officers as a group
(2,514,316). The shares beneficially owned by
Mr. Shanahan, Sr. do not include any shares issuable upon
exercise of stock options, including options presently
exercisable or exercisable within 60 days after January 17,
2005.

(3) 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 17, 2005,
increased by the assumed exercise of all options owned by
the beneficial owners indicated.

(4) Mr. Daniels resigned from his position as vice-chairman and
chief executive officer effective August 4, 2004.

(5) The Percentage of Shares Outstanding is less than one
percent.

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 and discourages undesirable mergers, tender offers,
proxy contests and the ill-favored exertion of control by a person or
group that holds a large block of common stock. The by-laws of the Company
also provide for the Board of Directors to have a total of sixteen
directors. Assuming each of the nominees for the 2005 Annual Meeting are
elected, the total number of directors making up the Board of Directors
will equal fifteen. The Nominating Committee of the Board will nominate
individuals to fill any vacancy on the Board when qualified nominees are
available. Shareholders may not, however, vote for a greater number of
nominees than the number of nominees named in this proxy statement.

The nominees, Gerald A. Potthoff, Gary C. Gerhardt, Thomas J.
Guilfoil, James A. Schaefer, MG George E. Friel (U.S. Army, Retired) and
General Charles T. Robertson, Jr. (U.S. Air Force, Retired) are each
proposed to be elected for a three year term that will expire in March
2008. The shares of common stock represented by properly executed proxies
will be voted in accordance with the instructions contained in the proxy
or, if no instructions are given, for each of 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, recommended by the Board of Directors.

The following table sets forth, for each director and nominee, his
principal occupation, the year in which his current term ends, the year in
which he was first elected as a director and his age.

CURRENT
NAME AND PRINCIPAL TERM FIRST
OCCUPATION OR EMPLOYMENT(1) ENDS ELECTED AGE
--------------------------- ------- ------- ---

Michael F. Shanahan, Sr. March December 65
Chairman 2006 1983

Gerald A. Potthoff March October 64
Vice Chairman, Chief Executive Officer and President 2005 1999

Gary C. Gerhardt March March 59
Vice Chairman and Chief Financial Officer 2005 1998

Ronald W. Davis March March 58
President, Business Development 2007 2003

William H.T. Bush March March 66
Chairman 2007 2000
Bush-O'Donnell & Co., Inc.

General Michael P.C. Carns March March 67
U.S. Air Force, Retired 2006 2000

Major General (MG) George E. Friel March September 62
U.S. Army, Retired 2005 1998

Thomas J. Guilfoil March March 85
Attorney at Law 2005 1993
Guilfoil, Petzall & Shoemake

S. Lee Kling March March 76
Chairman 2007 2000
The Kling Company

Lieutenant General (LTG) Kenneth E. Lewi March March 74
U.S. Army, Retired 2006 1992

General Charles T. Robertson, Jr. March December 58
U.S. Air Force, Retired 2005 2001
Vice President, Business Development
Aerospace Support
The Boeing Company

General Crosbie E. Saint March August 68
U.S. Army, Retired 2007 2000

James A. Schaefer 65
Audit Partner, Retired
Baird, Kurtz & Dobson LLP

Michael F. Shanahan, Jr. March December 38
President and Chief Executive Officer 2006 1994
Huntleigh/McGehee, Inc.

Earl W. Wims, Ph.D. March March 65
Chairman 2007 1992
Marketing Horizons, Inc.

--------
(1) Michael F. Shanahan, Jr. is the son of Michael F. Shanahan,
Sr. and the son-in-law of Earl W. Wims. There is no other
family relationship between any of the directors or
executive officers.

Michael F. Shanahan, Sr. was elected Chairman of the Board of the
Company in July 1987. He has served as Chief Executive Officer of the
Company from 1985 to 2003. Mr. Shanahan also serves on the Board of
Directors of Falcon Products, Inc.

Gerald A. Potthoff was named Vice Chairman, Chief Executive Officer
and President in August 2004. From October 1999 to August 2004, Mr.
Potthoff served as President and Chief Operating Officer of the Company.
Mr. Potthoff also served as President of Systems & Electronics Inc. from
October 1991 to July 2000.

Gary C. Gerhardt was named Vice Chairman of the Company in October
1999 and served as Executive Vice President from December 1994 until
October 1999. He has been Chief Financial Officer of the Company since
October 1993.

Ronald W. Davis has been President, Business Development since October
2002. He served as Vice President - Planning & Development from December
1999 to October 2002. He served as Vice President - Marketing for the
Company from April 1999 until December 1999 and for Engineered Air
Systems, Inc. from 1990 until December 1999.

William H.T. Bush has been Chairman of the investment firm
Bush-O'Donnell & Co., Inc. since 1986. Previously, he was President and
Chief Executive Officer of Boatmen's National Bank of St. Louis. Mr. Bush
is also on the Board of Directors of DT Industries, Inc., WellPoint
Heathcare Networks, Inc. and the Lord Abbett Family of Mutual Funds.

General Michael P.C. Carns (U.S. Air Force, Retired) served in the
United States Air Force for 35 years until his retirement in 1994. From
May 1991 until his retirement, General Carns served as Vice Chief of
Staff, Headquarters U.S. Air Force. From September 1989 to May 1999, he
served as director of the Joint Staff. He also serves on the Board of
Directors of Rockwell Collins, Inc. and Mykrolis Corporation.

MG George E. Friel (U.S. Army, Retired) served in the United States
Army for 38 years until his retirement in 1998. In the six years preceding
his retirement, Major General Friel headed the U.S. Army Chemical and
Biological Defense Command. He also serves on the Board of Directors of
Quick-Med Technologies, Inc.

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. Mr. Guilfoil also
serves as Vice Chairman of the Arizona Cardinals of the National Football
League.

S. Lee Kling has been Chairman of the Kling Company, a merchant
banking company, since 2002 and from 1991 to 2002 was Chairman of Kling
Rechter & Company, a merchant banking company. Previously, he was Chairman
of Landmark Bancshares Corp., a bank holding company. Mr. Kling also
serves on the Board of Directors of Bernard Chaus, Inc., Electro Rent
Corporation, Falcon Products, Inc., Kupper Parker Communications, Inc. and
National Beverage Corporation.

LTG Kenneth E. Lewi (U.S. Army, Retired) served in the United States
Army for 34 years until his retirement in 1989. His career in the U.S.
Army centered primarily on providing logistical support to U.S. armed
forces.

General Charles T. Robertson, Jr. (U.S. Air Force, Retired) has served
as Vice President, Air Force Support Programs, Aerospace Support, The
Boeing Company since December 2004. From April 2002 until December 2004,
he served as Vice President of Business Development and then as Vice
President, Mods and Upgrades. For 33 years until his retirement in 2001,
he served in the United States Air Force. General Robertson served as
Commander in Chief, U.S. Transportation Command, and Commander, Air
Mobility Command, Scott Air Force Base, from 1998.

General Crosbie E. Saint (U.S. Army, Retired) served in the United
States Army for 34 years until his retirement in 1992. In the four years
preceding his retirement, General Saint served as Commander in Chief,
United States Army, Europe and Seventh Army; Commander, Central Army Group
(NATO).

James A. Schaefer has been a Certified Public Accountant since 1965
and was an Audit Partner for 30 years. Most recently, he served as Audit
Partner for the accounting firm of Baird, Kurtz & Dobson LLP from 1988
until his retirement in 2004.

Michael F. Shanahan, Jr. has served as President and Chief Executive
Officer of Huntleigh/McGehee, Inc., an insurance concern, since July 2004.
Mr. Shanahan served as Executive Vice President of Lockton Companies, an
insurance concern, from November 2000 to September 2003. From October 1994
to September 2003, he was a Producer for Lockton Companies.

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.

DIRECTOR MEETINGS AND COMMITTEES

During the fiscal year ended October 31, 2004, the Board of Directors
of the Company met four times. The Board has determined that each of
William H. T. Bush, General Michael P. C. Carns, MG George E. Friel,
Thomas J. Guilfoil, S. Lee Kling, LTG Kenneth E. Lewi, General Charles T.
Robertson, Jr. and General Crosbie E. Saint qualify as independent
directors in accordance with the listing standards and rules of the Nasdaq
Stock Market, Inc. (Nasdaq). The Board has four committees: Executive,
Compensation, Audit and Nominating. All directors attended 75% or more of
the aggregate number of meetings of the Board and applicable Committee
meetings.

The Executive Committee for fiscal 2004 consisted of Michael F.
Shanahan, Sr., Gerald E. Daniels (until his resignation in August 2004),
Gerald A. Potthoff, Gary C. Gerhardt 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, except where action is authorized to
be taken only by the full Board. The Executive Committee met on several
occasions, as needed, throughout the course of fiscal year 2004.

The Audit Committee for fiscal 2004 consisted of William H.T. Bush,
General Michael P.C. Carns, MG George E. Friel and S. Lee Kling, all of
whom are considered independent under the listing standards of Nasdaq. Mr.
Kling serves as the Audit Committee's financial expert. The Audit
Committee operates under a written charter adopted by the Board of
Directors, a copy of which was attached as Appendix A to the Company's
Proxy Statement filed with the Securities and Exchange Commission on
January 30, 2004. 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 Audit Committee met
four times during fiscal year 2004.

The Compensation Committee for fiscal 2004 consisted of Thomas J.
Guilfoil, LTG Kenneth E. Lewi, Earl W. Wims (from November 1, 2003 to June
30, 2004) and General Crosbie E. Saint (from July 1, 2004 to October 31,
2004). The function of the Compensation Committee is to review and approve
the compensation policies and arrangements of the Company and its
subsidiaries, as well as to administer the Company's stock option and
purchase plans. Members of the Compensation Committee are restricted from
voting on matters that affect them. The Compensation Committee met four
times during fiscal year 2004.

The Nominating Committee for fiscal year 2004 consisted of Thomas J.
Guilfoil, General Charles T. Robertson, Jr. and LTG Kenneth E. Lewi (from
July 1, 2004 to October 31, 2004) each of whom are considered independent
under the listing standards of the Nasdaq. The purpose of the Nominating
Committee is to identify, evaluate and select potential director nominees.
The Nominating Committee operates under a written charter adopted by the
Board of Directors, a copy of which was attached as Appendix B to the
Company's Proxy Statement filed with the Securities and Exchange
Commission on January 30, 2004. Mr. Schaefer, the only new nominee to the
Board, was recommended to the Nominating Committee by the Chairman. The
Nominating Committee met one time during fiscal 2004.

The Nominating Committee will consider nominees recommended by
shareholders. Any shareholder wishing to nominate a candidate for director
at a shareholders meeting must submit a proposal as described under
"Shareholder Proposals for the Next Annual Meeting" and furnish certain
information about the proposed nominee. The notice submission should
include information on a candidate for director, including the proposed
candidate's name, age, business address, residence address, principal
occupation or employment for the previous five years, and class or series
and number of shares of the Company's common stock owned beneficially or
of record. In considering a potential nominee for the Board, shareholders
should note that the rules of Nasdaq require that a majority of the Board
be independent, as defined by Nasdaq rules. Further, when considering a
potential nominee, the Nominating Committee considers whether a candidate
evidences: personal characteristics of the highest personal and
professional ethics, integrity and values; an inquiring and independent
mind and practical wisdom and mature judgment; training and experience at
the policy-making level in business, government or community
organizations; expertise that is useful to the Company and complementary
to the background and experience of other Board members; willingness to
devote a required amount of time to carrying out the duties and
responsibilities of Board membership; commitment to serve on the Board
over a period of several years to develop knowledge about the Company, its
strategy and its principal operations; and willingness to represent the
best interests of all constituencies and objectively appraise management
performance and involvement in activities or interests that do not create
a conflict with the director's responsibilities to the Company. The notice
submission should be addressed to Nominating Committee Chair, c/o
Engineered Support Systems, Inc. 201 Evans Lane, St. Louis, Missouri
63121.

Shareholders who desire to communicate with members of the Board
should send correspondence addressed to Michael F. Shanahan, Sr., Chairman
of the Board, c/o Engineered Support Systems, Inc. 201 Evans Lane, St.
Louis, Missouri 63121. The Company does not, however, forward sales or
marketing materials or correspondence not clearly identified as
shareholder correspondence.

DIRECTORS FEES

Directors who are not full-time employees of the Company are paid
$1,000 for each meeting of the Board and $500 for each meeting of the
committee(s) on which they serve. Committee chairmen receive an additional
$500 per meeting. Directors are also paid $2,800 per month during their
term. Non-employee directors are reimbursed for expenses incurred in
attending meetings.

Non-employee directors also receive annual stock option awards in
accordance with the Engineered Support Systems, Inc. 2002 Stock Option
Plan for Non-Employee Directors. On March 2, 2004, Mssrs. Bush, Carns,
Friel, Guilfoil, Kling, Lewi, Robertson, Saint, Shanahan, Jr. and Wims
each received an option to acquire 5,625 shares of the Company's common
stock at an exercise price of $53.75 per share.

RELATED PARTY TRANSACTIONS

Huntleigh/McGehee, Inc. served as broker on substantially all of the
Company's insurance policies in fiscal 2004. Total commissions earned by
Huntleigh/McGehee on insurance premiums paid by the Company in fiscal 2004
were $800,000. Michael F. Shanahan, Jr. owns a majority of
Huntleigh/McGehee's outstanding stock and has served as the President and
Chief Executive Officer of Huntleigh/McGehee since July 2004. As a result
of contractual arrangements between Mr. Shanahan, Jr. and the other
stockholders of Huntleigh/McGehee, Mr. Shanahan, Jr. has not received any
compensation, either as shareholder or officer of Huntleigh/McGehee, as a
result of insurance brokerage services paid by the Company to
Huntleigh/McGehee in fiscal 2004. Mr. Shanahan, Jr. is a director of the
Company and the son of Michael F. Shanahan, Sr., Chairman of the Board of
the Company.

The Company paid David D. Mattern $409,000 in fees during fiscal 2004
for his services as Secretary and General Counsel of the Company. David D.
Mattern is the son-in-law of Michael F. Shanahan, Sr., Chairman of the
Board of the Company.

The Audit Committee of the Board of Directors has formally approved
all related party transactions.

REPORT OF THE AUDIT COMMITTEE

The following report is provided by the Audit Committee. The Committee
oversees and monitors the Company's financial reporting process on behalf
of the Board of Directors. The Committee, which consists entirely of
non-employee directors, who are independent under Nasdaq rules, met four
times in fiscal year 2004.

The Audit Committee has reviewed and discussed the audited financial
statements with management; discussed with the independent accountants the
matters required to be discussed by Statement on Auditing Standards No.
61, as may be modified or supplemented; and received from the independent
accountants written disclosures and the letter regarding their
independence required by Independence Standards Board Standard No. 1, as
currently in effect, and discussed with the independent accountants their
independence. Based on the review and discussions noted above, the Audit
Committee has recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2004 for filing with the
Securities and Exchange Commission.

The Audit Committee

S. Lee Kling, Chairman
William H. T. Bush
General Michael P. C. Carns
MG George E. Friel

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 and other executive officers of the Company and its
subsidiaries. The Committee, which consists entirely of independent
directors, met four times in fiscal 2004. No member of the Committee was
an officer or employee of the Company during that period.

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 relevant 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 and 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
bonus compensation and performance-based equity compensation. Base
salaries are reviewed annually. Salary changes reflect overall Company
performance, pay competitiveness and individual performance.

A substantial portion of each executive's annual cash compensation is
tied to the Company's performance through incentive bonus compensation.
The goals of this element of compensation are to focus the attention of

executives on profits, continued growth, increased efficiency and
teamwork, as well as to improve the Company's ability to attract and
retain outstanding executive talent.

The Committee determines the annual incentive bonus payment for each
executive at the end of each fiscal year based on the Company's
performance in important 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
contributions to the Company's progress towards long-term strategic
objectives. Certain executives do receive minimum bonus payments.

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
has adopted various Stock Option Plans ("Option Plans"), which have been
approved by the Company's shareholders. As of October 31, 2004, there were
4,087,853 shares reserved for issuance upon the exercise of outstanding
options or future 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 the date of the award. The Option Plans are administered
by the Compensation Committee and option awards are made subjectively
based upon the evaluations of the executive's past and anticipated future
contribution to the Company's performance.

FISCAL 2004 EXECUTIVE OFFICER COMPENSATION

In determining the fiscal year 2004 performance compensation payments
for the Chairman, the Chief Executive Officer and the other executive
officers, the Committee considered the Company's operating performance and
return to shareholders. Fiscal 2004 net revenues from continuing
operations, net income from continuing operations and book value increased
54%, 75% and 71%, respectively, over fiscal 2003. Share price increased 8%
from $55.06 per share on December 31, 2003 to $59.22 per share on December
31, 2004. The Committee also considered each executive's contribution to
the Company's performance.

Based on the subjective evaluation of the above factors, the Committee
approved the base annual salary of $1,250,000 and an incentive bonus
payment of $1,500,000 for the Company's Chairman. Based on the subjective
evaluation of the above factors, the Committee also approved the base
annual salary of $550,000 and an incentive bonus payment of $412,500 for
the Vice Chairman, Chief Executive Officer and President, the base annual
salary of $480,000 and an incentive bonus payment of $360,000 for the Vice
Chairman and Chief Financial Officer; the base annual salary of $430,000
and an incentive bonus payment of $322,500 for the President, Business
Development; and, the base annual salary of $220,000 and an incentive
bonus payment of $120,000 for the Group President - Support Systems. The
Committee also awarded options for 15,000, 15,000, 15,000 and 25,000
shares under the Option Plans to Mr. Potthoff, Mr. Gerhardt, Mr. Davis and
Mr. Rodrigues, respectively.

In addition to the foregoing, and also based on the subjective
evaluation of the above factors, the Committee approved the salary of
$499,000 and an incentive bonus payment of $405,000 for Gerald E. Daniels
as Vice Chairman and Chief Executive Officer. The Committee also awarded
options for 50,000 shares under the Option Plans to Mr. Daniels. Mr.
Daniels resigned from the Company effective August 4, 2004. In connection
with his resignation, Mr. Daniels received one year's salary ($720,000),
extended medical coverage ($42,000) and reimbursement of personal expenses
($28,000).

The Company has employment agreements with its Chairman and the other
executive officers. These employment agreements are summarized in the next
section of this proxy statement.

As a result of the Sarbanes-Oxley Act of 2002, the Company has
suspended payment of premiums with respect to split dollar life insurance
on the lives of certain of the Company's executive officers. In accordance
with the terms of the insurance policies, the insurance carriers have
applied available cash values in payment of premiums otherwise payable in
2003 and 2004.

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. The Committee concludes 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

LTG Kenneth E. Lewi, Chairman
Thomas J. Guilfoil
General Crosbie E. Saint

EMPLOYMENT AGREEMENTS

The Company has employment agreements with certain executive officers.
The terms and conditions of those agreements with the Chairman, the Vice
Chairman, Chief Executive Officer and President, the Vice Chairman and
Chief Financial Officer, the President, Business Development, and the
Former Vice Chairman and Chief Executive Officer are summarized below.

CHAIRMAN OF THE BOARD. The employment agreement with Michael F.
Shanahan, Sr. was executed on November 1, 2004 for a term of three years.
Unless terminated by Mr. Shanahan upon not less than 90 days nor more than
120 days written notice to the Company, or by the Company, the employment
agreement continues on a year-to-year basis. The current annual base
salary under this agreement is $1,000,000 and Mr. Shanahan also receives
an annual incentive bonus payment.

If the agreement is terminated by the Company, for other than cause,
Mr. Shanahan is entitled to termination pay equal to twice his total
annual compensation (payable in 24 equal monthly payments) for the fiscal
year of the Company ending immediately prior to the date of termination.
Mr. Shanahan is prohibited from competing with the Company after
termination during such time as he continues to receive compensation from
the Company. The employment agreement further provides that he is entitled
to an annual stock option award as determined by the Compensation
Committee of the Board of Directors. The employment agreement also
provides that the Company will provide Mr. Shanahan with an expense
allowance of $3,000 per month and an automobile allowance of $1,800 per
month and will reimburse his expenses associated with performing his
duties on behalf of the Company.

The Company is also a party to split dollar life insurance agreements
with Mr. Shanahan. Under these arrangements, the Company made annual life
insurance premium payments for Mr. Shanahan. In return, the Company will
be reimbursed for premiums it has paid. As provided for by the insurance
policies, the Company can borrow funds against the cash surrender value.
Ownership rights are subordinate to the Company's rights to be reimbursed
for the premiums it has paid.

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 $52,500 per month for a maximum of 60
consecutive months. For retirement or death, the benefit is $52,500 per
month for 24 months. In the event of a change in control of the Company,
Mr. Shanahan is entitled to receive a lump sum cash payment in an amount
equal to 2.99 times his average annual compensation for the prior five
fiscal years of employment with the Company.

VICE CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT. The employment
agreement with Gerald A. Potthoff was executed on November 1, 2004 for a
term of three years. Unless terminated by Mr. Potthoff upon not less than
90 days nor more than 120 days written notice to the Company, or by the
Company, the employment agreement continues on a year-to-year basis. Under
the terms of Mr. Potthoff's employment

agreement, Mr. Potthoff is paid a base annual salary of $720,000 and
receives an annual incentive bonus payment. The employment agreement also
provides that he is entitled to receive an annual stock option award based
on 15,000 shares of Company common stock. If the agreement is terminated
by the Company, other than for cause, Mr. Potthoff is entitled to
termination pay equal to his base salary upon the date of termination
payable over 12 months. The agreement prohibits Mr. Potthoff from
competing with the Company for a period of two years after termination.
Mr. Potthoff has been provided a club membership and is reimbursed for
expenses associated with performing his duties on behalf of the Company.
Mr. Potthoff receives benefits under a Supplemental Executive Retirement
Plan. The Company has a split dollar life insurance arrangement with Mr.
Potthoff similar to the agreement with Mr. Shanahan. In the event of a
change in control of the Company, Mr. Potthoff is entitled to receive a
lump sum cash payment in an amount equal to 2.99 times his average
compensation for the prior five fiscal years of employment with the
Company.

VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER. The employment agreement
with Gary C. Gerhardt was executed on November 1, 2004 for a term of three
years. Unless terminated by Mr. Gerhardt upon not less than 90 days nor
more than 120 days written notice to the Company, or by the Company, the
employment agreement continues on a year-to-year basis. Under the terms of
Mr. Gerhardt's employment agreement, Mr. Gerhardt is paid a base annual
salary of $500,000 and receives an annual incentive bonus payment. The
employment agreement also provides that he is entitled to receive an
annual stock option award based on 15,000 shares of Company common stock.
If the agreement is terminated by the Company, other than for cause, Mr.
Gerhardt is entitled to termination pay equal to his base salary upon the
date of termination payable over 12 months. The agreement prohibits Mr.
Gerhardt from competing with the Company for a period of two years after
termination. Mr. Gerhardt has also been provided club memberships and is
reimbursed for expenses associated with performing his duties on behalf of
the Company. The Company has a split dollar life insurance arrangement
with Mr. Gerhardt similar to its agreement with Mr. Shanahan. In the event
of a change in control of the Company, Mr. Gerhardt is entitled to receive
a lump sum cash payment in an amount equal to 2.99 times his average
annual compensation for the prior five fiscal years of employment with the
Company.

PRESIDENT, BUSINESS DEVELOPMENT. The employment agreement with Ronald
W. Davis was executed on November 1, 2004 for a term of three years.
Unless terminated by Mr. Davis upon not less than 90 days nor more than
120 days written notice to the Company, or by the Company, the employment
agreement continues on a year-to-year basis. Under the terms of Mr. Davis'
employment agreement, Mr. Davis is paid a base annual salary of $440,000
and receives an annual incentive bonus payment. The employment agreement
also provides that he is entitled to receive an annual stock option award
based on 15,000 shares of Company common stock. If the agreement is
terminated by the Company, other than for cause, Mr. Davis is entitled to
termination pay equal to his base salary upon the date of termination
payable over 12 months. The agreement prohibits Mr. Davis from competing
with the Company for a period of two years after termination. Mr. Davis
has also been provided club memberships and he is reimbursed for expenses
associated with performing his duties on behalf of the Company. The
Company has a split dollar life insurance arrangement with Mr. Davis
similar to the agreement with Mr. Shanahan. In the event of a change in
control of the Company, Mr. Davis is entitled to receive a lump sum cash
payment in an amount equal to 2.99 times his average annual compensation
for the prior five fiscal years of employment with the Company.

FORMER VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER. The employment
agreement with Gerald E. Daniels was executed on April 1, 2003 for a term
of one year. Under the terms of Mr. Daniels' employment agreement, Mr.
Daniels was paid a base annual salary of $720,000 and received an annual
incentive bonus payment. Mr. Daniels was also granted club membership and
was reimbursed for expenses associated with performing his duties on
behalf of the Company. Mr. Daniels resigned effective August 4, 2004. In
connection with his resignation, Mr. Daniels received one year's salary
($720,000), extended medical coverage ($42,000) and reimbursement of
personal expenses ($28,000).

As a result of the Sarbanes-Oxley Act of 2002, the Company has
suspended payment of premiums with respect to the split dollar life
insurance agreements for Mr. Shanahan and for those other officers with
split dollar life insurance agreements with the Company. In accordance
with the terms of the insurance policies, the

insurance carriers have applied available cash values in payment of
premiums otherwise payable in 2003 and 2004.

EXECUTIVE COMPENSATION

The following table sets forth the compensation for the past three
fiscal years for the Company's Chairman and the five next most highly
compensated executive officers for the fiscal year ended October 31, 2004:

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) COMPENSATION
--------------------------- ---- ------ ----- ---------- ------------

Michael F. Shanahan, Sr. 2004 $1,250,000 $1,500,000 0 $ 341,700(3)
Chairman 2003 $1,000,000 $1,500,000 0 $ 301,300
2002 $ 900,000 $ 714,000 1,290,938 $ 233,600

Gerald A. Potthoff 2004 $ 550,000 $ 412,500 15,000 $1,426,600(4)
Vice Chairman, Chief 2003 $ 500,000 $ 375,000 15,000 $ 268,600
Executive Officer and 2002 $ 320,000 $ 250,000 525,938 $ 181,900
President

Gary C. Gerhardt 2004 $ 480,000 $ 360,000 15,000 $ 30,700(5)
Vice Chairman and Chief 2003 $ 400,000 $ 300,000 15,000 $ 29,600
Financial Officer 2002 $ 280,000 $ 200,000 413,438 $ 15,000

Ronald W. Davis 2004 $ 430,000 $ 322,500 15,000 $ 44,100(6)
President, Business 2003 $ 350,000 $ 262,500 15,000 $ 30,200
Development 2002 $ 200,000 $ 175,000 413,438 $ 14,900

Daniel A. Rodrigues 2004 $ 220,000 $ 120,000 25,000 $ 18,600(7)
Group President - 2003 $ 190,000 $ 122,500 30,000 $ 15,000
Support Systems 2002 $ 158,000 $ 81,220 56,250 $ 3,800

Gerald E. Daniels(2) 2004 $ 499,000 $ 405,000 50,000 $ 38,000(8)
Vice Chairman and Chief 2003 $ 350,000 $ 262,500 150,000 $ 14,400
Executive Officer

--------

(1) All option amounts have been restated to reflect a 3-for-2
stock split effected in the form of a 50% stock dividend on
October 31, 2003.

(2) Mr. Daniels resigned from his position with the Company
effective August 4, 2004. Amounts for 2002 are not presented
for Mr. Daniels as his employment with the Company commenced
April 1, 2003. In connection with his resignation, Mr.
Daniels received one year's salary ($720,000), extended
medical coverage ($42,000) and reimbursement of personal
expenses ($28,000), which are not included in amounts
presented above.

(3) This amount includes $310,700 accrued pursuant to Mr.
Shanahan's employment agreement which provides for deferred
compensation to be paid in the event of retirement,
disability or death; $17,200 pursuant to the benefit of life
insurance premiums paid by the Company on Mr. Shanahan's
behalf; and, $13,800 of common stock contributed through the
Engineered Support Systems, Inc. Employee Stock Ownership
Plan.

(4) This amount includes $1,403,000 accrued pursuant to Mr.
Potthoff's employment agreement in connection with a
Supplemental Executive Retirement Plan; $11,600 of life
insurance premiums paid by the Company on Mr. Potthoff's
behalf; and, $12,000 for reimbursement of personal expenses.

(5) This amount includes $3,300 pursuant to the benefit of life
insurance premiums paid by the Company on Mr. Gerhardt's
behalf; $13,800 of common stock contributed through the
Engineered Support Systems, Inc. Employee Stock Ownership
Plan; and $13,600 for reimbursement of personal expenses.

(6) This amount includes $12,100 pursuant to the benefit of life
insurance premiums paid by the Company on Mr. Davis' behalf;
$13,800 of common stock contributed through the Engineered
Support Systems, Inc. Employee Stock Ownership Plan; and
$18,200 for reimbursement of personal expenses.

(7) This amount includes $800 pursuant to the benefit of life
insurance premiums paid by the Company on Mr. Rodrigues'
behalf and $17,800 for reimbursement of personal expenses.

(8) This amount includes $700 pursuant to the benefit of life
insurance premiums paid by the Company on Mr. Daniels'
behalf; $13,800 of common stock contributed through the
Engineered Support Systems, Inc. Employee Stock Ownership
Plan; and $23,500 for reimbursement of personal expenses.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock option
grants made during the fiscal year ended October 31, 2004 to the
individuals named in the Summary Compensation Table.

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
NUMBER OF FOR OPTION TERM(1)
SECURITIES PERCENT OF ------------------------
UNDERLYING TOTAL OPTIONS 5% 10%
OPTIONS GRANTED IN EXERCISE PRICE EXPIRATION ASSUMED ASSUMED
NAME GRANTED FISCAL YEAR PER SHARE DATE RATE RATE
---- ---------- ------------- -------------- ---------- ------- -------

Michael F. Shanahan, Sr...... 0 0.0% -- -- -- --
Gerald A. Potthoff........... 15,000 2.6% $47.62 9/15/09 $197,000 $ 436,000
Gary C. Gerhardt............. 15,000 2.6% $47.62 9/15/09 $197,000 $ 436,000
Ronald W. Davis.............. 15,000 2.6% $47.62 9/15/09 $197,000 $ 436,000
Daniel A. Rodrigues.......... 25,000 4.3% $55.25 7/14/09 $381,000 $ 843,000
Gerald E. Daniels............ 50,000 8.5% $49.12 3/31/09 $678,000 $1,499,000

--------
(1) The indicated 5% and 10% rates of appreciation are provided
to comply with Securities and Exchange Commission
regulations and do not necessarily reflect the views of the
Company as to the likely trend in the common stock price.
Actual gains, if any, on stock option exercises and common
stock holdings will be dependent on, among other things, the
future performance of the common stock and overall market
conditions. There can be no assurance that the amounts
reflected above will be achieved. Additionally, these values
do not take into consideration the option provision
providing for nontransferability.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

The following table sets forth information concerning the number of
exercisable and unexercisable stock options at October 31, 2004 held by
the individuals named in the Summary Compensation Table.

NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
NUMBER OPTIONS OPTIONS
OF SHARES AT 10/31/04 AT 10/31/04
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------

Michael F. Shanahan, Sr.......... 1,065,938 $36,980,000 0/0 $0/$0
Gerald A. Potthoff............... 157,500 $7,166,000 555,938/0 $26,707,000/$0
Gary C. Gerhardt................. 140,625 $6,951,000 719,063/0 $34,544,000/$0
Ronald W. Davis.................. 200,000 $6,625,000 243,438/0 $11,695,000/$0
Daniel A. Rodrigues.............. 18,750 $730,000 55,000/0 $1,441,000/$0
Gerald E. Daniels................ 0 $0 200,000/0 $7,206,000/$0

PERFORMANCE GRAPH

The following graph compares the annual percentage change in the
Company's cumulative total shareholder return on its common stock with (1)
the cumulative total return on the Standard and Poor's 500 composite index
("S&P 500") and with (2) the cumulative total return of the Standard and
Poor's Aerospace/ Defense index ("S&P Aerospace/Defense") for the period
October 31, 1999 through October 31, 2004.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ENGINEERED SUPPORT SYSTEMS, INC., THE S & P 500 INDEX
AND THE S & P AEROSPACE/DEFENSE INDEX

[GRAPH]

CUMULATIVE TOTAL RETURN
-------------------------------------------------------
10/99 10/00 10/01 10/02 10/03 10/04
------- ------ ------ ------ ------- -------

ENGINEERED SUPPORT SYSTEMS, INC. 100.00 156.89 531.86 523.13 1085.22 1157.34
S & P 500 100.00 106.09 79.67 67.64 81.70 89.40
S & P AEROSPACE/DEFENSE 100.00 125.40 91.54 93.78 107.15 129.34

--------
*Assumes $100 invested on October 31, 1999 and assumes the reinvestment of
dividends.

THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE "FOR" THE ELECTION OF SIX
DIRECTORS TO HOLD OFFICE FOR THREE YEARS.

PROPOSAL TWO

APPROVAL OF ENGINEERED SUPPORT SYSTEMS, INC.

2005 NON-EXECUTIVE STOCK OPTION PLAN AND RESERVATION OF 400,000 SHARES

OF COMMON STOCK TO THE PLAN

The Company is seeking shareholder approval of the Engineered Support
Systems, Inc. 2005 Non-Executive Stock Option Plan for key employees and
consultants of the Company, and the reservation of 400,000 shares of
Engineered Support Systems, Inc. common stock for future issuance under
the plan. The Company proposes to implement the plan if the plan is
approved by the shareholders. The purpose of the plan is to motivate key
employees and consultants by creating an incentive for them to remain in
the employ, or consultancy, of the Company and to work for the achievement
of the Company's strategic objectives. To accomplish this purpose, the
Compensation Committee may award so-called "non-incentive" stock options
of the Company's common stock to eligible key employees and consultants as
earned by their performance.

The complete text of the plan is attached as Appendix A to this proxy
statement. The following summary of certain provisions of the plan is
qualified by reference to the text of the plan.

Any employee or consultant of the Company shall be eligible to
participate in the plan, except no "officer" of the Company as that term
is defined in Rule 16a-1 of the Securities Exchange Act of 1934, as
amended, or director of the Company shall be eligible to participate in
the plan. The Compensation Committee shall administer the plan and, in
connection therewith, shall have full power to grant awards, construe and
interpret the plan, establish rules and regulations and perform all other
acts deemed reasonable and proper to administer the plan, subject to the
provisions of the plan.

The options shall be granted at the fair market value of the Company's
common stock on the date awarded. The closing price of the Company's
common stock as of January 19, 2005 was $57.46 per share. The options
expire five years from the date of grant, unless terminated sooner due to
the termination of service for cause or death of the optionee. The plan
will expire on October 31, 2010 unless extended or sooner terminated by
the Company's Board. In case of death, the beneficiary of the deceased
will have the right for six months after the date of death to exercise the
options. The options granted may not be repriced at any time and are not
transferable or assignable. For federal income tax purposes, no income
will be realized by a participant in the plan upon the grant of an option,
and the Company will not be entitled to a deduction at that time. Upon the
exercise of the option, the excess of the fair market value of the stock
on the date of exercise over the purchase price is ordinary income to the
holder as of the date of exercise. The Company generally will be entitled
to a deduction equal to the excess amount in the year of exercise.

NEW PLAN BENEFITS

The amounts that will be received by or allocated to employees under
the plan are not determinable because such amounts, if any, will be
awarded in the future at the discretion of the Committee.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of October 31, 2004 with
respect to the shares of common stock that may be issued under the
Company's existing equity compensation plans:

NUMBER OF SHARES
REMAINING AVAILABLE FOR
NUMBER OF SHARES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS OUTSTANDING OPTIONS SECURITIES REFLECTED IN
OR RIGHTS OR RIGHTS COLUMN (a))
PLAN CATEGORY (a) (b) (c)
------------- ------------------- ------------------- -----------------------

Equity compensation plans approved by
shareholders.............................. 2,982,000 $28.59 869,000
Equity compensation plans not approved by
shareholders(2)........................... 237,000 $20.14 --(2)
--------- -------
Total................................... 3,219,000 $27.97 869,000(2)
========= =======

--------

(1) All shares and per share amounts have been restated to
reflect a three-for-two stock split effected by the Company
on October 31, 2003.

(2) Equity compensation plans not approved by shareholders
include the (a) Engineered Support Systems, Inc. 2002
Non-Executive Stock Option Plan under which the Company has
issued 237,000 stock options to non-executive employees, and
(b) a Business Development Agreement dated May 24, 2001
under which the Company has issued to a consultant per year
for a period of three years the number of shares of the
Company's common stock equal to $100,000, calculated at the
stock's then current market value. The Company has no
further obligation to issue stock under the Business
Development Agreement.

THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
ENGINEERED SUPPORT SYSTEMS, INC. 2005 NON-EXECUTIVE STOCK OPTION PLAN.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

PricewaterhouseCoopers LLP, independent certified public accountants,
have been the auditors of the accounts of the Company since 1991,
including the fiscal year ended October 31, 2004. The Company anticipates
that representatives of PricewaterhouseCoopers LLP will be present at the
2004 Annual Meeting and PricewaterhouseCoopers LLP will have the
opportunity to make a statement if they so desire at that time.
PricewaterhouseCoopers LLP will also be available to respond to
appropriate questions raised at the Annual Meeting.

PricewaterhouseCoopers 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.

The following table sets forth the aggregate fees for professional
audit services for the audit of the financial statements for the fiscal
years ended October 31, 2004 and 2003 and fees billed for other services
during those fiscal years by PricewaterhouseCoopers LLP. All fees included
in the table below have been pre-approved by the Audit Committee.

2004 2003
---- ----

Audit fees(1).................... $488,200 $388,600

Audit related fees(2)............ 153,225 71,180

Tax fees(3)...................... 234,550 165,147

All other fees................... -- --
-------- --------
Total............................ $875,975 $624,927
======== ========

--------

(1) Audit fees consisted of audit work performed in the
preparation of financial statements as well as work
generally only the independent auditors can reasonably be
expected to provide, such as statutory audits.

(2) Audit related fees consisted of the following: $62,400 and
$43,500 in fiscal years 2004 and 2003, respectively, for
employee benefit plan audits; $2,500 and $2,500 in fiscal
years 2004 and 2003, respectively, for Form S-8 consents;
$15,750 and $0 in 2004 and 2003, respectively, for
consultation regarding SEC matters; $10,450 and $4,000 in
2004 and 2003, respectively, for out-of-pocket expenses; and
$62,125 and $21,180 in fiscal year 2004 and 2003 for
Sarbanes-Oxley Section 404 internal control procedures.

(3) Tax fees consisted of assistance with matters related to tax
compliance and consulting.

POLICY REGARDING THE APPROVAL OF INDEPENDENT AUDITOR PROVISION
OF AUDIT AND NON-AUDIT SERVICES

Consistent with Securities and Exchange Commission requirements
regarding auditor independence, the Audit Committee has adopted a policy
to pre-approve all audit and permissible non-audit services provided by
the independent auditor. Under the policy, the Committee must pre-approve
services prior to commencement of the specified service. The requests for
pre-approval are submitted to the Audit Committee by the Vice Chairman and
Chief Financial Officer or his designee with a statement as to whether in
their view the request is consistent with the Securities and Exchange
Commission's rules on auditor independence.

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
Shareholders.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's executive officers and directors, and persons
who own more than ten percent of the Company's outstanding stock, file
reports of ownership and changes in ownership with the Securities and
Exchange Commission. To the

knowledge of the Company based upon a review of the reports filed pursuant
to Rule 16a-3 of the Securities Exchange Act of 1934, all Section 16(a)
filing requirements applicable to its executive officers, directors and
greater than ten percent beneficial owners were complied with during the
fiscal year ended October 31, 2004.

SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING

Shareholder proposals for the 2006 Annual Meeting must be received by
the Company no later than October 31, 2005 for inclusion in the Company's
proxy statement and proxy for that meeting. Shareholder proposals that are
not included in the proxy statement may be considered at the 2006 Annual
Meeting if such proposals are received by the Company no later than
December 15, 2005. The procedures to be used by shareholders to recommend
nominees to the Board are outlined on pages 9 and 9 of this proxy
statement. All proposals should be submitted to the Company at 201 Evans
Lane, St. Louis, MO 63121, 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/ David D. Mattern

David D. Mattern,
Secretary and General Counsel

Dated: January 31, 2005

NOTICE: UPON WRITTEN REQUEST FROM ANY SHAREHOLDER OF RECORD AS OF
JANUARY 17, 2005 (OR ANY BENEFICIAL OWNER REPRESENTING THEY ARE OR WERE
ENTITLED TO VOTE AT THE 2005 ANNUAL MEETING), THE COMPANY WILL FURNISH TO
SUCH SHAREHOLDER, WITHOUT CHARGE, ITS ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED OCTOBER 31, 2004, 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
IS SPECIFICALLY REQUESTED. REQUESTS SHOULD BE DIRECTED TO: INVESTOR
RELATIONS, ENGINEERED SUPPORT SYSTEMS, INC., 201 EVANS LANE, ST. LOUIS, MO
63121.

APPENDIX A

ENGINEERED SUPPORT SYSTEMS, INC.

2005 NON-EXECUTIVE STOCK OPTION PLAN

ARTICLE I. GENERAL PROVISIONS

Section 1. PURPOSE OF PLAN. The purpose of the Engineered Support
Systems, Inc. 2005 Non-Executive 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 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.

(d) "Consultant" means any natural person who has a written agreement
with the Company or any Affiliate to provide consulting services.

(e) "Stock" means the $.01 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 authorized and unissued Stock and/or treasury
shares which shall be the total number of shares of Stock that may be
issued pursuant to Awards. 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
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 of
the Company or any Affiliate shall be eligible to participate in the Plan,
except that no "officer" of the Company as that term is defined in Rule
16a-1 promulgated under the Securities Exchange Act of 1934, as amended,
or director of the Company 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.

A-1

(d) The option price of shares subject to any stock option shall be
the closing price of the Stock on the date that the stock option is
granted. If the stock option is granted on a day that is not a trading
day, the option price shall be the closing price of the Stock on the
immediately preceding trading day. Stock options may not be repriced at
any time.

ARTICLE III. FORFEITURE OF AWARDS

(a) The recipient of an Award, in the case of an employee of the
Company or any Affiliate, shall forfeit all options not exercised upon the
occurrence of any of the following events:

(i) the recipient is discharged for cause;

(ii) the recipient engages in competition with the Company or any
Affiliate; or

(iii) 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 it 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 OPTIONEE

Section 1. DEATH OF OPTIONEE. Upon the death of a recipient of any
award, 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 in no event after the expiration of the term of the option, by
the recipient's beneficiary. From time to time, in a form acceptable to
the Plan Administrator, the recipient may designate any person or persons,
including a trust (concurrently, contingently or successively) to whom the
Award shall be transferred in the event that the recipient dies before
exercising the option. A beneficiary designation form shall be effective
only when the form is signed by the recipient and filed in writing with
the Plan Administrator while the recipient is alive, and shall cancel all
beneficiary designation forms that the recipient previously signed and
filed. If the recipient does not designate a beneficiary, the beneficiary
shall be the surviving spouse of the recipient, and if the recipient has
no spouse surviving, by the personal representative or the person or
persons entitled thereto by will or in accordance with the laws of descent
and distribution applicable to the recipient.

ARTICLE V. EXERCISE OF OPTION

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 201 Evans Lane, St. Louis, Missouri
63121. Written notice shall set forth the number of shares for which the
exercise is applicable together with a check for the purchase price of 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.

A-2

ARTICLE VI. OTHER GOVERNING PROVISIONS

Section 1. TRANSFERABILITY. No Award shall be transferable other than
at death as set out in Article IV, and any right granted under an Award
may be exercised during the lifetime of the holder thereof only by him.

Section 2. RIGHTS AS A SHAREHOLDER. A recipient of an Award shall 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 the Plan, or in the shares reserved
pursuant to the Plan, 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, 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; and, (2) any increase in the number of shares that
may be issued under the Plan, or any material increase in benefits under
the Plan must be approved by shareholders.

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 shareholders of the
Company. The Plan shall continue until October 31, 2010 unless sooner
terminated or extended by the Board of Directors. 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.

A-3

THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION Please / /
IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE

1. Election of Directors (three year term)

Nominees: FOR WITHHELD
01 Gerald A. Potthoff
02 Gary C. Gerhardt / / / /
03 Thomas J. Guilfoil
04 James A. Schaefer
05 MG George A. Friel
(U.S. Army, Retired)
06 General Charles T. Robertson, Jr.
(U.S. Air Force, Retired)

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 fully among the remaining nominees.

For, except vote withheld from the following nominee(s):

------------------------------------------------------------------------------

2. Engineered Support Systems, Inc. 2005 Non- FOR AGAINST ABSTAIN
Executive Stock Option Plan and the allocation
of 400,000 shares of Engineered Support Systems, / / / / / /
Inc. common stock to the Non-Executive Stock
Option Plan.

Attend Meeting / /

SIGNATURE SIGNATURE DATE
--------------------- ----------------------- ----------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. JOINT MEMBERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
-------------------------------------------------------------------------------
FOLD AND DETACH HERE

VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK

INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN
TIME THE DAY PRIOR TO ANNUAL MEETING DAY.

YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED,
SIGNED AND RETURNED YOUR PROXY CARD.

------------------------------- --------------------------------- ------------------------------
INTERNET TELEPHONE MAIL
http://www.proxyvoting.com/easi 1-866-540-5760 Mark, sign and date your proxy
Use the internet to vote your OR Use any touch-tone telephone OR card and return it
proxy. Have your proxy card in to vote your proxy. Have your in the enclosed
hand when you access the web proxy card in hand when you call. postage-paid envelope.
site.
------------------------------- --------------------------------- ------------------------------

IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.

PROXY

ENGINEERED SUPPORT SYSTEMS, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF SHAREHOLDERS MARCH 1, 2005

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
headquarters of the Company, 201 Evans Lane, St. Louis, Missouri 63121 on
Tuesday, March 1, 2005, 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.

------------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------------

------------------------------------------------------------------------------

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FOLD AND DETACH HERE

YOU CAN NOW ACCESS YOUR ENGINEERED SUPPORT SYSTEMS ACCOUNT ONLINE.

Access your Engineered Support Systems shareholder account online via
Investor ServiceDirect(R) (ISD).

Mellon Investor Services LLC, Transfer Agent for Engineered Support Systems,
now makes it easy and convenient to get current information on your
shareholder account.

o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN

VISIT US ON THE WEB AT http://www.melloninvestor.com

FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME

Investor ServiceDirect(R) IS A REGISTERED TRADEMARK OF
MELLON INVESTOR SERVICES LLC

APPENDIX

Page 16 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.