DCI Telecommunications, Inc.
611 Access Road
Stratford, CT 06615
Notice of Annual Meeting of the Shareholders
to be Held
July 29, 1999
at
Kiawah Island Resort
12 Kiawah Beach Drive
Kiawah Island, South Carolina 29455
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the
shareholders of DCI Telecommunications, Inc. (the "Company") will be
held at the Kiawah Island Resort, Kiawah Island, South Carolina on
July 29, 1999 at 9:00 a.m. local time to hear a report on the
condition of the Company from the Chief Executive Officer of the
Company and to vote on the following proposals recommended by the
Board of Directors for approval:
(1) To elect five directors to serve until the next Annual Meeting
of shareholders;
(2) To ratify the selection of Deloitte & Touche LLP, as the
Company's independent public auditors for the coming year; and,
(3) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 11,
1999 as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting. Only holders of the
Company's common stock at the close of business on the record date
are entitled to vote at the meeting.
Adoption of the proposals will require the affirmative vote of a
majority of the Common Stock voting on the proposal.
You are cordially invited to attend the meeting in person.
However, whether you plan to attend or not, we urge you to complete,
date, sign, and return the enclosed proxy promptly in order that as
many shares as possible may be represented at the meeting.
A copy of the Company's Annual Report to Shareholders is
enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph J. Murphy
-------------------------------
Joseph J. Murphy, President
Stratford, Connecticut
June 30, 1999
DCI Telecommunications
611 Access Road
Stratford, CT 06615
Annual Meeting - July 29, 1999
June 30, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
shareholders of DCI Telecommunications, Inc. to be held on Thursday
July 29, 1999 at 9:00 a.m., at the Kiawah Island Resort, Kiawah
Island, South Carolina.
In addition to the specific matters to be voted on at the
meeting, there will be a report on the Company's business and an
opportunity for shareholders to ask questions. I hope you will be
able to join us. If you are unable to attend, I strongly urge you to
complete your enclosed proxy. Your vote is very important.
Sincerely,
/s/ Joseph J. Murphy
- --------------------
Joseph J. Murphy
President
DCI Telecommunications, Inc.
Proxy Statement for Annual Meeting of Shareholders
Information concerning Solicitation and Voting
General
- -------
The enclosed Proxy is solicited on behalf of DCI
Telecommunications, Inc. (the "Company") for use at the Annual
Meeting of shareholders to be held Thursday, July 29, 1999 at 9:00
a.m. local time and at any adjournment thereof for the purposes set
forth herein and in accompanying Notice of Annual Meeting of
shareholders. The Annual Meeting will be held at the Kiawah Island
Resort, Kiawah Island, South Carolina.
These proxy solicitation materials are being mailed on or about
July 9, 1999 together with the Company's Annual Report to all
shareholders entitled to vote at the meeting.
Record Date and Principal Shareholders
- --------------------------------------
Holders of record of Common Stock at the close of business on
June 11, 1999 are entitled to notice of and to vote at the meeting.
There are no other outstanding voting securities of the Company. At
the record date, 29,843,982 shares of the Company's Common Stock were
issued and outstanding. Each shareholder is entitled to one vote for
each share of common stock held. The following table sets forth, as
of the most recent practical date (June 11, 1999), those persons
known to the Company to be the beneficial owners of more than 5% of
the Company's Common Stock:
Amount and Nature Percent of
Name of Beneficial Ownership Class
---- ----------------------- ----------
Joseph J. Murphy 7,112,145 (1,2) 20.54%
IXC Communications Services, Inc. 4,250,000 14.24%
1) Includes 1,392,727 shares which the beneficial owner, 615,090
shares which Grace Murphy, the beneficial owner's spouse, and 83,600
shares which Joseph J. Murphy III, the beneficial owner's son, have
the right to acquire pursuant to options which are exerciseable
within sixty days.
2) Included in Joseph Murphy ownership are shares issued for the
Edge Communications acquisition of which Mr. Murphy exercises sole
voting power as follows: Donald Gross, 1,750,533 (5.8%); Stephen
Gross, 1,750,533 (5.8%); Robert Cefail, 263,143; DCP Holding, LLC,
150,000; Lori Gross, 62,500; and Tibor Vas, 20,000.
Section 16(a) Reports
- ---------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "34
Act") requires officers and directors, and persons who own more than
10% of a registered class of the equity securities of a company which
is registered under the 34 Act, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than 10% shareholders are
required by certain regulations to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, the Company believes that during its most recent fiscal year
or prior fiscal years, all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were
complied with except as noted. The Company notes that 2 officers
filed untimely reports on transactions in, or holdings of DCI
Telecommunications, Inc. Common Stock during, or with respect to,
1999 as follows: Joseph Murphy, 1 report regarding 1 transaction and
John Adams, 4 report(s) regarding 23 transaction(s).
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by
the person giving it at any time before its use by delivering to the
Company a written notice of revocation or duly executed proxy bearing
a later date or by attending the meeting and voting in person.
Voting and Solicitation
In accordance with the Company's by-laws, directors shall be
elected by the affirmative vote a plurality of the votes cast in
person or by proxy by the holders of shares entitled to vote in
election at the Annual Meeting of shareholders, and the ratification
of Deloitte & Touche LLP as independent auditors shall be by the
affirmative vote of the majority of the shares voting on the proposal
in person or by proxy at the Annual Meeting; in each case, provided a
quorum is present. Thus, abstentions and broker non-votes will not
be included in vote totals and will have no effect on the outcome of
the vote. No shareholder shall be entitled to cumulate votes.
The cost of soliciting proxies, which is estimated to be $1,600,
will be borne by the Company. Proxies may be solicited by certain of
the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram or
letter. Also, the Company has engaged Morrow & Co. to provide
certain services in connection with the solicitation of the proxies.
Deadline for Receipt of Shareholder Proposals
Proposals of shareholders of the Company which are intended to
be presented by such shareholders at next year's Annual Meeting must
be received by the Company by no later than March 24, 2000 in order
that they may be considered for inclusion in the proxy statement and
form of proxy relating to that meeting.
PROPOSAL NO. 1
NOMINATIONS FOR ELECTION AS DIRECTORS
Nominees
A Board of five directors is to be elected at the meeting.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's five nominees named below. In the
event that any nominee of the Company is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of
directors to fill the vacancy or the Board may elect to fill such
vacancy at a later date. The Company is not aware of any nominee who
will be unable or decline to serve as a director. The term of office
of each person elected as a director will continue until the next
Annual Meeting of shareholders or until a successor has been elected
and qualified.
The names of the nominees, and certain information about them,
are set forth below.
Director Amount and Nature Percent of
Name Age Since of Beneficial Ownership(b) Class
---- --- -------- ----------------------- ---------
John J. Adams (a) 60 1995 320,574 1.0%
Vice President Marketing of DCI Telecommunications, Inc. Mr.
Adams was formerly vice president for R&D Scientific Corp. from 1993
to 1997 and founder and president of Validation Services Corp. from
1993 to 1997. Mr. Adams was previously president of Prevent
Chemicals, Ltd., a publicly traded manufacturer of specialty
chemicals.
Carter H. Hills 77 1995 379,273 1.1%
Retired diplomat with extensive experience in economic
development and management planning under auspices of Department of
State and major international organizations. Mr. Hills directed such
programs in countries of Near East and Vietnam. Served as financial
adviser and delegate for U.S. at key international conferences, as
well as a management consultant to the organization for economic
cooperation and development.
Joseph J. Murphy (a)(c) 60 1995 7,112,145 20.5%
President and CEO of DCI Telecommunications, Inc. Prior to that
he was executive vice president and chief financial officer from 1979
to 1990, and a member of the Board of Directors (1980 to 1984) of
Aquarion Company, a New York Stock Exchange Company. Formerly, he
was chief financial officer for Connecticut Energy Corp. from 1971 to
1979, a member of Price Waterhouse from 1964 to 1967 and an officer
in the United States Marine Corps from 1961 to 1964. He was a member
of the Board of Directors of Boys/Girls Club of Bridgeport and served
on the Economic advisory board for Fairfield University and Sudden
Death Syndrome (SIDS) for Fairfield County. He was also a member of
the FBI/Marine Corps Association.
Larry Shatsoff (a) 45 1995 1,131,744 3.3%
Vice President and Chief Operations Officer of DCI
Telecommunications, Inc. Mr. Shatsoff was vice president and chief
operations officer for Alpha Products from 1991 to 1994. He also was
executive vice president of Kalon Systems (a data processing services
company) from 1988 to 1990, and a manager of information systems for
Aquarion Company, a New York Stock Exchange Company, from 1981 to
1990.
Clifford Postelnik55 0 0.0%
Director of Sales and Marketing, DCI Europe. Prior to his recent
appointment, he was with wholly-owned subsidiary Edge Communications.
Mr. Postelnik joined Edge in 1997 after a 30-year career in bilateral
carrier contract negotiations and marketing to the tour and travel
industry, airlines and hotels in Europe, Africa and the Orient.
All directors and executive officers
as a group 10,122,074b 29.2%
Notes:
(a) Executive officer of Registrant. Executive officers serve
annual terms.
(b) Included in shares owned above are shares which the beneficial
owner has the right to acquire from options within sixty days as
follows: J. Murphy, 1,392,727 shares; L. Shatsoff, 1,009,545 shares;
J. Adams, 314,574 shares; and C. Hills, 217,272 shares. Shares
beneficially owned directly or indirectly.
(c) Included in Joseph Murphy ownership are shares issued to the
following individuals in connection with the Edge Communications
acquisition of which Mr. Murphy exercises sole voting power as
follows: Donald Gross, 1,750,533 (5.8%); Stephen Gross, 1,750,533
(5.8%); Robert Cefail, 263,143; DCP Holding, LLC, 150,000; Lori
Gross, 62,500; and Tibor Vas, 20,000.
The Board of directors urges shareholders to vote "FOR" each of the
nominees for directors set forth above.
_____________________________
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF CERTIFIED PUBLIC AUDITORS
The Board of Directors of the Company has selected Deloitte &
Touche LLP as its independent public auditors for the fiscal year
ending March 31, 2000. In accordance with a resolution of the Board
of Directors, this selection is being presented to shareholders for
ratification at the Annual Meeting. The Company's independent public
auditors for the fiscal year ended March 31, 1999 were Schnitzer &
Kondub P.C.
If the foregoing proposal is not approved by the shareholders or
if, prior to the 1999 Meeting, Deloitte & Touche LLP shall decline to
act or otherwise become incapable of acting, or if its employment
shall be otherwise discontinued by the Board of Directors, then the
Board of Directors will appoint other independent public auditors
whose employment for any period subsequent to the 1999 Annual Meeting
will be subject to ratification by the shareholders at the meeting.
The Company has been advised that representatives of Deloitte &
Touche LLP will not be present at the meeting. Schnitzer & Kondub
P.C. audited the Company's financial statements for the years ended
March 31, 1997, 1998 and 1999. The Company has been advised that
representatives of Schnitzer & Kondub P.C. will not be present at the
meeting.
The decision to change auditors was approved by the Board of
Directors on May 13, 1999.
It was mutually agreed by Schnitzer & Kondub P.C. and the
Company that DCI change auditors at this time. In response to the
Company's growth, Schnitzer & Kondub P.C. recommended Deloitte &
Touche LLP take over the role as independent auditors for fiscal
year 2000 and beyond. There are no disagreements of opinion between
Schnitzer & Kondub P.C. and DCI to report.
The Board of Directors recommends a vote "FOR" ratification of the
selection of Deloitte & Touche as independent auditors.
_____________________________
Board Meetings and Committees
The Board of Directors of the Company held 13 meetings during
the period April 1, 1998 to March 31, 1999. All of the then
incumbent directors attended all such meetings except for Carter
Hills and Lois Morris. Mr. Hills missed one meeting and Ms. Morris
missed five during the period which they were appointed a director.
In January 1995, the Board of Directors established a
Compensation Committee, a Nomination Committee and a Finance
Committee. In July 1997, an Executive Committee was formed. Larry
Shatsoff, an executive officer of the Company, is chairman of the
Compensation Committee, Joseph J. Murphy is the chairman of the
Nomination and Executive Committees and the Finance Committee
chairman was Carter H. Hills. All three committees met once during
the year ended March 31, 1999.
Compensation Committee Interlocks and Insider Participation
DCI's compensation committee consists of three members, all of
whom also serve as executive officers for the Company. Larry
Shatsoff serves as the chairman of the committee, and is also the
chief operating officer for DCI. The other two committee members are
Joseph J. Murphy, DCI's president and CEO, and John J. Adams, DCI's
chief marketing officer.
Board of Directors Compensation Committee
Report on Executive Compensation
Executive Compensation Philosophy
The Company's executive compensation program has the objective
of aligning executive and shareholder interests in the context of an
emerging company which must attract and retain executives with
entrepreneurial talent and management ability. DCI is a young
company which seeks to increase shareholder value by growing and
becoming consistently profitable. The executive compensation program
is accordingly designed to conserve compensation expense and provide
stock incentives which motivate executives toward performance which
enhances shareholder value.
Executive Compensation Program
Each year, the Compensation Committee, which is composed of
three members, recommends compensation arrangements for officers to
the Board of Directors, including the salaries, stock option award
levels and grants, and other matters of executive compensation.
DCI's executive compensation program in 1999 consisted of two
components: salary and stock options.
The primary comparison for CEO compensation is the
telecommunications comparison group of 10 investor-owned
telecommunications companies to which DCI compares its business
performance. The total compensation for the CEO will position him
below the median of this comparison group.
Salary ranges are set by periodic comparison to rates of pay for
comparable positions within the telecommunications industry for
corporate and telecommunications positions and the non-
telecommunications industries for non-telecommunications positions.
Individual salaries are generally considered for adjustment based on
external salary levels, individual performance and potential, and/or
changes in duties and responsibilities. The Company believes that
officer salaries are below the median of the salaries reported for
comparable positions.
CEO Compensation - 1999
Based on its members' individual business judgments and
available compensation data, the Compensation Committee reviewed and
approved the level and form of compensation for the Chief Executive
Officer in 1999.
Mr. Murphy's base salary as CEO of DCI is positioned below the
median among chief executives within the telecommunications
comparison group. Mr. Murphy received a stock option grant in 1999
of 592,727 options. The grant is exercisable at a price equal to the
market price of the stock on the date of grant.
Compensation Committee
Larry Shatsoff, Chairman
Joseph J. Murphy
John J. Adams
Shareholder Return Presentation
- -------------------------------
The following performance graph compares the yearly percentage
change in the Company's cumulative total shareholder return on its
Common Stock with the cumulative total return on the Russell 2000
Index, and the NASDAQ Telecommunications Index for the three years
commencing 1997 and ended 1999. Information for the stock price of
DCTC was not available for the years ended 1995 and 1996.
[ GRAPH INSERTED HERE]
Employment Agreements
- ---------------------
The Company entered into an employment agreement dated as of
June 10, 1997 with Joseph J. Murphy pursuant to which Mr. Murphy
renders services to the Company as its President and Chief Executive
Officer for an annual base salary of $150,000. The agreement carries
a severance package worth a minimum of two years salary.
The Company also entered into an employment agreement dated June
10, 1997 with Larry Shatsoff pursuant to which Mr. Shatsoff renders
services to the Company as its Vice President and Chief Operating
Officer, for an annual base salary of $100,000. The agreement carries
a severance package worth a minimum of two years salary.
The Company also entered into an employment agreement dated
August 15, 1998 with John J. Adams pursuant to which Mr. Adams
renders services to the Company as its Vice President and Chief
Marketing Officer, for an annual base salary of $70,000. The
agreement carries a severance package worth a minimum of two years
salary.
Director Compensation
- ---------------------
The Company's current policy is to compensate outside directors
through common stock option grants by the Company. Each director who
is not an employee of the Company or its subsidiaries is eligible to
receive stock options in the discretion of the Board of Directors.
For the 1998 fiscal year, Mr. Hills was granted options to purchase
92,272 shares of DCI stock at a price of $0.68 per share.
Executive Compensation
The following tables set forth for the fiscal year ended March
31, 1999, certain information regarding the total remuneration paid
and grants of options/SARs made to the chief executive officer and
each of the executive officers of the Company and its subsidiaries
and who received total cash compensation in excess of $100,000 during
the period. These amounts reflect total cash compensation paid by
the Company and its subsidiaries to these individuals during the
fiscal years March 31, 1999, 1998, and 1997.
Summary Compensation Table
Long-Term Compens.
------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities All Other
Name and Annual Underlying Compen-
Principal Salary Compen- Options/SARS sation
Positions Year ($) sation (#) ($)
--------- ---- ------- ------- ----------- --------
Joseph J. Murphy 1997 100,000 600,000
President, CEO, 1998 115,000 172,727
Chairman and 1999 126,000 592,727
Director
Larry Shatsoff 1997 55,800 400,000
V.P., COO 1998 63,000 154,545
and Director 1999 90,000 759,545
John J. Adams 1997 250,000
V.P., CMO 1998 6,000 84,090
and Director 1999 75,000 214,574
Aggregated Options /SAR Exercised in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARS Options/SARS
Acquired at at
on Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- -------- -------- ------------- -------------
Joseph J. Murphy 200,000 $375,000 992,727 $2,748,308
Larry Shatsoff 75,000 $160,934 1,009,545 $2,717,656
John J. Adams 60,000 $ 94,938 314,574 $ 857,705
Option/SAR Grants in Last Fiscal Year
-------------------------------------
% of Total
Options/SARS Exercise
Granted or
Options/SARs to Employees Base Expiration
Name Granted (#) in Fiscal Year Price($/Sh) Date
---- ------------- -------------- ----------- --------
Joseph J. Murphy 592,727 17.33 $0.68 10/15/03
Larry Shatsoff 759,545 22.21 $0.68 10/15/03
John J. Adams 214,574 6.27 $0.68 10/15/03
Ten-Year Option/SAR Repricings
-------------------------------
Number Market
of Price
Securi- of Length of
ties Stock Exercise Original
Under- at Price at Option
lying Time of Time of Term
Options/ Repric- Repric- Remaining
SARs ing ing New at
Repriced or or Exer- Date of
or Amend- Amend- cise Repricing
Amended ment ment Price or
Name Date (#) ($) ($) ($) Amendment
------ -------- ------- ----- ------- ----- ---------
Joseph J. Murphy 10/15/98 72,727 $0.68 $1.375 $0.68 44 months
10/15/98 100,000 $0.68 $1.75 $0.68 47 months
10/15/98 75,000 $0.68 $1.34 $0.68 54 months
Larry Shatsoff 10/15/98 54,545 $0.68 $1.375 $0.68 44 months
10/15/98 100,000 $0.68 $1.75 $0.68 47 months
10/15/98 55,000 $0.68 $1.34 $0.68 54 months
John J. Adams 10/15/98 30,681 $0.68 $1.375 $0.68 44 months
10/15/98 43,893 $0.68 $1.75 $0.68 47 months
10/15/98 35,000 $0.68 $1.34 $0.68 54 months
Carter Hills 10/15/98 27,272 $0.68 $1.375 $0.68 44 months
10/15/98 35,000 $0.68 $1.34 $0.68 54 months
Russell Hintz 10/15/98 34,090 $0.68 $1.375 $0.68 44 months
10/15/98 70,000 $0.68 $1.75 $0.68 47 months
10/15/98 35,000 $0.68 $1.34 $0.68 54 months
Daniel J. Murphy 10/15/98 54,545 $0.68 $1.375 $0.68 44 months
10/15/98 70,000 $0.68 $1.75 $0.68 47 months
10/15/98 55,000 $0.68 $1.34 $0.68 54 months
Compensation Committee
Larry Shatsoff, Chairman
Joseph J. Murphy
John J. Adams
Other Matters
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The Company knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it
is the intention of the persons named in the enclosed proxy to vote
the shares they represent as the Board of Directors may recommend.
It is important that your shares be represented at the meeting,
regardless of the number of shares you hold. You are, therefore,
urged to execute and return, at your earliest convenience, the
accompanying proxy card in the stamped, self-addressed envelope which
has been enclosed.
By Order of the Board of Directors
/s/ Joseph J. Murphy
----------------------------
Joseph J. Murphy, President
Dated: June 30, 1999