As filed with the Securities and Exchange Commission on March 31,
1994
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 [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DYNAMICS CORPORATION OF AMERICA
(Name of Registrant as Specified in its Charter)
Henry V. Kensing, Esq.
Vice President, General Counsel and Secretary
Dynamics Corporation of America
475 Steamboat Road
Greenwich, Connecticut 06830-7197
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule D-11(c)(1)(ii), 14a-6-(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6-(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and D-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule D-11; (1)
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule D-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
(5) Set forth the amount on which the filing fee is calculated
and state how it was determined.
DYNAMICS CORPORATION OF AMERICA
475 Steamboat Road
Greenwich, Connecticut 06830
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 6, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of DYNAMICS
CORPORATION OF AMERICA (the "Company"), a New York corporation, has been
called by the Board of Directors of the Company and will be held in the Cole
Auditorium of the Greenwich Library, West Putnam Avenue at Dearfield Drive,
Greenwich, Connecticut on May 6, 1994 at 10:30 A.M., for the following
purposes:
(1) To elect three directors of the Company to serve for a term of two
years and until their respective successors shall have been elected and
shall qualify.
(2) To consider and act upon a proposal to ratify and approve the
selection of Ernst & Young as independent auditors of the Company for the
year 1994.
(3) To consider and act upon such other matters as may lawfully come
before the meeting and all adjournments thereof.
Only shareholders of record at the close of business on March 18, 1994 are
entitled to vote at the meeting and any adjournments thereof.
You are requested to fill in, date and sign the enclosed proxy, which is
solicited by the Board of Directors.
By order of the Board of Directors
Henry V. Kensing
Secretary
Greenwich, Connecticut
March 31, 1994
IMPORTANT: Shareholders are requested to fill in, date, sign and mail the
accompanying proxy in the enclosed, self-addressed, stamped envelope
regardless of whether they expect to attend the meeting in person. The prompt
return of the proxy will save the Company the expense of further
solicitation. Your cooperation is respectfully requested.
DYNAMICS CORPORATION OF AMERICA
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Dynamics Corporation of America (the
"Company") to be used at the Annual Meeting of Shareholders of the Company
which will be held in the Cole Auditorium of the Greenwich Library, West
Putnam Avenue at Dearfield Drive, Greenwich, Connecticut on May 6, 1994 at
10:30 A.M., and at any adjournments thereof.
Shareholders who execute proxies retain the right to revoke them at any time;
unless so revoked, the shares represented by proxies will be voted at the
meeting. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein; any such proxy on which no
direction is specified will be voted FOR the election as directors of the
nominees named herein and FOR the ratification and approval of the selection
of Ernst & Young as independent auditors of the Company for the year 1994.
Management knows of no matters to come before the meeting other than those
set forth in the Notice of Annual Meeting of Shareholders.
The principal executive offices of the Company are located at 475 Steamboat
Road, Greenwich, Connecticut 06830. The approximate date on which this Proxy
Statement and the enclosed proxy were first sent or given to shareholders was
March 31, 1994.
Shareholders of record at the close of business on March 18, 1994 will be
entitled to one vote for each share of the Common Stock, par value $0.10 per
share, of the Company (the "Common Stock") then held. There were 3,875,399
shares of Common Stock outstanding on March 18, 1994, of which 4,812 were
non-voting shares convertible at any time into voting shares.
ELECTION OF DIRECTORS
At the meeting, three directors will be elected to serve for a term of two
years and until the election and qualification of their respective
successors.
The affirmative vote of the holders of a plurality of the shares represented
in person or by proxy at the meeting is required to elect the nominees. The
Board of Directors recommends that the shareholders vote FOR the election of
each of the nominees named below.
In the event that any of such nominees is unable or unwilling to serve as a
director, an event which the Company does not anticipate, the proxies hereby
solicited will be voted for the remaining nominees named below or for such
substitute person or persons as the Board of Directors may select.
The following table sets forth information with respect to the nominees for
directors, each of whom is now a director and was elected to office by the
vote of the shareholders, except for Russell H. Knisel who was elected a
director by the Board of Directors on August 26, 1993:
Shares of
Common Stock Percent
Beneficially of Year First
Name and Age Principal Owned as of Common Became
of Nominees Occupation February 9, 1994 (1) Stock Director
CLASS B
(term expires 1996)
Patrick J. Dorme--58 Vice President-Finance and
Chief Financial Officer
of the Company 31,627.725 (2) .81% 1985
Russell H. Knisel--60 Business Consultant 600 .02% 1993
Saul Sperber--80 Financial Advisor 3,936 .10% 1974
The following table sets forth information with respect to the Company's
other directors whose terms of office will continue after the meeting and
will expire at the 1995 Annual Meeting of Shareholders:
Shares of
Common Stock Percent
Beneficially of Year First
Name and Age Principal Owned as of Common Became
of Directors Occupation February 9, 1994 (1) Stock Director
CLASS A
(term expires 1995)
Harold Cohan--69 Business Consultant 1,838 .05% 1986
Frank A. Gunther--86 President, Highpoint
Enterprises, Incorporated,
radio and microwave
communications engineering 4,317 (3) .11% 1966
Henry V. Kensing--60 Vice President, General
Counsel and Secretary
of the Company 14,351.675 .37% 1977
Andrew Lozyniak--62 Chairman of the Board 177,413.631 (4) 4.57% 1970
and President of the
Company
(1) In each case, beneficial ownership consists of sole voting and investment
power, except that 1,500 shares of Mr. Kensing, l,000 shares of Mr. Cohan and
500 shares of Mr. Knisel are owned jointly with their respective spouses.
Beneficial ownership as of February 9, 1994 includes common stock units
credited to the accounts of non-employee directors under the Company's Stock
Retirement Plan for Outside Directors described below. Except as referred to
herein, no nominee or director owns beneficially any security of the Company.
In addition Messrs. Dorme, Kensing and Lozyniak, as members of the Pension
Committee for the Retirement Plan for Employees of Dynamics Corporation
(Footnotes continued on following page)
2
(Footnotes continued from preceding page)
of America, have the right to instruct the Trustee to vote 100,000 shares of
the Company's common stock, which shares are not included in the foregoing
tables.
(2) In addition, Mrs. Dorme holds 18,000 shares owned by her. Mr. Dorme's
children and grandchildren hold a total of 10,100 shares. Mr. Dorme disclaims
beneficial ownership of such shares.
(3) In addition, Mrs. Gunther holds 600 shares owned by her. Mr. Gunther
disclaims beneficial ownership of such shares.
(4) In addition, Mrs. Lozyniak holds 15,100 shares owned by her. Five of Mr.
Lozyniak's children, two daughters-in-law and two grandchildren are the
beneficial owners of a total of 57,358 shares. Mr. Lozyniak disclaims
beneficial ownership of such shares.
Mr. Edward J. Mooney, a director since 1972 whose term would have expired at
the Annual Meeting of Shareholders, passed away on February 7, 1994. No
replacement nominee has been selected.
The proxies being solicited cannot be voted for a greater number of persons
than the number of nominees named.
There is no family relationship between any director, executive officer or
person nominated or chosen by the Board of Directors to become a director or
executive officer. There are no arrangements or understandings between any
director and any other person pursuant to which the director was selected as
a director.
The business experience of each of the nominees and directors during the past
five years is as listed above under principal occupation with the exception
of Mr. Cohan, Mr. Knisel and Mr. Sperber.
Mr. Cohan's present occupation is and has been since October 1, 1990 as
listed above. From September, 1986 until September 30, 1990, Mr. Cohan was a
principal of M.R. Weiser & Co., Certified Public Accountants.
Mr. Knisel retired as Vice Chairman of Shawmut Bank on December 31, 1993, a
position he held for more than five years prior to his retirement.
Mr. Sperber's present occupation is and has been since February 9, 1993 as
listed above. From May 1, 1989 to February 9, 1993, Mr. Sperber was an
accountant with Salerno & Co., Certified Public Accountants. For the five
years prior to May 1, 1989, Mr. Sperber was a partner of Bernard Kalman &
Co., Certified Public Accountants.
Messrs. Lozyniak and Dorme also serve as directors of CTS Corporation, an
electronic components manufacturing company; the Company owns approximately
37.3% of the issued and outstanding common shares of CTS Corporation.
The Company has a standing Audit Committee of the Board of Directors which is
comprised of Messrs. Sperber, Chairman, Cohan, Gunther and Knisel. Said
Committee met twice during the year 1993. It performs the following
functions: recommends the engagement of the independent auditors, reviews the
scope of the audit, reviews the recommendations and comments of the
independent auditors with respect to
3
internal controls and the consideration given or the corrective action taken
by management, reviews internal accounting procedures and controls with the
Company's financial and accounting staff and reviews non-audit services
provided by the independent auditors.
The Company has a standing Compensation Committee of the Board of Directors
which is comprised of Messrs. Gunther, Chairman, Cohan, Knisel and Sperber.
Said Committee met twice during the year 1993. Said Committee considers and
acts upon all matters dealing with executive compensation, including
incentive compensation plans and the 1980 Restricted Stock and Cash Bonus
Plan.
The Company has no nominating or similar committee.
During the year 1993 the Board of Directors held thirteen meetings. One
director (Edward J. Mooney) attended fewer than 75% of the total number of
meetings of the Board of Directors.
Directors who are employees of the Company and are compensated as such
receive no additional compensation for their services as directors. Other
directors receive an annual retainer of $9,000.00 plus $800.00 as a fee for
attendance at each meeting of the Board. No fee is paid for services on any
committee of the Board.
Effective January 1, 1993, the Company agreed to reimburse outside directors
for certain covered prescription drug charges incurred by the directors or
their spouses net of any reimbursement from any other group coverage and/or
individual coverage independently arranged by the director or his spouse.
Under this program, no more than $25,000 in reimbursement may be paid to any
outside director over the entire life of the program ($50,000 in case an
outside director's spouse also participates in the program). The program is
subject to amendment or termination at the discretion of the Company. During
1993, pursuant to the program, the amount following each director's name was
paid: Harold Cohan $322; Frank A. Gunther $2,202; and Saul Sperber $624.
On June 26, 1986 the Company adopted The Dynamics Corporation of America
Stock Retirement Plan For Outside Directors (the "Plan"). Under the Plan,
separate accounts are opened by the Company in the names of non-employee
directors. On January 1 of each year, starting in 1987, a Deferred Stock
Account in the name of each outside director is credited with 100 Common
Stock Units if said director was an outside director of the Company on the
last day of the immediately preceding calendar year or ceased to be a
director during such preceding calendar year by reason of his retirement,
disability or death. In addition, on January 1, 1987 the Company credited to
the Deferred Stock Account of each such director 50 Common Stock Units for
each complete calendar year of his service to the Company as an outside
director prior to January 1, 1986. Each Deferred Stock Account will also be
credited with Common Stock Units when credits equivalent to cash dividends on
the shares in an account aggregate an amount equal to the value of a share of
Common Stock on a dividend payment date. All Deferred Stock Units in a
director's account will be distributed in Common Stock as of January 1st
after the director leaves the board from Treasury shares held by the Company.
Until such time the Company's obligation under the Plan is an unsecured
promise to deliver shares of Common Stock. No Common Stock will be held in
trust or as a segregated fund because of the Plan. In 1993 four members of
the Board of Directors were eligible to participate in the Plan. The Company
expensed an aggregate of $6,000 in respect of Common Stock Units credited on
January 1, 1994 to the accounts of the eligible directors as a group for the
year 1993 pursuant to the Plan.
4
Security Ownership of Certain Beneficial Owners
On February 15, 1994, to the knowledge of the Company, the following table
shows the only entities which owned beneficially more than 5% of the Common
Stock issued and outstanding on or about that date.
Number
of
Name and Address Shares Percent of
of Beneficial Owner (1) Class
Wholly owned subsidiaries of The Gabelli Group,
Inc.:
Corporate Center at Rye,
Rye, NY 10580-1430
GAMCO Investors, Inc. 809,800 20.86%
Gabelli Funds, Inc. 150,000 3.86%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 280,000 7.21%
J.P. Morgan & Co., Incorporated
60 Wall Street
New York, New York 10260 251,100 6.47%
(1) Information with respect to beneficial ownership is based on information
furnished by the beneficial owners named above. Under the rules of the
Securities and Exchange Commission, beneficial ownership is determined by the
possession of either voting or investment power.
Each of the above members of The Gabelli Group, Inc. has the sole power to
vote or direct the vote and sole power to dispose or to direct the
disposition of the securities reported for it, either for its own benefit or
for the benefit of its investment clients or its partners, as the case may
be, except that GAMCO Investors, Inc. does not have authority to vote 70,000
of the reported shares, and except that Gabelli Funds, Inc. shares with the
Board of Directors of The Gabelli Asset Fund, The Gabelli Growth Fund, The
Gabelli Convertible Securities Fund and/or The Gabelli Value Fund Inc. voting
power with respect to the 150,000 shares held by such funds, so long as the
aggregate voting interest of all of the mentioned members of Gabelli Group,
Inc. does not exceed 25% of the issuer's total voting interest.
Dimensional Fund Advisors Inc. has asked that the following language be used
when describing the beneficial ownership of the shares it holds. Dimensional
Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is
deemed to have beneficial ownership of 280,000 shares of Dynamics Corporation
of America stock as of December 31, 1993 and February 16, 1994, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of The DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and the DFA
Participating Group Trust, investment vehicles for qualified employee benefit
plans, all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares. Dimensional has sole
voting power over 176,800 shares and officers of DFA Investment Dimensions
Group Inc. and The Investment Trust Company vote 103,200 shares.
J.P. Morgan & Co., Incorporated has sole voting power over 182,900 of the
251,100 shares beneficially owned by it.
5
All officers and directors of the Company as a group owned as of February 9,
1994 an aggregate of 254,367 shares of Common Stock or approximately 6.5% of
the Common Stock issued and outstanding on that date.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
To the Company's knowledge, based solely on its review of the copies of
changes of ownership of Common Stock and other equity securities furnished to
the Company and written representations that no other reports were required
to be filed during the year 1993 and to date, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
Executive Compensation
The following table sets forth current and long-term compensation information
for each of the last three fiscal years of the Chief Executive Officer and
each of the other executive officers whose salary and bonus for the fiscal
year 1993 exceeded the disclosure threshold established by the Securities and
Exchange Commission.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
Restricted
Stock All Other
Salary($) Bonus($) Awards($) Compensation($)
Name and Principal Position (6) Year (1) (2) (3) (4)
Andrew Lozyniak, Chairman of the Board
and President 1993 324,186 -- -- 12,951
1992 314,460 -- -- 12,284
1991 301,576 -- 130,000 --
Edward J. Mooney, Vice Chairman of the Board,
Vice President and Secretary (5) 1993 207,487 -- -- 4,746
1992 201,261 -- -- 4,624
1991 193,008 -- 65,000 --
Henry V. Kensing, Vice President, General
Counsel and a Director 1993 168,381 -- -- 5,203
1992 163,329 -- -- 4,966
1991 156,632 -- 65,000 --
Patrick J. Dorme, Vice President-Finance, Chief
Financial Officer and a Director 1993 139,957 15,000 -- 4,119
1992 135,758 -- -- 3,951
1991 130,191 -- 65,000 --
(1)Includes salaries deferred in 1993 under the DCA Savings and Investment
Plan pursuant to Section 401(k) of the Internal Revenue Code (see Savings and
Investment Plan below).
(2)Includes bonuses paid to the executives shown in the table in the last
three years pursuant to the Company's incentive performance plan. The Board
of Directors has determined to continue for 1994 a
(Footnotes continued on following page)
6
(Footnotes continued from preceding page)
policy of awarding bonuses on the basis of results on both an overall and
divisional basis, and on individual performance as described in the Report of
the Compensation Committee included herein.
(3)The number of restricted shares awarded in 1991 under the Plan to the
executives named were as follows: Mr. Lozyniak, 10,000; Mr. Mooney, 5,000;
Mr. Kensing, 5,000; Mr. Dorme, 5,000. The value of the restricted stock
awards in 1991 was determined by multiplying the fair market value of the
Company's common stock on the date of grant by the number of shares awarded.
As of December 31, 1993, the number and value of aggregate restricted stock
award holdings were as follows: 6,000 shares ($90,000) by Mr. Lozyniak; 3,000
shares ($45,000) by Mr. Kensing and 3,000 shares ($45,000) by Mr. Dorme. Upon
termination of Mr. Mooney's employment on December 31, 1993, 3,000 shares
($45,000) were forfeited under the terms of the Plan.
Restrictions lapse each year after the first year with respect to 20% of the
shares awarded in prior years under the Plan and cash bonuses are paid to the
holders thereof as called for by the Plan. The aggregate amount of cash
compensation paid in 1993, 1992 and 1991, for the executives named is as
follows:
Mr. Lozyniak 1993 $28,250 1992 $46,750 1991 $26,500
Mr. Mooney 1993 $14,125 1992 $35,000 1991 $26,500
Mr. Kensing 1993 $14,125 1992 $17,625 1991 $12,313
Mr. Dorme 1993 $14,125 1992 $23,750 1991 $13,375
Pursuant to the Plan, regular cash dividends are paid to holders of
restricted stock awarded under the Plan.
This Plan has a change of control provision under which, upon a change of
control of the Company, all restrictions on shares awarded under the Plan
will lapse and cash bonuses will be paid on those shares.
(4)Includes the amounts contributed under the 401(k) Plan by the Company and
the imputed income value of the term life insurance portion of the coverage
under "split-dollar" life insurance policies.
(5)Mr. Mooney terminated his employment with the Company on December 31, 1993
and retired under the Company's retirement plan. He became a consultant to
the Company and a non-employee director on January 1, 1994 and continued as
such until his death on February 7, 1994, during which period he received
$9,833 for consulting services and director fees.
(6)Employment Agreements. As of February 1, 1991, the Company entered into
five year employment agreements with Andrew Lozyniak, Edward J. Mooney, Henry
V. Kensing and Patrick J. Dorme. Mr. Mooney agreed to terminate his
employment agreement and all rights and obligations thereunder effective
December 31, 1993 and that employment agreement was replaced by a consulting
agreement which provided for monthly compensation at the annual rate of
$50,000, payment under which terminated at his death.
The Board of Directors annually reviews the contributions of Messrs.
Lozyniak, Kensing and Dorme to the Company and may increase their salary
rates in accordance with such contributions. In addition, such rates will be
increased on March 1st of each year by no less than the annual percentage
increase in the consumer price index for the prior calendar year.
(Footnotes continued on following page)
7
(Footnotes continued from preceding page)
The employment agreements of such individuals may be terminated by the
Company for cause. In the event of disability, each such employee shall be
compensated for up to six months at full salary and up to an additional six
months at no less than one-half the rate in effect at the time such
disability commenced. If such disability continues beyond twelve months, the
Company may terminate said disabled employee's agreement but shall be
obligated to pay Mr. Lozyniak, Mr. Kensing or Mr. Dorme compensation at the
rate of 40% of the regular compensation in effect at the time of such
termination during the period commencing on the date of such termination to
the tenth anniversary thereof. If the employee dies during the employment
period, the Company shall pay to the wife of Mr. Lozyniak the sum of $90,000
and of Mr. Kensing or Mr. Dorme, the sum of $80,000 per year during the
period commencing on the date of the death of the employee and ending on the
tenth anniversary thereof.
In the event of merger, sale or consolidation in which the Company is not the
surviving entity, or if voting control shall be obtained by any person, firm
or corporation, or group of persons, firms or corporations, not in control as
of February 1, 1991, each of said employees shall have the right to terminate
his employment agreement upon 30 days' written notice at any time within
three months after the occurrence of such event. Upon such termination, the
Company or the consolidated or surviving entity shall pay the employee
exercising said right, in lieu of any other further compensation, in a lump
sum, undiminished by any excise tax imposed upon the receipt thereof, on the
date of such termination, an amount equal to five times the sum of (a)
two-thirds of the aggregate regular compensation called for by said agreement
at the rate in effect at such termination, and (b) two-thirds of the largest
amount earned by the employee as bonuses for any of the five fiscal years
preceding that in which termination occurs.
If the Company terminates the agreement other than for cause or disability of
the employee, it shall pay to the employee in a lump sum, undiminished by any
excise tax imposed upon the receipt thereof, within 30 days of the date of
termination, in lieu of any further compensation under the agreement, an
amount equal to the sum of (a) two-thirds of the employee's regular
compensation at the rate in effect at the time of such termination, from the
date of such termination to the last day of the employment period called for
by the agreement and (b) two-thirds of the largest amount earned by the
employee as bonuses for any of the five fiscal years preceding that in which
termination occurs multiplied by the number of years and/or fraction thereof
then remaining in the employment period called for by the agreement.
The Company also agrees not to endanger in any way, during the period of said
agreements, any benefit available to said employees under the "split-dollar"
life insurance policies owned by them and to continue to pay the premiums
thereon during such period and in the event of a change of control. The
agreements also contain provisions calling for payment of legal fees to said
employees if they are required to enforce the agreements against the Company
or a successor and for the continuation of medical insurance for said
employees and their spouses for up to ten years after retirement.
In addition, the executive officers received other non-cash compensation, not
otherwise described in this proxy statement, such as perquisites, but the
aggregate amount thereof did not exceed the lesser of $50,000 or 10% of the
total salary and bonus for each of the persons named in the Table.
8
Pension Benefits
The estimated annual benefits payable upon retirement at normal retirement
age and the years of credited service as of January 1, 1994 under the
Company's Retirement Plan for Employees (the "Pension Plan") for the
individuals named in the Executive Summary Compensation Table above and for
all the executive officers of the Company as a group are as follows:
Years of
Credited
Estimated Service
Annual As of
Retirement January 1,
Benefits* 1994
Andrew Lozyniak $115,641 32
Patrick J. Dorme $ 79,922 25
Henry V. Kensing $ 38,624 9
All executive officers as a group (consisting $290,617
of 4 people)
* During 1993, 1992, and 1991 in accordance with the Employee Retirement
Income Security Act of 1974, as amended (ERISA), Edward J. Mooney was
required to take payments of his pension under the Company's Retirement Plan
for Employees and its Savings and Investment Plan in the aggregate amounts of
$64,990, $63,154 and $61,609, respectively. Mr. Mooney retired on December
31, 1993.
The latest available actuarial present value of normal retirement benefits
for all employees who are participants in the Pension Plan is $15,694,250.
Under the Pension Plan, the retirement benefit, payable at normal retirement
or current age, is equal to the sum of (A) and (B) below:
(A) Past Service Benefit--equal to .7% of 1975 earnings up to $7,800 plus
1.4% of the excess multiplied by credited service prior to December 31, 1975.
(B) Future Service Benefit
(i) equal to 1% of annual earnings up to the Social Security Wage Base
plus 2% of the excess, for each year of credited service after January 1,
1976 and prior to December 31, 1988.
(ii) equal to 1.1% of annual earnings up to the Social Security Wage Base
plus 1.45% of the excess, for each year of credited service after December
31, 1988 or
(iii) equal to 1.45% of annual earnings up to the Social Security Wage
Base plus 1.80% of the excess (in lieu of the benefit under (ii) above) for
years of credited service in excess of 25 years (but such higher benefit to
be earned no earlier than in the plan year ended December 31, 1989).
For purposes of the Pension Plan, covered earnings for the named Executive
Officers are essentially equivalent to the amount reported as salary in the
Annual Compensation section of the Summary Compensation Table above.
The minimum annual benefit for Greenwich office employees who have completed
20 or more years of service is 50% of the three-year average salary, not
including bonuses, for the years immediately preceding a participant's actual
retirement date. The maximum annual retirement benefit for 1993 under the
Pension Plan is $115,641. The Pension Plan has been amended to comply with
the requirements of the Tax Reform Act of 1986. Such amendments, which are
retroactive to January 1, 1989, have reduced retirement benefits
9
earned by the executive officers of the Company for service after that date
as indicated in (B)(ii) above and have also eliminated the minimum annual
Greenwich office benefit for such executive officers as of that date. In
addition, the estimated annual retirement benefits reflect the additional
requirements of the 1993 Tax Act limiting to $150,000 the amount of
compensation which may be taken into account in calculating benefits under
the Plan.
Savings and Investment Plan
Effective January 1, 1985, the Company implemented a Savings and Investment
Plan for all employees not covered by collective bargaining agreements which
qualified as a profit sharing plan under Section 401(k) of the Internal
Revenue Code ("401K Plan"). The 401K Plan allows eligible employees to defer
up to 10% of their pay (increased to 16% effective November 1, 1990) until
retirement, death, disability or the occurrence of certain other events.
Under the 401K Plan, the Company makes basic matching contributions, in cash
(in which the employee is immediately fully vested), of $1.00 for every $1.00
of pay deferred up to 2% of pay, and also may match, in cash or in shares of
the Company's common stock, at the Company's option, all or part of
additional deferrals of pay up to 6% of pay, depending on the Company's
current results of operations and forecasted business conditions. Since
inception of the Plan through October 31, 1991, the Company decided in each
plan year to match 50% of deferrals above 2% of pay up to 6% of pay in
Company shares, which additional matching contributions do not vest until the
contributions have been in the Plan for two full plan years (effective
November 1, 1989, such additional contributions vest immediately if and when
the employee completes five (5) years of service with the Company).
Under the Tax Reform Act of 1986, the amount of pay employees may defer under
the Plan must be limited to $8,994 in 1993 ($9,240 in 1994) for the Plan to
retain its tax-qualified status.
All contributions of employees and all Company matching contributions which
are made in cash are invested either in guaranteed investment contracts
issued by insurance companies or other financial institutions and/or in
mutual funds, in accordance with the choice of the contributing employee.
1980 Restricted Stock and Cash Bonus Plan
All officers and directors who are employees of the Company are also eligible
to participate in the 1980 Restricted Stock and Cash Bonus Plan (the
"Restricted Stock Plan"). The Restricted Stock Plan, as approved by the
shareholders on May 1, 1981, and as amended by them on May 6, 1988 to
replenish the 148,567 shares granted from 1981 to 1988, provides for the
award or sale of so-called "restricted stock", which is governed by Section
83 of the Internal Revenue Code, to key executive personnel of the Company or
any subsidiary. The total number of shares of Common Stock which may be
subject to the Restricted Stock Plan may not exceed 400,000 shares (subject
to adjustment in certain events as described below).
The Restricted Stock Plan is administered by the Compensation Committee
elected by the Board of Directors, presently consisting of four directors of
the Company, each of whom shall be ineligible to participate in the
Restricted Stock Plan and shall be a "disinterested person" as that term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934.
In accordance with the terms of the Restricted Stock Plan, the Committee
shall select participants from among those officers and key management
executives who are full-time employees of the Company or any subsidiary.
Criteria for selection include: level of responsibility, performance,
potential, salary, bonuses, prior grants of stock options, and similar
considerations. Having selected eligible participants the Committee will
offer such persons the right to acquire by award or purchase a certain number
of shares of
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Common Stock on such terms and at such price, if any, as it deems
appropriate. Shares acquired by offerees pursuant to the Restricted Stock
Plan are subject to the restriction that, during the period of five years
after the date of acquisition, the participant may not sell, transfer, or
otherwise dispose of such shares as to which the restrictions shall not have
lapsed unless he or she shall first have offered such shares to the Company
for repurchase. The restrictions lapse as to 20% of the shares acquired
pursuant to the Restricted Stock Plan in each year following the acquisition
of the shares after the first year. In addition, within five years following
the date shares were acquired, upon termination of the participant's
employment for any reason, including the participant's death or disability,
the Company is required to repurchase and the participant is required to
sell, at no cost to the Company if the shares were awarded or at their
original purchase price if the shares were purchased, all shares as to which
the restrictions shall not have lapsed. In the event of a change in control
of the Company not approved by the directors in office prior to such change
in control, all restrictions upon the transfer of such shares shall lapse.
As soon as practicable after the restrictions as to any shares have lapsed,
the Company shall pay a cash bonus to the participant equal to the fair
market value of such shares as of the date of such lapse if such shares were
awarded or equal to the excess of the fair market value thereof as of the
date of such lapse over the original purchase price of such shares if such
shares were purchased. The cash bonus is intended to defray the federal
income tax payable at the time restrictions on transfer lapse. The Company
may pay up to five such cash bonuses to any participant, but in no event
shall the aggregate of such cash bonuses payable to any participant be
greater than a sum equal to twice the fair market value of such shares on the
date they were originally acquired.
In the event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares for other securities, the
Restricted Stock Plan provides for appropriate adjustment by the Committee of
the total number of shares which may be offered for award or purchase under
the Plan and in the price, if any, paid for shares under the Plan.
The Restricted Stock Plan terminates upon the award or sale of all of the
shares available under the Plan. The Board of Directors may terminate or
amend the Restricted Stock Plan but may not, without approval by vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy at a meeting of shareholders duly called, increase the number of shares
reserved for the Plan.
There is no limit to the number of shares that may be granted to any
individual or to the officers and directors of the Company as a group. Each
participant will be required to give a representation in writing that he or
she is acquiring the shares of Common Stock under the Restricted Stock Plan
for his or her own account as an investment and not with a view to, or for
sale in connection with, any distribution thereof. The approximate number of
key employees which it is estimated will participate in the Restricted Stock
Plan at any one time is no more than 35.
There were no restricted shares awarded in 1993 under the Plan to those
individuals named in the Executive Compensation Table.
However, in 1993, restrictions lapsed with respect to 20% of the shares
awarded in prior years under the Restricted Stock Plan and cash bonuses were
paid to the holders thereof as called for by the Plan.
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors, comprised of Frank A.
Gunther, Chairman, Harold Cohan, Russell H. Knisel and Saul Sperber, submits
this report on Executive Compensation to the Company's Stockholders.
The Compensation Committee of the Board of Directors believes it has
implemented programs of executive compensation established to achieve the
following objectives:
1. Attract and retain key executives and managers;
2. Align the financial interests of those key executives and managers with
those of the stockholders of the Company; and
3. Reward individual performance commensurate with Corporate performance.
These objectives are achieved through a combination of compensation
arrangements including base salary, annual cash incentive compensation and
long-term incentive compensation through restricted stock and cash bonus
awards, in addition to medical, pension and other benefits available to
employees in general. The three principal components of Executive Officer
compensation at the Company are base salary, the Incentive Performance Plan
and the 1980 Restricted Stock and Cash Bonus Plan.
The Compensation Committee each year reviews the recommendations of the Chief
Executive Officer as to the amount of his proposed base salary, cash
incentive and long term compensation, if any, and that for the Company's
other executive officers. Factors considered by the Chief Executive Officer
in making his recommendations are typically subjective, such as his
perception of the individual's performance, any planned change in functional
responsibility and unusual contributions to the Company, as well as the
objective criterion of the Company's financial performance. Each of the
members of the Compensation Committee has many years of experience in
business, industry and financial and corporate affairs and utilizes that
experience and his knowledge of the Company's several lines of business in
considering the recommendations of the Chief Executive Officer and in making
the final determinations on executive compensation.
BASE SALARY
The base salaries of the named Executive Officers of the Company are as set
forth above in the Summary Compensation Table and in the outline of their
Employment Agreements dated as of February 1, 1991. Since commencement of the
terms of the Employment Agreements, the compensation rates for the named
Executives, including the Chief Executive Officer, have been increased each
year only to the extent of the annual percentage increase in the consumer
price index for the prior calendar year.
INCENTIVE PERFORMANCE PLAN
Although the Board of Directors has a policy of awarding bonuses on the basis
of results on both an overall and divisional basis plus individual
performance, as indicated in the above Summary Compensation Table, no bonus
was awarded to any of the named Executive Officers of the Company, including
the Chief Executive Officer, during the last three years under the Incentive
Performance Plan, except for the Chief Financial Officer in 1993. The
principal criterion for a bonus award under that Plan is financial
performance, although the Plan by its terms does not limit itself to that
criterion.
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RESTRICTED STOCK AND CASH BONUS PLAN
The 1980 Restricted Stock and Cash Bonus Plan is outlined in detail above.
The Plan provides for equity participation as a key part of the Company's
executive compensation program for motivating and rewarding executives and
managers over the long term. Awards of restricted stock have provided an
important link between the executives and the stockholders of the Company.
The key employees selected for share awards under the Plan in 1991 were those
who have contributed to the success of the Company and are expected to
contribute materially to its success in the future. The number of shares
awarded in 1991 to the named Executive Officers, their market value, vesting
and related cash bonuses paid are set forth in the above Summary Compensation
Table and footnote (3) thereto. No awards under the Plan were made to the
named Executive Officers in 1993.
Respectfully submitted,
Dynamics Corporation of America
Compensation Committee
/s/ Frank A. Gunther
................................................
Frank A. Gunther, Chairman
/s/ Harold Cohan
................................................
Harold Cohan
/s/ Russell H. Knisel
................................................
Russell H. Knisel
/s/ Saul Sperber
................................................
Saul Sperber
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STOCK PERFORMANCE CHART
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the last five fiscal years with the cumulative
total return on the Wilshire 5000 Equity Index and the S&P Hi-Tech index over
the same period.
Five-Year Total Returns
DCA, S&P Hi-Tech and Wilshire 5000
[TABULAR REPRESENTATION OF LINE GRAPH]
For the Year Ended December 31,
1988 1989 1990 1991 1992 1993
Dynamics Corp. of America $100 $101 $ 41 $ 46 $ 60 $ 70
S&P Hi-Tech 100 99 101 115 120 147
Wilshire 5000 Equity Index 100 129 121 163 177 197
Assumes $100 invested on January 1, 1989 in Dynamics Corporation common
stock, Standard & Poor's Hi-Tech composite, and Wilshire 5000 Equity Index.
Assumes reinvestment of dividends.
PROPOSAL TO RATIFY AND APPROVE THE SELECTION
OF ERNST & YOUNG AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE YEAR 1994
The Company is submitting for approval by the shareholders the Board of
Directors' selection of Ernst & Young as independent auditors to examine the
consolidated financial statements of the Company for the fiscal year ending
December 31, 1994. The Audit Committee of the Board of Directors concurs in
this recommendation. The firm, or a predecessor, has served as the Company's
auditors since 1972.
If the shareholders do not approve the selection of Ernst & Young to serve as
independent auditors, the directors will, under authority of the By-laws,
appoint other auditors.
Representatives of Ernst & Young will be present at the meeting. They will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from the shareholders.
Ernst & Young's auditing-related fees for 1993 aggregated $234,000.
The Board of Directors recommends a vote "FOR" the ratification and approval
of Ernst & Young as independent auditors of the Company for the year 1994.
The affirmative vote of the holders of the majority of the shares represented
in person or by proxy at the meeting is required for such ratification and
approval.
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DATE FOR PROPOSALS FOR NEXT YEAR'S MEETING
Any proposal of a shareholder intended to be presented at the next Annual
Meeting of Shareholders must be received by the Company for inclusion in its
proxy statement and form of proxy relating to that meeting no later than
November 30, 1994.
MISCELLANEOUS
The Company will bear the cost of preparing, assembling and mailing the
proxy, this Proxy Statement and other material which may be sent to
shareholders in connection with this solicitation. Solicitation may be made
by mail, telephone, telegraph and personal interview. The Company may
reimburse persons holding shares in their names or in the names of nominees
for their expense in sending proxies and proxy material to their principals.
In addition, the Company has retained Morrow & Co. at a cost to the Company
of $5,000 to aid in the solicitation of proxies.
The Annual Report of the Company for its fiscal year ended December 31, 1993
is enclosed.
By order of the Board of Directors
Henry V. Kensing
Secretary
Greenwich, Connecticut
March 31, 1994
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