DYNAMICS CORPORATION OF AMERICA
475 Steamboat Road
Greenwich, Connecticut 06830
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 3, 1996
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 3, 1996 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 1996.
(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 15, 1996 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 27, 1996
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.
<PAGE>
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 3, 1996 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 1996.
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 27, 1996.
Shareholders of record at the close of business on March 15, 1996 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 3,815,961
shares of Common Stock outstanding on March 15, 1996, of which 3,843 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.
<PAGE>
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:
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Beneficially of Year First
Name and Age Principal Owned as of Common Became
of Nominees Occupation February 7, 1996 (1) Stock Director
- - ----------------------- ----------------------------- -------------------- ------- ----------
<S> <C> <C> <C> <C>
CLASS B
(term expires 1998)
Patrick J. Dorme--60 Vice President-Finance and 34,944.803 (2) .91% 1985
Chief Financial Officer of
the Company
Russell H. Knisel--62 Business Consultant 802 .02% 1993
Saul Sperber--82 Financial Advisor 4,166 .11% 1974
</TABLE>
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 1997 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Beneficially of Year First
Name and Age Principal Owned as of Common Became
of Directors Occupation February 7, 1996 (1) Stock Director
- - ----------------------- ----------------------------- -------------------- ------- ----------
<S> <C> <C> <C> <C>
CLASS A
(term expires 1997)
Harold Cohan--71 Business Consultant 2,056 .05% 1986
Frank A. Gunther--88 President, Highpoint 4,551 (3) .12% 1966
Enterprises, Incorporated,
radio and microwave
communications engineering
Henry V. Kensing--62 Vice President, 14,269.246 (4) .37% 1977
General Counsel and
Secretary of
the Company
Andrew Lozyniak--64 Chairman of the Board 185,428.189 (5) 4.84% 1970
and President of the
Company
<FN>
________________
(1)In each case, beneficial ownership consists of sole voting and investment
power, except that l,000 shares of Mr. Cohan and 500 shares of Mr. Knisel
are owned jointly with their respective spouses. Beneficial ownership as
of February 7, 1996 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 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.
(Footnotes continued on following page)
2
<PAGE>
(Footnotes continued from previous page)
(2)In addition, Mrs. Dorme holds 18,000 shares owned by her. 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. Kensing holds 7,500 shares owned by her. Mr. Kensing
disclaims beneficial ownership of such shares.
(5)In addition, Mrs. Lozyniak holds 15,100 shares owned by her. Mr. Lozyniak
disclaims beneficial ownership of such shares.
</FN>
</TABLE>
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. Knisel and Mr. Sperber.
Mr. Knisel's present occupation is and has been since January 1, 1994 as
listed above. 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.
Messrs. Lozyniak and Dorme also serve as directors of CTS Corporation, an
electronic components manufacturing company; the Company owns approximately
44.1% 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 and
which met twice during the year 1995. 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 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 and which met once during the year 1995. It considers and acts upon
all matters dealing with executive compensation, including executive
contracts, incentive compensation plans and the 1980 Restricted Stock and
Cash Bonus Plan.
The Company has no nominating or similar committee.
During the year 1995 the Board of Directors held twelve meetings. Each
director attended all of the meetings of the Board of Directors and of the
Committees on which he served.
3
<PAGE>
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 1995, pursuant to the program, the amount following each
director's name was paid: Harold Cohan $447; Frank A. Gunther $2,661; and
Saul Sperber $837.
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 1995 four members of
the Board of Directors were eligible to participate in the Plan. The Company
expensed an aggregate of $9,800 in respect of Common Stock Units credited on
January 1, 1996 to the accounts of the eligible directors as a group for the
year 1995 pursuant to the Plan.
Security Ownership of Certain Beneficial Owners
On or about February 15, 1996, 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 that date.
4
<PAGE>
Number
Name and Address of Percent of
of Beneficial Owner Shares(1) Class
----------------------------------------------- ------- ----------
GAMCO Investors, Inc. 801,400 20.93%
Gabelli Funds, Inc. 152,000 3.97%
Gabelli International, Limited 2,500 .07%
One Corporate Center
Rye, NY 10580-1435
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 312,450 8.16%
_______________
(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 Gabelli entities 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 101,500 of the
reported shares.
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 312,450 shares of
Dynamics Corporation of America stock as of February 15, 1996, 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 DFA Participation 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 180,050 shares and officers of DFA
Investment Dimensions Group Inc. and the DFA Investment Trust Company vote
132,400 shares.
All officers and directors of the Company as a group owned as of February
7, 1996 an aggregate of 265,080 shares of Common Stock or approximately 6.9%
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 1995 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 1995 exceeded the disclosure threshold established by the
Securities and Exchange Commission.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
----------------- -----------
Restricted
Stock All Other
Name and Principal Position (5) Year Salary($)(1) Bonus($)(2) Awards($)(3) Compensation($)(4)
- - ------------------------------------------------- --- ------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Andrew Lozyniak, Chairman of the Board and
President 1995 341,802 -- -- 14,250
1994 333,316 -- 147,500 11,888
1993 324,186 -- -- 12,951
Henry V. Kensing, Vice President, General
Counsel, Secretary and a Director 1995 177,536 10,000 -- 5,651
1994 173,123 10,000 110,625 5,405
1993 168,381 -- -- 5,203
Patrick J. Dorme, Vice President-Finance, Chief
Financial Officer and a Director 1995 147,566 10,000 -- 4,431
1994 143,898 10,000 110,625 4,248
1993 139,957 15,000 -- 4,119
<FN>
(1)Includes salaries deferred in 1995 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 1996 a 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 1994 under the Plan to the
executives named were as follows: Mr. Lozyniak, 10,000; Mr. Kensing,
7,500; Mr. Dorme, 7,500. The value of the restricted stock awards in 1994
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, 1995, the number and value of aggregate restricted stock
award holdings were as follows: 10,000 shares ($245,000) by Mr. Lozyniak;
7,000 shares ($171,500) by Mr. Kensing and 7,000 shares ($171,500) by Mr.
Dorme.
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 1995, 1994 and 1993, for the executives named is
as follows:
Mr. Lozyniak 1995 $95,750 1994 $26,500 1993 $28,250
Mr. Kensing 1995 $59,438 1994 $13,250 1993 $14,125
Mr. Dorme 1995 $59,438 1994 $13,250 1993 $14,125
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.
(Footnotes continued on following page)
6
<PAGE>
(Footnotes continued from preceding page)
(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)Employment Agreements. As of February 1, 1996, the Company entered into
five year employment agreements with Andrew Lozyniak, Henry V. Kensing and
Patrick J. Dorme.
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.
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
and ending on the earlier of the tenth anniversary thereof or the date the
employee attains age 65. If the employee dies during the employment
period, the Company shall pay to the wife of Mr. Lozyniak the sum of
$60,000 and of Mr. Kensing or Mr. Dorme, the sum of $50,000 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, 1996, 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 stock
and cash 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 regular 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 stock and cash 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 term of
said agreements, any benefit available to said employees under the
"split-dollar" life insurance policies on their lives and to
7
<PAGE>
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 reimbursement of
premiums for health insurance coverage for said employees and their spouses
and any dependents for up to ten years after retirement.
The Company also agrees to pay each of the employees supplementary
retirement benefits described below under the captions "Pension Benefits"
and "Savings and Investment Plan." Such benefits shall be funded over the
terms of the employment agreements by annual contributions by the Company
to a trust established in compliance with Internal Revenue Service Revenue
Procedure 92-64.
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.
</FN>
</TABLE>
Pension Benefits
The estimated annual benefits payable upon retirement at normal retirement
age and the years of credited service as of January 1, 1996 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:
Estimated Years of
Annual Credited Service
Retirement As of
Benefits January 1, 1996
-------- ----------------
Andrew Lozyniak $119,970 34
Patrick J. Dorme $ 80,230 27
Henry V. Kensing $ 38,620 11
All executive officers as a
group (consisting of 4 people) $294,983
The latest available actuarial present value of normal retirement benefits
for all employees who are participants in the Pension Plan is $17,089,996.
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 up to ten 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).
8
<PAGE>
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 1995 under the Pension Plan is $120,000. The Pension Plan has been
amended and restated 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 earned by the executive officers of the Company for
service after that date 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.
The February 1, 1996 employment agreements provide for supplemental
retirement benefits for Messrs. Lozyniak, Dorme and Kensing to restore
benefits generally available to employees in the Greenwich office of the
Company under the Pension Plan and the Savings and Investment Plan referred
to below but which are not available to them because of the above mentioned
tax law changes and limitations. Under the employment agreements, the Company
will provide additional retirement benefits, payable in an actuarially
determined lump sum at retirement, equal to the difference between the
benefits the executives will receive under the Pension Plan and the benefits
they would have received thereunder but for the tax law changes and
limitations. The estimated annual benefits under the retirement benefit
restoration provision of the employment agreements, when added to the
benefits under the Pension Plan referred to on page 8, and assuming the
executives were to retire at the end of the term of the agreements, produce
the following total annual estimated retirement benefits for the executives:
Andrew Lozyniak $170,900
Patrick J. Dorme $ 80,450
Henry V. Kensing $ 77,820
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 18% of their pay 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. Such additional matching
contributions vest 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 $9,240 in 1995 and $9,500 in 1996 for the
Plan to retain its tax-qualified status. The tax laws have
9
<PAGE>
also imposed a limit of $150,000 on pay available for deferral and matching
by the Company under the 401K Plan. The employment agreements with Messrs.
Lozyniak, Dorme and Kensing provide for payment to each of the executives at
retirement of an amount equal to 2% of the excess of his base salary over
$150,000 in each year of the term of the agreements, together with interest
at 8% on these amounts.
Under the Plan, 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 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
10
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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.
No shares were awarded in 1995 under the Restricted Stock Plan.
In 1995, 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.
Transactions with Management and Others
On September 19, 1985, the Board of Directors authorized the Company to
purchase from time to time up to 750,000 shares of its Common Stock for
various Company purposes, in the open market or in privately negotiated
transactions. The Company has purchased 658,648 shares of its Common Stock
pursuant to this authority.
In January 1995, one of Mr. Dorme's daughters and her fiance sold a total
of 4,000 shares of Company stock and the Company paid them the closing market
price of such shares at the time of the transaction, a total of $91,500. The
shares sold were gifts made at various times by Mr. Dorme. In February 1995,
one of Mr. Lozyniak's sons and the son's wife offered to sell a total of
4,500 shares of their shares in the Company and the Company paid them the
closing market prices at the time of the transactions, aggregating $105,750.
The shares sold were gifts made at various times by Mr. Lozyniak.
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.
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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, 1996. Since commencement of the
terms of the predecessor Employment Agreements on February 1, 1991, 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
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
the Chief Executive Officer during the last three years under the Incentive
Performance Plan. The Chief Financial Officer was awarded a bonus under the
Plan in 1993, 1994 and 1995 as was the General Counsel in 1994 and 1995. 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 1994 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 1994 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. The awards to the named Executive Officers in
1994 were in recognition of their effective performance, particularly in
connection with the favorable settlement of a portion of the Fermont
Division's claim against the Government for an equitable adjustment under its
3KW generator set contract. There were no awards of restricted stock to the
named Executive Officers under the Plan in 1995.
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 Corporation'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
Composite Index over the same period.
Five Year Cumulative Total Returns
For the Dynamics S&P
Year Ended Corporation Hi-Tech Wilshire
December 31 of America Composite 5000
1990 100 100 100
1991 114 114 134
1992 147 119 146
1993 172 146 163
1994 237 170 163
1995 287 245 222
Assumes $100 invested on January 1, 1991 in Dynamics Corporation of America
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 1996
The Company is submitting for approval by the shareholders the Board of
Directors' selection of Ernst & Young as auditors to examine the consolidated
financial statements of the Company for the fiscal year ending December 31,
1996. 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 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 1995 aggregated $248,000.
The Board of Directors recommends a vote "FOR" the ratification and
approval of Ernst & Young as independent auditors of the Company for the year
1996. 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, 1996.
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,
1995 is enclosed.
By order of the Board of Directors
Henry V. Kensing
Secretary
Greenwich, Connecticut
March 27, 1996
15
PROXY PROXY
DYNAMICS CORPORATION OF AMERICA
475 Steamboat Road, Greenwich, CT. 06830
This Proxy is Solicited on behalf of the Board of Directors
The undersigned, revoking all previous proxies, hereby appoints A.
LOZYNIAK and H. V. KENSING, or either of them, attorneys and proxies with
power of substitution and with all the powers the undersigned would possess
if present, to vote all shares of the common stock of DYNAMICS CORPORATION
OF AMERICA (the "Company") registered in the name of the undersigned, at
the Annual Meeting of Shareholders to be held on May 3, 1996 at 10:30 A.M.
in the Cole Auditorium of the Greenwich Library, West Putnam Avenue at
Dearfield Drive, Greenwich, Connecticut, and any adjournments thereof, as
more fully described in the accompanying Proxy Statement of the Company
dated March 27, 1996.
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS
Nominees: Patrick J. Dorme, Russell H. Knisel and Saul Sperber
FOR all nominees WITHHELD from all nominees
[ ] [ ]
For, except vote withheld from the following nominee(s):
- - --------------------------------------------------------
2. Proposal to ratify and approve the Selection of Ernst &
Young LLP as independent auditors of the Company for the year
1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion upon such other matters as may lawfully come
before the meeting and all adjournments thereof.
The shares represented hereby will be voted as directed by this proxy, but
if no determination is made they will be voted FOR the election of all
nominees and FOR the selection of Ernst & Young LLP as independent auditors
of the Company for the year 1996.
Signature--------------------------------------
Date-------------------------------------------
Signature--------------------------------------
Date-------------------------------------------
NOTE: Please date and sign exactly as your name(s)
appear(s). If acting as attorney, executor, trustee, or in
any other representative capacity, sign name and title.
