<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DYNATECH CORPORATION
(Name of Registrant as Specified In Its Charter)
DYNATECH CORPORATION
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO: DYNATECH CORPORATION]
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
Burlington, Massachusetts
June 25, 1997
To the Stockholders of
Dynatech Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of Dynatech
Corporation will be held at the offices of Hale and Dorr LLP, 26th Floor, 60
State Street, Boston, Massachusetts on Wednesday, July 30, 1997 at 10:00 a.m.
for the following purposes:
1. To fix the number of Directors at eight and to elect a class of three
Directors to serve for a three-year term and until their successors are
duly elected and qualified;
2. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the current fiscal year; and
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
Stockholders of record at the close of business on June 6, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
PETER B. TARR
Clerk
- --------------------------------------------------------------------------------
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 3
DYNATECH CORPORATION
3 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803-5087
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Dynatech Corporation ("Dynatech" or the
"Company") for the Annual Meeting of Stockholders to be held on Wednesday, July
30, 1997 at 10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts and any adjournments thereof. The enclosed proxy, if
properly executed and returned, may be revoked at any time before it is
exercised by delivering to the Clerk of the Company a duly executed written
notice of revocation, by delivering a duly executed proxy bearing a later date,
or by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, by itself, revoke a proxy.
The Company's Annual Report for the fiscal year ended March 31, 1997,
containing financial statements for that year and prior periods, is being mailed
to stockholders concurrently with this Proxy Statement and form of proxy on or
about June 25, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
("SEC"), EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY
STOCKHOLDER UPON WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY,
DYNATECH CORPORATION, 3 NEW ENGLAND EXECUTIVE PARK, BURLINGTON, MASSACHUSETTS
01803-5087.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on June 6, 1997, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 16,675,563
shares of Common Stock of the Company, $.20 par value ("Common Stock"),
constituting all of the voting stock of the Company. Holders of Common Stock are
entitled to one vote per share.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Annual Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
voting on the matter is required for the ratification of the selection of
Coopers & Lybrand L.L.P. as the Company's independent auditors for the current
fiscal year.
Shares that abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee who indicates on a proxy that he or she
does not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and also will not
be counted as shares voted on such matter. Accordingly, abstentions and "broker
non-votes" will have no effect on the voting on matters, such as the ones
presented for stockholder approval at this Annual Meeting, that require the
affirmative vote of a certain percentage of the shares voting on the matter.
<PAGE> 4
PROPOSAL NO. 1
ELECTION OF A CLASS OF DIRECTORS
Stockholders will be asked to fix the number of directors at eight. The
Board of Directors is divided into three classes, with the Directors in each
class serving for a term of three years and until their successors are duly
elected and qualified. As the term of one class expires, a successor class is
elected at each annual meeting of stockholders.
The persons named in the enclosed proxy will vote to elect John F. Reno, L.
Dennis Kozlowski and Peter van Cuylenburg (the "Nominees") as a class of
Directors to serve for three years until the 2000 annual meeting and until their
successors are duly elected and qualified, unless authority to vote for any of
the Nominees is withheld by marking the proxy to that effect. Each of the
Nominees is currently serving as a Director of the Company and has indicated his
willingness to continue to serve, if elected, as a Director. However, if any of
them fails to stand for election or is unable to accept election, the proxies
will be voted for the election of such other person or persons as the Board of
Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES.
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following table sets forth certain information with respect to the
Nominees and those Continuing Directors of the Company whose terms expire at the
annual meetings of stockholders in 1998 and 1999.
NOMINEES FOR ELECTION AT 1997 ANNUAL MEETING
(CLASS WITH TERM EXPIRING IN 2000)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR AT LEAST THE PAST FIVE YEARS AGE SINCE
-------------------------------- --- --------
<S> <C> <C>
John F. Reno(D).................................................... 58 1993
President and Chief Executive Officer of the Company since
January 1993 and Chairman of the Board of Directors since August
1996; President and Chief Operating Officer from July 1991 to
January 1993; Executive Vice President and Chief Operating
Officer prior to July 1991. Mr. Reno is also a Director of
Millipore Corporation.
L. Dennis Kozlowski(A)............................................. 50 1995
Chairman of the Board of Tyco International Ltd. since 1993;
Chief Executive Officer since 1992; President and Chief Operating
Officer since 1989. President of Grinnell Corporation, a
subsidiary of Tyco International, since 1984. Mr. Kozlowski is
also a Director of Thiokol Corp., Applied Power Inc., and
Raytheon Company.
Peter van Cuylenburg(B)............................................ 49 1996
President, Specialty Storage Products Group, Quantum Corporation,
since September 1996. Executive Vice President of Xerox from July
1993 to December 1995. From April 1992 to May 1993, Mr. van
Cuylenburg was President of NeXT Computer, Inc., a manufacturer
of computer systems, and from December 1989 to April 1992, he was
a Group Director for Cable & Wireless plc. Mr. van Cuylenburg is
also a Director of Mitel Corporation.
</TABLE>
2
<PAGE> 5
CONTINUING DIRECTORS
(CLASS WITH TERM EXPIRING IN 1998)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR AT LEAST THE PAST FIVE YEARS AGE SINCE
-------------------------------- --- --------
<S> <C> <C>
Ronald L. Bittner(A)(D)............................................ 55 1995
Chairman, CEO, President, and Director of Frontier Corporation, a
national telecommunications company in Rochester, NY since 1993;
President and Chief Executive Officer since 1992. Prior to 1992,
Mr. Bittner served as President of Telecom Group.
O. Gene Gabbard(C)................................................. 57 1994
Consultant and entrepreneur who works with high technology
start-up companies since February 1993. Prior to that, Mr.
Gabbard was an Executive Vice President and Chief Financial
Officer of MCI Communications Corporation. Mr. Gabbard is also a
Director of InterCel, Inc., Adtran, Inc., and MindSpring
Enterprises, Inc.
Richard K. Lochridge (A)(B)(D)..................................... 53 1986
President and Chief Executive Officer of Lochridge and Company,
Inc., a management consulting firm, since April 1986. Prior to
that, Mr. Lochridge was a Vice President of the Boston Consulting
Group and a member of the Management Committee of the Boston
Consulting Group, Inc. Mr. Lochridge is also a Director of
Hannaford Brothers Food, Inc.
</TABLE>
CONTINUING DIRECTORS
(CLASS WITH TERM EXPIRING IN 1999)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR AT LEAST THE PAST FIVE YEARS AGE SINCE
-------------------------------- --- ---------
<S> <C> <C>
William R. Cook(C)................................................. 53 1994
President and Chief Executive Officer of BetzDearborn Inc. of
Trevose, Pennsylvania, a chemical company, since 1993 and
Chairman since April 1996; President and Chief Operating Officer
from 1989 to 1993. Mr. Cook is also a Director of the Chemical
Manufacturers Association.
Robert G. Paul(C)(D)............................................... 55 1994
President, Chief Executive Officer and Director of Allen Telecom
Inc., manufacturer and marketer of electronics and other products
for the wireless communications industry, in Beachwood, Ohio
since 1991; President and Chief Operating Officer prior to 1991.
</TABLE>
- ---------------
(A) Member of the Audit Committee.
(B) Member of the Board Governance Committee.
(C) Member of the Compensation Committee.
(D) Member of the Executive Committee.
3
<PAGE> 6
DYNATECH BOARD OF DIRECTORS'
SUMMARY OF CORPORATE GOVERNANCE GUIDELINES
Dynatech's Board of Directors believes its principal obligations encompass
the evaluation and compensation of senior management, planning for management
succession, and maintaining sufficient knowledge about the Company and its
markets to effectively judge strategic plans for the long-term benefit of the
stockholders, employees, customers and communities in which the Company
operates.
The governance guidelines adopted by the Company's directors in fiscal 1997
may be summarized as follows:
1. The Board will comprise nine members including the Chief Executive
Officer, of whom eight members are currently serving and a ninth is
anticipated to join the Board during fiscal 1998. Exceptions may exist for
brief periods when, for example, election of a new director precedes an
incumbent director's retirement or an overlap period exists with election
of a new director or Chief Executive Officer.
2. Directors should not represent any specific constituencies and
will be selected and assessed on such factors as personal integrity and
independence, understanding of technology, markets, finance, marketing, and
other knowledge needed to make the Board, in total, complete in its
capacity to perform its duties.
3. New directors will be recommended for election to the Board
following evaluation by the Board Governance Committee with input from the
Chairman and Chief Executive Officer.
4. The Board Governance Committee will conduct an annual survey to
assess performance of the Board in its entirety and each member
individually to improve overall Board effectiveness. In addition, the Board
Governance Committee has the responsibility to propose slates of nominees
to be approved by the Board each year for inclusion in proxy statements to
stockholders.
5. At least annually, there shall be a full Board evaluation of the
Chief Executive and Chairman of the Board's performance, and there shall be
an annual report by the Chief Executive on succession planning and
management development.
6. To ensure the influx of new ideas and knowledge and revitalized
group interactions within the Board while also providing continuity,
Dynatech has set outside director term limits of 15 years or the completion
of five full three-year terms, whichever is longer.
7. In addition, no director shall stand for reelection after reaching
the age of 70.
8. The retirement of a Chief Executive Officer shall not mean
automatic continuance on the Board. Rather, upon the occurrence of such an
event, the Chief Executive Officer shall be expected to submit his or her
Board resignation, and the Board shall determine whether to accept it.
9. The Board has no predetermined policy as to separation of the
roles of Chairman and Chief Executive Officer. However, in the event the
Chairman is a management director, the outside directors shall consider,
each year, whether they wish to choose one of their members to be the Lead
Director.
10. There are four Board committees: Executive, Governance, Audit,
and Compensation. Each has a charter. The Chief Executive may serve only on
the Executive Committee, which is intended to act only when full Board
participation is determined unnecessary or in an emergency.
11. The Board Governance Committee is responsible for committee
assignments. The committee chairmen shall be outside directors, and it is
the opinion of the Board that it is desirable that committee assignments
and chairs be rotated from time to time.
4
<PAGE> 7
12. Committee and Board agendas will be developed by the respective
chairs in consultation with other members. Any Board member is free to
suggest inclusion of items for the agenda of any committee.
13. Executive sessions of outside directors shall occur at least
biannually, led by the Lead Director or Chair of the Governance Committee
if no Lead Director has been selected.
14. The Company expects its directors to own and retain stock.
Therefore, it is the Company's philosophy that the majority of board
compensation be paid in shares of stock to more effectively align the
interests of the Directors with those of the stockholders. Directors who
are also employees receive no additional compensation for Board service.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has Executive, Audit, Compensation, and Board Governance
Committees of the Board of Directors.
The Board of Directors met six times during fiscal year 1997. Each Director
attended at least 75 percent of the aggregate number of meetings of the Board of
Directors and the committees on which he served.
The Executive Committee, which met one time during fiscal year 1997, is
vested with the authority of the Board of Directors in most matters between
meetings of the Board of Directors.
The Audit Committee, whose Chairman is Ronald L. Bittner, met two times
during fiscal year 1997. The Audit Committee recommends to the Board of
Directors the appointment of the independent public accountants, reviews the
scope and budget for the annual audit, and reviews the results of the
examination of the Company's financial statements by the independent public
accountants. The Audit Committee also periodically reviews the job performance
of the Chief Financial Officer. The Company's financial personnel and
independent public accountants have full access to the Audit Committee.
The Compensation Committee, whose Chairman is Robert G. Paul, reviews the
Company's executive compensation and benefit policies as further described in
the Compensation Committee Report on Executive Compensation included in this
proxy statement. The Compensation Committee met two times during fiscal year
1997. The Company is not aware of any Compensation Committee interlocks.
The Board Governance Committee, whose Chairman is Richard K. Lochridge, was
established in 1994 as the Nominating Committee and was renamed the Board
Governance Committee in June 1995. The Board Governance Committee met three
times during fiscal year 1997. The Board Governance Committee consists of
Directors who are not officers or employees of the Company or any subsidiary of
the Company. The Board Governance Committee is charged with the responsibility
of evaluating the Board of Directors' structure, personnel, and processes so as
to permit the Board of Directors to discharge successfully its fiduciary duties
and to consider the needs of the Company's stockholders. In this connection, the
Board Governance Committee typically recommends to the Board of Directors the
slate of nominees for election as Director at each annual meeting of
stockholders. The Board Governance Committee will consider the recommendation of
any stockholder with respect to nominees for election to the Board of Directors.
Any such recommendation should be accompanied by all relevant information,
including information required by the applicable rules of the SEC and any other
industry experience. To make a recommendation, a stockholder should send the
nominee's name and supporting information to the Clerk of the Company at the
Company's principal executive office. In order to permit the Board Governance
Committee to give fair consideration to any such recommendation, the information
should be received by the date specified under the applicable rules of the SEC
relating to stockholder proposals.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
Compensation of Non-Employee Directors ("Non-Employee Directors") of the
Company is at the rate of $1,500 for each Board of Directors or committee
meeting attended ($500 for each committee meeting held directly before or after
a meeting of the Board of Directors), $750 for a meeting held over the
telephone, plus a quarterly retainer fee paid at the rate of 200 shares of
Dynatech Common Stock per quarter. Chairmen of all Committees other than the
Executive Committee receive an additional 25 shares of Dynatech Common Stock per
quarter. In addition, the Dynatech Corporation 1994 Stock Option and Incentive
Plan provides for the automatic grant of stock options to Non-Employee Directors
of the Company. Each Non-Employee Director is entitled to receive an option to
purchase 10,000 shares of Common Stock upon initial election to the Board of
Directors and an additional option to purchase 3,000 shares of Common Stock
after each Annual Meeting of Stockholders. Non-Employee Directors who have
served on the Board for at least five years are also entitled to receive an
annual retirement benefit equal to $16,000. Such retirement benefit is payable
following the later of the Non-Employee Director's 60th birthday or retirement
from the Board (or such later date as the Director shall elect) for a period
equal to the number of full years of service on the Board, up to a maximum of
ten years.
PRINCIPAL STOCKHOLDERS
Based upon information contained in the most recent Schedule 13D, Schedule
13G, or other information available to the Company, the following entity
beneficially owned more than five percent (5%) of the Company's Common Stock as
of April 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF COMMON
NAME OWNED STOCK(1)
---- ------ ----------
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, MA 02109.......................................... 1,450,105 8.6%
</TABLE>
- ---------------
(1) Based on 16,832,963 shares of Common Stock outstanding as of April 30, 1997.
6
<PAGE> 9
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of April 30, 1997
with respect to the shares of Common Stock of the Company beneficially owned by
each Director of the Company, each of the executive officers named in the
Summary Compensation Table contained herein, and by all Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF OPTION SHARES DEFERRED
BENEFICIAL SUBJECT TO STOCK PERCENTAGE OF
NAME OF INDIVIDUAL OWNERSHIP(1)(2) VESTING(3) SHARES(4) COMMON STOCK(2)
- ------------------ --------------- ------------- --------- ---------------
<S> <C> <C> <C> <C>
John F. Reno........................ 154,654(5) 253,500 0 *
John R. Peeler...................... 61,376(6) 103,200 0 *
George A. Merrick................... 19,940(7) 54,200 0 *
Roger C. Cady....................... 11,954(8) 44,000 0 *
John A. Mixon....................... 22,155(9) 55,000 0 *
Robert H. Hertz..................... 23,199(10) 48,800 0 *
Allan M. Kline...................... 11,600(11) 40,000 0 *
Robert G. Paul...................... 8,825 16,000 0 *
Richard K. Lochridge................ 9,000 21,000 5,850 *
O. Gene Gabbard..................... 6,450 16,000 0 *
William R. Cook..................... 6,200 16,000 0 *
L. Dennis Kozlowski................. 2,600 13,000 0 *
Peter van Cuylenburg................ 2,200 13,000 0 *
Ronald L. Bittner................... 200 16,000 3,350 *
All current Directors and Executive
Officers as a group (15 persons).. 315,150(12) 731,300 9,200 1.9%
</TABLE>
- ---------------
* Less than 1%
(1) Represents shares of Common Stock beneficially owned on April 30, 1997.
Unless otherwise noted, each person has sole voting and investment power
with respect to such shares.
(2) Based upon 16,832,963 shares of Common Stock outstanding as of April 30,
1997. Common Stock includes all shares of outstanding Common Stock plus, as
required for the purpose of determining beneficial ownership (in accordance
with Rule 13d-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act")), all shares of Common Stock subject
to any right of acquisition by such person, through exercise or conversion
of any security, within 60 days of April 30, 1997.
(3) Represents shares of Common Stock underlying stock options already granted
but which are not yet vested or exercisable within 60 days of April 30,
1997.
(4) Represents shares of Common Stock payable but receipt of which has been
voluntarily deferred pursuant to the terms of the Non-Employee Directors'
Stock Compensation Plan and 1994 Stock Option and Incentive Plan.
(5) Includes 2,000 shares owned by Mr. Reno's spouse and 9,050 shares owned by
a relative for which Mr. Reno has power of attorney. Includes 102,800
shares of Common Stock issuable upon exercise of stock options which are
exercisable within 60 days of April 30, 1997.
(6) Includes 38,400 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997.
7
<PAGE> 10
(7) Includes 16,800 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997.
(8) Includes 4,000 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997. Mr. Cady's
active employment with the Company terminated on April 11, 1997.
(9) Includes 18,050 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997.
(10) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997. Mr. Hertz'
active employment with the Company terminated on July 31, 1996.
(11) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997.
(12) Includes 194,850 shares of Common Stock issuable upon exercise of stock
options which are exercisable within 60 days of April 30, 1997. Excludes
shares which may become vested and exercisable upon a Change in Control as
defined in the stock option plan pursuant to which such options were
granted.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth information concerning
compensation awarded to, earned by, or paid to (i) the Company's Chief Executive
Officer, (ii) the four highest compensated executive officers who were serving
as executive officers at the end of fiscal 1997, (iii) one other person who
served as an executive officer during fiscal 1997, but was not so serving at the
end of fiscal 1997 and (iv) one other person who served as an executive officer
at the end of fiscal 1997 (collectively, the "Named Executive Officers") for
services rendered in all capacities with respect to the Company's fiscal years
ended March 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS(2)
-------------------------------- ------------ ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)(3)
------------------ ------ ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
John F. Reno............................ 1997 456,250 1,032,185 55,100 31,892
Chairman, President and 1996 435,000 372,836 62,000 25,533
Chief Executive Officer 1995 385,000 420,609 144,000 5,571
John R. Peeler.......................... 1997 244,242 662,214 20,800 18,936
Corporate Vice President-- 1996 225,042 293,128 28,000 15,939
Communications Test Division 1995 213,000 305,790 64,000 5,519
George A. Merrick(4).................... 1997 210,331 242,673 15,000 16,343
Corporate Vice President-- 1996 204,667 196,798 19,000 7,253
Display Business 1995 116,667 75,244 40,000 0
John A. Mixon........................... 1997 178,500 270,591 13,800 9,910
Corporate Vice President-- 1996 172,125 94,384 14,000 8,851
Human Resources 1995 159,500 120,684 40,000 5,404
Allan M. Kline(5)....................... 1997 158,333 218,918 50,000 3,234
Corporate Vice President, Chief
Financial Officer and Treasurer
Roger C. Cady(6)........................ 1997 216,000 286,508 13,000 11,875
Former Corporate Vice 1996 211,500 99,898 14,000 10,815
President--Business 1995 202,500 145,825 13,000 5,362
Development
Robert H. Hertz(7)...................... 1997 221,500 377,747 0 17,190
Former Treasurer and Chief 1996 216,625 133,633 19,000 11,672
Financial Officer 1995 200,000 170,244 30,000 5,571
</TABLE>
- ---------------
(1) Perquisites and other personal benefits paid to each Named Executive Officer
in each instance aggregated less than 10% of the total annual salary and
bonus set forth in the columns entitled "Salary" and "Bonus" for each Named
Executive Officer, and accordingly, have been omitted from the table as
permitted by the rules of the SEC.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights to any of the Named Executive Officers during the years shown.
(3) Figures in this column represent the Company's contributions on behalf of
each of the Named Executive Officers under the Company's 401(k) plan. In
fiscal 1996 and fiscal 1997, these figures also include the
9
<PAGE> 12
Company's contributions under a nonqualified deferred compensation plan,
which became effective April 1, 1995.
(4) Mr. Merrick's employment with the Company commenced in September 1994.
(5) Mr. Kline's employment with the Company commenced in June 1996.
(6) Mr. Cady's active employment with the Company terminated on April 11, 1997.
Mr. Cady will continue to be paid his monthly base salary, a performance
bonus for fiscal 1997 and certain benefits for a period of twenty-four (24)
months; provided that should he accept full-time employment during this
period, his payments from the Company shall either cease or be reduced
depending upon the amount of compensation paid by his new employer. Mr.
Cady's stock options shall continue to vest during this period.
(7) Mr. Hertz' active employment with the Company terminated on July 31, 1996.
Mr. Hertz will continue to be paid his monthly base salary through July 31,
1998, as well as certain benefits and bonuses for the 1997, 1998 and
(pro-rated) 1999 fiscal years, such bonuses to be calculated in the manner
utilized for the fiscal 1996 bonus. Mr. Hertz' stock options shall continue
to vest during this period, and any such options not vested as of July 31,
1998 will at that date become vested and exercisable.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options to the Named Executive Officers during the fiscal year ended March
31, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#) YEAR(%) ($/SH)(1) DATE 5%($) 10%($)
- ---- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John F. Reno............... 55,100 9.1% $33.25 7/30/06 $1,152,180 $2,919,854
John R. Peeler............. 20,800 3.4% $33.25 7/30/06 $ 434,943 $1,102,232
George A. Merrick.......... 15,000 2.5% $33.25 7/30/06 $ 313,661 $ 794,879
John A. Mixon.............. 13,800 2.3% $33.25 7/30/06 $ 288,568 $ 731,288
Allan M. Kline............. 50,000 8.2% $32.00 6/17/06 $1,006,231 $2,549,988
Roger C. Cady.............. 13,000 2.1% $33.25 7/30/06 $ 271,839 $ 688,895
Robert H. Hertz............ 0 -- -- -- -- --
</TABLE>
- ---------------
(1) Options vest annually in five equal installments beginning on the first
anniversary date of grant. The options in this table expire 10 years after
grant.
(2) These columns show the hypothetical value of the options granted at the end
of the option terms if the price of the Common Stock were to appreciate
annually by 5% and 10%, respectively. At April 30, 1997, the aggregate value
of Common Stock held by non-affiliates of the Company was approximately
$555,696,045, based upon 16,712,663 shares outstanding and held by
non-affiliates at a price per share of $33.25. If the Common Stock
appreciates at a compound rate of 5% per year for ten years, the aggregate
value of all shares held by non-affiliates would be approximately
$905,169,657, representing an increase of $349,473,612. Similarly, if the
Common Stock appreciates at a compound rate of 10% per year for ten years,
the aggregate value of all shares held by non-affiliates would be
approximately $1,441,331,905, representing an increase of $885,635,860.
There is no assurance that the stock price will appreciate at the rates
shown.
10
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES.
The following table sets forth certain information regarding stock option
exercises by the Named Executive Officers during the fiscal year ended March 31,
1997, and stock options held by the Named Executive Officers at March 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FY-END(#) FY-END(2)($)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) (1)($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John F. Reno................... 35,600 $812,500 102,800/253,500 $1,577,700/$2,926,200
John R. Peeler................. 17,600 $461,600 38,400/103,200 $ 633,700/$1,290,900
George A. Merrick.............. 3,000 $ 85,875 16,800/ 54,200 $ 292,175/$ 619,200
John A. Mixon.................. 6,250 $171,922 18,050/ 55,000 $ 239,425/$ 564,450
Allan M. Kline................. 0 $ 0 0/ 50,000 $ 0/$ 0
Roger C. Cady.................. 12,000 $249,175 0/ 48,000 $ 0/$ 521,300
Robert H. Hertz................ 11,200 $237,550 15,000/ 48,800 $ 252,200/$ 793,650
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of the Common Stock on the
date of exercise, less the option exercise price.
(2) Calculated on the basis of the fair market value of the Common Stock on
March 31, 1997 ($30.00), less the applicable option exercise price.
SPECIAL TERMINATION AGREEMENTS
Each of the persons named in the compensation table set forth above (other
than Messrs. Cady and Hertz) as well as other key employees are party to Special
Termination Agreements with the Company. These Agreements provide that if there
is a "Change in Control" of the Company (as defined in the Agreements), and if
during the two-year period following such Change in Control the officer's
employment is terminated for any reason other than on account of death or for
"cause," or the officer terminates his or her own employment following a
demotion, reduction in compensation, or similar event, the officer will be
entitled to receive a lump sum payment from the Company within 15 days after the
date of termination and continuance of fringe benefits. Under the Agreements,
the amount of the severance payment is based on an officer's length of service
with the Company, ranging incrementally from one times the officer's average
annual cash compensation to three times the officer's average annual cash
compensation after fifteen years of service.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1997, the Company paid Lochridge and Company, Inc., a
management consulting firm based in Boston, Massachusetts, aggregate fees of
$130,168.17 for professional services done by their Technology Practice area.
Richard K. Lochridge, a Director of the Company, is President and Chief
Executive Officer of Lochridge and Company, Inc. The Company believes that the
terms of its arrangements with Lochridge and Company, Inc. are at least as
favorable to the Company as those the Company could negotiate with unrelated
third parties.
11
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established in
1979 and is comprised solely of independent, non-employee Directors. The
Compensation Committee reviews and approves all compensation plans, benefit
programs, and perquisites for executives and other employees. The Compensation
Committee sets the salary of the Chief Executive Officer (the "CEO"), sets
relative relationships between the CEO's salary and the salary of other key
executives, and recommends to the Board the compensation program for Directors.
The Compensation Committee reviews and approves management recommendations for
stock option grants under the Company's stock option plan. The Compensation
Committee periodically reviews the job performance of the Chief Executive
Officer.
The Company's executive compensation program has been designed to attract
and retain exceptional executives who seek a long-term association with the
Company and who enjoy the challenge of pay for performance. The basic program
consists of two cash compensation components: base salary and a performance
based annual bonus. A third component, ownership-linked stock options, is used
for executive retention, to attract new key people, to recognize accomplishments
under individually tailored business growth programs, and to align the long-term
interests of eligible executives with those of the stockholders.
Base salary for the CEO is set annually taking into consideration Company
sales and profit growth, overall job performance, and mid-range pay levels for
CEOs of corporations of a similar size. The Compensation Committee utilizes, as
a reference, up-to-date information on compensation practices of other companies
from several independent sources. Base salary is then set so as to represent no
more than 40% of total attainable compensation, the majority of which is fully
contingent upon the achievement of both qualitative and quantitative levels of
performance and stockholder return. Mr. Reno's annual base salary was increased
to $475,000 on January 1, 1997 from $450,000. The Company believes that Mr.
Reno's base salary is at approximately the median base compensation level paid
to chief executive officers of corporations of a similar size and complexity to
the Company.
The Company's pay for performance annual bonus program is considered the
most significant cash-based compensation component. Executives in this program
earn a bonus set by growth in profit and return on assets from either their
particular business unit or the Company as a whole. The plan is formula-based
using weighted average three year (current and two trailing) performance and is
designed so that consistently good individual performance over the three years
provides the executive with the highest payout. The intent is to encourage
investment decisions in undertakings that will provide the best medium term
(three year) financial results. With consistently outstanding profit growth, an
executive can earn a bonus of several times the executive's annual salary; or,
with no profit growth and return on assets below standard, no bonus at all. For
fiscal year 1997, Mr. Reno's bonus was $1,032,185, representing approximately
217.3% of his current base salary. Mr. Reno's fiscal 1997 bonus was earned as a
result of current and prior years' performance, including the Company's
completion during fiscal 1997 of its strategy to dispose of the Company's
noncore businesses. This compares to fiscal year 1996 when his bonus, calculated
under the same formula, was $372,836 and represented 82.9% of his base salary.
The third compensation component is an ownership-linked stock option
program, which provides long-term incentives to executives that are aligned with
the interests of the Company's stockholders. Stock options, granted at market
price, typically vest annually in 20% increments over five years. A longer term
perspective is established by sequential grants. The stock option program
requires specified levels of continued stock ownership for senior executives
based on position and years of participation in the program. The program is
designed to encourage senior executives to be long-term stockholders and to have
owner concern and care for the Company as a whole. The intent of the option
program is to provide an executive with the opportunity for financial gain which
is larger than cumulative annual bonuses but which takes much longer to achieve;
and
12
<PAGE> 15
which requires meaningful long-term growth in the market price of the Company's
Common Stock for the gain to be realized.
The size and frequency of option grants are based on level of
responsibility, performance of the Company as a whole, the performance of the
executive's business unit, and the executive's personal performance. Annually,
both financial and non-financial specific goals are set aimed at building future
marketplace strengths, intercompany cooperation and alliances, achieving
corporate success factors, and, when appropriate, restructuring issues. For
senior executives, option grants may be subject to reduction and/or elimination
in proportion to the executive's ownership position relative to ownership levels
required by the plan. Other option grants may be made based upon management's
specific recommendations, and review and approval by the Compensation Committee.
Grants are made from a Compensation Committee defined pool of shares. In
accordance with these goals and policies, in fiscal year 1997, Mr. Reno was
granted an option to purchase 55,100 shares of common stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which became effective on January 1, 1994, generally limits the
Company's ability to deduct compensation expense in excess of $1 million paid to
the Company's Chief Executive Officer or four other most highly paid executive
officers. The Compensation Committee's policy with respect to Section 162(m) is
to make every reasonable effort to insure that compensation is deductible to the
extent permitted while simultaneously providing Company executives with
appropriate rewards for their performance. Towards this end, the Company's 1994
Stock Option and Incentive Plan has been drafted in a manner that will qualify
stock options as performance-related compensation not subject to the cap on
deductibility imposed by Section 162(m).
Robert G. Paul, Chairman
O. Gene Gabbard
William R. Cook
REPORTS UNDER SECTION 16(a) OF THE EXCHANGE ACT
Based solely on its review of copies of reports filed by persons
("Reporting Persons") required to file such reports pursuant to Section 16(a) of
the Exchange Act, the Company believes that all filings required to be made by
Reporting Persons of the Company were timely made in accordance with the
requirements of the Exchange Act.
13
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED MARCH 31, 1997
The graph that follows compares the five-year cumulative total return of
the Company's Common Stock with the S&P 500 Composite Stock Price Index and the
S&P High Tech Composite Index. It assumes an investment of $100 on March 31,
1992 in the Common Stock of the Company, and the stocks comprising the S&P 500
and the S&P High Tech Composite Index and assumes reinvested dividends.
[LINE CHART]
<TABLE>
<CAPTION>
Measurement Period DYNATECH S&P HIGH TECH
(Fiscal Year Covered) CORPORATION COMPOSITE S&P 500 INDEX
<S> <C> <C> <C>
Mar92 100.000 100.000 100.000
Mar93 135.443 112.917 115.188
Mar94 93.670 131.347 116.891
Mar95 159.494 169.815 135.059
Mar96 237.975 230.093 178.278
Mar97 303.797 303.579 213.567
</TABLE>
14
<PAGE> 17
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the current fiscal year. Although
stockholder approval of the Board of Directors' selection of Coopers & Lybrand
L.L.P. is not required by law, the Board of Directors believes that it is
advisable to give stockholders an opportunity to ratify this selection. If this
proposal is not approved at the Annual Meeting, the Board of Directors may
reconsider its selection.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
PROPOSALS BY STOCKHOLDERS
In order for a proposal of a stockholder to be included in the Board of
Directors' proxy statement for the Company's 1998 Annual Meeting, it must be
received at the principal executive office of the Company on or before February
25, 1998, pursuant to Rule 14a-8 under the Exchange Act. Such a proposal must
comply with the requirements as to form and substance established by the SEC in
order to be included in the proxy statement.
In addition, the Company's By-laws provide that any stockholder of record
wishing to have a stockholder proposal considered at an annual meeting, other
than a stockholder proposal included in the Company's proxy statement pursuant
to Rule 14a-8 under the Exchange Act, must provide written notice of such
proposal and appropriate supporting documentation, as set forth in the By-laws,
to the Company at its principal executive office not less than 75 days nor more
than 120 days prior to the anniversary date of the immediately preceding annual
meeting (the "Anniversary Date"); provided, however, that in the event the
annual meeting is scheduled to be held on a date more than 30 days before or
more than 60 days after the Anniversary Date, notice must be so delivered not
later than the close of business on the later of (i) the 75th day prior to the
scheduled date of such annual meeting or (ii) the 15th day after public
disclosure of the date of such meeting.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
which may come before the meeting. It is the intention of the persons named in
the enclosed proxy to vote the proxy in accordance with their best judgment if
any other matters should properly come before the meeting, including voting for
election of a Director in place of any person named in the proxy who may not be
available for election.
The cost of soliciting proxies will be borne by the Company. The
solicitation of proxies by mail may be followed by solicitation of certain
stockholders by officers, Directors, or employees of the Company by telephone or
in person. The Company also has retained MacKenzie Partners, Inc. to assist in
the solicitation of proxies at an estimated cost of $5,000 plus reasonable
expenses.
IF YOU MAY NOT BE PRESENT AT THE MEETING, IT WOULD BE APPRECIATED IF YOU
WOULD COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
Burlington, Massachusetts
June 25, 1997
15
<PAGE> 18
543-PS-97
<PAGE> 19
APPENDIX A
----------
DYNATECH CORPORATION
PROXY PROXY
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 30, 1997
The undersigned, revoking all prior proxies, hereby appoint(s) John F.
Reno, Allan M. Kline, Mark V.B. Tremallo and Peter B. Tarr, and each of them,
with full power of substitution, as proxies to represent and vote, as designated
herein, all shares of Common Stock of Dynatech Corporation (the "Company") which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of the Company to be held at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts, on July 30, 1997 at
10:00 a.m., local time, and at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed by
the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. Attendance of the undersigned at the meeting or any
adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing before it is exercised or
affirmatively indicate his intent to vote in person.
i. To set the number of directors at eight and to elect the
following Directors to serve for a three year term (except
as marked below):
John F. Reno, L. Dennis Kozlowski and Peter van Cuylenburg
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY to vote for all nominees
[ ] FOR all nominees
except the following:_____________________
ii. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
-21-
<PAGE> 20
Please sign exactly as name appears hereon.
When shares are held by joint owners, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give title as such. If a
corporation or a partnership, please sign by
authorizing person.
Signature:________________________________
Date:_____________________________________
THIS PROXY IS SOLICITED Signature:________________________________
ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY Date:_____________________________________
-22-
