March 29, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Lynch Corporation - Preliminary Proxy Materials
Ladies and Gentlemen:
Accompanying this letter for filing pursuant to
Regulation 14A under the Securities Exchange Act of 1934 is a
preliminary proxy statement and form of proxy for the annual
meeting of shareholders of Lynch Corporation scheduled for May 9,
1996. It is anticipated that definitive proxy materials will be
mailed to shareholders on April 11, 1996.
The $125.00 filing fee is being transferred to the
Commission's account pursuant to Rule 13(c) of Regulation
S-T.
Please call me at (212) 969-3290, if you have any
questions.
Very truly yours,
Edward W. Kerson
cc: Robert A. Hurwich, Esq.
<PAGE>
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:
(x) Preliminary Proxy Statement
() Definitive Proxy Statement
() Definitive Additional Materials
() Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec.
240.14a-12
Lynch Corporation
(Name of Registrant as Specified in Its Charter)
Edward W. Kerson, Esq., Proskauer Rose Goetz & Mendelsohn LLP,
1585 Broadway, New York, New York 10036
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(x) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(i)(2).
() $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
() Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 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
compute pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is
calculated and state how it was determined.
() 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:
DRAFT 3/27/96
LYNCH CORPORATION
8 Sound Shore Drive
Greenwich, Connecticut 06830
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 1996
__________________
To The Shareholders of April 11, 1996
Lynch Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Lynch Corporation, an Indiana Corporation, will be held at the
Greenwich Public Library, 101 West Putnam Avenue, Greenwich,
Connecticut on Thursday, May 9, 1996, at 3:00 P.M. for the
following purposes:
1. To elect seven directors to serve until the next Annual
Meeting of Shareholders and until their successors are
duly elected and qualified.
2. To consider and vote on the right to exchange promissory
notes in a principal amount of up to $25 million that may
be issued by the Corporation for a convertible note of
the Corporation under certain circumstances.
3. To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
Information relating to the above matters is set forth in the
attached Proxy Statement. As fixed by the Board of Directors, only
Shareholders of record at the close of business of March 27, 1996
are entitled to receive notice of, and to vote at, the Annual
Meeting and any adjournments thereof.
The Board of Directors encourages all shareholders to
personally attend the annual meeting. Your vote is very important
regardless of the number of shares you own. Shareholders who do
not expect to attend are requested to promptly date, complete and
return the enclosed proxy card in the enclosed accompanying
postage-paid envelope in order that their shares of common stock
may be represented at the annual meeting. Your cooperation is
greatly appreciated.
By Order of the Board of Directors
Robert A. Hurwich
Secretary
IMPORTANT: Your vote is important regardless of the
number of shares you own. Please date, sign and
return your proxy promptly in the enclosed
envelope. Your cooperation is greatly appreciated.
LYNCH CORPORATION
8 Sound Shore Drive
Greenwich, Connecticut 06830
_____________________
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors of
Lynch Corporation (the "Corporation") in connection with the
solicitation of proxies for use at the Annual Meeting of
Shareholders to be held at the Greenwich Public Library, Greenwich,
Connecticut on May 9, 1996, at 3:00 P.M. and at any adjournments
thereof. This Proxy Statement and the accompanying proxy is first
being mailed to shareholders on or about April 11, 1996.
Only shareholders of record at the close of business on March
27, 1996 are entitled to notice of, and to vote at, the Annual
Meeting. As of the close of business on such date, __________
shares of the Corporation's common stock, no par value (the "Common
Stock"), were outstanding and eligible to vote. Each share of
Common Stock is entitled to one vote on each matter submitted to
the shareholders. Where a specific designation is given in the
proxy, the proxy will be voted in accordance with such designation.
If no such designation is made, the proxy will be voted FOR the
nominees for director named below, FOR approval of the right to
exchange a promissory note in a principal amount of up to $15
million that may be issued by the Corporation into convertible
notes of the Corporation under certain circumstances, and in the
discretion of the proxies with respect to any other matter that is
properly brought before the Annual Meeting. Any shareholder giving
a proxy may revoke it at any time before it is voted at the Annual
Meeting by delivering to the Secretary of the Corporation a written
notice of revocation or duly executed proxy bearing a later date or
by appearing at the Annual Meeting and revoking his or her proxy
and voting in person.
An automated system administered by the Corporation's transfer
agent tabulates the votes. Pursuant to the Indiana Business
Corporation Law and the By-laws of the Company, shares held by
persons who abstain from voting on a proposal will be counted in
determining whether a quorum is present, but will not be counted as
voting either for or against such proposal. If a broker indicates
on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will
not be considered as present and entitled to vote with respect to
that matter.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to
serve until the next Annual Meeting of Shareholders and until their
respective successors are elected. Except where authority to vote
for directors has been withheld, it is intended that the proxies
received pursuant to this solicitation will be voted for the
nominees named below. If for any reason any nominee shall not be
available for election, such proxies will be voted in favor of the
remainder of those named and may be voted for substitute nominees
in place of those who decline to be candidates. Management,
however, has no reason to expect that any of the nominees will be
unavailable for election.
The election of directors shall be determined by a plurality
of the votes cast.
All of the nominees have served as directors of the
Corporation since the last annual meeting held May 18, 1995, except
for Messrs. Papitto and Muoio. The By-laws of the Corporation
provide that Board of Directors shall consist of no less than five
and no more than thirteen members and that any vacancies on the
Board of Directors for whatever cause arising, including newly-
created directorships, may be filled by the remaining directors
until the next meeting of shareholders. Biographical summaries and
ages as of April 1, 1996 of the nominees are set forth below. Data
with respect to the number of shares of the Common Stock
beneficially owned by each of them appears on pages
through of this Proxy Statement. All such information
has been furnished to the Corporation by the nominees.
<TABLE>
Name; Age; Business Experience
and Principal Occupation for Last
5 Years; and Directorships in Public Served
Corporations and Investment Companies Director from
<S> <C>
Morris Berkowitz, 73
Business Consultant (since 1984);
Vice President (1970-1983) of LIN
Broadcasting Corporation, a corporation
engaged in cellular telephone, broadcasting
and publishing activities . . . . . . . . . . . 1987
E. Val Cerutti, 56
Business Consultant (since 1992); President
and Chief Operating Officer (1975 - 1992) of
Stella D'oro Biscuit Co., Inc., producer of
bakery products; Director of The Gabelli
Convertible Securities Fund and The Gabelli
Gold Fund . . . . . . . . . . . . . . . . . . . 1990
Paul J. Evanson, 54
President (since 1995) of Florida Power &
Light Co.; Vice President, Finance and Chief
Financial Officer of FPL Group, Inc. (since
1992), parent company of Florida Power & Light;
President and Chief Operating Officer of the
Corporation (1988 - 1992); Chairman (1990 - 1992)
and President (1988 - 1992) of Spinnaker
Industries, Inc., a subsidiary of the Corporation
engaged in the manufacturing of industrial process
and air pollution equipment; Executive Vice
President of Moore McCormack Resources, Inc.
(1986-1988), formerly a diversified construction
materials and natural resources company; Director
of FPL Group, Inc., Florida Power & Light Company
and Southern Energy Homes, Inc. . . . . . . . . 1988
Mario J. Gabelli, 53
Chairman and Chief Executive Officer of the
Corporation (since 1986); Director of The Morgan
Group, Inc., a subsidiary of the Corporation
(since 1994); Director of Spinnaker Industries,
Inc., a subsidiary of the Corporation (since 1995);
Chairman and Chief Executive Officer of Gabelli
Funds, Inc., successor to The Gabelli Group, Inc.
(since 1980), an investment adviser and holding
company for subsidiaries engaged in various
aspects of the securities business; Chairman,
President and Chief Investment Officer of Gabelli
Global Multimedia Trust Inc. (since 1984), Gabelli
Gold Fund, Inc. (since 1994), Gabelli Global
Series Funds, Inc. (since 1993), Gabelli Investor
Funds, Inc. (since 1993), Gabelli Equity Series
Funds Inc. (since 1991), The Gabelli Value Fund
Inc. (since 1989), The Gabelli Series Funds, Inc.
(since 1989), and The Gabelli Equity Trust Inc.
(since 1986); Trustee of The Gabelli Money
Market Funds (since 1992), The Gabelli Growth
Fund (since 1987) and The Gabelli Asset Fund
(since 1986). . . . . . . . . . . . . . . . . . 1986
Salvatore Muoio, 36
Security Analyst and Vice President of Lazard
Freres & Co., L.L.C., an investment banking
firm (since 1995); Securities Analyst at
Gabelli & Company, Inc. (1985-1995) . . . . . . 1995
Ralph R. Papitto, 69
Chairman and Chief Executive Officer of AFC
Cable Systems, Inc., a manufacturer and
supplier of electrical distribution products
(since 1993); Founder, Chairman and a
Director of Nortek, Inc., a manufacturer
of construction products (1967 - 1993);
Director of AFC Cable Systems, Inc. . . . . . . 1995
Paul P. Woolard, 72
Business Consultant (since 1986); Senior
Executive Vice President (1975-1986) of
Revlon, Inc.; President of Revlon
Beauty Group of Revlon, Inc., (1984 -
1986), manufacturer of cosmetics and
fragrances; Director of Chemex
Pharmaceutical, Inc . . . . . . . . . . . . . . 1968
</TABLE>
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
There were five (5) meetings of the Board of Directors during
1994, and the Board acted twice by unanimous written consent.
The Board of Directors has established three standing
committees, the principal duties of which are described below:
Audit Committee: Recommends to the Board of Directors the
appointment of independent auditors; reviews annual financial
reports to shareholders prior to their publication; reviews the
report by the independent auditors concerning management procedures
and policies; and determines whether the independent auditors have
received satisfactory access to the Corporation's financial records
and full cooperation of corporate personnel in connection with
their audit of the Corporation's records. The Audit Committee met
4 times during 1995. The present members are Messrs. Berkowitz
(Chairman) and Woolard.
Executive Compensation and Benefits Committee: Develops and
makes recommendations to the Board of Directors with respect to the
Corporation's executive compensation policies; recommends to the
Board of Directors the compensation to be paid to executive
officers; administers the Lynch Corporation 401(k) Savings Plan and
Bonus Plan, as summarized on pages x through x of this Proxy
Statement; and performs such other duties as may be assigned to it
by the Board of Directors. The Executive Compensation and Benefits
Committee met 2 times during 1995. The present members are Messrs.
Woolard (Chairman) and Papitto.
Executive Committee: Exercises all the power and authority of
the Board of Directors, except as otherwise provided by Indiana law
or by the By-laws of the Corporation, in the management affairs of
the Corporation during intervals between meeting of the Board of
Directors. The Executive Committee met once and acted once during
1995. The present members are Messrs. Gabelli (Chairman), Cerutti,
Evanson and Papitto.
The Corporation does not have a nominating committee.
Nominations for directors and officers of the Corporation are
matters considered by the entire Board of Directors.
COMPENSATION OF DIRECTORS
Directors, who are not otherwise employees, receive an annual
cash retainer of $10,000 and a fee of $1,000 for each Board of
Directors meeting and each committee meeting (which lasts for at
least one hour) the Director attends, and commencing with 1996
$15,000 worth of Common Stock of the Corporation. In addition, a
non-employee director serving as a committee chairman receives an
additional $2,000 payment. A director who is an employee of the
Corporation is not compensated for services as a member of the
Board of Directors or any committee thereof. In addition, the
Corporation purchases accident and dismemberment insurance coverage
of $100,000 for each member of the Board of Directors and maintains
a liability insurance policy which provides for indemnification of
each Director (and officer) against certain liabilities which each
may incur in his capacity as such.
Mr. Bell, who resigned as a director of the Corporation as of
December 31, 1995, is also a director and a member of the
Compensation Committee of The Morgan Group, Inc. ("Morgan Group")
and received the normal compensation payable to directors and
committee members thereof. Mr. Cerutti received $79,000 in 1995 as
a director of and for special consulting service provided to Lynch
Machinery, Inc., a subsidiary of the Corporation. Mr. Woolard
received $4,000 in 1996 as a director of Lynch Machinery, Inc. and
Mr. Boyle received $9,000 as a director of M-tron Industries, Inc.,
a subsidiary of the Corporation. See Compensation Committee
Interlocks and Insider Participants at page for certain payments
by Spinnaker Industries, Inc. ("Spinnaker") to a company affiliated
with Mr. Boyle, who resigned as a director of the Corporation
effective January 17, 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 1996, certain
information with respect to all persons known to the Corporation to
each beneficially own more than 5% of the Common Stock of the
Corporation, which is the only class of voting stock of the
Corporation outstanding. The table also sets forth information
with respect to the Corporation's Common Stock beneficially owned
by the directors, by each of the executive officers named in the
Summary Compensation Table on page of this Proxy
Statement, and by all directors and executive officers as a group.
The number of shares beneficially owned is determined under rules
of the Securities and Exchange Commission, and the information is
not necessary indicative of beneficial ownership for any other
purpose, Under such rules, beneficial ownership includes any
shares to which a person has the sole or shared voting or
investment power or any shares which the person can acquire within
60 days (e.g., through exercise of stock options or conversions of
securities). Except as otherwise indicated, the shareholders
listed in the table have sole voting and investment powers with
respect to the Common Stock set forth in the table. The following
information is either reflected in Schedule 13Ds and 13Gs or Form
3s and Form 4s that have been filed with the Securities and
Exchange Commission or which has otherwise been furnished to the
Corporation.
<TABLE>
Name of Amount and Nature Percent
Beneficial Owner* of Beneficial Ownership of Class
<S> <C> <C>
Bruce A Ritzenthaler 123,0481 8.8%
Dimensional Fund
Advisors, Inc. 84,8002 6.1%
Mario J. Gabelli 346,9053 24.9%
Morris Berkowitz 338 **
E. Val Cerutti 7384 **
Paul J. Evanson 5,238 **
Salvatore Muoio 438 **
Ralph R. Papitto 538 **
Paul P. Woolard 2,141 **
Robert E. Dolan 2355 **
Robert A. Hurwich 926
All Directors and
Executive Officers
as a group (ten in
total) 356,663 25.7%
<FN>
* The address of each holder of more than 5% of the Common Stock
is as follows: Bruce A. Ritzenthaler - 7-A West Jackson
Avenue, Naperville, IL 60540; Dimensional Fund Advisors - 1299
Ocean Avenue, Santa Monica, CA 90401; and Mr. Gabelli -
Corporate Center at Rye, Rye, NY 10580.
** Represents holdings of less than one percent.
(1) Does not include 2,200 shares registered in the name of Mr.
Ritzenthaler's wife with respect to which Mr. Ritzenthaler
does share investment or voting power.
(2) Because of its investment and/or voting power over shares of
Common Stock of the Corporation held in the accounts of its
investment advisory clients, Dimensional Fund Advisors, Inc.,
an investment adviser ("Dimensional"), is deemed to be the
beneficial owner of 84,800 shares. Dimensional disclaims
beneficial ownership of all such shares.
(3) Includes 326,219 shares of Common Stock owned directly by Mr.
Gabelli including 2,991 held for the benefit of Mr. Gabelli
under the Corporation's 401(k) Savings Plan, and 20,000 shares
of Common Stock owned by certain family trusts. Mr. Gabelli
disclaims beneficial ownership of the shares owned by the
family trusts.
(4) 500 shares are jointly owned with wife and sharing voting and
investment power.
(5) Includes 35 shares registered in the name of Mr. Dolan's
children with respect to which Mr. Dolan has voting and
investment power.
(6) Held for the benefit of Mr. Hurwich under the Corporation's
401(k) Savings Plan.
</FN>
</TABLE>
Spinnaker is a majority-owned subsidiary of the Corporation
whose stock is traded in the over-the-counter market and which is
listed in the National Association of Securities Dealers Automated
Quotations (NASDAQ). Mr. Gabelli beneficially owns 52,200 shares
(including 15,300 shares owned by certain family trusts which Mr.
Gabelli disclaims beneficial ownership of) (2.2% of the outstanding
shares) of Spinnaker's Common Stock. He may also be deemed to be
a beneficial owner of 2,259,063 shares (83.2% of the outstanding
shares) of Spinnaker's Common Stock owned by the Corporation
(through Lynch Manufacturing Corporation, a wholly-owned subsidiary
of the Corporation) by virtue of his ownership of 24.4% of the
shares of the Common Stock of the Corporation. Mr. Gabelli,
however, specifically disclaims beneficial ownership of all shares
of the Common Stock of Spinnaker held by the Corporation. Boyle,
Fleming, George & Co. Inc., an affiliate of Mr. Boyle, owns
warrants to purchase 689,443 shares (20%) of Spinnaker Common
Stock. Mr. Evanson owns 2,250 shares of Spinnaker Common Stock.
Mr. Dolan owns 1,225 shares of Spinnaker Common Stock.
Morgan Group is a 47% owned subsidiary of the Corporation
whose stock is traded on the NASDAQ National Market System. Mr.
Gabelli beneficially owns 10,000 shares (0.7%) of Morgan Group's
Class A Common Stock. He may also be deemed to be a beneficial
owner of 150,000 shares of Morgan Group's Class A Common Stock and
1,200,000 shares of Morgan Group's Class B Common Stock owned by
the Corporation, by virtue of his ownership of 24.4% of the shares
of Common Stock of the Corporation. Mr. Gabelli, however,
specifically disclaims beneficial ownership of all shares of Morgan
Group stock held by the Corporation. Mr. Woolard owns 200 shares
of Morgan Group's Class a Common Stock.
EXECUTIVE COMPENSATION
The following tables set forth compensation received by the
Corporation's Chief Executive Officer and each of the other
executive officers of the Corporation for the last three fiscal
years and certain information as to stock options:
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Long Term
Compensation
Awards
Name and Stock All Other
Principal Underlying Compensatin
Positions Year Salary($) Bonus($) Options ($)
<S> <C> <C> <C> <C> <C>
Mario J. Gabelli1995 325,000 625,000 - 200
Chief Executive
Officer,
Chairman of
the Board 1994 150,000 0 - 200
Chairman of
the Executive
Committee 1993 150,000 250,000 - 200
Michael J. Small1995 183,846 0 12,256 Shs
Office of the
President 1994 191,538 0 37,000 Shs -
Robert E. Dolan 1995 152,700 125,000
Chief Financial
Officer 1994 140,096 0 - 200
1993 125,096 50,000 - 200
1992 104,469 15,000 - 200
Robert A. 1995 135,200 50,000 200
Hurwich3 1994 107,538 0 - -
Vice President-
Administration,
Secretary,
General Counsel
<FN>
(1) Bonuses earned during any fiscal year are generally paid during the
following fiscal year. Mr. Gabelli used his 1995 bonus to purchase 10,373
shares of Common Stock from the Corporation.
(2) The compensation reported represents contributions made by the
Corporation to the Lynch Corporation 401(k) Savings Plan. The amount of
perquisites, as determined in accordance with the rules of the Securities
and Exchange Commission relating to Executive Compensation did not exceed
10 per cent of salary and bonus for 1994.
(3) Messrs. Small and Hurwich joined the Corporation in January 1994 and
February 1994, respectively. Mr. Small's employment terminated effective
September 1, 1995; amount for 1995 includes consulting fees paid to
Mr. Small for the remainder of 1995.
</FN>
</TABLE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Poten-
tial Value
Real- at
izable Assumed
Annual Stock
Rates of Price
Individual Apprecia-Option
Grants tion For Term
Percent
Number of
of Total
SecuritiesOptions/
Underlying SARS Exercise
Options/Granted to or
SARS Employees Base
Granted in Fiscal Price Expiration
(#) Year ($/Sh) Date 5%($) 10($)
(b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Michael J. Small12,256 100% $33.25 1/18/99 N.A.1 N.A.1
<FN>
1. The options set forth in the table were the second installment
granted to Mr. Small pursuant to an employment agreement for
Mr. Small to serve in the Office of the President. In
addition, the employment agreement provided for a third
additional option installment of 12,256 shares, which would
have had an exercise price equal to the closing prices of the
Corporation stock on January 18, 1996. All options terminated
as a result of his termination of employment effective
September 1, 1995. See Transactions with Certain Affiliated
Parties.
</FN>
</TABLE>
EXECUTIVE COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
Overview and Philosophy
The Executive Compensation and Benefits Committee
("Committee") of the Board of Directors is responsible for
developing and making recommendations to the Board of Directors
with respect to the Corporation's executive compensation policies
and administering the various executive compensation plans. In
addition, the Committee recommends to the Board of Directors the
annual compensation to be paid to the Chief Executive Officer and
each of the other executive officers of the Corporation, as well as
to other key employees. The Committee is comprised of two
independent, non-employee directors.
The objectives of the Corporation's executive compensation
program are to:
. Support the achievement of desired Corporation
performance.
. Provide compensation that will attract and retain
superior talent and reward performance.
. Ensure that there is appropriate linkage between
executive compensation and the enhancement of shareholder
value.
. Evaluate the effectiveness of the Corporation's incentive
arrangements.
The executive compensation program is designed to provide an
overall level of compensation opportunity that is competitive with
companies of comparable size, capitalization and complexity.
Actual compensation levels, however, may be greater or less than
average competitive levels based upon annual and long-term Company
performance and specific issues peculiar to the Corporation, as
well as individual performance. The Committee uses its discretion
to recommend executive compensation at levels warranted in its
judgment by corporate and individual performance.
Executive Officer Compensation Program
The Corporation's executive officer compensation program is
comprised of base salary, cash bonus compensation, Executive Stock
Purchase Loan Plan, Lynch Corporation 401(k) Savings Plan, and
other benefits generally available to employees of the Corporation.
In connection with recruiting for the Office of the President in
1994, the Corporation also awarded stock options. In 1996 the
Corporation adopted a Phantom Stock Plan application to officers
and employees of the Corporation. Mr. Gabelli elected not to
participate in the Phantom Stock Plan.
Base Salary
Base salary levels for the Corporation's executive officers
are intended to be competitive. In recommending salaries the
Committee also takes into account individual experience and
performance and specific issues particular to the Corporation. A
summary of the compensation awarded to the Chief Executive Officer
and certain other executive officers is set forth in the "Summary
Compensation Table" on page of this Proxy Statement.
Bonus Plan
The Corporation has in place a bonus plan that is based on an
objective measure of corporate performance and on subjective
evaluation of individual performance for its executive officers and
other key personnel. In general, the plan provides for an annual
bonus pool equal to 20% of the excess of (i) the consolidated pre-
tax profits of the Corporation for a calendar year over (ii) 25% of
the Corporation's shareholders' equity at the beginning of such
year adjusted for dividends paid during the year. The Executive
Compensation and Benefits Committee at its discretion may take into
consideration other factors and circumstances in awarding bonuses
such as progress toward achievement of strategic goals and
qualitative aspects of management performance. A summary of
bonuses awarded to the Chief Executive Officer and certain other
executive officers is set forth in the "Summary Compensation Table"
on page of this Proxy Statement.
Lynch Phantom Stock Plan
In February 1996 the Corporation adopted a Phantom Stock Plan
pursuant to which share units equivalent to one share of Common
Stock of the Corporation may be awarded to officers and employees
of the Corporation. Mr. Gabelli elected not to participate in the
Plan. The Committee administers the Phantom Stock Plan, including
selecting the persons to be awarded share units and number units to
be awarded. Such share units are initially valued at a trailing
average price of the Corporation's Common Stock (or such other
price as the Committee determines), vest on the first anniversary
of the date of grant and may be exercised by the grantee at any
time after vesting and prior to the fifth anniversary of the date
of Grant. Upon exercise the grantee is entitled to the difference
between the market price of the Corporation's Common Stock on the
date of exercise and the award value, multiplied by the number of
share units granted, and the Corporation may elect to pay the award
with Common Stock of the Corporation for up to 100% of the value.
Seven thousand one hundred units were awarded in February 1996, of
which 4,000 were awarded to Mr. Dolan and 2,500 were awarded to Mr.
Hurwich at $63.03 per share units.
Executive Stock Purchase Loan Plan
In December 1994, the Corporation adopted the Executive Stock
Purchase Loan Plan ("Stock Loan Plan"). The Stock Loan Plan is
intended to encourage stock ownership in the Corporation by its
executive officers. The Corporation may loan up to one hundred
percent (100%) of the purchase price of the shares to officers of
the Corporation selected by the Chairman of the Board (who is not
eligible to participate). The maximum amount of loans under the
Stock Loan Plan is $100,000 per year ($30,000 per officer per year)
and $200,000 in total, which amounts may be increased by the Board
of Directors. Loans will bear interest (currently 6.34% per annum)
and will be collateralized by the shares so acquired until the loan
has been repaid. The shares may be put to the Corporation in full
satisfaction of the loan principal. To date, no such loans have
been made to any individual under the Stock Loan Plan.
Lynch Corporation 401(k) Savings Plan
All employees of the Corporation and its subsidiaries are
eligible to participate in the Lynch Corporation 401(k) Savings
Plan, other than those employed in the Corporation's telephone
entities and those covered by a collective bargaining agreement,
after having completed one year of service (as defined in the Plan)
and having reached the age of 18.
The 401(k) Plan permits employees to make contributions by
deferring a portion of their compensation. Participating employees
also share in contributions made by their respective employers.
The annual mandatory employer contribution to each participant's
account is equal to 25% of the first $800 of the participant's
contribution. In addition, the employer may make a discretionary
contribution of up to 75% of the first $800 of the participant's
contribution. No such discretionary contribution was made in 1994.
A participant's interest in both employee and employer
contributions and earnings thereupon are fully vested at all times.
Employee and employer contributions are invested in guaranteed
investment contracts, certain mutual funds or Common Stock of the
Corporation, as determined by the participants. With respect to
the individuals listed in the Summary Compensation Table, employer
contributions of $200 were paid to the accounts of each of Messrs.
Gabelli, Dolan, and Hurwich, and each of such individuals deferred
$9,240 under the Plan during 1995, which amounts have been included
for such individual in the Summary Compensation Table.
Benefits
The Corporation provides medical life insurance and disability
benefits to the executive officers (in the case of Mr. Gabelli, it
shares the cost with Gabelli Funds, Inc.) that are generally
available to Corporation employees. The amount of perquisites, as
determined in accordance with the rules of the Securities and
Exchange Commission relating to executive compensation, did not
exceed 10% of salary and bonus for fiscal 1994.
Chief Executive Officer Compensation
The following table sets forth compensation received by Mr.
Gabelli since 1986 when Mr. Gabelli became Chairman and Chief
Executive Officer of the Corporation:
<TABLE>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salary 0 0 60,000 90,000 90,000 90,000 150,000 150,000 150,000 325,000
Bonus 0 0 30,000 0 0 0 100,000 250,000 0 625,000
</TABLE>
After considering the substantial increase in the size and scope of
the Corporation, improved financial performance as reflected by the
increase in private market value as well as public market value,
and improved return on shareholder equity, the Compensation
Committee recognized that Mr. Gabelli's 1994 and prior years'
compensation was materially below that of chief executive officers
of comparable companies, even after considering that Mr. Gabelli's
service to the Corporation is not full time. Therefore, the
Committee increased Mr. Gabelli's salary to $500,000 per year
effective July 1, 1995. In addition, the Committee recognizes the
role of leadership, particularly that of the Chief Executive
Officer, in developing existing businesses and in making strategic
acquisitions. Therefore, it is considering other forms of "at
risk" incentive compensation for Mr. Gabelli to maximize both the
intrinsic value of the Corporation's assets and the market price of
the Company's stock. In order to further identify Mr. Gabelli's
interests with that of the Corporation, the Corporation authorized
the sale by the Corporation to Mr. Gabelli of $625,000 of Common
Stock (equal to Mr. Gabelli's 1995 bonus), which resulted in the
purchase of 10,373 shares. The Corporation had a good year in 1995
including record earnings and the undertaking and/or completion of
several important strategic steps, and executive officers,
especially Mr. Gabelli, made substantial contributions to the
Corporation's performance which is reflected in the bonus awarded
to Mr. Gabelli.
Paul P. Woolard,
Chairman
Ralph R. Papitto
Members of the
Executive Compensation
and Benefits
Committee
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on
the Common Stock of the Corporation for the last five fiscal years
ended December 31, 1995 with the cumulative total return on the
broad market by the American Stock Exchange Market Value Index, and
the peer group, as measured by the Amex Service Industry Subindex
over the same period (assuming the investment of $100 in the
Corporation's Common Stock, and each of the indexes on December 31,
1990, and reinvestment of all dividends).
INVESTMENT OF $100 DOLLARS ON DECEMBER 31, 1990
WITH REINVESTMENT OF DIVIDENDS
Put graph here
INDEX ON CUMULATIVE TOTAL RETURNS SINCE 1990
- -0- Lynch Corporation
- - - Board Market = American Stock Exchange Market Value Index
- -X- Peer Group = American Stock Exchange Service Industry Index
ITEM 2
TO CONSIDER AND VOTE ON THE EXCHANGE RIGHT IN A PROMISSORY NOTE IN
A PRINCIPAL AMOUNT OF UP TO $25 MILLION THAT MAY BE ISSUED BY THE
CORPORATION
The Corporation may require funds for general corporate
purposes, including, without limitation, advances to Spinnaker,
investment in personal communication services ("PCS") and
acquisitions. If those funds are required, the Corporation may
request Gabelli Funds, Inc. ("GFI") to assist the Corporation in
obtaining up to $25 million of those funds. Mr. Gabelli is the
principal shareholder of, and controls, GFI. GFI or its
Proprietary Accounts may provide some or all of those funds. To
the extent GFI assists in obtaining funds from persons other than
GFI or its Proprietary Accounts, the Corporation would pay GFI
customary fees for such services, as determined and approved by the
Board of Directors of the Corporation. Proprietary Accounts shall
mean the accounts of (i) all subsidiaries of GFI, (ii) all
directors, officers and key employees of GFI and its subsidiaries,
including Mr. Gabelli, (iii) all accounts of members of the
immediate family of a person included in clause (ii), i.e., spouse
and minor children living with such person, and (iv) all accounts
in which (a) any one of the persons or entities listed in clauses
(i) through (iii) has at least a 10% interest or (b) in which
persons or entities listed in clauses (i) through (iii) in the
aggregate have at least a 25% interest.
It is anticipated that any such funds that are raised would be
in the nature of borrowings represented by promissory notes (the
"Notes"). It is anticipated that the Notes would bear interest at
8% per annum, with principal and interest payable not earlier than
120 days after the issue date of the Notes. It is further
anticipated that the Notes may be secured by a pledge of the stock
of certain subsidiaries of the Corporation (which may, at the time,
be subject to a prior security interest) and possibly other
security.
It is anticipated that the holder(s) of the Notes would be
entitled after the occurrence of a payment default on the Notes to
exchange the Notes for Convertible Notes of the Corporation (the
"Convertible Notes"). It is anticipated that the Convertible Notes
would have a maturity of up to 10 years, and would contain such
terms as the Board of Directors may authorize, including a right to
be converted into Common Stock at a conversion price equal to the
lowest of (i) $60 per share, (ii) the closing price of the Common
Stock on the last trading day before issuance of the Notes or (iii)
the average market price of the Common Stock during an agreed
period before the default. The closing price of the Common Stock
on the American Stock Exchange on April , 1996, was $ .
It is anticipated that any Notes held by GFI or its
Proprietary Accounts would provide that in the event of a payment
default the Corporation would use its best efforts to register
with the Securities and Exchange Commission, Convertible Notes
equal to the principal amount of Notes (plus accrued but unpaid
interest thereon) held by such party or parties and the shares of
Common Stock into which the Convertible Notes may be convertible,
for offering by the Corporation to all shareholders of the
Corporation, including Mr. Gabelli, on a basis such that each
shareholder would be entitled to acquire a portion of such
Convertible Notes as nearly equal as possible to that portion of
the outstanding shares of Common Stock owned by such shareholder on
the date the registration is declared effective. It is anticipated
that Mr. Gabelli would be able to pay for his allocable portion of
the Convertible Notes by exchanging Notes held by GFI and its
Proprietary Accounts valued at the principal amount of Notes so
exchanged plus accrued but unpaid interest thereon. It is
anticipated that the Corporation may use any net proceeds from that
offering to pay any Notes that shall not have been exchanged for
Convertible Notes. If the Notes qualify for listing on the
American Stock Exchange, the Corporation anticipates that it would
seek to have the Convertible Notes listed.
The Corporation hereby incorporates by reference the financial
statements, the supplementary financial information and
management's discussion and analysis of financial condition in the
Corporation's 1995 Annual Report ot Shareholders delivered to
shareholders with this Proxy Statement. In addition, reference is
made to the pro forma financial information in Exhibit A hereto.
The Board believes that, in a circumstance in which the Notes
would become convertible into Convertible Notes (i.e., after a
payment default on the Notes), and if the Notes (or a substantial
portion thereof) were converted, the default might be cured. The
Board considers the exchange provision of the Notes to be
reasonable and appropriate under the circumstances.
THE BOARD OF DIRECTORS (OTHER THAN MR. GABELLI, WHO IS MAKING
NO RECOMMENDATION) RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE
EXCHANGE RIGHT.
MR. GABELLI HAS NOT INDICATED HOW HE INTENDS TO VOTE THE
SHARES BENEFICIALLY OWNED BY HIM ON THIS MATTER.
TRANSACTIONS WITH CERTAIN AFFILIATED PERSONS
Mr. Gabelli is affiliated with various entities which he
directly or indirectly controls and which are engaged in various
aspects of the securities business, such as an investment advisor
to various institutional and individual clients including
registered investment companies and pension plans, as a
broker-dealer, and as managing general partner of various private
investment partnerships. On March 12, 1996, the Corporation paid
Mr. Gabelli his 1995 bonus of $625,000 and sold him 10,373 shares
of Common Stock for $625,000, or $60.25 per share, the closing
price of the Common Stock on March 11, 1996. In addition, the
Corporation loaned Mr. Gabelli $212,000 for the period from March
15, 1996 until March 31, 1996, at 6% interest, for the payment of
withholding taxes on Mr. Gabelli's 1995 bonus paid in Common Stock.
During 1995, the Corporation and its subsidiaries engaged in
various transactions with certain of these entities and the amount
of commissions, fees, and other remuneration paid to such entities,
excluding reimbursement of certain expenses related to Mr.
Gabelli's employment by the Corporation, was less than $60,000.
Pursuant to Indiana law and the Corporation's Articles of
Incorporation and as previously reported, the Corporation
indemnified Mr. Gabelli for outside legal fees of $391,575 incurred
in connection with a regulatory inquiry. See also Item 2 above.
Michael J. Small ceased to be an officer and employee of the
Corporation effective September 1, 1995, and his employment
agreement and stock options terminated as of that date. The
Corporation agreed to pay Mr. Small consulting fees of $350,000
over a three and one-quarter year period plus an additional
$600,000, half of which was paid at year-end 1995 and the other
half to be paid over three years.
See Compensation Committee Interlocks and Insider
Participation below.
Compensation Committee Interlocks and Insider Participants
Mr. Boyle, who is the Chairman and Chief Executive Officer of
Spinnaker, served as a member of the Executive Compensation and
Benefits Committee from August 17, 1995 until his resignation as a
director of the Corporation on January 17, 1996 and attended one
meeting on December 7, 1995. Messrs. Gabelli and Dolan serve as
directors of Spinnaker, which does not have a compensation
committee.
In June 1994, Spinnaker and Boyle, Fleming, George & Co., Inc.
("BF") entered into a Management Agreement (the "Management
Agreement"), pursuant to which BF agreed to provide to Spinnaker
operations management, strategic planning, acquisition analysis and
implementation, investment banking and financial advisory services
and supervision of Spinnaker's financial reporting and regulatory
obligations. Mr. Boyle, a director of the Corporation through
January 17, 1996, is a director, chief executive officer and a
principal owner of BF and pursuant to the Management Agreement
became a director and Chairman of the Board and chief executive
officer of Spinnaker.
The Management Agreement had an initial term of one year, and
is automatically renewable for a term of one additional year unless
either party gives notice of termination not less than 90 days
prior to the end of the first anniversary of the Agreement.
Thereafter, the Agreement is terminable on 90 days' notice by
either party. Pursuant to the Management Agreement BF received a
management fee of $200,000 in 1995, plus reimbursement of expenses.
The management fee for 1996 has been raised to $400,000 reflecting,
among other things, the increased size and complexity of Spinnaker.
Mr. Boyle does not receive a salary from Spinnaker, nor does Mr.
Fleming, the President of Spinnaker.
Spinnaker and BF also entered into a Warrant Purchase
Agreement (the "Warrant Purchase Agreement") in June 1994, pursuant
to which BF received a Warrant (the "A Warrant") to purchase
678,943 shares of Common Stock of Spinnaker for a price of $2.67
per share (adjusted for the three for two stock split in December
1994 and December 1995) at any time on or before June 10, 1999. BF
may also receive a warrant to purchase additional Spinnaker shares
under certain circumstances on the occurrence of an equity offering
by Spinnaker.
When Spinnaker acquired an 80.1% interest in Brown-Bridge
Industries, Inc., an acquisition opportunity developed by BF prior
to entering into the Management Agreement, certain affiliates of BF
loaned Spinnaker $322,000 at an interest rate of 18% to help
Spinnaker fund its portion of Spinnaker's acquisition and acquired
6.2% of the Brown-Bridge stock on the same terms and conditions as
Spinnaker.
INDEPENDENT AUDITORS
The Board of Directors upon the recommendation of its Audit
Committee, has reselected the firm of Ernst & Young, independent
auditors, to audit the consolidated financial statements of the
Corporation for the fiscal year ending December 31, 1996.
Management has not followed the practice of presenting the
selection of auditors to the shareholders for their approval.
Representatives of Ernst & Young are expected to be available at
the Annual Meeting with the opportunity to make a statement if they
desire to do so and to answer appropriate questions.
SECTION 16(a) REPORTING
Section 16(a) of the Securities and Exchange Acts of 1934, as
amended, requires the Corporation's directors, executive officers
and holders of more than 10% of the Corporation's Common Stock to
file with the Securities and Exchange Commission and American Stock
Exchange initial reports of ownership and reports of changes in the
ownership of Common Stock and other equity securities of the
Company. Such persons are required to furnish the Corporation with
copies of all Section 16(a) filings. Based solely on the
Corporation's review of the copies of such filings it has received
and written representations of directors and officers, the
Corporation believes that during the fiscal year ended December 31,
1995, its officers, directors, and 10% shareholders are in
compliance with all Section 16(a) filing requirements applicable to
them, except that the initial filing when Mr. Muoio became a
director was inadvertently filed approximately one week late.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1997
Annual Meeting of Shareholders must be received by the Office of
the Secretary, Lynch Corporation, 8 Sound Shore Drive, Greenwich,
Connecticut 06830, by no later than December 14, 1995, for
inclusion in the Corporation's proxy statement and form of proxy
relating to the 1996 Annual Meeting.
MISCELLANEOUS
The Board of Directors knows of no other matters which are
likely to come before the Annual Meeting. If any other matters
should properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying form of proxy to vote on
such matters in accordance with their best judgment.
The solicitation of proxies is made on behalf of the Board of
Directors of the Corporation, and the cost thereof will be borne by
the Corporation. The Corporation has employed the firm of Morrow
& Co. Inc., 345 Hudson Street, New York, New York, 10014 to assist
in this solicitation at a cost of $3,500, plus out-of-pocket
expenses. The Corporation will also reimburse brokerage firms and
nominees for their expenses in forwarding proxy material to
beneficial owners of the Common Stock of the Corporation. In
addition, officers and employees of the Corporation (none of whom
will receive any compensation therefor in addition to their regular
compensation) may solicit proxies. The solicitation will be made
by mail and, in addition, may be made by telegrams and personal
interviews, and the telephone.
ANNUAL REPORT
The Corporation's Annual Report to Shareholders for the fiscal
year ended December 31, 1995, has been sent herewith to each
shareholder. Such Annual Report, however, is not to be regarded as
part of the proxy soliciting material.
By Order of the Board of
Directors
ROBERT A. HURWICH
Secretary
Dated: April 11, 1996
<TABLE>
LYNCH CORPORATION
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995
<CAPTION>
CONVERSION
OF
CONVERTIBLE
NOTES
PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
SALES AND REVENUES 429,435 429,435
COSTS AND EXPENSES 402,144 402,144
OPERATING PROFIT 27,291 0 27,291
OTHER INCOME (EXPENSE):
Investment income 3,070 3,070
Interest expense (17,004) 2,000 (15,004)
Share of operations
of affiliated
companies 398 398
Gain on sales of
subsidiary and
affiliate stock 59 59
INCOME BEFORE INCOME
TAXES AND MINORITY
INTEREST 13,814 2,000 15,814
Provisions for
income taxes (5,415) (680) (6,095)
Minority interests (2,254) (2,254)
NET INCOME 6,145 1,320 7,465
Weighted average
shares and
share equivalents
outstanding 1,407,000 416,667 1,823,667
EARNINGS PER SHARE 4.37 4.09
<FN>
NOTES: (1) Assumes Central Products Acquisition occurred on January 1,
1995
(2) Assumes conversion of $25 million of Convertible Notes and
that the conversion price is $60 per share
(3) Central Products pro forma adjustments as filed in Form
8-K/A(1) as filed by Lynch as of October 4, 1996.
(4) All numbers except per share numbers are in thousands.
</FN>
</TABLE>
<TABLE>
LYNCH CORPORATION
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995
<CAPTION>
CONVERSION
OF DEBT
AS REPORTED ADJUSTMENTS PRO FORMA
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash
equivalents 15,921 15,921
Marketable securities
and short-term
investments 11,432 11,432
Trade accounts
receivable,
less allowances
of $ and
$737 in 1995
and 1994,
respectively
includes
$3,602 and
$3,624 of
costs in
excess of
billings at
1995 and 1994,
respectively 52,306 52,306
Inventories 33,235 33,235
Deferred income
taxes 4,242 4,242
Other current
assets 6,810 6,810
TOTAL CURRENT ASSETS 123,946 0 123,946
PROPERTY, PLANT
AND EQUIPMENT:
Land 2,068 2,068
Buildings and
improvements 16,675 16,675
Machinery and
equipment 128,397 128,397
147,140 0 147,140
Accumulated
depreciation (36,093) (36,093)
111,047 0 111,047
INVESTMENTS IN AND
ADVANCES TO
AFFILIATED COMPANIES 8,982 8,982
INTANGIBLE ASSETS, NET 53,060 53,060
OTHER ASSETS 5,702 5,702
TOTAL ASSETS 302,737 0 302,737
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to
banks 9,622 9,622
Trade accounts
payable 20,147 20,147
Accrued interest
payable 1,146 1,146
Accrued liabilities 30,135 30,135
Customer advances 3,787 3,787
Current maturities of
long-term debt 64,708 (25,000) 39,708
TOTAL CURRENT
LIABILITIES 129,545 (25,000) 104,545
LONG-TERM DEBT 113,029 113,029
DEFERRED INCOME
TAXES 11,687 11,687
MINORITY INTERESTS 12,964 12,964
SHAREHOLDERS'
EQUITY
Common Stock, no par
or stated value:
Authorized 10
million shares
issued
1,471,191 and
1,887,857 shares 5,139 25,000 30,139
Additional paid-in
capital 7,873 7,873
Retained earnings 23,776 23,776
Treasury stock of
92,528 and
92,533
shares, at
cost (1,276) (1,276)
TOTAL SHAREHOLDERS'
EQUITY 35,512 25,000 60,512
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY 302,737 0 302,737
</TABLE>
LYNCH CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of LYNCH CORPORATION (the
"Corporation") hereby appoints Joseph H. Epel and Robert A.
Hurwich, or any one of them (each with power to act alone and with
power of substitution), Proxies of the undersigned, with authority
to vote at the Annual Meeting of Shareholders of the Corporation to
be held May 9, 1996 and at any adjournments thereof, all the shares
of Common Stock of the Corporation which the undersigned would be
entitled to vote if then personally present, upon the matters
specified below, and, in their discretion, upon such other matters
that may properly come before the Annual Meeting, and any
adjournments thereof.
The shares represented by this Proxy shall be voted in accordance
with the instructions given by the shareholder, but if no
instructions are given, this Proxy will be voted FOR all of the
nominees for Directors listed in Item 1 and FOR Item 2 and, in the
discretion of the Proxies, with respect to any other matter that is
properly brought before the Annual Meeting.
(continued and to be signed on the reverse side)
LYNCH CORPORATION
1. Election of Directors Duly Nominated:
FOR WITHHOLD Morris Berkowitz, E. Val
Cerutti, Paul J. Evanson, Mario
J. Gabelli, Salvatore Muoio,
Ralph R. Papitto and Paul P.
Woolard. (INSTRUCTION: To
withhold authority to vote for
one or more individual nominees,
write such name or names on the
space provided below.)
2. Right to exchange a promissory note in a principal amount up to
$15 million that may be issued by the Corporation into Convertible
Notes under certain circumstance, as described in the Proxy
Statement.
FOR AGAINST WITHHOLD
Please sign exactly as your name
appears on this Proxy. All joint
owners must sign. When acting as
attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation,
please sign in full corporate name by
President or other authorized person.
If a partnership, please sign in full
partnership name by authorized
person.
Dated: , 1995
(L.S.)
(Signature of Shareholder)
(L.S.)
(Signature of Shareholder)
PLEASE DATE, SIGN AND MAIL THIS PROXY
IN THE ENVELOPE PROVIDED.
