SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Lynch Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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.:
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4) Date Filed:
<PAGE>
April 22, 1999
To Lynch Shareholders
Our Lynch 1999 Annual Meeting will be held at the Indian Harbor Yacht Club, 710
Steamboat Road, Greenwich, CT, 06830, on Thursday, May 13, 1999 at 3:00 p.m. for
the election of directors. A formal Notice of the Meeting and Proxy Statement is
included.
After the formal meeting, there will be a presentation and discussion of matters
concerning your company and, as in the past, I will be available to answer
questions.
Among the topics to be discussed this year will be the previously announced
proposed spin off of Lynch Interactive Corporation, which would own Lynch's
multimedia and services businesses, and you will have an opportunity to analyze
the benefits of this action.
I encourage all stockholders to personally attend the Annual Meeting.
Mario J. Gabelli
Chairman of the Board and
Chief Executive Officer
1
<PAGE>
LYNCH CORPORATION
401 Theodore Fremd Avenue
Rye, NY 10580
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1999
To The Shareholders of April 22, 1999
Lynch Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Lynch
Corporation, an Indiana Corporation, will be held at the Indian Harbor Yacht
Club, 710 Steamboat Road, Greenwich, CT 06830, Thursday, May 13, 1999, 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 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 April 4, 1999 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.
2
<PAGE>
LYNCH CORPORATION
401 Theodore Fremd Avenue
Rye, NY 10580
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 Indian Harbor
Yacht Club, Greenwich, Connecticut on May 13, 1999, 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 22, 1999.
Only shareholders of record at the close of business on April 4, 1999 are
entitled to notice of, and to vote at, the Annual Meeting. As of the close of
business on such date, 1,418,248 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, 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.
3
<PAGE>
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. If a proposed Spin Off of
Lynch Interactive Corporation, which would hold the Corporation's multimedia and
transportation services businesses, is effected, certain directors will become
directors of Interactive and some may cease to be directors of the Company and
certain other persons may be added as directors of the Company.
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 7, 1998. 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, 1999 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 4 through 6 of this Proxy Statement. All such
information has been furnished to the Corporation by the nominees.
Name; Age; Business Experience
and Principal Occupation
for Last 5 Years; and Directorships in
Public Corporations and Investment Companies
--------------------------------------------
<TABLE>
<CAPTION>
Served as
Director from
<S> <C>
E. Val Cerutti, 59
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, 57
President (since 1995) of Florida Power & Light Co.; Vice President,
Finance and Chief Financial Officer of FPL Group, Inc. (1992- 1995), 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 adhesive backed materials; Director of FPL
Group, Inc., Florida Power & Light Company and Southern Energy Homes,
Inc............................................................................... 1988
John C. Ferrara, 47
Executive Vice President and Chief Financial Officer (1998-January 1999) of
Golden Books Family Entertainment, Inc., a NASDAQ company which published,
licensed and marketed entertainment products and subsequently filed for
protection under the Bankruptcy Act in late February 1999; Vice President
and Chief Financial Officer (1989-1997) of Renaissance Communications
Corp., a NYSE company which owned and operated television broadcast
stations; from 1973-1989, various financial positions at The American
Express Company, National Broadcasting Company (NBC) and Deloitte & Touche;
Director of Gabelli Funds, Inc. (since 1999)...................................... 1998
Mario J. Gabelli, 56
Chairman and Chief Executive Officer of the Corporation (since 1986);
Chairman and Chief Executive Officer of Gabelli Funds, Inc., (since 1980),
a private company which makes investments for its own account; Chairman and
Chief Executive Officer of Gabelli Asset Management Inc. (since 1999), a
NYSE listed holding company for subsidiaries engaged in various aspects of
the securities business (including GAMCO Investors, Inc. of which he is
Chairman and Chief Executive Officer); Director/Trustee and/or President of
thirteen registered investment companies managed by Gabelli Funds, LLC
(since 1986); Director of East/West Communications, Inc.; Governor of the
American Stock Exchange........................................................... 1986
</TABLE>
8
<PAGE>
Name; Age; Business Experience
and Principal Occupation
for Last 5 Years; and Directorships in
Public Corporations and Investment Companies
--------------------------------------------
<TABLE>
<CAPTION>
Served as
Director from
-------------
<S> <C>
David C. Mitchell, 57
President of the Telephone Group and member of the Board of Directors of
Rochester Telephone (now Frontier Corp.) until 1992; President and Chief
Executive Officer of Personal Sound Technologies, Inc., a development stage
new venture company bringing a technology hearing aid to market (1992-3);
Advisor to C-Tec Corporation from 1993 to its corporate reorganization in
1997; Director of Commonwealth Telephone Enterprises, Inc. (where he has
also serves as an adviser), USN Communications, Inc.; Marine Midland Bank
(Rochester, NY Board), Finger Lakes Long Term Care Insurance Co. and IBS
International Corp................................................................ 1998
Salvatore Muoio, 39
Principal and Chief Investment Officer of S. Muoio & Co. LLC, a securities
advisory firm (since 1996); Securities Analyst and Vice President of Lazard
Freres & Co., L.L.C., an investment banking firm (1995-1996); Securities
Analyst at Gabelli & Company, Inc. (1985-1995).................................... 1995
Ralph R. Papitto, 72
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.;
Chairman of the Board of Trustees of Roger Williams
University........................................................................ 1995
</TABLE>
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
----------------------------------------------
There were four meetings of the Board of Directors during 1998, and the
Board acted three times 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 two times during
1998. The present members are Messrs. Ferrara (Chairman) and Mitchell.
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
Bonus Plan, 401(k) Savings Plan, and Phantom Stock Plan, as summarized on pages
7 through 11 of this Proxy Statement; and performs such
<PAGE>
other duties as may be assigned to it by the Board of Directors. The Executive
Compensation and Benefits Committee met two times during 1998 and acted once by
unanimous written consent. The present members are Messrs. Papitto (Chairman),
Cerutti and Evanson. A Subcommittee consisting of Messrs. Papitto and Cerutti
deal with matters relating to the Principal Executive Bonus Plan and in 1998
acted once by unanimous written consent.
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 acted once
during 1998 by unanimous written consent. 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
-------------------------
In 1998, Directors, who were not otherwise employees, received 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 $15,000 worth of Common Stock of the Corporation at the beginning
of each year (but not less than 200 shares). Effective January 1999, directors,
who are not otherwise employees, receive a monthly cash retainer of $1,500, a
fee of $2,000 for each in personam Board of Directors Meeting and a fee of
$1,000 for each telephonic Board of Directors meeting (which lasts for at least
one hour) and each committee meeting the director attends. In addition, a
non-employee director serving as a committee chairman receives an additional
$2,000 annual cash retainer. 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. Cerutti received $9,000 as a director of Lynch Systems, Inc., a
subsidiary of the Company, for 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth, as of March 15, 1999, 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 6 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 necessarily 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, Form 4s and Form 5s that have
been filed with the Securities and Exchange Commission or which has otherwise
been furnished to the Corporation.
<PAGE>
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner* of Beneficial Ownership of Class
- ---------------------------------------------------------------------------------
<S> <C> <C>
Dimensional Fund Advisors, Inc. .................. 86,9001 6.1%
Mario J. Gabelli ................................. 323,8362 22.8%
E. Val Cerutti ................................... 1,1523 **
Paul J. Evanson .................................. 5,652 **
John C. Ferrara .................................. 414 **
David C. Mitchell ................................ 4004 **
Salvatore Muoio .................................. 852 **
Ralph R. Papitto ................................. 952 **
Robert E. Dolan .................................. 2355 **
Robert A. Hurwich ................................ 2576 **
All Directors and Executive
Officers as a group (nine in
total) ......................................... 333,750 23.5%
<FN>
* The address of each holder of more than 5% of the Common Stock is as
follows: 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) 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 86,900 shares.
Dimensional disclaims beneficial ownership of all such shares.
(2) Includes 252,836 shares of Common Stock owned directly by Mr. Gabelli
(including 2,922 held for the benefit of Mr. Gabelli under the
Corporation's 401(k) Savings Plan), 1,000 shares owned by a charitable
foundation of which Mr. Gabelli is a trustee and 70,000 shares owned by
a limited partnership in which Mr. Gabelli is the general partner and has
a 20% interest. Mr. Gabelli disclaims beneficial ownership of the shares
owned by the foundation and by the partnership, except for his 20%
interest therein.
(3) 500 shares are jointly owned with wife and sharing voting and investment
power.
(4) 200 shares 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 Common
Stock and Class A Common Stock is traded on the American Stock Exchange (AMEX).
Mr. Gabelli may be deemed to be a beneficial owner of 2,237,203 shares (61% of
the outstanding shares) of Spinnaker's Common Stock and 2,259,063 shares (61% of
the outstanding shares) of Spinnaker's Class A Common Stock owned by the
Corporation (through Lynch Manufacturing Corporation, a wholly-owned subsidiary
of the Corporation) by virtue of his ownership of 22.8% of the shares of the
Common Stock of the Corporation. Mr. Gabelli, however, specifically disclaims
beneficial ownership of all shares of the Common Stock and Class A Common Stock
of Spinnaker held by the Corporation. As of April 1, 1999, Mr. Evanson owns
1,500 shares of Spinnaker Common Stock and Mr. Dolan owns 1,125 shares of
Spinnaker Common Stock.
<PAGE>
Morgan Group is an approximately 55% owned subsidiary of the Corporation
whose stock is traded on the American Stock Exchange (AMEX). As of April 1, 1998
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 155,900 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
22.8% 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.
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:
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual Compensation
Long Term
Name and Compensation All Other
Principal Awards Stock Compensation
Position Year Salary($) Bonus($)1 Underlying Option2 ($)3
<S> <C> <C> <C> <C> <C>
Mario J. Gabelli ................ 1998 500,000 0 -- 200
Chief Executive Officer, .... 1997 500,000 0 25,000 200
Chairman of the Board ....... 1996 500,000 0 -- 200
Chairman of the Executive
Committee
Robert E. Dolan ................. 1998 240,000 50,000 2,000 200
Chief Financial Officer ..... 1997 201,000 0 4,000 200
1996 172,500 200,000 4,000 200
Robert A. Hurwich ............... 1998 164,000 20,000 1,000 200
Vice President-Admin.- ....... 1997 156,000 0 1,500 200
istration, Secretary, ....... 1996 147,500 50,000 2,500 200
General Counsel
Mark M. Feldman4 ................ 1998 229,800 0 0 0
- --------
<FN>
1 Bonuses earned during any fiscal year are generally paid during the
following fiscal year.
2 Shares of Common Stock underlying Phantom Stock Plan awards.
3 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 the lesser of $50,000 or 10% of salary and bonus for
1998.
4 Mr. Feldman served as Executive Vice President of the Corporation from
February, 1998 through December 31, 1998.
</FN>
</TABLE>
18
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR1
--------------------------------------
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation For Option Term
Number of Percent of Exercise or Expira-
Securities Total Options/ Base Price tion
Underlying SARs Granted to ($/Sh)1 Date
Options/SARs Employees in
Granted Fiscal Year
Name (#) 5% ($)2 10%($)2
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Robert E. Dolan 2,000 51 $84.63 3/ 6 /02 $ 0 $ 0
Robert A. Hurwich 1,000 26 $84.63 3/ 6 /02 $ 0 $ 0
<FN>
1. Grants were awards under the Phantom Stock Plan. The base price was the
average price of the stock for the 30 trading days ending December 31,
1997. The grants vest on the first anniversary of the date of grant (i.e.,
March 6, 1999).
2. Phantom Stock Rights become exercisable only if at any time during the term
the stock price exceeds two times the base price (or $169.26 per share). No
amounts would be payable under the rights unless the stock price
appreciation exceeds 10% per annum.
</FN>
</TABLE>
AGGREGATE OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
----------------------------------------
<TABLE>
<CAPTION>
Number of Securities Under- Value of Unexercised In-the-
lying Options/SARs at Fiscal Money Options/SARS at
Shares Acquired on Value Realized Year-End (#) Fiscal Year-End ($)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
(a) (b) (c) (d) (e)1
<S> <C> <C> <C> <C>
Mario J. Gabelli None None None/25,000 $0/$12,250
Robert E. Dolan None None None/10,000 $0/$31,840
Robert A. Hurwich None None None/5,000 $0/$19,410
<FN>
1. Phantom Stock Rights become exercisable only if at any time during the
term the stock price per share exceeds two times the base price. The
base prices are $63.03 for rights granted in 1996, $70.11 for rights
granted in 1997, and $84.63 for rights granted in 1998. The stock price
has not exceeded two time the base price.
</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
<PAGE>
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:
o Support the achievement of desired Corporation performance.
o Provide compensation that will attract and retain superior talent
and reward performance.
o Ensure that there is appropriate linkage between executive
compensation and the enhancement of shareholder value.
o Evaluate the effectiveness of the Corporation's incentives for key
executives.
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, 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. In 1997, the Committee
reviewed its executive compensation program for the chief executive officer with
that of certain other companies, although it was difficult to find comparable
companies, and the Committee based its compensation actions on factors other
than specific comparisons to other companies.
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 1996 the Corporation adopted a Phantom Stock
Plan applicable to officers and employees of the Corporation. Mr. Gabelli
elected not to participate in the Phantom Stock Plan in 1998.
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 relating to the
Corporation. A summary of the compensation awarded to the Chief Executive
Officer and the other executive officers is set forth in the "Summary
Compensation Table" on page 6 of this Proxy Statement. Salary increases for 1998
were based upon a variety of judgmental factors, including the individual
performances of the officers in 1997 and their anticipated contributions to the
Corporation in 1998, the increasing size and complexity of the Corporation and
the general financial and strategic performance of the Corporation. With respect
to Mr. Gabelli, the Committee determined again not to raise Mr. Gabelli's salary
of $500,000 per year.
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 (other than the Principal Executive
Officer, i.e., Mr. Gabelli) 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 less (ii)
25% of the Corporation's average shareholders equity at the beginning of such
year. For 1998 shareholders equity was the average of shareholders'
<PAGE>
equity at the beginning of 1998 and 1997, and for 1999 and beyond shareholders
equity will be the average of shareholders equity at the beginning of the prior
three years and the beginning of the two preceding years. The bonus pool would
also be reduced by amounts paid pursuant to the Principal Executive Bonus Plan.
See next paragraph below. The Executive Compensation and Benefits Committee in
its discretion may take into consideration other factors and circumstances in
determining the amount of the bonus pool and awarding bonuses such as progress
toward achievement of strategic goals and qualitative aspects of management
performance. The total bonuses paid for 1996 and 1998 exceeded the bonus formula
because of the work by management in achieving strategic goals, including
investments in personal communications services, acquisitions and financings. No
bonuses were paid to executive officers for 1997. The breakdown of the bonus
pool is not based upon a formula but upon judgmental factors.
Mr. Gabelli is the sole participant in the Principal Executive Bonus Plan
adopted by the Board of Directors and approved by shareholders in 1997. The
Principal Executive Bonus Plan is similar to the regular Bonus Plan, except that
it (i) specifies a Maximum Annual Bonus (as defined therein) which is based on a
maximum percentage (80%) of a specified bonus pool and (ii) removes the
discretion of the Committee to award annual bonuses above the established
Maximum Annual Bonus. The Plan is designed to satisfy an exemption from Section
162(m) of the Internal Revenue Code, which denies a deduction by an employer for
certain compensation in excess of $1 million per year. No bonus was paid to Mr.
Gabelli for 1997 or 1998 under the Principal Executive Bonus Plan.
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 6 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. The Committee
administers the Phantom Stock Plan, including selecting the persons to be
awarded share units and number of 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 four 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 unit. Thirty-one thousand, seven hundred units were awarded in March
1996, of which 25,000 were awarded to Mr. Gabelli, 4,000 were awarded to Mr.
Dolan and 1,500 were awarded to Mr. Hurwich at $70.106 per share unit. Three
thousand nine hundred units were awarded in March 1998, of which 2,000 were
awarded to Mr. Dolan and 1,000 were awarded to Mr. Hurwich at $84.63 per share
unit. The awards were discretionary and not based upon a formula but were
intended to give executive officers a substantially increased equity equivalent
interest in the Corporation as a continuing incentive. In 1998, the Plan, as
well as outstanding rights, was amended to provide that rights would become
exercisable only if at any time during the term thereof the stock price exceed
twice times the base or grant price.
<PAGE>
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 certain of its subsidiaries are
eligible to participate in the Lynch Corporation 401(k) Savings Plan, 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 1998. 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 whom
deferred $9,200 under the Plan during 1998, which amounts have been included for
each individual in the Summary Compensation Table.
Benefits
- --------
The Corporation provides medical life insurance and disability benefits to
the executive officers 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 1998.
Chief Executive Officer Compensation
- ------------------------------------
The following table sets forth compensation received by Mr. Gabelli for the
last ten years as Chairman and Chief Executive Officer of the Corporation:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salary 90,000 90,000 90,000 150,000 150,000 150,000 325,000 500,000 500,000 500,000
Bonus 0 0 0 100,000 250,000 0 625,000 0 0 0
</TABLE>
<PAGE>
Mr. Gabelli performs the usual functions of the chief executive officer of
a company and is particularly involved in the development of acquisition,
investment and financial strategies. 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. Therefore, the
Committee increased Mr. Gabelli's salary to $500,000 per year effective July 1,
1995, with no raise since then. 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
considers 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. Accordingly, the Committee granted Mr. Gabelli
25,000 units under the Corporation's Phantom Stock Plan in 1997. Previously, the
Corporation authorized the sale by the Corporation to Mr. Gabelli of $625,000 of
Common Stock in March 1996 (equal to Mr. Gabelli's 1995 bonus), which resulted
in the purchase of 10,373 shares. 1998 was a year of certain accomplishments,
including record EBITDA and the undertaking and/or completion of several
important strategic steps, including acquisitions and the harvesting and cost
cutting initiatives. However, 1998 was also a year of certain disappointments
including the profitability of certain manufacturing operations. Executive
officers, including Mr. Gabelli, made substantial contributions to the
Corporation's performance; however, no bonus was awarded to Mr. Gabelli.
Ralph R. Papitto, Chairman of the Executive
Compensation and Benefits Committee
25
<PAGE>
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, 1998 with the cumulative total return over the same period on the broad
market, as measured by the American Stock Exchange Market Value Index, and on a
peer group, as measured by a composite index based on the total returns earned
on the stock of the publicly traded companies included in the Media General
Financial Services database under the three Standard Industrial Classification
(SIC) codes within which the Corporation conducts the bulk of its business
operations: SIC Code 4813, Telephone Communications, except Radio Telephone (105
companies, SIC Code 267, Converted Paper and Paperboard Products, except Boxes
(33 companies) and SIC Code 4213, Trucking, except Local (52 companies). The
data presented in the graph assumes that $100 was invested in the Corporation's
Common Stock and in each of the indexes on December 31, 1993 and that all
dividends were reinvested.
INVESTMENT OF $100 DOLLARS ON DECEMBER 31, 1993
-----------------------------------------------
WITH REINVESTMENT OF DIVIDENDS
------------------------------
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY, PEER GROUP AND BROAD MARKET
------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------
COMPANY/INDEX/MARKET 1993 1994 1995 1996 1997 1998
- -------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Lynch Corporation 100.00 130.43 254.35 306.52 360.87 306.52
Peer Group Index 100.00 94.89 106.35 115.41 139.49 157.26
AMEX Market ..... 100.00 88.33 113.86 120.15 144.57 142.61
</TABLE>
The Industry Index Chosen was:
A Composite of SIC Codes - 267, 4213 and 4813
The Broad Market Index Chosen was:
American Stock Exchange
26
<PAGE>
MISCELLANEOUS
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. During 1998, 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 (including approximately $72,000 reimbursement in connection with an
airplane in part owned by a subsidiary of Gabelli Funds, Inc.), was less than
$60,000.
As of August 12, 1996, Rivgam Communicators, L.L.C., a subsidiary of GFI,
agreed to pay a subsidiary of the Corporation a 10% net profit interest (after a
capital charge) in Rivgam in return for certain services provided or to be
provided, by the Corporation's subsidiary in connection with bidding on and
developing PCS licenses. In December, 1998, Rivgam transferred to the subsidiary
of the Corporation a 10 megahertz PCS license in the Las Cruces, NM BTA in full
satisfaction of Rivgam's obligations under the agreement. The cost of the
license to Rivgam in the Federal Communications Commission's auction in 1997 was
$674,000. In March, 1997 and February 1998, Bal/Rivgam, L.L.C. and BCK/Rivgam,
L.L.C., in which affiliates of GFI have a 49.9% interest, agreed to pay the
subsidiary a 5% net profits interest (after a capital charge) in Bal/Rivgam and
BCK/Rivgam, respectively, in return for certain services provided or to be
provided by the Corporation's subsidiary in connection with bidding on and
developing wireless communication service licenses and local multipoint
distribution services licenses. Mr. Gabelli is the principal shareholder of GFI
and is its Chairman and Chief Executive Officer.
In 1998, the Corporation entered into a lease for approximately 5,000
square feet in a building in Rye, New York, recently purchased by an affiliate
of Mr. Gabelli. The lease runs through December, 2002, and provides for rent at
approximately $18.00 per square foot, per annum plus a minimum of $2.50 per
square foot per annum for electricity, subject to adjustment for increases in
tax and other operating expenses. The amount of the lease is currently
approximately $8,620 per month.
In 1998, the Corporation has entered into a non-exclusive agreement with
Gabelli & Company, Inc. ("G&C"), a subsidiary of GFI, pursuant to which G&C
would act as a financial advisor to assist the Corporation in the realization of
the value of its television investments. In the event that a transaction is
consummated with a party contacted by G&C, the Corporation would pay G&C a fee
of 0.75% of the consideration received.
INDEPENDENT AUDITORS
--------------------
Representatives of Ernst & Young, the Corporation's auditors for 1998, 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. The
Corporation has not yet selected a principal auditor for 1999.
On August 25, 1997, the Corporation's majority-owned subsidiary Spinnaker
Industries, Inc. ("Spinnaker") dismissed Deloitte & Touche LLP, independent
accountants ("DT"), as the principal accountant for Central Products Company, a
wholly owned subsidiary of Spinnaker ("Central Products"), and expanded the
auditing responsibility
<PAGE>
of the Corporation's and Spinnaker's principal accountants, Ernst & Young, to
include Central Products operations. Ernst & Young has served as the
Corporation's and Spinnaker's principal independent accountant since at least
1988. Ernst & Young referred to DT's audits of Central Products' financial
statements for the year ended December 31, 1996 in its reports regarding its
audits of the financial statements of Spinnaker and the Corporation.
Spinnaker's Audit Committee, with the knowledge of the Corporation's Audit
Committee, recommended the foregoing change in accountants to Spinnaker's Board
of Directors, who approved such action on August 12, 1997. The Spinnaker Audit
Committee's recommendation was based upon its desire to consolidate its annual
audit process under one independent accounting firm.
The report of DT on Central Product's financial statements for the year
ended December 31, 1996 did not contain an adverse opinion or a disclaimer of an
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles. There were no disagreements with DT on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure during those two periods and in the subsequent interim
periods, which if they had not been resolved to the satisfaction of DT, would
have caused it to make reference to such disagreement in its report on Central
Products' financial statements.
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, 1998, its officers, directors, and 10% shareholders are in
compliance with all Section 16(a) filing requirements applicable to them.
PROPOSALS OF SHAREHOLDERS
-------------------------
Proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Office of the Secretary, Lynch
Corporation, 401 Theodore Fremd Avenue, Rye, NY 10580, by no later than December
24, 1999, for inclusion in the Corporation's proxy statement and form of proxy
relating to the 2000 Annual Meeting.
<PAGE>
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, 1998, 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 22, 1999
30
LYNCH CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of LYNCH CORPORATION (the "Corporation")
hereby appoints Robert E. Dolan 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 13, 1998 at 3:00 p.m., 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, 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)
<PAGE>
LYNCH CORPORATION
1. Election of Directors Duly Nominated:
FOR WITHHOLD E. Val Cerutti, Paul J. Evanson, John C. Ferrara, Mario J.
Gabelli, David C. Mitchell, Salvatore Muoio, and Ralph R. Papitto.
(INSTRUCTION: To withhold authority to vote for one or more individual
nominees, write such name or names on the space provided below.)
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: , 1999
(L.S.)
(Signature of Shareholder)
(L.S.)
(Signature of Shareholder)
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE
ENVELOPE PROVIDED.
