One Enterprise Drive
Shelton, Connecticut 06484
(203) 926-1801
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
Your proxy is hereby solicited on behalf of the Board of
Directors of Data Switch Corporation (herein the "Company") for use
at the 1994 Annual Meeting of the Shareholders. The 1994 Annual
Meeting is to be held on Wednesday, June 22, 1994, commencing at
10:00 a.m., at the Ramada Inn, 780 Bridgeport Avenue, Shelton,
Connecticut 06484. The purposes of the meeting are set forth
herein and in the accompanying Notice of Annual Meeting.
It is anticipated that these materials will be mailed on or
after May 15, 1994 to all shareholders entitled to vote at the
meeting. Any person giving a proxy has the right to revoke it by
executing and delivering a later proxy, by attending the meeting
and voting his or her shares in person or by giving written notice
of revocation to the Company prior to the Annual Meeting.
The cost of the solicitation of these proxies is being
borne by the Company. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners.
Proxies may also be solicited by certain of the Company's
directors, officers and employees, acting without additional
compensation for such services.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
All holders of the Company's Common Stock, par value $.01
(herein the "Common Shares") of record as of the close of business
on May 1, 1994 are entitled to vote at the Annual Meeting. Each
holder is entitled to one vote per Common Share. There is no
cumulative voting.
Security Ownership of Directors, Management and Certain Beneficial
Owners
As of the close of business on December 31, 1993, 12,175,849
Common Shares were issued and outstanding. The following table
sets forth, as of such date, information relating to the beneficial
ownership of the Company's Common Shares by each person known to
the Company to be beneficial owner of more than 5% of the Common
Shares, by each director, by each of the named executive officers
and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
Approximate
Percentage of
Name and Address Number of Shares Outstanding Shares
<S> <C> <C>
Richard E. Greene* 2,212,079(a) 18.0%
4255 Gulf Drive #125
Holmes Beach, FL 34217
Beall Technologies, Inc. 1,489,300 12.3%
and Purnendu Chatterjee
100 Lighting Way
Secaucus, NJ 07094
Wechsler & Co., Inc. 898,016(b) 6.9%
105 South Bedford Road
Suite 310
Mount Kisco, NY 10549
Dimensional Fund Advisors Inc. 788,700 6.5%
1299 Ocean Avenue
Santa Monica, CA 90401
William J. Lifka* 40,000(c) 0.3%
610 N. Flagship Drive
Salem, SC 29676
Frederick Dietz 100,357(d) 0.8%
31 Doe Hollow Road
Trumbull, CT 06611
Anthony J. Fusarelli 26,334(e) 0.2%
6 Crescent Lane
Trumbull, CT 06611
Michael D. Stashower* 86,305(f) 0.7%
14 Cardinal Lane
Westport, CT 06880
Brandt R. Allen* 0 0.0%
1208 Blueridge Road
Charlottesville, VA 22903
D. David Cohen* 25,168(g) 0.2%
82 Tara Drive
Roslyn, NY 11576
Norman L. Rasmussen* 0 0.0%
59 Commercial Wharf
Boston, MA 92110
Irwin J. Sitkin* 5,533(h) 0.2%
3500 Mystic Pointe Drive
Apt. 1601
Aventura, FL 33180
All directors and officers 2,552,249(i) 20.5%
as a group
(14 persons)
<FN>
*Director
________________
(a) Includes 131,249 Common Shares owned of record by a trust for
the benefit of Mr. Greene's children. Also includes 48,000 Common
Shares owned of record by Mr. Greene's wife. Mr. Greene disclaims
beneficial ownership as to such Common Shares. Also includes
vested options to purchase a total of 80,000 shares.
(b) Assumes conversion of Data Switch 8-1/4% Convertible
Subordinated Debentures, T-Bar 9% Convertible Subordinated
Debentures and exercise of Data Switch Common Stock Purchase
Warrants, representing a total of 898,016 Common Shares.
(c) Includes vested options to purchase 10,000 Common Shares.
(d) Includes vested options to purchase 61,496 Common Shares.
(e) Includes vested options to purchase 9,917 Common Shares.
(f) Assumes conversion of Data Switch 8-1/4% Convertible
Subordinated Debentures, representing 7,225 shares. Also includes
vested options to purchase 45,833 Common Shares.
(g) Includes 505 Common Shares owned of record by trusts for the
benefit of Mr. Cohen's children and 864 Common Shares owned of
record by Mr. Cohen's wife. Mr. Cohen disclaims beneficial
ownership as to such Common Shares. Also includes vested options
to purchase 3,333 Common Shares.
(h) Includes vested options to purchase 13,337 Common Shares.
(i) Includes vested options to purchase 259,930 Common Shares and
assumes conversion of Data Switch 8-1/4% Convertible Subordinated
Debentures representing 7,225 Common Shares.
</TABLE>
ELECTION OF DIRECTORS
Nominees
The Company's Bylaws currently provide for the election of a
minimum of three and a maximum of nine directors. All of the seven
nominees for directorships are currently serving as such, and five
were previously elected by the shareholders. Messrs. Allen and
Rasmussen were appointed by the Board in October 1993. The term of
the office of each person elected as a director will continue until
the next Annual Meeting of Shareholders, unless sooner terminated
pursuant to the Company's Articles of Incorporation or Bylaws.
Unless otherwise instructed on the proxy to withhold votes for
any nominee, the proxy holders will vote the proxies received by
them for the nominees named below. In the event that any nominee
of the Company is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors
to fill the vacancy. The Company is not aware of any nominee who
will be unable, or who intends to decline, to serve as a director.
The names and ages of the nominees as of March 31, 1994, and
certain information about them are set forth below:
Director
Name of Nominee Age Principal Occupation Since
William J. Lifka 64 Chairman, President and Chief 1985
Executive Officer of the
Company
Brandt R. Allen 53 Associate Dean and 1993
Professor, Darden
Business School
D. David Cohen 53 Attorney in private practice 1992
and Of Counsel, Parker
Duryee Rosoff & Haft
Richard E. Greene 56 Founder of the Company 1977
Norman L. Rasmussen 65 President and Chief Executive 1993
Officer, SofTech, Inc.
Irwin J. Sitkin 63 Retired Vice President, 1989
Corporate Administration of
Aetna Life and Casualty
Company
Michael D. Stashower 67 Retired Executive Vice President 1985
and Chief Financial Officer
of the Company
William J. Lifka became Chairman, President and Chief Executive
Officer of the Company in December 1993, and has been a director of
the Company since 1985. From 1984 to 1993, Mr. Lifka was President
and Chief Executive Officer of Summagraphics Corporation. From
1979 to 1984, Mr. Lifka held various key management positions at
International Telephone and Telegraph Corporation, where his most
recent title was Vice President and Group General Manager,
Communications.
Brandt R. Allen has been a director of the Company since October
1993. Since 1970, he has been on the faculty of the Darden
Business School, University of Virginia, where he is currently
Associate Dean and the James C. Wheat Professor of Business
Administration. Prior to joining the University of Virginia
faculty, Mr. Allen was a professor at the Harvard Business School.
D. David Cohen has been a director of the Company since May 1992.
He previously served as a director of the Company from 1986 to
1988. He is currently engaged in the private practice of law in
New York and is Of Counsel to the New York law firm of Parker
Duryee Rosoff & Haft. From December 1988 to December 1990, while
also engaged in the practice of law as a member of Parker Duryee
Rosoff & Haft, Mr. Cohen served as Vice President and General
Counsel of the Company. From 1983 to 1988 he was a partner in the
law firm of Cooper, Cohen, Singer & Ecker.
Richard E. Greene is founder of the Company. He has been a
director since the inception of the Company in 1977 and was
Chairman of the Board until December 1993. Mr. Greene was employed
from 1974 until 1976 as General Manager of the Computer Switch
Division of T-Bar Incorporated. From 1963 to 1974, he served in
various sales, marketing and management capacities with IBM. Mr.
Greene is also a trustee of Ward Technical College and The Computer
Museum.
Norman L. Rasmussen has been a director of the Company since
October 1993. Since 1991, he has been President, Chief Executive
Officer and a director of SofTech, Inc. Prior to his employment
with SofTech, he headed Teleprocessing, Inc., a systems integration
firm which he founded. Mr. Rasmussen was a member of the
Massachusetts Governor's Industry Advisory Committee on Information
Processing from 1986 to 1994. He was employed by IBM in various
marketing and development positions from 1953 to 1974.
Irwin J. Sitkin has been a director of the Company since 1989. Mr.
Sitkin is a retired Vice President, Corporate Administration, of
Aetna Life and Casualty Company. During his 35 years at Aetna, Mr.
Sitkin held executive positions in data processing and information
systems. Mr. Sitkin is also a director of HaL Computer Systems
Incorporated.
Michael D. Stashower has been a director of the Company since 1985.
From 1990 until February 1994, he served as Executive Vice
President, Chief Financial Officer and Treasurer of the Company.
Previously, Mr. Stashower served as Executive Vice President of
Softstrip, Inc. Prior to joining Softstrip, Mr. Stashower held
various key management positions at Perkin-Elmer Corporation, where
his most recent title was Senior Vice President, Finance.
Meetings, Committees and Attendance
The Board of Directors of the Company held eight regular
meetings in 1993. During 1993, the Board maintained two standing
committees: the Compensation and Stock Option Committee and the
Audit Committee. Each incumbent director attended at least 75% of
the aggregate of: (1) the total number of Board meetings held
during the period he was a director; and (2) the total number of
meetings held by all committees of the Board on which he served
during such period.
The Compensation and Stock Option Committee reviews the
Company's remuneration policies and practices, administers certain
of the Company's incentive compensation and stock option plans and
establishes the salaries of the executive officers of the Company.
The Audit Committee reviews the external audit programs of the
Company and its subsidiaries and the adequacy of the Company's
internal controls and systems, and monitors compliance with the
Company's conflicts of interest and business ethics policies. The
committees generally meet separately from, but on the same days as,
regularly scheduled Board meetings. At least once annually, the
Audit Committee meets separately with the Company's independent
outside auditors.
Compensation of Directors
Directors who are not employees or officers of the Company
(herein the "Outside Directors") receive the following
compensation: (1) $8,000 per year as a retainer; (2) $1,000 per
Board meeting attended; and (3) $500 per committee meeting
attended, when the committee convenes on a day on which no Board
meeting is held.
In addition to the cash compensation, each Outside Director is
granted a non-qualified option upon appointment to the Board to
purchase 10,000 Common Shares, and an additional option to purchase
5,000 Common Shares each year thereafter in which such Outside
Director continues to serve. The options vest in three equal
installments, on each of the first three successive anniversaries
of the date of grant, subject to continued service. The exercise price of
the option is fixed at the fair market value of the Common
Shares as of the date of the first meeting following the Outside
Director's election to serve, and on the annual date of grant
thereafter.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee (the "Committee")
is composed of four directors, none of whom are employees of the
Company. The Committee acts upon base salary levels and target
incentives for executive officers of the Company recommended by
management at or about the beginning of each fiscal year.
The Company's compensation policies are generally designed to
link executive compensation to the performance of the individual
and the Company; to provide long-term incentives linked to
increased shareholder value; and to provide pay competitive with
that of similarly sized companies in the same or similar
industries. The Company's executive officer compensation consists
of two key elements: (i) an annual component, comprised of base
salary, bonus and stock awards and (ii) a long term component,
comprised of stock options.
Annual Component. Base salaries for executive officers are
determined based upon pay grade levels for each officer. Such pay
grade levels are set by evaluating the responsibilities of the
position and comparing it with other executive officers' positions
and similar positions in comparable companies on an annual basis.
Annual adjustments are determined in accordance with both the
Company's performance and individual contributions to Company
performance.
Executives and other key employees of the Company are eligible
for cash bonuses pursuant to the Data Switch Bonus Plan (the
"DSBP"), which was adopted beginning July 1, 1992. Under the DSBP,
up to 10% of the Company's pre-tax, pre-bonus profits are placed in
a pool, and distributed among participants in cash, based on base
salary and pay grade level. In 1993, bonuses under the DSBP were
payable quarterly, based upon quarterly results. The DSBP was
modified in 1994 to provide for annual payments, which the
Committee believes more accurately reflect the Company's
performance over the course of the year. The DSBP was adopted in
lieu of a prior plan which provided for potentially greater
bonuses, subject to profit levels meeting pre- determined
projections. The Committee has determined that in 1994, no amounts
will be payable under the DSBP unless the Company attains a minimum
pre-tax, pre-bonus profit of $500,000.
Executive officers also participate in the Company's 1992
Executive Stock Incentive Plan (the "Stock Plan"), under which up
to 6% of the pre-tax, pre-bonus profits of the Company are placed
in a bonus pool. On an annual basis, 83.3% of the bonus pool is
paid to participants in Common Shares and the balance in cash,
based upon the executive's base salary. There were no cash or
stock awards made under the Stock Plan in 1993. The Committee has
determined that in 1994, no benefits will be awarded under the
Stock Plan unless the Company attains a minimum pre-tax, pre-bonus
profit of $1,000,000.
Long-Term Component. Stock Options are granted annually to
executive officers, in numbers based upon their pay grade level and
individual contributions to the Company's performance. The
exercise price of stock options is the fair market value of the
Common Shares at the time the options are granted. The Committee
has instituted a policy that incentive stock options shall not be
granted at an exercise price lower then $2.00 per share.
CEO Compensation. Mr. William J. Lifka was hired for a
six-month period as President and Chief Executive Officer in
December 1993, at which time his base salary over such period was
fixed by the Committee. In January 1994, Mr. Lifka was granted a
restricted stock award of 50,000 Common Shares. The vesting of a
portion of such restricted stock award is contingent upon Mr.
Lifka's completion of full service during the Agreement term.
THE COMPENSATION COMMITTEE
Irwin J. Sitkin, Chairman
Brandt R. Allen
Norman L. Rasmussen
Michael D. Stashower
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Messrs. William J. Lifka (Chairman), Irwin J. Sitkin and D.
David Cohen served as members of the Compensation and Stock Option
Committee ("Committee") during the last fiscal year. None of these
persons were officers or employees of the Company during this
period. During the current fiscal year, Messrs. Irwin J. Sitkin
(Chairman), Brandt R. Allen, Norman L. Rasmussen and Michael D.
Stashower are serving as members of the Committee, none of which
persons are presently officers or employees of the Company. No
executive officers may serve as members of the Committee. There
are no interlocks as defined by the Securities and Exchange
Commission.
Mr. Cohen was Vice President and General Counsel of the
Company from May 1988 to December 1990, while also engaged in the
outside practice of law as a member of Parker Duryee Rosoff &
Haft. Mr. Cohen is presently outside General Counsel to the
Company.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation of the
Chief Executive Officer and the former Chief Executive Officer of
the Company and the Company's four other most highly compensated
executive officers whose salary and bonus exceeded $100,000 in
1993, for services rendered during fiscal years 1993, 1992 and
1991.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Commis- All
sions Other
Name and and Compen-
Title Year Salary Bonuses Options sation
($) ($) (#) ($)(1)
<S> <C> <C> <C> <C> <C>
William J. 1993(2) 10,923 - - -
Lifka
Chairman,
President &
Chief
Executive
Officer
Richard E. 1993 210,000 10,128 30,000 8,003
Greene, 1992 210,000 6,004 - 6,624
Founder 1991 210,000 - 60,000 -
Frederick 1993 175,000 6,077 7,500 5,014
Dietz, 1992 158,333 21,894 32,500 4,862
Deputy 1991 138,000 57,665 3,500 -
President
Anthony J. 1993 120,000 63,802 12,500 4,797
Fusarelli, 1992 110,000 64,253 16,500 2,537
Vice President 1991 98,333 68,013 1,250 -
of Domestic
Sales,
Marketing &
Service
Michael D. 1993 158,269 6,451 32,500 10,157
Stashower, 1992 146,333 2,932 - 8,738
Executive 1991 134,000 7,568 7,500 -
Vice Pres.
and Chief
Financial
Officer
J. Roger 1993 240,000 13,890 115,000 33,160(4)
Moody(3) 1992 208,522 6,147 200,000 7,008
1991 - - - -
<FN>
(1) Includes Company-paid life insurance premiums for the benefit
of each such executive officer and Company contributions for the
account of each such executive officer under the Company's Employee
Retirement Savings Plan.
(2) Mr. Lifka joined the Company as Chairman, President and Chief
Executive Officer on December 16, 1993.
(3) Mr. Moody resigned as President and Chief Executive Officer on
December 15, 1993.
(4) Includes certain amounts in connection with Mr. Moody's
relocation.
</TABLE>
OPTION GRANTS IN 1993
Set forth below is a summary of stock option grants made during the
year ended December 31, 1993 to the Chief Executive Officer and
former Chief Executive Officer of the Company and each of the four
other most highly compensated executive officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants For Option Term (1)
% of Total
Options Exercise
Options Granted to or Base Expir-
Granted Employees in Price ation
Name (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
William J. - - - - - -
Lifka
Richard E. 20,000 7.1 7.75 7/22/1998 - -
Greene 10,000 3.23 1/28/1998 5,223 15,040
Frederick 7,500 1.8 2.94 1/28/2003 13,868 35,142
Dietz
Anthony J. 7,500 2.4 2.94 1/28/2003 13,868 35,142
Fusarelli 2,500 2.94 7/22/2003 4,622 11,714
Michael D. 7,500 7.7 2.94 1/28/1998 6,092 13,462
Stashower 25,000 2.94 7/22/1998 20,307 44,873
J. Roger 80,000 27.3 2.81 7/14/1998(2) 62,108 141,376
Moody 20,000 2.81 7/14/2003 35,344 89,568
15,000 2.94 1/28/2003 27,735 70,284
<FN>
(1) Potential realizable value is based on an assumption that the
stock price of the common stock appreciates at the annual rate
shown from the date of grant until the end of the option term. The
numbers are calculated based on the requirements of the Securities
and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
(2) Expiration dates when granted. Mr. Moody's options have
expired due to the cessation of his employment with the Company.
</TABLE>
OPTION EXERCISES IN 1993 AND OPTION VALUES AT YEAR-END 1993
There were no options exercised in 1993 by any of the persons
in the table below.
The following table provides information as to the value of
options held by the persons named below, measured in terms of the
closing price of the Common Shares on December 31, 1993.
<TABLE>
<CAPTION>
Number of Shares Value
Subject to Unexercised Unexercised In-the-
Option at Year End at Year-End($)(1)
Exer- Unexer Exer- Unexer-
Name cisable cisable cisable cisable
<S> <C> <C> <C> <C>
William J. Lifka 10,000 - - -
Richard E. Greene 80,000 50,000 - -
Frederick Dietz 61,496 45,834 - -
Anthony J. Fusarelli 9,917 29,000 - -
Michael D. Stashower 45,833 54,167 - -
J. Roger Moody 76,666 248,334 - -
<FN>
(1) Value at year-end was $1.75 per Common Share
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
On December 15, 1993, the Company entered into an Employment
Agreement with William J. Lifka pursuant to which Mr. Lifka was
hired as president and Chief Executive Officer of the Company for
a 6-month period, at a monthly salary of $20,000. Pursuant to such
agreement, Mr. Lifka is responsible for the recruitment of a
successor President and Chief Executive Officer. In January 1994,
Mr. Lifka was awarded a restricted stock grant of 50,000 shares,
full vesting of which is contingent upon Mr. Lifka's completion of
full service during the agreement term.
The Company has entered into Executive Severance Compensation
Agreements with its executive officers pursuant to which such
officers would be entitled to receive payments of six months'
salary, plus up to 50% of such officer's aggregate total
compensation during the five fiscal years preceding a change in
control, based upon length of service with the Company or its
successor, if the individual officer's employment with the Company
is involuntarily terminated (or the individual receives a reduction
in compensation or demotion in title, etc.) for reasons other than
cause following such change in control, or during the six month
period preceding such change in control.
CERTAIN TRANSACTIONS
In April 1989, the Company loaned $75,000 to Mr. Richard E.
Greene, Chairman of the Board of Directors. The loan does not bear
interest, and is payable upon demand by the Company.
Mr. D. David Cohen, a director of the Company, also serves as
outside General Counsel to the Company pursuant to a written
retainer arrangement. In addition to fees as an Outside Director,
approximately $69,000 in compensation was paid to Mr. Cohen in 1993
for fees and expenses in this capacity.
FIVE YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of cumulative total
shareholder returns for the Company as compared with (i) the Center
for Research in Security Prices of the University of Chicago
("CRSP") Index for Nasdaq Stock Market (U.S. Companies) and (ii) a
peer group of consisting of the CRSP Index for Nasdaq Computer
Manufacturers' Stocks.
(Performance Graph on Separate Page)
<PAGE>
The Board of Directors of the Company, acting upon the
recommendation of its Audit Committee, has selected Coopers &
Lybrand as the independent accountants of the Company for the year
1994, subject to ratification by the shareholders.
Coopers & Lybrand has been the Company's auditor since 1981
and has advised the Company that it has neither any direct or
indirect financial interest in the Company or its subsidiaries nor
any other connection therewith except in the capacity of
independent public accountants.
A representative of Coopers & Lybrand is expected to be
present at the Annual Meeting of the Shareholders. Such
representative will have the right to make a statement if he or she
desires to do so and will be available to respond to appropriate
questions.
The proposal for ratification of the selection of Coopers &
Lybrand requires the approval of a majority of the Common Shares
present and voting at the meeting. If the proposal should not be
approved, the Board of Directors would have to select an
alternative firm of auditors. The Board recommends that
shareholders vote FOR the proposal.
Section 16(a) Reporting
Each director, officer and beneficial owner of ten percent
(10%) or more of a registered class of the Company's equity
securities is required to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in
ownership of the Common Shares and other equity securities of the
Company by specific due dates. During the year ended December 31,
1993, all such filing requirements were complied with, except that
Mr. D. David Cohen filed one late report on Form 4, covering one
purchase transaction.
OTHER MATTERS
The Company knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it
is the intention of the persons named in the enclosed form of proxy
to vote the shares they represent as the Board of Directors may
recommend.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR 1995 ANNUAL MEETING
Proposals of shareholders which are intended to be presented
by such shareholder at the Company's 1995 Annual Meeting must be
received by the Company no later than January 31, 1995 in order to
be included in the Proxy Statement and form of proxy relating to
that meeting. The Annual Report to the Shareholders for the year 1993 is
also enclosed, but is not part of the proxy soliciting material.
DATA SWITCH CORPORATION
The Board of Directors
May 15, 1994
