-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iQ749GzBwN7uVmUxXQoJjYlPAPJmyNJObkwYvv8zUouQ67jsTpKcKeqK/8CDUcAr ut45fSWQ/GZ4PKbBNfqCmg== 0000921749-94-000010.txt : 19940623 0000921749-94-000010.hdr.sgml : 19940623 ACCESSION NUMBER: 0000921749-94-000010 CONFORMED SUBMISSION TYPE: PREC14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940622 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DYNATECH CORP CENTRAL INDEX KEY: 0000030841 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 042258582 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: PREC14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-07438 FILM NUMBER: 94535101 BUSINESS ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 BUSINESS PHONE: 6172726100 MAIL ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SC FUNDAMENTAL INC CENTRAL INDEX KEY: 0000919094 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 133563937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PREC14A BUSINESS ADDRESS: STREET 1: 712 5TH AVE 19TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2129573500 MAIL ADDRESS: STREET 1: 712 5TH AVENUE 19TH FL STREET 2: 712 5TH AVENUE 19TH FL CITY: NEW YORK STATE: NY ZIP: 10019 PREC14A 1 Preliminary Copy SCHEDULE 14A 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 [ ] Filed by a party other than the Registrant [X] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to section 241.14a-11(c) or section 240.14a-12 DYNATECH CORPORATION (Name of Registrant as Specified In Its Charter) SC FUNDAMENTAL INC., THE SC FUNDAMENTAL VALUE FUND, L.P., SC FUNDAMENTAL VALUE BVI, INC., SC-BVI PARTNERS, SC FUNDAMENTAL VALUE BVI, LTD., GARY N. SIEGLER AND PETER M. COLLERY (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or14a-6(i)(2). [X] $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 computed pursuant to Exchange Act Rule 0-11: ______________________________________________________________ 4) Proposed maximum aggregate value of transaction: ______________________________________________________________ [FN] 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: _________________________________________________ PRELIMINARY COPY DYNATECH STOCKHOLDERS COMMITTEE 712 Fifth Avenue New York, NY 10019 PROXY STATEMENT OF THE DYNATECH STOCKHOLDERS COMMITTEE IN OPPOSITION TO THE BOARD OF DIRECTORS Dynatech Corporation 1994 Annual Meeting of Stockholders Scheduled for July 26, 1994 _______________________ TO ALL STOCKHOLDERS OF DYNATECH CORPORATION: This Proxy Statement is being furnished to holders (the "Stockholders") of the Common Stock, par value $.20 per share (the "Common Stock"), of Dynatech Corporation ("Dynatech" or the "Company") in connection with the solicitation of Proxies by the Dynatech Stockholders Committee (the "Committee") for use in connection with the Company's 1994 Annual Meeting which is scheduled to be held on July 26, 1994, at 10:00 A.M. at the Goodwin, Proctor & Hoar Conference Center, 2nd Floor, Exchange Place, Boston, MA or at any adjournments or postponements thereof (the "Annual Meeting"). The Committee, consisting of substantial holders of the Company's Common Stock, is seeking your support (a) to elect their nominees (constituting a minority of the Board of Directors) to the Board of Directors, (b) for their proposal to recommend to the Board of Directors that it retain a nationally recognized investment banking firm to value the Company and its businesses and conduct a sale of the Company in a fair process, at the highest price obtainable, or a substantial restructuring with a view towards maximizing Stockholder value (Proposal No. 2) and (c) against the 1994 Stock Option and Incentive Plan proposed by the Board of Directors (Proposal No. 3). If you have any questions or have any difficulty granting proxies, you are invited to contact Georgeson & Company Inc. at toll-free (800) 223-064. Banks and brokers call (212) 440-9800 (collect). SHARES REPRESENTED BY A VALID UNREVOKED BLUE PROXY CARD WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, SHARES REPRESENTED BY A BLUE PROXY CARD WILL BE VOTED FOR THE ELECTION OF THE COMMITTEE'S NOMINEES AS DIRECTORS OF THE COMPANY; FOR THE PROPOSAL TO BE OFFERED BY THE COMMITTEE (THE "COMMITTEE PROPOSAL"), AS SET FORTH HEREIN UNDER THE CAPTION "COMMITTEE PROPOSAL"; AGAINST THE BOARD'S 1994 STOCK OPTION AND INCENTIVE PLAN PROPOSAL, AS DESCRIBED IN THE COMPANY'S BOARD OF DIRECTORS' PROXY STATEMENT (THE "BOARD'S PROXY STATEMENT"); AND WILL BE VOTED IN THE DISCRETION OF THE PERSONS NAMED THEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME PROVIDED THAT A WRITTEN REVOCATION WHICH CLEARLY IDENTIFIES THE PROXY BEING REVOKED IS EXECUTED AND DELIVERED TO THE COMMITTEE, C/O GEORGESON & COMPANY INC. AT WALL STREET PLAZA, NEW YORK, NEW YORK 10005 OR TO THE SECRETARY OF THE COMPANY AT DYNATECH CORPORATION, 3 NEW ENGLAND EXECUTIVE PARK, BURLINGTON, MASSACHUSETTS 01803-5087. A LATER DATED PROXY AUTOMATICALLY REVOKES AN EARLIER DATED ONE. YOU MAY ALSO REVOKE ANY PROXY GIVEN BY ATTENDING THE ANNUAL MEETING AND VOTING YOUR SHARES OF COMMON STOCK. This Proxy Statement and BLUE Proxy Card are first being sent to Stockholders on or about July __, 1994. According to the Board's Proxy Statement, as of the close of business on June 13, 1994 (the "Record Date"), there were 9,297,009 shares of Common Stock outstanding. Each share of Common Stock is entitled to one vote. Only Stockholders of record at the close of business on the Record Date are entitled to vote at the Annual Meeting. IMPORTANT Carefully review this Proxy Statement and the enclosed materials. YOUR PROXY IS IMPORTANT. No matter how many or how few shares you own, please vote FOR the Committee's nominees, FOR Proposal No. 2 and AGAINST Proposal No. 3, all as set forth herein, by so indicating and by signing, dating and mailing the enclosed BLUE Proxy Card promptly. You CANNOT use the Company's WHITE Proxy Card to vote for the Committee's nominees. IF YOU HAVE ALREADY MAILED THE WHITE PROXY CARD SUPPLIED TO YOU BY THE COMPANY'S BOARD OF DIRECTORS, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE BY SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD IN THE ENCLOSED BLUE ENVELOPE. Remember, your latest dated proxy determines your vote at the Annual Meeting. If you own your shares in the name of a brokerage firm, bank nominee or other institution, only they can vote your shares of Common Stock. Accordingly, you should contact the person responsible for your account and give instructions with respect to the granting of proxies. Your broker cannot vote your shares unless he or she receives your specific instructions. If you have any questions or have any difficulty granting proxies, you are invited to contact Georgeson & Company Inc. at toll-free (800) 223-2064. Banks and Brokers call (212) 440-9800 (collect). BACKGROUND OF AND REASONS FOR THE PROXY SOLICITATION In opposition to the Board of Directors, the Committee is seeking to solicit the proxies of Stockholders to be used: (i) to vote FOR the election of Gary N. Siegler, Peter M. Collery and Curtis Macnguyen (the "Committee's Slate") as directors of the Company to serve until their successors are duly elected and qualified; (ii) to vote FOR Proposal No. 2 (the "Committee Proposal") urging the retention by the Company of a nationally recognized investment banking firm to value the Company and its businesses and conduct a sale of the Company or a substantial restructuring with a view towards maximizing Stockholder value in the near term (the "Committee Proposal"); (iii) to vote AGAINST Proposal No. 3 -- the 1994 Stock Option and Incentive Plan proposed by the Board of Directors; and (iv) to vote in their discretion on such other matters as may properly come before the meeting or any adjournments or postponements thereof. The Committee owns an aggregate of 9.5% of the 9,297,009 shares of Common Stock which were outstanding on the Record Date according to the Board's Proxy Statement. According to filings with the Securities and Exchange Commission, the Committee's share ownership constitutes the largest holding in the Company. In contrast, the nominees of the Board of Directors, including the President and Chief Executive Officer own, as a group, less than 0.6% of the Company's Common Stock which does not constitute a significant financial stake in the Company. More importantly, the Committee believes management's performance over the last five years has failed to provide adequate returns to Stockholders. DYNATECH'S STOCK HAS SIGNIFICANTLY UNDERPERFORMED BOTH THE S&P HIGH TECH COMPOSITE INDEX AND THE S&P 500 COMPOSITE INDEX. The following Chart, showing the five year cumulative total return for Dynatech from March 31, 1989 to March 31, 1994, is reproduced from page 11 of the Board's Proxy Statement. PLEASE STUDY THIS CHART CAREFULLY Comparison of Five-Year Cumulative Total Return For the Year Ended March 31, 1994
Measurement Period (Fiscal Dynatech S&P 500 High-Tech Year Covered) Corp. Index Composite 3/1989 100.00 100.00 100.00 3/1990 86.1 119.27 107.95 3/1991 112.50 136.46 117.85 3/1992 109.72 151.53 120.60 3/1993 148.61 174.60 132.52 3/1994 102.78 177.17 155.86 Compounded Annual Rate of Return from March 31, 1989 through March 31, 1994 0.55% 12.12% 9.28% _________________ The compounded annual rate of return set forth is not on the chart in the Board's Proxy Statement but is based on the informa- tion therein.
The Chart shows that a hypothetical investment on March 31, 1989 of $100 in each of the Common Stock of Dynatech, the S&P 500 Index and the S&P High Tech Composite Index would have returned to the investor on March 31, 1994, $102.78 for the Dynatech investment, versus $177.17 for the S&P 500 Index and $155.86 for the S&P High Tech Composite Index. The comparative compounded annual rate of return for the period from March 31, 1989 through March 31, 1994 also shows how dramatically Dynatech has underperformed these indices. Set forth below are some of the reasons the Committee believes that management's performance has been inadequate and why the Committee is seeking your votes in support of the Committee's Slate and the Committee Proposal. THE COMMITTEE BELIEVES MANAGEMENT'S DEPLOYMENT OF CASH FLOW HAS FAILED TO GENERATE SATISFACTORY RETURNS. The Committee believes that Dynatech's performance is woefully inadequate given the degree of reinvestment of cash flow into the Company's businesses. According to information contained in the Company's Annual Reports to Stockholders during its 1989 through 1994 fiscal years, rather than pay dividends to Stockholders, Dynatech reinvested the substantial majority of its Gross Cash Flow in its businesses in the form of R&D expenses, capital expenditures, and cash paid for acquisitions. Notwithstanding this massive reinvestment which was presumably undertaken to increase future cash flows, the Company's Gross Cash Flow in 1994 was barely above the 1989 level, and its Net Cash Flow was below the 1989 level as shown in the table below. [FN] "Gross Cash Flow" is defined as earnings before interest, R&D, income taxes, depreciation, amortization and unusual items. "Net Cash Flow" is defined as Gross Cash Flow minus the sum of R&D expenditures, capital expenditures and acquisition expenditures. Gross Cash Flow; Expenditures for R&D, Capital Items and Acquisitions; Net Cash Flow (millions of dollars)
Years Ending March 31 Fiscal year 1994 1993 1992 1991 1990 1989 Gross Cash Flow $93.6 $116.2 $107.3 $108.5 $95.6 $93.2 Less: R&D 53.8 54.3 51.7 51.7 42.5 39.2 Capital expenditures 17.8 14.3 16.3 16.8 15.0 15.9 Acquisitions 2.8 5.6 22.6 17.4 8.8 12.2 Net cash flow $19.2 $42.0 $16.7 $22.6 $29.3 $25.9
DYNATECH'S SG&A AND R&D EXPENSES ARE MUCH HIGHER THAN THOSE OF ITS PEERS. Dynatech's expenditures for selling and general administration ("SG&A") and research and development ("R&D") in fiscal year 1994 as a percentage of total sales were considerably above those of its peers in the electronics industry as grouped by Value Line Investment Survey (the "Value Line Group"). According to data contained in the Compusat information service database, the average percentage of total sales spent by companies in the Value Line Group for SG&A and R&D combined was 29% in their recently completed fiscal year, as compared to 47% for Dynatech. With respect to R&D, while the Committee recognizes that a strong R&D budget is crucial, the Committee believes that Dynatech has wasted much of its R&D spending on projects that have generated little or no return. With respect to SG&A, the Committee believes, on the basis of discussions it has held with the Board's nominees for director, all of whom are currently Board members, that such nominees do not have any valid explanation for Dynatech's current level of SG&A spending. Furthermore such nominees did not even acknowledge to the Committee that Dynatech's SG&A spending is excessive when compared to that of the Company's peers. UNDER THE CURRENT MANAGEMENT, THE COMPANY'S PROFITS HAVE DETERIORATED SIGNIFICANTLY OVER THE PAST THREE QUARTERS. In the last three fiscal quarters, the Company's profits have decreased dramatically as set forth in the table below. Under the stewardship of John F. Reno, who became President and Chief Executive Officer of Dynatech in January of 1993, the Company, in the 4th quarter of fiscal year 1994, reported its first quarterly loss in 23 years. Reported Earnings Per Share from Continuing Operations
Quarter 1994 1993 Second 0.35 0.53 Third 0.15 0.61 Fourth -3.70 0.63 _____________________ Includes a $3.51 per share restructuring charge for continuing operations. Excluding the restructuring charge, the Company would have reported a loss of $.19 per share from continuing operations.
THE COMPANY HAS FAILED TO MEET ANALYSTS' EARNINGS EXPECTATIONS FOR THE LAST THREE QUARTERS. In each of the last three quarters, the Company has announced earnings that were significantly below the consensus expectation of the Wall Street analysts who follow Dynatech. Set forth below are the Institutional Brokers Estimate System (I/B/E/S Inc.) consensus earnings estimates for Dynatech for the fiscal quarters ending September 1993, December 1993, and March 1994, and the earnings actually reported for these quarters. Actual Reported Earnings Compared to Analysts' Estimates
Actual Reported Earnings Mean from Anaylsts' Continuing Date Estimates Operations Difference 3/94 0.31 -0.19 -0.50 12/93 0.50 0.15 -0.35 9/93 0.47 0.35 -0.12 Excludes a $3.51 per share restructuring charge for continuing operations.
THE COMPANY HAS FAILED TO TAKE CERTAIN SIGNIFICANT CORPORATE ACTIONS WHICH COULD RESULT IN SUBSTANTIAL INCREASES IN STOCKHOLDER VALUE. Dynatech is an agglomeration of some 42 different businesses, each of which operates with a large degree of autonomy. The Committee believes that Dynatech could sell or spin off certain operations at prices which exceed their value to the Company. By way of example, the Committee believes that the Company's telecommunications testing equipment businesses (together, "TTC") could be worth in excess of $200 million. This belief is based upon statements made by Dynatech management at a meeting between Dynatech management and a representative of the Committee that TTC's sales for fiscal year 1994 approximated $130 million, its operating profit margin (i.e. earnings before interest, taxes and amortization of intangibles divided by sales) is in the "good teens" and that the business is expected to grow at approximately 10% per year. Applying 16%, a conservative estimate of a "good teens" operating profit margin, to a sales base of $130 million results in operating profits in excess of $20 million for fiscal year 1994 for TTC. To value TTC's business, the Committee multiplied the $20 million or more of operating profits by a valuation multiple of 10 chosen by the Committee, based upon its view of TTC's current industry dynamics, competitive position and solid growth prospects. This results in a Committee estimated valuation for the TTC business in excess of $200 million, or $21.51 per share which exceeds the closing price of a share of Dynatech Common Stock as reported by NASDAQ on June 20, 1994. This valuable asset represents less than one-third of Dynatech's total business as measured by sales for fiscal year 1994. THE COMMITTEE AND THE BOARD'S NOMINEES DISAGREE ON THE NEED FOR EXTRAORDINARY ACTION. Representatives of the Committee made inquiries, on June 10, 1994, of the Board's nominees for election as directors regarding a variety of subjects designed to elicit the Board's nominees' views regarding maximization of Stockholder value. In the Committee's view, the Board's nominees' responses reflect a relative satisfaction with the status quo. The Committee considers this unacceptable. Business as usual is not good enough. The Committee believes the proper course of action for the Company is as set forth in the Committee Proposal below. Accordingly, after considering various alternatives, the Committee decided to propose a slate of three directors and to solicit proxies in support of such slate and in support of the Committee Proposal. On June 10, 1994, The SC Fundamental Value Fund, L.P. requested a list of Stockholders of the Company in accordance with applicable state law to be used in connection with the solicitation of proxies. THE COMMITTEE BELIEVES THE COMPANY'S PROPOSED "RESTRUCTURING" IS WHOLLY INADEQUATE. In the Committee's view, the Company's proposed restructuring is largely cosmetic and does not address the serious problems described above. The Company's restructuring has three essential elements: (i) writing off a substantial amount of intangible assets; (ii) designating certain businesses for sale; and (iii) incurring certain severance and related out-of-pocket costs. The first of these actions should have no positive impact at all on the Company's cash flow, and merely represents an acknowledgment that previous acquisitions are not worth the amount paid for them. The second of these actions consists of reclassifying certain of the Company's business as "Held for Sale." This action, pending actual completion of such sales, is simply an accounting change which has the impact of increasing reported earnings from continuing operations by segregating losses incurred by the businesses "Held for Sale." Even if management succeeds in selling these businesses, the Committee believes that these sales are far too limited in scope. The final action, the incurrence of severance and other costs will, according to statements made by management at an investors' meeting in New York City on May 6, 1994, result in a $20 million cash outflow which will subsequently produce $9 million in annual cash savings. Management has, however, cautioned that some portion of these savings will be absorbed by increases in R&D, and that SG&A expenses as a percentage of sales will be increased by the need to spread fixed costs over a smaller sales base. In the Committee's opinion, a "restructur-ing" which contemplates further increases in R&D and SG&A ratios, far from solving the Company's problems, further exacerbates them. THE COMMITTEE BELIEVES MANAGEMENT CANNOT BE COUNTED ON TO TAKE NECESSARY REMEDIAL ACTION. In view of the matters described above, the Committee does not have confidence that Dynatech's present management can be relied upon to maximize the value of the Company's shares. The members of the Committee's Slate are committed, if elected, to take such action as they deem advisable and in the best interest of Stockholders and which they believe will maximize Stockholder value. Specifically, the Committee believes that, given all of the matters discussed above, a sale of the Company would most likely be the best means to maximize Stockholder value. In the Committee's opinion, the Stockholders would be best served by having a nationally recognized investment banking firm retained to value the Company and its businesses and (i) to conduct a sale of the Company, in a fair process, at the highest price obtainable, or (ii) to implement a major restructuring of the Company which might include the spin-off of TTC to shareholders. The Committee further believes that the restructuring alternative should be pursued only if it is determined that such a restructuring will result in higher value to Stockholders than a sale of the entire Company. In attempting to determine the potential value of Dynatech in a sale, the Committee has disaggregated the Company into three components. The first of these, TTC, is, as described above, thought to be worth in excess of $200 million, or $21.51 per share. The second component, businesses held for sale, are expected, according to statements by Dynatech Management at the May 6 investors' meeting, to generate approximately $40 million, or $4.30 per share in net proceeds. The balance of the continuing businesses have revenues of approximately $260 million. Of the 36 companies grouped with Dynatech by Value Line, and on the basis of information contained in the Value Line Investment Survey dated April 29, 1994, the LOWEST multiple of aggregate company value (defined as market value of equity plus (or minus) net debt or (cash)) to total revenues in the most recent fiscal year is 0.29 times. Applying this multiple to the $260 million of sales for the non-TTC Dynatech continuing businesses, results in a value of $75.4 million, or $8.11 per share. Subtracting from these values the Company's net debt of $12.8 million or $1.38 per share, indicates a potential value for Dynatech of $302.6 million, or $32.54 per share as illustrated below:
Total Company (Millions of Dollars) Per Share TCC $200.0 $21.51 Businesses to be sold 40.0 4.30 Remaining businesses 75.4 8.11 Debt, net of cash (12.8) (1.38) Total $302.6 $32.54 Source: Company 1994 Annual Report
If elected, Messrs. Siegler, Collery and Macnguyen are committed to attempting to persuade the Board of Directors to accept the Committee Proposal. As directors, they would work to provide maximum values for you -- the owners of the Company. None of the members of the Committee intend to sell their shares of Common Stock back to the Company unless a similar opportunity is available to all Stockholders. THE COMMITTEE PROPOSAL At the Annual Meeting members of the Committee will propose that the Stockholders vote for the following resolution: "RESOLVED, that the stockholders of the Company, assem- bled in person or by proxy at the annual meeting of Stockholders, request and recommend that the Board of Directors retain a nationally recognized investment banking firm to value the Company and its businesses and (i) to conduct a sale of the Company in a fair process, at the highest price obtainable, or (ii) to implement a major restructuring of the Company which might include the spin-off of TTC to stockholders. The stockholders of the Company further request and recommend that the restructuring alternative be pursued only if it is determined that such a restructuring would result in higher value to Stockholders than a sale of the entire company." While there is no assurance that the Company will permit a vote on the Committee Proposal and while adoption of the Proposal at the Annual Meeting would not legally bind the Board of Directors, the Committee expects that given the fiduciary responsibility of the directors, the directors will honor the Stockholders request. If elected, the Committee's nominees will strongly urge the Board to adopt actions set forth in the Committee Proposal. The Committee urges you to consider the Committee Proposal seriously and to vote for the Committee Proposal which is Proposal 2 on the Blue Proxy Card. THE BOARD'S PROPOSED STOCK OPTION AND INCENTIVE PLAN The Board's Proxy Statement contains a proposal for the Approval of the Dynatech Corporation 1994 Stock Option and Incentive Plan. The Committee recommends a vote AGAINST with respect to this matter and will vote any proxies on this matter AGAINST if no preference is indicated as to Item 3 of the BLUE Proxy Card. The Committee opposes the Board's proposed 1994 Stock Option and Incentive Plan because, in light of the Committee's view that a sale of the Company or other extraordinary corporate action is likely to be the most prudent course to maximize Stockholder value, the Committee believes that this is not the appropriate time to implement such a plan. THE COMMITTEE AND ITS SLATE The members of the Committee are SC Fundamental Inc., a Delaware corporation ("SC"), The SC Fundamental Value Fund, L.P., a Delaware limited partnership ("Fund"), SC Fundamental Value BVI, Inc., a Delaware corporation ("BVI Inc."), SC-BVI Partners, a Delaware partnership ("Partners"), SC Fundamental Value BVI, Ltd., a British Virgin Islands corporation ("BVI Ltd."), Gary N. Siegler ("Siegler") and Peter M. Collery ("Collery"). Information concerning the Committee's members and other participants, including their relationships to one another and beneficial ownership of securities of the Company, is set forth herein and on Appendix A hereto. Other than the foregoing, neither the members of the Committee, the members of the Committee's Slate, nor any other person listed in Appendix A has any interest in the matters to be voted upon at the Annual Meeting, other than their interest as Stockholders. The offices of the members of the Committee, with the exception of BVI Ltd., are located at 712 Fifth Avenue, 19th Floor, New York, New York 10019. The office of BVI Ltd. is located at Kaya Flambayon 9, P.O. Box 812, Curacao, Netherlands Antilles. The Board of Directors of the Company is divided into three classes of directors. At each annual meeting of Stockholders, members of one of the classes, on a rotating basis, are elected for a three-year term. According to the Board's Proxy Statement, the total number of directors is 9. The Committee's Slate, if elected, would serve for the term expiring in 1997 and until the due election and qualification of their successors. The Committee has no reason to believe any of its nominees will be disqualified or unable or unwilling to serve if elected. However, in the event that any of the Committee's nominees should become unavailable for any reason, proxies may be voted for another person nominated by the Committee to fill the vacancy. The Committee's nominees for membership on the Company's Board of Directors are Gary N. Siegler, Peter M. Collery and Curtis Macnguyen. Each of these nominees has consented to serve as a director if elected and intends to discharge his duties as director of the Company in compliance The Committee's nominees for membership on the Company's Board of Directors are Gary N. Siegler, Peter M. Collery and Curtis Macnguyen. Each of the nominees has consented to serve as a director if elected and intends to discharge his duties as director of the Company in compliance with all applicable legal requirements, including the general fiduciary obligations imposed upon directors of a corporation. Except as described herein, there are no arrangements or understandings between any nominee and any other person pursuant to which he was selected as a nominee. The information below concerning age, principal occupation, directorships and beneficial ownership of Common Stock has been furnished by the respective nominees.
Present Principal Number of Occupation and Shares of Percent Principal Occupations Common of Name, Business during Last Five (5) Stock Common Address & Age Years;Directorships Owned Stock Gary N. Siegler Director and President 887,300 9.5% 712 Fifth Avenue of SC Fundamental New York, NY Value BVI, Inc. since 10019 December 1992; (Age 32) Chairman of the Board of Directors of Medical Resources Inc. since September 1992; Director and President of SC Fundamental Inc. since June 1990; Chairman of the Board of Directors of National R.V. Holdings, Inc. since April 1989 and Vice President and Secretary of National R.V. Holdings, Inc. from April 1989 to August 1993; Director and President of Siegler, Collery & Co. since January 1989; Directors and President of Arena Capital Corp. since August 1988. Peter M. Collery Vice President and 887,300 9.5% 712 Fifth Avenue Director of SC New York, NY Fundamental Value BVI, 10019 Inc. since December (Age 35) 1992; Director of Medical Resources Inc. since September 1992; Director and Vice President of SC Fundamental Inc. since June 1990; Director of National R.V. Holdings, Inc. since April 1989 and President and Treasurer of National R.V. Holdings, Inc. from April 1989 to August 1993; Director and Vice President of Siegler, Collery & Co. since January 1989; Director and Vice President of Arena Capital Corp. since January 1989; Vice President of Dillon, Read & Co. from January 1987 to January 1989. Curtis Macnguyen Associate of Siegler, 0% 0% 712 Fifth Avenue Collery & Co. since New York, NY January 1993; 10019 Financial Analyst of (Age 25) Gleacher & Co. from March 1991 to December 1993; Financial Analyst of Morgan Stanley & Co. from June 1990 to March 1991. By virtue of his indirect control of Fund and BVI Ltd., Mr. Siegler may be deemed to beneficially own the 887,300 shares of Common Stock directly beneficially owned by Fund and BVI Ltd. Nothing contained in this Proxy Statement shall be construed as an admission of beneficial ownership of such shares by Mr. Siegler. By virtue of his indirect control of Fund and BVI Ltd., Mr. Collery may be deemed to beneficially own the 887,300 shares of common stock directly beneficially owned by Fund and BVI Ltd. Nothing contained in this Proxy Statement shall be construed as an admission of beneficial ownership of such shares by Mr. Collery.
All transactions in securities of the Company engaged in by any member of the Committee or of the Committee's Slate during the past two years are summarized on Appendix A. No member of the Committee or of the Committee's Slate owns any securities of the Company of record but not beneficially. No member of the Committee, the Committee's Slate or, to the knowledge of the Committee, any other persons listed on Appendix A or any associates of the foregoing, owns beneficially any securities of the Company. No member of the Committee or of the Committee's Slate is a party to any contract, arrangement or understanding with any person with respect to any securities of the Company. No member of the Committee, the Committee's Slate, or, to the knowledge of the Committee, any other persons listed on Appendix A or any associates of the foregoing has any arrange-ment or understanding with respect to any future employment by the Company or its affiliates, and no such person has any arrangement or understanding with respect to any future transac-tions to which the Company or any of its affiliates will or may be a party. Certain shares of Common Stock owned by Fund and BVI Ltd. were purchased on margin. As of June 16, 1994, such Common Stock, among other securities of issuers other than the Company, was subject to margin indebtedness to Neuberger & Berman of $27,252,000 and $8,250,000, respectively. Except as described herein or in Appendix A, no member of the Committee, member of the Committee's Slate, any other persons listed on Appendix A, nor, to the knowledge of the Committee, any of their associates (i) has engaged in or has a direct or indirect interest in any transaction or series of transactions since the beginning of the Company's last fiscal year, or in any currently proposed transaction, to which the Company or any of its subsidiaries is a party where the amount involved was in excess of $60,000, (ii) owns beneficially any securities of the Company, (iii) borrowed any funds for the purpose of acquiring or holding any securities of the Company, or is presently, or has been within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of the Company, (iv) is the beneficial or record owner of any securities of the Company or any parent or subsidiary thereof, or (v) has, during the past ten years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). EXPENSES OF SOLICITATION The entire expense of preparing and mailing this Proxy Statement and any other soliciting materials and the total expenditures relating to the solicitation of Proxies will be borne by the Committee. The members of the Committee's Slate will be indemnified by Fund and BVI Ltd. for losses, claims and liabilities arising out of the Committee's activities. In addition to the use of the mails, Proxies may be solicited by members of the Committee and/or their employees or their affiliates' employees by telephone, telegram and personal solicitation. No additional compensation will be paid to those persons engaged in such solicitation. The Committee has entered into an arrangement with Georgeson & Company Inc. ("Georgeson") pursuant to which Georgeson has agreed to assist the Committee with its solic-itation of Proxies, strategy, press and investor relations in connection with any meetings of Stockholders through and in-cluding Dynatech's 1994 Annual Meeting. The arrangement with Georgeson provides for the payment of fees to Georgeson in an amount not to exceed $60,000. Georgeson expects to engage approximately 40 persons in connection with its efforts on behalf of the Committee. Such persons will, among other activities, solicit proxies from Stockholders by telephone, telegram and personal solicitation. In addition, banks, brokerage houses and other custodians, nominees and fiduciaries will be requested to forward proxy solicitation materials to the beneficial owners of the Common Stock that such institutions hold of record, and the Committee will reimburse such institutions for their reasonable out-of-pocket expenses. The Committee estimates that its total expenditures relating to the solicitation of Proxies will be approximately $_______, plus the fees payable to Georgeson. Total cash expenditures to date relating to this solicitation have been ap- proximately $___________. The costs of the solicitation will be borne by Fund and BVI Ltd. in proportion to the number of shares of Common Stock owned by each of them. The members of the Committee's Slate will not directly bear any portion of the cost of the solicitation. The Committee presently intends to seek reimbursement from the Company for reasonable expenses in connection with this solicitation. If the matter is so submitted by the Company's Board of Directors, the Committee will accept the results of such vote. VOTE REQUIRED A majority of the shares of Common Stock represented in person or by proxy and entitled to vote is required for approval of matters to be presented at the Annual Meeting, except for the election of directors, which requires a plurality of the votes cast of Common Stock represented in person or by proxy and entitled to vote at the Annual Meeting. Each share of Common Stock is entitled to one vote. According to the Board's Proxy Statement, shares of Common Stock whose holders either are present in person at the Annual Meeting but not voting, or have submitted proxies with respect to which authority has been withheld, will be treated as present at the Annual Meeting only for the presence or absence of a quorum for the transaction of business and will be disregarded in determining the votes cast for purposes of the election of directors. Unmarked proxies submitted by intermediaries that are record holders of Common Stock beneficially owned by others will be treated in a similar manner. ADDITIONAL INFORMATION Reference is made to the Board's Proxy Statement for information concerning the Common Stock, beneficial ownership of Common Stock by, and other information concerning the Company's management, the Company's directors, the Company's independent public accountants the principal holders of Common Stock and procedures for submitting proposals for consideration at the 1995 Annual Meeting. APPENDIX A The members of the Dynatech Stockholders Committee (the "Committee") that are not members of the Committee's Slate are SC Fundamental Inc., a Delaware corporation ("SC"), The SC Fundamental Value Fund, L.P., a Delaware limited partnership ("Fund"), SC Fundamental Value BVI, Inc., a Delaware corporation ("BVI Inc."), SC-BVI Partners, a Delaware partnership and SC Fundamental Value BVI, Ltd., a British Virgin Islands corporation ("BVI Ltd."). Set forth below is the name and principal business of each member of the Committee which is not a member of the Committee's Slate.
NAME PRINCIPAL BUSINESS SC Fundamental Inc. Primarily engaged in acting as general partner of Fund. The SC Fundamental Primarily engaged in investing in Value Fund, L.P. securities. SC Fundamental Primarily engaged in acting as managing Value BVI, Inc. general partner of Partners, the investment manager of BVI Ltd. SC-BVI Partners Primarily engaged in acting as the investment manager of BVI Ltd. SC Fundamental Primarily engaged in investing in Value BVI, Ltd. securities.
The business address of each member of the Committee which is not a member of the Committee's Slate, with the exception of BVI Ltd., is 712 Fifth Avenue, 19th Floor, New York, New York 10019. The business address of BVI Ltd. is Kaya Flambayon 9, P.O. Box 812, Curacao, Netherlands Antilles. TRANSACTIONS IN COMMON STOCK DURING PAST TWO YEARS
THE SC FUNDAMENTAL VALUE FUND, L.P. Date Purchases (Number of Shares) October 27, 1993 42,750 November 2, 1993 35,200 November 9, 1993 49,500 November 9, 1993 7,000 November 10, 1993 5,200 November 10, 1993 7,000 November 11, 1993 7,000 November 11, 1993 1,350 November 17, 1993 8,750 November 18, 1993 4,800 November 19, 1993 2,800 November 30, 1993 104,450 November 30, 1993 3,100 December 1, 1993 35,000 December 15, 1993 1,750 December 27, 1993 5,300 December 27, 1993 2,400 December 29, 1993 1,400 December 30, 1993 1,400 January 4, 1994 2,900 May 16, 1994 51,700 May 18, 1994 22,800 May 20, 1994 13,800 May 27, 1994 199,600 May 3, 1994 20,200 June 1, 1994 13,000 June 1, 1994 1,700 June 2, 1994 17,200 June 2, 1994 5,200 June 2, 1994 13,800 June 3, 1994 37,400 Febuary 2, 1994 3,500 March 7, 1994 35,200 March 9, 1994 2,300 March 17, 1994 15,900 April 13, 1994 3,500 April 14, 1994 2,900 April 14, 1994 17,600 April 14, 1994 3,900 April 15, 1994 10,300 April 19, 1994 4,250 April 20, 1994 4,500 April 21, 1994 5,500 May 1, 1994 5,000 SC FUNDAMENTAL VALUE BVI, LTD. Date Purchases (Number of Shares) October 27, 1993 17,250 November 2, 1993 14,800 November 9, 1993 20,700 November 9, 1993 3,000 November 10, 1993 2,300 November 10, 1993 3,000 November 11, 1993 3,000 November 11, 1993 550 November 17, 1993 3,650 November 18, 1993 2,000 November 19, 1993 1,200 November 30, 1993 43,550 November 30, 1993 1,300 December 1, 1993 15,000 December 15, 1993 750 December 27, 1993 2,300 December 27, 1993 1,100 December 29, 1993 600 December 30, 1993 600 January 4, 1994 1,300 January 31, 1994 100 May 1, 1994 5,000 May 16, 1994 23,300 May 18, 1994 10,200 May 20, 1994 6,200 May 27, 1994 90,100 May 31, 1994 9,100 June 1, 1994 5,900 June 1, 1994 800 June 2, 1994 7,800 June 2, 1994 2,400 June 2, 1994 6,200 June 3, 1994 16,900 February 2, 1994 1,500 March 7, 1994 14,800 March 9, 1994 1,100 March 17, 1994 6,600 April 13, 1994 1,500 April 14, 1994 1,100 April 14, 1994 7,400 April 14, 1994 1,600 April 15, 1994 4,300 April 19, 1994 1,750 April 20, 1994 1,800 April 21, 1994 2,300
Fund directly beneficially owns 611,100 shares of Common Stock. SC, being the general partner of Fund, may be deemed to beneficially own the Common Stock which Fund owns. BVI Ltd. directly beneficially owns 276,200 shares of Common Stock. Partners, being the investment manager of BVI Ltd., and BVI Inc., being the managing general partner of Partners, may be deemed to indirectly beneficially own the Common Stock that BVI Ltd. directly beneficially owns. Siegler and Collery, by virtue of their status as controlling stockholders of SC and BVI Inc., may be deemed to beneficially own the Common Stock which SC and BVI Inc. may be deemed to beneficially own. Nothing contained in this Proxy Statement or in this Appendix A shall be constituted as an admission of beneficial ownership by any such person. There are no material proceedings in which any member of the Committee's Slate is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. Set forth below is information relating to employees of Siegler Collery, an affiliate of members of the Committee, who may solicit proxies by telephone, telegram or personal solicita-tion, for which no additional compensation will be paid. The business address of all such persons is 712 Fifth Avenue, 19th Floor, New York, New York 10019. Name Principal Occupation or Employment Neil Koffler Financial Analyst, Siegler, Collery & Co. David Einhorn Financial Analyst, Siegler, Collery & Co. Jeffrey Keswin Financial Analyst, Siegler, Collery & Co. PROXY UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1, FOR PROPOSAL 2, AGAINST PROPOSAL 3 AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF. 1. Election of Directors for a term expiring in 1997 (as set forth in the Board's Proxy Statement) FOR WITHHOLD FROM ALL NOMINEES __ __ |__| |__| COMMITTEE Nominees are: RECOMMENDS VOTE Gary N. Siegler, Peter M. Collery FOR PROPOSAL 1, and Curtis Macnguyen FOR PROPOSAL 2, AND AGAINST [AUTHORITY TO VOTE FOR ANY PROPOSAL 3 NOMINEE(S) MAY BE WITHHELD FROM ANY NOMINEE(S) BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF SUCH NOMINEE(S).] 2. To retain an investment banking firm to conduct a sale or to implement a major restructuring (as set forth in the Committee's Proxy Statement). FOR AGAINST ABSTAIN __ __ __ |__| |__| |__| 3. To approve the 1994 Stock Option and Incentive Plan (as set forth in the Board's Proxy Statement). FOR AGAINST ABSTAIN __ __ __ |__| |__| |__| (CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE) PRELIMINARY COPY For Information of the Securities Exchange Commission Only PROXY SOLICITED BY DYNATECH STOCKHOLDERS COMMITTEE IN OPPOSITION TO THE BOARD OF DIRECTORS The undersigned hereby appoints GARY N. SIEGLER, PETER M. COLLERY and NEIL KOFFLER, and each of them, as proxies, with full power of substitution, to vote as set forth below and in their discre-tion upon such other matters as may properly come before the meeting, for and on behalf of the undersigned all the shares of common stock of DYNATECH CORPORATION held of record by the undersigned, at the close of business on June 13, 1994, at the Annual Meeting of Stockholders to be held in the Goodwin, Proctor & Hoar Conference Center, 2nd Floor, Exchange Place, Boston, Massachusetts, on Tuesday, July 26, 1994 at 10:00 a.m. and at any adjournments or postponements thereof, hereby granting full power and authority to act on behalf of the undersigned at said meeting or any adjournments or postponements thereof. Please sign exactly as name appears, indicating title or representative capacity, where applicable. PLEASE SIGN, DATE AND RETURN Signature:_____________________________________ _____________________________________ Title or Authority:____________________________ Date:__________________________________________ PLEASE SIGN, DATE AND MAIL YOUR BLUE PROXY IN YOUR BLUE ENVELOPE TODAY -----END PRIVACY-ENHANCED MESSAGE-----