FARMSTEAD TELEPHONE GROUP, INC.
81 Church Street
East Hartford, CT 06108
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, June 13, 1996
To the Stockholders:
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders
of Farmstead Telephone Group, Inc. (the "Meeting") will be held
at 10:00 a.m. on Thursday, June 13, 1996 at the Marco Polo
Restaurant, 1250 Burnside Ave., East Hartford, CT 06108 for the
following purposes:
1. To elect a board of five directors to serve until the next
Meeting or until their successors are duly elected and
qualified;
2. To approve a proposal to amend the Company's Certificate of
Incorporation to authorize a reverse stock split of the
outstanding shares of common stock;
3. To ratify the selection, by the Board of Directors, of
independent auditors for the year ending December 31, 1996; and
4. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April
30, 1996 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting.
Stockholders are cordially invited to attend the Meeting. If
you do not expect to be personally present at the Meeting, but
wish your stock to be voted for the business to be transacted
thereat, please fill in, sign and date the enclosed proxy and
return it by mailing it in the accompanying postage-paid
envelope.
By Order of the Board of Directors,
Robert G. LaVigne
Secretary
May 8, 1996
IF YOU CANNOT BE PRESENT, PLEASE SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
FARMSTEAD TELEPHONE GROUP, INC.
81 Church Street
East Hartford, CT 06108
_______________
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, June 13, 1996
_______________
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Farmstead Telephone
Group, Inc. (the "Company"), of proxies to be voted at the
Annual Meeting of Stockholders of the Company (the "Meeting") to
be held on Thursday, June 13, 1996 at 10:00 a.m. at the Marco
Polo Restaurant, 1250 Burnside Ave., East Hartford, CT 06108,
for the purposes set forth in the attached Notice of Annual
Meeting of Stockholders.
The holders of record of the Company's common stock, par value
$.001 per share, as of the close of business on April 30, 1996
(the "Record Date"), are entitled to vote on all matters brought
before the Meeting. As of March 31, 1996, there were
21,238,676 common shares outstanding.
Each stockholder is entitled to one vote for each share of
common stock held by him or her at the close of business on the
Record Date. When proxies in the enclosed form are returned
properly executed, the shares represented thereby will be voted
at the Meeting and, where instructions have been given by the
stockholder, will be voted in accordance therewith. If the
stockholder does not otherwise specify, the stockholder's shares
will be voted FOR each of the nominees for director, FOR the
proposal to amend the Company's Certificate of Incorporation to
authorize a reverse stock split of the outstanding shares of
common stock, and FOR the proposal to ratify the appointment of
the independent auditors, all as set forth in this Proxy
Statement. As to any other business which may come before the
Meeting, the proxy holders will vote in accordance with their
best judgment. A stockholder executing the accompanying proxy
has the power to revoke it at any time prior to the exercise
thereof by appearing at the Meeting and voting in person or by
filing with the Secretary of the Company, (i) a duly executed
proxy bearing a later date, or (ii) a written instrument
revoking the proxy.
This Proxy Statement and the accompanying Proxy Card are first
being mailed to stockholders on or about May 8, 1996. A copy of the
Company's Annual Report for the year ended December 31, 1995, is
being mailed to all stockholders with this Proxy Statement.
The solicitation of proxies in the accompanying form is made by,
and on behalf of, the Board of Directors, and no compensation
will be paid therefore. There will be no solicitation by
officers and employees of the Company. The Company will make
arrangements with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of proxy material to
the beneficial owners of shares held of record by such persons,
and such persons will be reimbursed for reasonable expenses
incurred by them in connection therewith.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the
beneficial ownership of the Company's Common Stock, $.001 par
value, as of February 26, 1996 by (i) each person known by the
Company to own beneficially more than five percent of the
Company's outstanding shares of common stock, (ii) all directors
of the Company, (iii) each Named Executive Officer (as defined
below. See "Compensation of Officers and Directors") and (iv)
all directors, and executive officers of the Company as a
group. In addition to being a beneficial owner of more than
five percent of the Company's outstanding shares of common
stock, Mr. George J. Taylor, Jr. is a director of the Company.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
Name and Address of Beneficial Owner (1) Beneficially Owned (2) Common Stock
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Five Percent Stockholders:
George J. Taylor, Jr.......................... 2,688,011 (3) 12.5%
Martin H. Meyerson and
M.H. Meyerson & Co., Inc.
80 Montgomery Street
Jersey City, New Jersey....................... 1,172,105 (4) 5.49%
Other Directors:
Robert G. LaVigne............................. 380,000 (5) 1.8%
Harold L. Hansen.............................. 65,000 (6) *
Hugh M. Taylor................................ 102,370 (7) *
Joseph J. Kelley.............................. 10,000 (8) *
Other Named Executive Officer:
Alexander E. Capo............................. 62,800 (9) *
All Directors, and Executive Officers
as a Group (9 persons)......................... 3,546,681 (10) 15.9%
_______________
<FN>
Less than 1%.
<F1> The address of each of the Company's directors is c/o the
Company, 81 Church Street, East Hartford, CT 06108.
<F2> Except as otherwise indicated, the Company believes each
person named in the table has sole voting and investment power
with respect to all shares beneficially owned by him.
Information with respect to beneficial ownership is based upon
information furnished by such stockholder.
<F3> Includes 350,000 shares issuable upon exercise of currently
exercisable stock options and 1,000 shares issuable upon
exercise of currently exercisable warrants. Also includes
180,000 shares held by his children, and an aggregate of 200
shares, for which Mr. Taylor is sole custodian, held for the
benefit of his children under the U.G.M.A.
<F4> Reported on Form 13G as of December 31, 1995. Mr.
Meyerson owns 305,000 shares directly. Additionally, Mr.
Meyerson, as a controlling person of M.H. Meyerson & Co., Inc.
("MHMC"), a broker-dealer which makes a market in the securities
of the Company, may be deemed to exercise sole voting and
dispositive power with respect to the shares held by MHMC. As
of December 31, 1995, MHMC held 867,105 share equivalents
consisting of 281,879 shares of common stock, 75,500 warrants
to purchase 75,500 shares of common stock, plus 254,863
underwriters options to purchase 254,863 units, each unit
consisting of one share of common stock plus one warrant to
purchase one share of common stock. The foregoing does not
include 771,800 shares of common stock plus 46,000 warrants to
purchase 46,000 shares of common stock owned by other persons
associated with MHMC and family members of such associated
persons.
<F5> Includes 330,000 shares issuable upon exercise of
currently exercisable stock options.
<F6> Consists of shares issuable upon exercise of currently
exercisable stock options.
<F7> Includes 73,500 shares issuable upon exercise of currently
exercisable stock options and 15,000 shares held by his
children.
<F8> Consists of shares issuable upon exercise of currently
exercisable stock options.
<F9> Includes 50,000 shares issuable upon exercise of currently
exercisable stock options, and 2,900 shares issuable upon
exercise of currently exercisable warrants.
<F10> Includes 1,008,500 shares issuable upon exercise of currently
exercisable stock options and 3,900 shares issuable upon
exercise of currently exercisable warrants.
</FN>
</TABLE>
ITEM 1 - ELECTION OF DIRECTORS
Five directors are to be elected at the Meeting to hold office
until the next Meeting or until their successors have been duly
elected and qualified. The election of directors requires the
affirmative vote of at least the majority of shares of common
stock present or represented at a meeting at which a quorum
(one-third of the outstanding shares of common stock) is present
or represented. It is the intention of the persons named in the
accompanying proxy form to vote FOR the election of the five
persons named in the table below as directors of the Company,
unless authority to do so is withheld. In the event that any of
the below listed nominees for director should become unavailable
for election for any presently unforeseen reason, the persons
named in the accompanying proxy form have the right to use their
discretion to vote for a substitute.
The following table sets forth the name and age of each nominee
for director and each executive officer other than such
nominees, the year first elected a director or, in the case of
the other executive officers, the year first appointed an
executive officer, and the positions held by them with the
Company.
<TABLE>
<CAPTION>
Year First
Name Age Elected Position(s) Held
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Nominees:
George J. Taylor, Jr. (2) 53 1984 Chairman of the Board,
President, Chief Executive
Officer and Director
Robert G. LaVigne 45 1988 Vice President - Finance &
Administration, Chief Financial
Officer, Secretary, Treasurer
and Director
Harold L. Hansen (1) (2) (3) 66 1992 Director
Hugh M. Taylor (1) (2) (3) 52 1993 Director
Joseph J. Kelley (1) (2) (3) 56 1995 Director
Other Executive Officers:
Alexander E. Capo 45 1987 Vice President - Marketing &
Sales
Joseph A. Novak, Jr. 53 1993 Vice President - Operations
Neil R. Sullivan 45 1994 Corporate Controller, General
Manager and Assistant Secretary
John G. Antonich 55 1996 General Manager, Cobotyx Division
_______________
<FN>
<F1> Member of the Audit Committee.
<F2> Member of the Compensation Committee.
<F3> Member of the Stock Option Committee.
</FN>
</TABLE>
George J. Taylor, Jr. has been Chairman of the Board of
Directors and Chief Executive Officer of the Company (including
its predecessors) since 1984, and President since 1989. He was
a director of FIC Acquisition Corporation (formerly Farmstead
International Corporation) from 1988 until 1992, and was also
the President of Lease Solutions, Inc. (formerly Farmstead
Leasing, Inc.), a business products and automobile leasing
company, from 1981 until it was dissolved in 1993. From 1977 to
1981, Mr. Taylor was Vice President - Marketing and Sales for
National Telephone Company. He was one of the founders of the
National Association of Telecommunication Dealers, has been a
member of, or advisor to, its Board of Directors since its
inception in 1986, and for two years served as its President and
Chairman. Mr. Taylor is also a Director of the Company's 50 %
owned affiliate, Beijing Antai Communication Equipment Company,
Ltd. ("ATC"). Mr. Taylor is the brother of Mr. Hugh M.
Taylor.
Robert G. LaVigne was employed by the Company in March 1988 and
has served in the capacities indicated above since July 1988.
In addition, from January 1994 until October 1994 he served as
General Manager of the Company's domestic telephone equipment
business unit. From 1985 to 1988 he was the Controller of
Economy Electric Supply, Inc., a distributor of electrical
supplies and fixtures. From 1982 to 1985 he was the Corporate
Controller of Hi-G, Inc., a manufacturer of electronic and
electromechanical components. Mr. LaVigne is a Certified Public
Accountant, and was associated with the accounting firm of
Arthur Young and Company from 1977 to 1982. Mr. LaVigne is also
a Director of ATC.
Harold L. Hansen, a director of the Company since 1992, is
currently the President of Hansen Associates, a management and
financial consulting firm founded by him in 1983. From
November 1994 to April 1995 he was the President of H2O
Environmental, Inc., an environmental and geotechnical services
company. During 1993 and 1994 he was the President of Hansen
Associates. Prior to 1983 Mr. Hansen served in various
corporate executive capacities including Executive Vice
President and Chief Operating Officer of Gestetner Corporation,
Vice President and General Manager of the Office Products
Division of Royal Business Machines and Vice President and
General Manager of the Business Products Group of Saxon
Industries.
Hugh M. Taylor has been a director of the Company since July
1993. Since June 1994 he has served as a Managing Director of
Newbury, Piret & Co., an investment banking firm located in
Boston, MA. From 1993 to June 1994 he was the CEO, President
and a director of the Berlin City Bank, Berlin, New Hampshire.
From 1992 to 1993 he was the Executive Vice President of Fleet
Bank of Massachusetts. From 1990 to 1992 he was the Executive
Vice President and Chief Operating Officer of Fleet Bank of
Boston. From 1973 to 1990 he was employed by the New England
Merchants Bank, later the Bank of New England, where he held
various executive management positions within the Commercial
Banking Division, and the bank's venture capital subsidiary.
Mr. Taylor is the brother of Mr. George J. Taylor, Jr.
Joseph J. Kelley has been a director of the Company since
April 1995. He has been involved in the telecommunications
industry since 1963. He is currently President of East Haven
Associates of Wellesley, in Wellesley, Massachusetts, which
provides executive and technical support for European and Asian
based communication companies seeking to expand market share in
the U.S., as well as for U.S. companies seeking to expand
internationally. During 1994, he was Group Vice President of
NYNEX, responsible for operations in the Commonwealth of
Massachusetts. From 1985 to 1994 he served in various executive
level positions with NYNEX, or associated companies including
Vice President - Operations of New England Telephone (1991 -
1993), Vice President - New England Telephone, Network
Department (1990 - 1991), Corporate Director of Business
Development, NYNEX Marketing (1988 - 1990) and Vice President of
New England Telephone - Maine (1985 - 1988).
Alexander E. Capo has been involved in the telephone industry
since 1972. He has held the position of Vice President -
Marketing and Sales since 1987. From 1985 to 1987 he was the
Director of Sales for The Farmstead Group, Inc. Prior thereto
he was a Sales Manager with the National Telephone Company.
Joseph A. Novak, Jr. was employed by the Company in January
1990. He was appointed Vice President - Operations in July
1993, and since August 1995 has been in charge of warehouse and
technical operations for the Company's international telephone
equipment business. From 1990 to 1993 he was in charge of
warehouse and technical operations for the domestic telephone
equipment business unit. Prior to 1990, he was employed by
AT&T for 28 years, serving in various operational and sales
management capacities. Mr. Novak is also Vice General Manager
and a Director of ATC.
Neil R. Sullivan was employed by the Company in October 1994 as
Corporate Controller and as General Manager of the Company's
domestic telephone equipment business unit, and in December 1994
was also appointed Assistant Secretary of the Company.
From 1981 to 1994 he was employed by Zero Corporation
("Zero"), a manufacturer of cabinets, cooling equipment and
containers for the electronics industry. Mr. Sullivan was
Controller of various divisions of Zero from 1981 to 1991, and
was Vice President/General Manager of the Zero-East division
from 1991 to 1994.
John G. Antonich was employed by the Company as Director of
Sales in July 1993. In February 1996, he was appointed General
Manager of the Cobotyx voice processing products division. From
January 1991 to April 1993 he was an Account Executive with
Quodata, a software manufacturer. For two years prior thereto
he was a part owner of Accurate Data, a computer systems dealer.
Meetings and Committees of the Board of Directors
In 1995, the Board of Directors held four meetings and all
Directors attended at least 75% of the meetings held. In
addition, a number of actions were approved by unanimous written
consent resolutions of the directors. The Audit Committee and
Compensation Committee each met once during 1995. The Stock
Option Committee did not meet during 1995, but a number of
actions were approved by unanimous consent resolutions..
The duties of the Audit Committee are to consult with the
independent auditors and the accounting staff of the Company
with respect to the adequacy of internal controls, and to make a
recommendation to the Board regarding the appointment of
independent auditors for the following year. The Compensation
Committee determines the compensation and benefits of the Chief
Executive Officer and to review and approve, or modify if deemed
appropriate, the recommendations of the Chief Executive Officer
with respect to the compensation and benefits of the other
executive officers. The Stock Option Committee administers the
issuance of grants pursuant to the Company's stock option
plans.
ITEM 2 - PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE A REVERSE STOCK SPLIT OF THE
OUTSTANDING SHARES OF COMMON STOCK
Approval of this proposal would permit the Board of Directors,
in its discretion, to implement a reverse stock split of the
Company's outstanding shares of common stock, which would reduce
the number of outstanding shares of common stock (as well as
affecting the amount and exercise price of shares underlying
warrants and certain options) on a pro-rata basis, would affect
all stockholders proportionately and would, therefore, increase
the amount of common stock available for future issuance. The
shares of common stock outstanding after the proposed reverse
stock split would have the same rights and privileges as the
shares of common stock currently held.
The Company has entered into a letter of intent with an
underwriter which, as presently structured, contemplates the
issuance and public sale of one million Units, each Unit to
consist of one share of Common Stock, one Redeemable A Warrant
and one Redeemable B Warrant (collectively the "Securities" or
the "Units"). For a thirty day period following the Offering
Record Date as defined below, the Company's stockholders (the
"Eligible Stockholder") will be given a non-transferable
preferential right (the "Right") to purchase Units of an amount
equivalent to their proportional ownership of the Company's
common stock as of the Offering Record Date. Eligible Stockholders
are defined as all stockholders of record on the date of the
issuance of a Prospectus describing the offering of the
Securities (the "Offering Record Date"). Eligible Stockholders
will also have the right to indicate their interest to purchase
additional Units, subject to availability.
The public offering price of the Units (the "Unit Price")
will be equal to the average closing bid price over the preceding
ten day period (as adjusted for a reverse stock split described
below) of the Company's common stock as shown on the Nasdaq
SmallCap Market(SM) on the effective date of the Registration
Statement of the offering (the "Effective Date"). Each Redeemable
A Warrant will be exercisable into one share of common stock at an
exercise price equal to 130% of the Unit Price per share for a
period of sixty (60) months commencing on the Effective Date. The
A Warrants will be redeemable by the Company commencing thriteen
(13) months from the Effective Date at $.10 per warrant, provided
that the closing bid price of the common stock equals or exceeds
150% of the Unit Price for twenty (20) consecutive trading days.
Each Redeemable B Warrant will be exercisable into one share of
common stock at an exercise price equal to 150% of the Unit
Price per share for a period of sixty (60) months commencing on the
Effective Date. The B Warrants will be redeemable by the Company
commencing thirteen (13) months from the Effective Date at $.10 per
warrant, provided that the closing bid price of the common stock
equals or exceeds 170% of the Unit Price for twenty (20) consecutive
trading days.
As a prerequisite for the proposed public offering, the
underwriter is requiring that, prior to the Effective Date of the
offering, the Company obtain stockholder approval and implement a
1 for 10 reverse stock split. Specifically, the reverse split will be
based upon the assumption that the market price of the Company's
common stock will increase in direct inverse proportion to the
ratio of the reverse split. For example, if the ratio of the
reverse split is 1:10, the assumption is that the market price
of the common stock should increase tenfold. Based upon the
application of the formula at the closing market price of $.344
on March 29, 1996, each share of common stock would be split
into 1/10th shares of common stock, with an initial adjusted
market value of $3.44 per share. This explanation of the
consequencesof a one for ten reverse split is illustrative only,
and no assurance can be given that the market value will in fact
adjust as illustrated. In addition, no assurance can be given
that the final terms and structure of the contemplated offering
will be as described. If this proposal is adopted, the Board of
Directors will be authorized to implement a reverse split in any
desired amount such as, for example, one for five, one for
fifteen, et cetera.
Any reverse split would be implemented in the discretion of
the Board of Directors irrespective of whether the underwriter for
the offering is the current underwriter with whom the Company is
presently working with or any other underwriter which requires a
reverse split as a prerequisite to an offering. If the application
of the ratio causes any stockholder to have a fractional share of
stock, such share will be rounded up to the next highest whole
share. Delaware law requires that the Company must amend its
Articles of Incorporation to provide for the reverse split of
its outstanding common stock.
The Company intends to use the proceeds of this public offering
to expand the Company's business, both domestically and
internationally, which could include the acquisition of other
businesses. Until specific opportunities are presented, the
Company cannot determine in any greater detail how the proceeds
of any offering will be used.
While approval of this proposal would not increase the
authorized capital of the Company, additional shares of common
stock would be available to the Company for issuance due to the
decrease of currently outstanding common stock caused by a
reverse stock split. If any additional shares of common stock
made available by this amendment are not issued to satisfy the
obligations as discussed above, such unused shares could be issued
at the direction of the Company's Board of Directors from time
to time for any proper corporate purpose, including, without
limitation, the acquisition of other businesses, the rasing of
additional capital for use in its business, a split of, or
dividend on, then outstanding shares or in connection with any
employee stock plan or program. Any future issuances of
authorized shares of common stock may be authorized by the Board
of Directors without further action by the stockholders.
Although the Company's Board of Directors will issue common
stock only when required or when the Board considers such
issuance to be in the best interests of the Company, the
issuance of additional common stock may, among other things,
have a dilutive effect on earnings per share and on the equity
and voting rights of stockholders. Furthermore, since Delaware
law requires the vote of a majority of shares of each class of
stock in order to approve certain mergers and reorganizations,
the additional authorized but unissued shares of common stock
available as a result of the reverse stock split could permit
the Board to issue shares to persons supportive of management's
position. Such persons might then be in a position to vote to
prevent a proposed business combination which is deemed
unacceptable to the Board, although perceived to be desirable by
some stockholders, including, potentially, a majority of
stockholders. This could provide management with a means to
block any majority vote which might be necessary to effect a
business combination in accordance with applicable law.
Additionally, the presence of such additional authorized but
unissued shares of common stock could discourage unsolicited
business combination transactions which might otherwise be
desirable to stockholders. The Board of Directors is not currently
aware of any contemplated hostile or friendly takeover attempt or
business combination proposal.
Except for (i) shares of common stock reserved for issuance
pursuant to stock option plans and other agreements, (ii) shares
of common stock reserved for issuance upon exercise of
outstanding warrants, (iii) shares of common stock reserved for
issuance upon exercise of any Underwriters' Option, and (iv)
shares of common stock issuable in connection with the proposed
public offering, the Company's Board of Directors has no current
plans to issue additional shares of common stock. However, the
Board believes that the benefits of providing it with the
flexibility to issue shares without delay for any proper
business purpose, including as an alternative to an unsolicited
business combination opposed by the Board, outweigh the possible
disadvantages of dilution and discouraging unsolicited business
combination proposals, and that it is prudent and in the best
interests of stockholders to provide the advantage of greater
flexibility which will result from this amendment as well as
permitting the proposed offering to proceed.
The affirmative vote of a majority of the shares present and
entitled to vote at the Meeting are required for approval of the
amendment to the Certificate of Incorporation. Abstentions will
be treated as "NO" votes and Broker-Non-Votes will be
disregarded.
ITEM 3 - RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors recommends the appointment of Deloitte &
Touche LLP to audit the books and financial records of the
Company for the year ending December 31, 1996. Representatives
of Deloitte & Touche LLP are expected to be present at the
Meeting, will be available to respond to appropriate questions,
and will be afforded the opportunity to make a statement if they
desire to do so.
The affirmative vote of a majority of the votes cast at the
Meeting are required for ratification of the appointment of
Deloitte & Touche LLP.
COMPENSATION OF OFFICERS AND DIRECTORS
The following table sets forth all compensation paid or accrued
by the Company for services rendered during the three years
ended December 31, 1995 to the Chief Executive Officer ("CEO")
and to each officer whose total annual compensation exceeded
$100,000 in 1995 (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Annual Compensation Awards (2)
------------------------ ------------
Fiscal Salary ($) All Other
Name and Principal Position Year (1) Bonus ($) Options (#) Compensation ($) (3)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CEO:
George J. Taylor, Jr. 1995 150,000 30,000 600,000 5,135
1994 114,723 8,595 250,000 3,077
1993 110,685 - - 2,556
Named Officers:
Alexander E. Capo 1995 182,055 - - 3,900
1994 123,481 - 50,000 -
1993 141,011 - - -
Robert G. LaVigne 1995 84,000 16,800 - -
1994 83,635 16,154 275,000 -
1993 70,000 - - -
Peter S. Buswell (4) 1995 113,539 - 300,000 7,294
1994 112,616 - - -
1993 - - 100,000 -
_______________
<FN>
<F1> Includes base salary and sales commissions if applicable.
<F2> The Company did not grant any estricted stock awards or
stock appreciation rights ("SARS") or make any long-term
incentive plan payments during the fiscal years presented.
<F3> Category includes insurance premiums paid by the Company,
and an amount attributable to the use of a Company automobile
for Mr. Taylor, a car allowance for Mr. Capo, and accrued
vacation and sick pay paid to Mr. Buswell.
<F4> Mr. Buswell joined the Company in 1994, and resigned
as an employee and Director of the Company on September 11,
1995. During 1993, Mr. Buswell provided marketing and
technical consulting services to the Company in connection
with the start up of the Company's voice processing product
lines, for which he earned an aggregate of $52,375 in 1993. In
1993, Mr. Buswell received a non-qualified option grant to
purchase 100,000 shares of common stock under the 1992 Stock
Option Plan.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning individual
grants of options to purchase shares of the Company's Common
Stock made to each Named Officer during the year ended December
31, 1995:
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) (1) Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George J. Taylor, Jr. 600,000 53% .52 8/8/00
Peter S. Buswell 300,000 27% .42 5/19/05
_______________
<FN>
<F1> The exercise price for Mr. Taylor represented 110% of the
fair market value of the common stock on the grant date. The
exercise price for Mr. Buswell represented the fair market value
of the common stock on the grant date.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table provides information on the number and value
of unexercised options held at December 31, 1995, by each Named
Officer.
<TABLE>
<CAPTION>
No. of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares 12/31/95 ($) 12/31/95 (#)
Acquired on Value ----------------------------- -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George J. Taylor, Jr. - - 250,000 600,000 - -
Alexander E. Capo - - 50,000 - - -
Robert G. LaVigne - - 290,000 160,000 11,025 -
Peter S. Buswell - - 90,000 310,000 - -
</TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year:
None.
Compensation of Directors
Non-employee directors receive $500 for each attended board
meeting, plus a non-qualified option to purchase 10,000 shares
of Common Stock upon election to the Board. Directors are
reimbursed for their expenses for each meeting attended.
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
Mr. George J. Taylor, Jr. has a three year employment agreement,
expiring November 28, 1997, which provides for an annual base
salary of $150,000, and which may be revised upward on an annual
basis by the Board of Directors. The agreement also provides
for (i) a bonus of up to 50% of base salary if the Company
attains its annual revenue and earnings objectives set by the
Board of Directors beginning with fiscal year 1995, and (ii) an
additional award equal to 7 1/2 % of earnings in excess of said
earnings objective. Mr. Taylor was also granted an option to
purchase 600,000 shares of the Company's Common Stock. The
agreement also provides for severance payments equal to two
years' salary plus incentives in the event the Company
terminates this agreement without cause or Mr. Taylor terminates
the agreement with good reason, and severance payments equal to
one year's salary plus incentives in the event the agreement is
not renewed. The agreement also contains provisions regarding
confidentiality and a non-compete covenant which prohibits him
from competing with the Company during his employment and for up
to two years thereafter. Mr. Taylor's compensation agreements
were established by the Compensation Committee and approved by
the Board of Directors.
Mr. Capo's compensation arrangements for fiscal 1995 consisted
of a base salary of $30,000, a $3,900 car allowance and sales
commissions of $ 152,055. Mr. Capo's sales commissions were
calculated based upon a pre-determined percentage of the gross
profit on sales generated from his direct selling efforts.
Commencing in May 1995, Mr. Buswell entered into a three year
employment agreement consisting principally of (i) a base
salary of $120,000 per year, (ii) a bonus of 5% of the annual
after-tax earnings of the Cobotyx division in excess of the
board-approved operating budget for that business unit, (iii)
participation in a bonus pool established and administered by
the Compensation Committee of the Board of Directors, up to a
maximum of 50% of salary, and (iv) an option to purchase up to
300,000 shares of Common Stock at an exercise price equal to the
fair market value of the Company's Common Stock on the grant
date. Mr. Buswell resigned from the Company on September 11,
1995.
Mr. LaVigne does not have an employment agreement with the
Company. At the discretion of the Compensation Committee, Mr. LaVigne
is eligible to participate in a bonus pool up to a maximum of 50% of
salary.
Report on Repricing of Options/SARS:
During 1995, the Compensation Committee and the Board of
Directors (collectively the "Directors"), undertook to review
the status of currently outstanding stock options. The
Directors determined that a significant number of such options
were far out of the money and that their existence no longer
provided the incentive and motivation that their issuance
contemplated. There was also a concern that a deterioration of
employee morale might result. Accordingly, the Directors
believed that, under the circumstances, it was appropriate to
re-price the affected outstanding options to a level where they
would once again be able to function as incentive and
motivational awards. On June 7, 1995, the Directors amended the
exercise price of outstanding options granted to all employees
(including the Named Officers) and directors to $.42 per share,
representing the fair market value of the common stock on that
date. For Mr. George J. Taylor, Jr., the exercise price was
changed to $.462 per share, representing 110% of fair market
value.
Compliance with Section 16 (a) of the Exchange Act:
To the Company's knowledge, based solely on a review of the
copies of reports furnished to the Company, the following
persons failed to file, on a timely basis, reports required to
be filed during the fiscal year ended December 31, 1995:
All of the current officers and directors except Mr. Kelley,
and Mr. Buswell (a former officer and director) each filed late a
Form 4 to report the re-pricing, for purposes of Section 16, of
outstanding stock options previously granted to them. This late
filing resulted from the Company not being aware that repricing existing
stock options required a Form 4 filing. Messrs. Kelley, H. Taylor and
Hansen each filed late a Form 4 reporting a grant of 10,000 options.
Mr. Kelley filed late a Form 3 reporting his appointment as a director
of the Company.
Certain Business Relationships and Transactions with Management:
None.
ANNUAL REPORT/FORM 10-KSB
The Company's 1995 Annual Report to its stockholders is a
reproduction of its Form 10-KSB filed with the United States
Securities and Exchange Commission ("SEC"), excluding the Index
to Exhibits and any filed exhibits and is being mailed to all
stockholders concurrently with this proxy statement. Copies of
the Company's Form 10-KSB (without exhibits) as filed with the
SEC may be obtained by writing to the Corporate Secretary,
Farmstead Telephone Group, Inc., 81 Church Street, East Hartford,
CT 06108.
STOCKHOLDERS' PROPOSALS FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present for the 1996
Annual Meeting of Stockholders must be received by the Company by
January 9, 1997 to be eligible for inclusion in the proxy material
for that Meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
know of no other business to be presented at the Meeting.
However, if any other matters properly come before the Meeting,
the persons named in the enclosed form of proxy are expected to
vote the proxy in accordance with their best judgment on such
matters.
INCORPORATION BY REFERENCE
The Financial Statements contained in the Annual Report
accompanying this Proxy Statement are incorporated herein by
reference.
By Order of the Board of Directors,
Robert G. LaVigne
Secretary
East Hartford, Connecticut
May 8, 1996
FARMSTEAD TELEPHONE GROUP, INC.
81 Church Street, East Hartford, CT 06108 (860) 282-0010
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - June 13, 1996
The undersigned, as a Stockholder of FARMSTEAD TELEPHONE GROUP, INC.
(the "Company"), hereby appoints George J. Taylor, Jr. and Robert G.
LaVigne or any one of them, the true and lawful proxies and attorneys in
fact of the undersigned to attend the Annual Meeting of the Stockholders of
the Company to be held June 13, 1996 at 10:00 a.m. at the Marco Polo
Restaurant, 1250 Burnside Avenue, East Hartford, CT 06108, and any
adjournment thereof, and hereby authorizes them to vote, as
designated below, the number of shares which the undersigned would
be entitled to vote, as fully and with the same effect as the undersigned
might do if personally present, on the following matters as set forth in
the Proxy Statement and Notice dated May 8, 1996.
(1) ELECTION OF DIRECTORS
___ FOR all nominees listed below (except as marked to the contrary
below)
___ WITHHOLD AUTHORITY to vote for all nominees listed below
NOMINEES: ____ George J. Taylor, Jr. ____ Robert G.LaVigne
____ Harold L. Hansen ____ Hugh M. Taylor
____ Joseph J. Kelley
(INSTRUCTIONS: To withhold authority to vote for any of the individual
nominees, PRINT that nominee's name on the line below.)
________________________________________________________________
(2) PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE A REVERSE STOCK SPLIT OF THE OUTSTANDING SHARES
OF COMMON STOCK.
_____ FOR _____ AGAINST _____ ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 1996.
_____ FOR _____ AGAINST _____ ABSTAIN
(4) IN THE DISCRETION OF SUCH PROXIES UPON ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS (1), (2) AND (3).
This Proxy is revocable and the undersigned reserves the right
to attend the meeting and vote in person. The undersigned
hereby revokes any proxy heretofore given in respect of the
shares of the Company.
Dated: ________________________ , 1996
_______________________________________
SIGNATURE*
_______________________________________
SIGNATURE*
*NOTE: Please sign exactly as the name(s) appear on your Stock
Certificate. When attorney, executor, administrator, trustee,
or guardian, please give full title as such. If more than one
name is shown, as in the case of joint tenancy, each party
should sign.
THE BOARD OF DIRECTORS URGES THAT YOU FILL IN, SIGN AND DATE THE
PROXY AND RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
