<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Raychem Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Raychem Corporation
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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:(A) (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
(A) Set forth the amount on which the filing fee is calculated and
state how it was determined.
--------------------------------------------------------------------------------
<PAGE> 2
RAYCHEM
RAYCHEM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
NOVEMBER 1, 1995
10:00 A.M.
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Raychem
Corporation, a Delaware corporation (the "Company"), will be held at the
Company's principal office, 300 Constitution Drive, Menlo Park, California, on
Wednesday, November 1, 1995, at 10:00 a.m. local time, for the following
purposes:
1. To elect directors;
2. To approve an amendment to the Company's Amended and Restated 1984
Employee Stock Purchase Plan and Amended and Restated 1985 Supplemental
Employee Stock Purchase Plan to provide additional shares;
3. To approve an amendment to the Company's Amended and Restated 1990
Incentive Plan to provide additional shares;
4. To ratify the appointment by the Company's Board of Directors of Price
Warehouse LLP to audit the accounts of the Company and its subsidiaries
for the 1996 fiscal year; and
5. To consider and transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on September 8,
1995, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and at any adjournment or postponement of
the meeting.
By Order of the Board of Directors
ROBERT J. VIZAS
Secretary
Menlo Park, California
September 18, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY SIGN THE ACCOMPANYING PROXY AND
MAIL IT IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
<PAGE> 3
RAYCHEM CORPORATION
------------------------
PROXY STATEMENT
------------------------
TO THE STOCKHOLDERS:
The enclosed proxy is solicited on behalf of the Board of Directors of
Raychem Corporation, a Delaware corporation (the "Company"), for use at the
annual meeting of stockholders to be held at the Company's principal office on
November 1, 1995, at 10:00 a.m. local time, or any adjournment or postponement,
at which stockholders of record at the close of business on September 8, 1995,
will be entitled to vote. On August 21, 1995, the Company had issued and
outstanding 44,066,955 shares of Common Stock, par value $1.00 per share
("Common Stock").
Holders of Common Stock are entitled to one vote for each share held. A
majority of the outstanding shares of common stock is required for a quorum.
Abstentions will be counted towards the tabulation of votes cast on matters
presented to the stockholders and will have the same effect as negative votes.
Broker nonvotes occur when nominee recordholders do not vote on specific issues
because they did not receive specific instructions on such matters from the
beneficial owners of such shares. Broker nonvotes are counted towards a quorum,
but are not to counted for any purpose in determining whether a matter has been
approved.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company at the Company's principal office, 300
Constitution Drive, Menlo Park, California 94025-1164, an instrument of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person.
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy,
and any additional material furnished to stockholders. Copies of solicitation
material will be furnished to brokerage houses, fiduciaries, and custodians
holding in their names shares that are beneficially owned by others to forward
to such beneficial owners. Raychem will reimburse brokerage houses, fiduciaries,
and custodians for their expense in forwarding solicitation material to such
beneficial owners. The original solicitation of proxies by mail may be
supplemented by one or more of telephone, telegram, or personal solicitation by
directors, officers, or employees of the Company. No additional compensation
will be paid for any such services.
The Company intends to mail this proxy statement on or about September 18,
1995.
<PAGE> 4
NOMINATION AND ELECTION OF DIRECTORS
GENERAL
Each director to be elected will hold office until the next annual meeting
of stockholders and until his successor is elected and has qualified, or until
his death, resignation, or removal. There are eight nominees for the eight
positions on the Board of Directors. All of the nominees are currently directors
of the Company having been elected by the stockholders at the 1994 Annual
Meeting of Stockholders, with the exception of Dr. Richard A. Kashnow. Dr.
Kashnow has been elected to the Board effective October 1, 1995, when he will
assume the duties of CEO of the Company, filling the vacancy created by Robert
J. Saldich's retirement. Each person nominated for election has agreed to serve
if elected, and management has no reason to believe that any nominee will be
unavailable to serve.
Mr. Robert J. Saldich, President, Chief Executive Officer and a director of
the Company since April 1, 1995, is retiring effective October 1, 1995, and will
not stand for re-election to the Board. Mr. Saldich's career at the Company
began in 1964, and his outstanding contributions to the Company will be missed.
Mr. Saldich will continue as a consultant to the Company.
NOMINEES
Set forth below is information regarding the nominees, including
information furnished by them as to their principal occupations for the last
five years, certain directorships, and their ages as of June 30, 1995.
<TABLE>
<CAPTION>
DIRECTOR
AGE SINCE
--- --------
<S> <C> <C>
Paul M. Cook is Chairman of the Board and was the Chief Executive Officer of
the Company until April 1, 1990, when he retired. He is the Chairman of the
Board of SRI International, and a director of Chemfab Corporation. Mr. Cook
will relinquish the Chairmanship of the Company's Board to Dr. Kashnow on
October 1, 1995............................................................ 71 1957
Richard Dulude is the retired Chairman and Chief Executive Officer of Corning
Vitro Corporation. He also was the Vice Chairman of Corning Incorporated
and a director of Dow Corning Corporation. He is a director of Grumman
Corporation and AMBAC, Inc. ............................................... 62 1991
James F. Gibbons has been the Dean of the School of Engineering at Stanford
University since 1984. He has been a professor of electronics at Stanford
since 1964. He is a director of Lockheed Martin Corporation, Cisco Systems,
Inc. and Centigram Communications Corporation.............................. 63 1987
Richard A. Kashnow was elected Chairman of the Board, President and Chief
Executive Officer of the Company effective October 1, 1995. He is currently
President of Schuller International Group, a wholly owned subsidiary of
Manville Corporation, which he joined in 1987. Dr. Kashnow is a director of
Applied Power, Inc. ....................................................... 53 1995
John P. McTague has been a Vice President of Ford Motor Company since 1986,
and has held the position of Vice President of Technical Affairs for Ford
Motor Company since March 1, 1990. He is a director of Argonne National
Laboratory and the National Center for Manufacturing Sciences.............. 56 1994
Dean O. Morton is the retired Executive Vice President and Chief Operating
Officer of Hewlett-Packard Company. He is currently a director of ALZA
Corporation, Tencor Instruments, Centigram Communications Corporation,
MetLife Portfolios, Inc., Metropolitan Series Fund, Inc. and The Clorox
Company. He is also a trustee of the State Street Reserved Funds Group..... 63 1989
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
AGE SINCE
--- --------
<S> <C> <C>
Isaac Stein is the President of Waverley Associates, Inc. From 1990 to 1992,
he served as Chairman of the Board of Esprit de Corp, and from 1991 to 1992
was its acting President and Chief Executive Officer. Mr. Stein is a
director of ALZA Corporation and the Benham Group of mutual funds.......... 48 1993
Cyril J. Yansouni is Chairman and CEO of Read-Rite Corporation. Prior to
March 1991, he was Executive Vice President and President of the Computer
Systems Product Group of Unisys Corporation. Mr. Yansouni serves on the
boards of PeopleSoft, Inc. and Informix Software Inc. ..................... 53 1994
</TABLE>
3
<PAGE> 6
STOCK OWNERSHIP
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of July 31, 1995, (i) by each person
known by the Company to own beneficially more than 5% of the outstanding Common
Stock, (ii) by each director and nominee for director, (iii) by each executive
officer named in the Summary Compensation Table herein, and (iv) by all
executive officers and directors as a group. Each person has sole investment and
voting power with respect to the shares indicated, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
COMMON STOCK OF COMMON
BENEFICIALLY STOCK
NAME AND ADDRESS OWNED(a) OUTSTANDING(b)
---------------------------------------------------------------- ------------ --------------
<S> <C> <C>
FMR Corporation(c).............................................. 5,523,890 12.6%
82 Devonshire Street
Boston, Massachusetts 02109
State Farm Insurance Companies.................................. 2,726,500 6.2%
1 State Farm Plaza
Bloomington, Illinois 61710
Neuberger & Berman(d)........................................... 2,296,455 5.2%
605 Third Avenue
New York, New York 10158
Manning & Napier Advisors....................................... 2,259,126 5.1%
One Lincoln First Square #1100
Rochester, New York 14604
Paul M. Cook.................................................... 287,567
Richard Dulude.................................................. 4,260
James F. Gibbons................................................ 16,538
Richard A. Kashnow.............................................. 0
John P. McTague................................................. 1,750
Dean O. Morton.................................................. 11,626
Isaac Stein..................................................... 11,245
Cyril J. Yansouni............................................... 2,750
Robert J. Saldich............................................... 242,492
Harry O. Postlewait............................................. 76,578
Michael T. Everett.............................................. 150,319
Raymond J. Sims................................................. 51,901
Joseph G. Wirth................................................. 55,375
All executive officers and directors as a group (26 persons).... 1,441,435 3.2%
</TABLE>
---------------
(a) The figures include options to purchase shares of Common Stock exercisable
within 60 days following July 31, 1995, and held by: Mr. Cook, 4,876 shares;
Mr. Dulude, 3,510 shares; Dr. Gibbons, 16,538 shares; Mr. McTague, 750
shares; Mr. Morton, 5,626 shares; Mr. Stein, 10,438 shares; Mr. Yansouni,
750 shares; Mr. Saldich, 224,352 shares; Mr. Postlewait, 74,000 shares; Mr.
Everett, 149,375 shares; Mr. Sims, 49,964 shares; Mr. Wirth, 55,375 shares;
and all executive officers and directors as a group, 1,086,332 shares.
(b) Amounts less than 1.00% are not shown.
(c) This information was obtained from a filing on Form 13G dated July 10, 1995.
(d) The Company has been informed by Neuberger & Berman ("N&B"), a registered
investment advisor, that it may have discretionary authority to dispose of
or to vote shares that are under its management. As a result, N&B may be
deemed to have beneficial ownership of such shares. N&B does not, however,
have any economic interest in the shares; its clients are the actual owners
of the shares and have the sole right to receive and the power to direct the
receipt of dividends from or proceeds from the sale of the shares. Of the
shares set forth above, N&B had shared dispositive power with respect to all
shares, sole voting power with respect to 678,800 shares and shared voting
power with respect to 526,100 shares. With regard to the shared voting
power, Neuberger & Berman Management, Inc., and Neuberger & Berman Funds are
deemed to be beneficial owners for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, since they have shared power to
make decisions whether to retain or dispose of the shares. N&B is the sub-
advisor to the Funds.
4
<PAGE> 7
BOARD COMMITTEES AND MEETINGS
The Board of Directors has standing audit, compensation, nominating and
executive committees. In addition, the Board of Directors, during part of fiscal
year 1995, had an Ericsson Raynet joint venture oversight committee.
The functions of the audit committee are as follows: to review and report
to the Board with respect to the annual audit by the Company's independent
accountants, including the scope and general extent of their examination, the
audit procedures that will be utilized by the independent accountants, and the
compensation of the independent accountants; to review and report to the Board
on the general policies and procedures utilized by the Company with respect to
internal auditing, accounting, and financial controls; and to review and report
to the Board on the subject of the retention of the Company's independent
accountants. Messrs. Dulude and Stein and Dr. Gibbons were the members of the
committee in fiscal year 1995.
The functions of the compensation committee are to determine the general
compensation policies of the Company, establish compensation plans and determine
senior management compensation. The members of the compensation committee in
fiscal year 1995 were Messrs. Dulude, Morton and Yansouni. Mr. Yansouni was
appointed a member of the committee in August 1994. A Report of the Compensation
Committee on Executive Compensation is included herein.
The functions of the nominating committee are to recommend candidates for
election to the Board of Directors and to develop policies for the size and
composition of the Board. The members of the nominating committee in fiscal year
1995 were Dr. Gibbons and Mr. Morton. Stockholder proposals for nominees will be
accepted by the nominating committee and will be given due consideration for
recommendation to the Board in light of the nominees' qualifications.
Stockholder nominees for future years should be submitted in writing to the
nominating committee in care of the Corporate Secretary by August 1 or 90 days
prior to the annual meeting of stockholders, whichever is earlier.
In fiscal year 1995 the functions of the executive committee were to focus
on the Ericsson Raynet joint venture, management succession within Raychem, and
the general operation of the Board. Messrs. Stein, Morton and Saldich were the
members of the committee in fiscal year 1995.
The Ericsson Raynet joint venture oversight committee was established by
the Board of Directors in April 1994 to review the operations of Raynet and its
strategic plans. Since the responsibilities of this committee were effectively
transferred to the executive committee during the fiscal year, the Ericsson
Raynet joint venture oversight committee was formally disbanded as of June 30,
1995. Messrs. Stein and Morton and Dr. Gibbons were the members of the committee
in fiscal year 1995.
During the fiscal year ended June 30, 1995, the Board of Directors held
eleven meetings, the audit committee held three meetings, the compensation
committee held four meetings, the nominating committee held no meetings, the
executive committee held 15 meetings and the Ericsson Raynet joint venture
oversight committee held no meetings. Each director attended at least 75% of the
aggregate number of Board meetings and meetings of committees of which he is a
member that were held during the fiscal year.
5
<PAGE> 8
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company for services
rendered in all capacities during the latest three fiscal years ending June 30
by the Chief Executive Officer and each of the other four most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(b)
------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(a) OPTIONS(#) COMPENSATION
---------------------------- ---- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Saldich........... 1995 $649,000 $160,000 $ 0 50,000 $ 0
President and 1994 549,000 220,000 0 36,000 0
Chief Executive Officer 1993 497,000 110,000 0 30,000 0
Harry O. Postlewait......... 1995 $409,000 $100,000 $ 0 28,000 $ 0
Executive Vice President 1994 369,000 130,000 0 24,000 0
1993 307,000 65,000 0 20,000 0
Michael T. Everett.......... 1995 $310,000 $ 60,000 $ 0 14,000 $101,269(c)
Sr. Vice President 1994 320,000 120,000 0 12,000 164,271(c)
1993 284,000 46,500 0 12,500 0
Raymond J. Sims............. 1995 $284,000 $110,000 $ 0 12,000 $ 0
Sr. Vice President and 1994 249,000 60,000 0 12,000 0
Chief Financial Officer 1993 217,000 20,507 0 8,000 0
Joseph G. Wirth............. 1995 $304,000 $ 66,000 $ 0 12,000 $ 6,996(e)
Sr. Vice President and 1994 294,000 75,000 0 12,000 9,221(e)
Chief Technical Officer 1993 284,000 35,000 12,789(d) 12,500 29,574(e)
</TABLE>
---------------
(a) In accordance with Securities and Exchange Commission regulations,
perquisites less than the lesser of (a) $50,000 or (b) 10% of salary and
bonus are not shown.
(b) No Restricted Stock Awards or stock appreciation rights ("SAR") grants were
made to any named executive officer during the three year period ended June
30, 1995.
(c) This amount represents a special allowance paid to Mr. Everett to cover
additional costs of living overseas.
(d) This amount represents tax expenses reimbursed as part of relocation.
(e) This amount represents mortgage interest differential paid as part of
relocation.
6
<PAGE> 9
STOCK OPTIONS
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding options granted during fiscal
year 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (a)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
---------------------------------------------------------- RATE OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(c)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(#)(b) FISCAL YEAR ($/SH) DATE 5% 10%
------------------------- ------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Saldich........ 50,000 4.8% $ 35.875 8/12/04 $1,128,080 $2,858,776
Harry O. Postlewait...... 28,000 2.7% $ 35.875 8/12/04 $ 631,725 $1,600,914
Michael T. Everett....... 14,000 1.3% $ 35.875 8/12/04 $ 315,862 $ 800,457
Raymond J. Sims.......... 12,000 1.1% $ 35.875 8/12/04 $ 270,739 $ 686,106
Joseph G. Wirth.......... 12,000 1.1% $ 35.875 8/12/04 $ 270,739 $ 686,106
</TABLE>
---------------
(a) No SAR grants were made to any named executive officer during the fiscal
year ended June 30, 1995.
(b) All options granted to executive officers in fiscal 1995 are exercisable as
follows: 25% of the options on or after the first grant date anniversary;
50% on or after the second anniversary; 75% on or after the third
anniversary, and 100% on or after the fourth anniversary. Exercisability of
options may be accelerated by the Board of Directors. At the time of
exercise, price may be paid in cash, by delivery of shares already owned
(subject to certain conditions), by a secured loan from the Company, or by
cashless exercise. The option plan permits withholding of shares to satisfy
tax obligations upon exercise.
(c) Potential Realizable Value is based on the assumed annual share price
appreciation for the ten year option term. The 5% annual growth results in
a stock price of $58.44 per share and the 10% annual growth rate results in
a price of $93.05 per share. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised.
OPTION EXERCISES AND VALUATION
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding option exercises during fiscal
year 1995 and options outstanding as of June 30, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES (a)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS
ON VALUE FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE(b)(c)
----------------------- ----------- -------- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Robert J. Saldich...... 0 $ 0 194,352/109,648 $ 1,037,371/$449,419
Harry O. Postlewait.... 0 $ 0 67,000/ 46,000 $ 140,250/$ 68,750
Michael T. Everett..... 7,500 $ 47,510 137,750/ 34,250 $ 474,339/$122,656
Raymond J. Sims........ 2,294 $ 25,617 41,839/ 28,125 $ 257,111/$ 85,422
Joseph G. Wirth........ 0 $ 0 44,250/ 32,250 $ 422,406/$117,906
</TABLE>
---------------
(a) No SARs were outstanding at June 30, 1995, nor were any SAR grants made to
any named executive officer during the year ended June 30, 1995.
(b) The market value of the underlying securities at the fiscal year-end minus
the exercise price of in-the-money options. The market value (closing share
price) on June 30, 1995 was $38.25.
(c) Average exercise prices of all options outstanding for named executive
officers are: Mr. Saldich, $33.85; Mr. Postlewait, $37.06; Mr. Everett,
$35.65; Mr. Sims, $34.00; and Mr. Wirth, $31.19.
7
<PAGE> 10
EMPLOYMENT AGREEMENT
On June 7, 1995, the Company entered into a Consulting/Employment Agreement
with Mr. Saldich. The purpose of the agreement is to retain Mr. Saldich's
services as CEO or as a consultant until June 7, 1998. The agreement replaces
any other severance benefits to which he might otherwise be entitled. Mr.
Saldich will continue to receive base pay, raises and bonuses based on his
performance and the performance of the Company while he is CEO. After his
retirement on October 1, 1995, Mr. Saldich will continue to receive compensation
through June 7, 1998, at an annual rate of $650,000. At the end of the Company's
fiscal year 1996, the fiscal year in which Mr. Saldich's tenure as CEO will have
ended, he will receive a bonus reflecting the Board of Directors' assessment of
his performance during the transition to the new CEO and the Company's
performance. Mr. Saldich's executive benefits will continue until June 7, 1998,
including vesting of stock options. Mr. Saldich will accrue pension credit
through age 65 and his pension benefits will be calculated using a base
compensation of $650,000 per year. He agrees to hold himself available for up to
20% of his time for consulting after his retirement, until June 7, 1998. The
Company will provide Mr. Saldich with an office and a secretary through June 7,
1998. Mr. Saldich agrees not to compete with the Company during the term of the
agreement.
DIRECTORS' FEES AND STOCK OPTIONS
Directors not employed by the Company (all directors except Mr. Saldich)
are paid an annual fee of $20,000 plus $1,000 for each Board and committee
meeting attended in person. In addition, the chair of the audit committee
receives an annual fee of $7,500; the chair of the nominating committee receives
an annual fee of $16,000; the chair of the executive committee receives an
annual fee of $25,000; and the chair of the Ericsson Raynet joint venture
oversight committee received an annual fee of $25,000. Mr. Cook, Mr. Stein and
Mr. Halperin receive additional compensation for providing consulting services
to the Company or its subsidiaries or affiliates. Mr. Cook provides advice to
the Company with respect to technologies and management development. Mr.
Halperin provided advice to Raynet with respect to sales, marketing, and
recruiting before conclusion of the joint venture with Ericsson, and he
currently consults with the Company on issues related to the Company's Ericsson
Raynet joint venture. Mr. Stein provides advice to the Company with respect to
financing alternatives and other Company issues.
The Company entered into a consulting agreement with Mr. Cook upon his
retirement on April 1, 1990, providing for an annual retainer of $100,000,
payment of one-half of his office rent, and the assignment of a Company employee
as his secretary. The agreement includes a commitment from Mr. Cook to consult
for the Company on an as-needed basis and not to consult or work for a
competitor of the Company during the term of the agreement. The agreement may be
terminated by either party for any reason at the end of any fiscal year upon 90
days' prior written notice.
The Company entered into a consulting agreement with Mr. Stein on January
25, 1994, providing for a retainer of $32,000 per quarter to be paid to Waverley
Associates, Inc. and an option grant of 10,000 shares at fair market value on
the date of grant. The agreement included a commitment from Waverley Associates,
Inc. to hold Mr. Stein available for up to 20% of his time for such consulting.
Effective July 1, 1994, the Company entered into a new consulting agreement with
Mr. Stein that supersedes the January 25, 1994 agreement. The new agreement
provides for a retainer of $30,000 per month and an option grant of 25,000
shares with the expectation that there will be an additional grant at the
beginning of fiscal year 1996 commensurate with the level of Mr. Stein's
involvement with the Company. The agreement includes a commitment from Waverley
Associates, Inc. to hold Mr. Stein available for up to 50% of his time for
consulting to the Board of Directors and the Chief Executive Officer, in
addition to his normal Board responsibilities. The agreement also includes a
commitment from Mr. Stein to act as chair of the executive committee for which
he receives $25,000 per year and chair of the Ericsson Raynet joint venture
oversight committee for which he received $25,000 in fiscal year 1995. In
addition, the Company agreed to reimburse customary out-of-pocket expenses and
pay Waverley Associates, Inc. an additional $5,000 per month as a contribution
to rental and secretarial expenses.
Mr. Robert M. Halperin, a valued member of the Board of Directors since
1961, retired November 9, 1994. Mr. Halperin retired as President and Chief
Operating Officer of the Company on April 1, 1990. He
8
<PAGE> 11
served as Vice Chairman of the Board of Raychem until his retirement and he
served as Chairman of the Board of Raynet Corporation until November 1994, when
the Company's joint venture with LM Ericsson was formed. Raynet Corporation
entered into a consulting agreement with Mr. Halperin upon his retirement on
April 1, 1990, providing for an annual retainer of $150,000 and an office and
secretary at Raynet. Under the agreement, Mr. Halperin was required to devote
20% of his time to Raynet and not to consult or work for a competitor of the
Company during the term of the agreement. Another agreement, which was executed
by Mr. Halperin and the Company as of April 1, 1990, granted him supplementary
pension benefits of $150,000 as a lifetime annuity, extended the vesting of
certain options through the period of his consultancy for Raynet, and extended
the exercise period for certain options that were already vested. On April 18,
1994, Raynet and Mr. Halperin entered into a new consulting agreement that
superseded the former agreements. The new agreement provided for a monthly
retainer of $12,500 from the date of the agreement through December 31, 1994 and
$6,250 per month for the period from January 1, 1995 through November 30, 1995.
In addition, Raynet agreed to reimburse Mr. Halperin for the relocation of his
office and for office rent and secretarial services, at a rate of 100% from July
1, 1994 through December 31, 1994, and at a rate of 50% from January 1, 1995
through November 30, 1995. The Company guaranteed Raynet's obligations under the
new consulting agreement and agreed to assume them in the event of a disposition
of Raynet. Effective November 17, 1994, Raychem assumed Raynet's obligations
under the new consulting agreement.
Under the 1987 Directors Stock Option Plan, each director who is not an
employee of the Company receives an option to purchase 3,000 shares of Common
Stock on the date he or she first serves as a non-employee director. Thereafter,
each non-employee director receives an option to purchase 750 shares of Common
Stock upon re-election at the annual meeting of stockholders. A total of 150,000
shares of Common Stock have been reserved for issuance under this plan. The
exercise price of options granted under this plan is the fair market value of
the Common Stock on the grant date. For the fiscal year ended June 30, 1995, Dr.
McTague, who was elected during the fiscal year, received an option to purchase
3,000 shares of Common Stock at a grant price of $35.875 per share, and each
director (except Mr. Saldich, who was not eligible) received an option to
purchase 750 shares of Common Stock at a grant price of $36.125 per share. If
re-elected at the annual meeting, each director other than Dr. Kashnow will
receive an option to purchase an additional 750 shares.
The Board of Directors considers stock ownership in the Company by
directors to be of utmost importance. Such ownership enhances directors'
commitment to the future of the Company and further aligns their interests with
those of the Company's stockholders. In keeping with this philosophy, the Board
has established minimum stock ownership guidelines for directors. These
guidelines require directors to own Raychem Common Stock having a value of at
least five times their annual retainer. Each director will have three years to
reach this ownership level.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Committee of the Board of Directors ("Committee") determines the
general compensation policies of the Company, establishes compensation plans,
and sets specific compensation levels for Executive Officers. During the 1995
fiscal year, the Committee was composed of Messrs. Morton (Chair), Dulude, and
Yansouni. All of the Committee members are "disinterested" as that term applies
under the Securities and Exchange Commission's Rule 16b-3 and "independent"
under Internal Revenue Code Section 162(m).
The Committee reviews executive compensation matters not less than once
annually. At the request of the Committee, the Company's Human Resources
Department presents analyses and recommendations on executive compensation for
the next fiscal year. The Committee thereafter makes specific determinations for
each Executive Officer.
Executive Officer compensation typically consists of three components: base
salary, an annual cash bonus award, and a long-term incentive in the form of
stock options. Salary ranges, along with "target" levels for cash bonuses and
stock option grants, are established by the Committee based on median
competitive market levels indicated from pay surveys and other information
obtained by the Company regarding select U.S.
9
<PAGE> 12
companies of similar size, complexity, and quality to that of the Company. The
Committee believes that it is important for all officers to have a meaningful
ownership stake in the Company and encourages them to acquire and hold Raychem
shares.
BASE SALARIES. For fiscal year 1995, as for recent prior years, the
Committee obtained an independent consultant's report summarizing executive
salary levels at over 25 comparison companies. Included were prominent
electronics, telecommunications, computer software and hardware, and industrial
manufacturing companies, representing organizations with whom the Company
competes for talent and/or which have market capitalization or other attributes
similar to the Company. Publicly available surveys and salary data reported in
proxy statements were used to provide supplementary information. In setting
salary levels, salary data were adjusted to reflect relative sales volume and
differences in business unit size, as appropriate. Additionally, the Committee
considered each Executive Officer's individual experience and sustained
performance, as well as salary levels within the Company. Executive Officers'
salaries were increased for fiscal year 1995 reflecting the previously described
pay philosophy and process. However, the Committee decided to freeze base
salaries of all officers for fiscal year 1996 as part of the Company's efforts
to control costs and to further emphasize pay for performance.
ANNUAL BONUSES. A variable cash bonus plan was implemented in fiscal year
1993 and continued during fiscal year 1995 for all non-Raynet employees, except
four corporate officers who are responsible for the overall affairs of the
Company (the Chief Executive Officer (CEO) Mr. Saldich, Executive Vice President
Mr. Postlewait, Chief Financial Officer Mr. Sims, and General Counsel Mr.
Vizas). There were two formula-derived components to the plan, a corporate
profit sharing pool and a business unit incentive pool. The corporate profit
sharing pool was based on the Company's pre-tax return on assets (exclusive of
Raynet); the business unit pool was based on individual business sector return
on controllable assets and provides the opportunity for additional compensation
based on sales growth. Specific thresholds had to be met before any awards were
paid. These thresholds for fiscal year 1995 were stated as absolute levels of
certain financial performance indicators. Furthermore, each officer in the
variable cash bonus plan was eligible for an additional discretionary amount
above the formula-derived bonus. The Committee exercised this discretion with
respect to Executive Officers, basing its decisions on individual performance.
The four corporate officers who do not participate in the variable cash
bonus plan were eligible for annual bonus awards only at the discretion of the
Committee. Bonuses for these individuals generally reflect the overall Raychem
performance. The Committee generally considers the level of payments earned by
other officers under the variable cash bonus plan, and then determines awards
for the four corporate officers considering their relative contributions to
reflect internal fairness and equity. For fiscal year 1995, the Committee
considered contributions toward the directional improvement in financial
results, as compared to prior years, and significant progress during the year
toward long-term strategic Company objectives including the Raynet transition
and joint venture with Ericsson.
In addition, the Committee made special, one-time awards to certain
Executive Officers in recognition of their contributions to the transition to
the Ericsson Raynet joint venture.
LONG-TERM INCENTIVES. Stock option grants recently have been the only form
of long term incentive used by the Committee. The Committee believes that stock
options play an important role in attracting, retaining, and motivating
executives. Stock options provide executives with a means of accumulating
Company stock ownership, which the Committee endorses as a key objective of the
executive compensation program. The Committee's practice is to grant options
annually at 100% of the fair market value at the date of grant. Options
typically vest at a rate of 25% per year over four years.
The Committee uses competitive data gathered from relevant comparison
companies by independent consultants as one factor to determine option grant
levels for Executive Officers. The Committee considers both individual option
grant size and aggregate shares granted as a percent of outstanding shares at
the comparison companies. In addition, the Committee considers the aggregate
stock option shares granted throughout the Company, individual experience and
performance of recipients, and past individual grant amounts.
10
<PAGE> 13
CEO COMPENSATION. The Committee's goal in setting the compensation level
for the CEO is to reward the CEO for the results of the Company and its
subsidiaries, as well as progress made in positioning the Company for sustained
future growth. The Committee reviews CEO compensation packages and related
financial performance data at relevant selected comparison companies to
determine a reasonable level and mix of pay for the Company's CEO.
Robert J. Saldich became president and CEO of the Company on April 1, 1990.
Initially, Mr. Saldich's base salary as CEO was $450,000 per year. Mr. Saldich
received no increase in his base salary in fiscal years 1991 and 1992 as the
Company faced the challenge of worldwide economic recession along with
significant downsizing of the defense industry, while continuing to support its
Raynet investment. He then received an increase to $500,000 at the beginning of
fiscal year 1993, and to $550,000 at the beginning of fiscal year 1994.
Following a special study by independent consultants, at the beginning of fiscal
year 1995 the Committee increased his base salary to $650,000. The Committee
believes that this salary history accords with the Company's performance (return
on assets, sales growth, progress towards strategic initiatives, etc.) since Mr.
Saldich assumed the role of president and CEO. The Committee further believes
that the current salary now is positioned more closely to the median for
businesses that are similar in size and complexity to the Company.
For fiscal year 1995, the Committee designated a cash bonus of $160,000 for
Mr. Saldich. This is lower than the bonus that he earned for fiscal year 1994.
The combination of Mr. Saldich's fiscal year 1995 bonus and salary earnings is
less than the competitive median because of below-median absolute Company
results including consolidated Raynet performance, and a decline in key
financial performance measures from fiscal year 1994. However, it reflects the
Committee's recognition of Mr. Saldich's leadership contributions and sustained
progress toward critical long-range strategic objectives.
Stock options are granted to the CEO, as to other executive officers, based
on position level, individual performance, prior grant history and external
market data. Mr. Saldich was granted options on 50,000 shares of the Company's
common stock in fiscal year 1995. Competitive data analyzed by the Committee
indicate that this approximates a median competitive grant, closing the
competitive shortfall represented by his fiscal year 1994 grant of only 36,000
shares and properly focusing on long-term stockholder-value growth in his
overall total compensation. His fiscal year 1995 options were granted at fair
market value at the time of grant and vest ratably over four years. All of the
options are "non-qualified" options.
OFFICER SEVERANCE POLICY. Raychem provides severance benefits for all
employees whose employment is terminated due to reduction in force. During the
1995 fiscal year, the Committee formalized a separate program for officers. Each
individual officer is guaranteed one full year of base salary and selected
benefits continuation upon involuntary termination other than for cause. A
second year of base salary and benefits continuation is offered, provided the
officer is not employed or, if employed, a differential if the officer is paid a
lower base salary than the officer received while employed at Raychem.
COMPANY POLICY TOWARD DEDUCTIBILITY OF EXECUTIVE OFFICER COMPENSATION. In
fiscal year 1995, the Company's stockholders amended the 1990 Incentive Plan in
light of Section 162(m) of the Internal Revenue Code. Section 162(m) generally
places a $1 million per person limit on the deduction a publicly held
corporation may take for compensation paid to its CEO and its four other highest
paid Executive Officers, unless, in general, the compensation is exempt as
"performance based." As a result of this amendment, gains realized by these
officers at exercise of Company stock options granted under the 1990 Incentive
Plan should not be included in the compensation subject to the $1 million
deductibility limit. With regard to salaries and annual bonuses, none of the
covered individuals' compensation exceeded $1 million for fiscal year 1995.
[SIGNED:] Messrs. Dulude, Morton (Chair), and Yansouni
11
<PAGE> 14
RAYCHEM STOCK PERFORMANCE CHART
The chart below compares the Company's cumulative total stockholder return
(overall market performance with reinvested dividends) during the five-year
period ended June 30, 1995, against the Standard & Poor's 500 Stock Index and
the Standard & Poor's Electrical Index, both of which are established and well-
known indices.
The Company is a broadly diversified materials science business and is not
easily categorized within any specific industry index.
RAYCHEM CORPORATION
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(a)
<TABLE>
<CAPTION>
S&P ELEC
MEASUREMENT PERIOD EQUIP IN-
(FISCAL YEAR COVERED) RAYCHEM S&P 500 DEX(b)
<S> <C> <C> <C>
30/JUN/90 100.00 100.00 100.00
30/JUN/91 78.24 116.89 137.55
30/JUN/92 96.22 140.90 170.75
30/JUN/93 119.54 168.31 238.08
30/JUN/94 109.25 178.29 262.04
30/JUN/95 116.40 233.11 356.75
</TABLE>
(a) Total return assumes reinvestment of dividends. Assumes $100 invested June
30, 1990.
(b) S&P Electrical Equipment Index includes AMP, Emerson Electric, General
Electric, W.W. Grainger, Honeywell, Raychem, Thomas & Betts, and
Westinghouse Electric.
PENSION PLANS
The Company has a defined benefit pension plan that provides retirement
benefits to eligible United States employees. Subject to certain exceptions, for
each year of credited service after 1992, each eligible employee accrues an
annual benefit equal to 1.375% of compensation plus 0.625% of compensation in
excess of Social Security compensation. In addition, the plan provides for a
past service benefit of the sum of 1.375% of the average compensation of a
participant for the three highest consecutive years of compensation prior to
1992 plus 0.625% of such average compensation in excess of Social Security
compensation, multiplied by the years of credited service prior to 1992. Years
of credited service are limited to a total of 35 years, and these years comprise
the highest-paid 35 years worked. The benefits payable to any employee are
payable upon retirement from the Company at age 65 and are subject to certain
limitations established by applicable law and the plan. An employee who retires
after age 65 receives the greater of the benefit at age 65 increased by 1/180
per month for each month of service thereafter or the benefit for all years of
service.
The Company has adopted a supplemental executive retirement plan for all
United States employees whose benefits under the Company's pension plan are
limited by United States federal tax laws. The plan provides these employees
with benefits equivalent to those not paid under the pension plan because of the
12
<PAGE> 15
federal tax law limitations. However, the supplemental retirement plan limits
years of credited service to 35, and no benefits are payable under the plan
subsequent to the participant's engaging in any activity in competition with the
Company. The plan authorizes the Board, in its discretion, to accelerate the
payment of benefits or establish a trust fund for participants upon a change in
control of the Company.
The estimated annual aggregate benefit payable under the plans upon
retirement from the Company at age 65 to each of the executive officers named in
the Summary Compensation Table (assuming that each person's covered compensation
in future years remains at its 1994 calendar year-end annualized level) is
$320,491 for Robert J. Saldich, $195,742 for Harry O. Postlewait, $154,522 for
Michael T. Everett, $157,135 for Raymond J. Sims, and $51,121 for Joseph G.
Wirth.
COMPANY LOANS TO DIRECTORS AND EXECUTIVE OFFICERS
In connection with option exercises and the purchase of its Common Stock
under equity incentive plans, the Company has made available to employees,
including directors and executive officers, deferred payment arrangements and
advances to cover income tax liabilities. The indebtedness resulting from such
arrangements has a five year term and bears interest, which is accruing at rates
ranging from 5% to 9.1% per year, payable in annual installments. The maximum
amounts of such indebtedness outstanding during the fiscal year ended June 30,
1995, together with the amounts outstanding at June 30, 1995, for each person
who was a director or executive officer during the fiscal year and for whom the
principal amount exceeded $60,000 at any time during such period, is as follows:
$192,473 and $0 for Robert J. Saldich.
The Company has also extended to certain executive officers loans on a
secured basis for relocation expense and other personal needs. The loans are
repayable over four to five years and bear interest, accruing at rates between
0% and 8%. As of June 30, 1995, the maximum amount of such indebtedness
outstanding during the 1995 fiscal year, together with the amount outstanding at
June 30, 1995, for each such executive officer for whom the principal amount
exceeded $60,000 at any time during such period was as follows: Harry O.
Postlewait, $233,414 and $207,414; Joseph G. Wirth, $600,000 and $600,000;
Andrew Roake, $1,000,000 and $1,000,000; and James Spradling, $215,744 and
$139,142.
13
<PAGE> 16
ADDITION OF SHARES TO EMPLOYEE STOCK PURCHASE PLANS
BACKGROUND
The Company maintains an Amended and Restated 1984 Employee Stock Purchase
Plan and an Amended and Restated 1985 Supplemental Employee Stock Purchase Plan
that permit United States employees and employees of certain domestic and
foreign subsidiaries to purchase the Company's Common Stock at a discounted
price. These plans are designed to encourage and assist a broad spectrum of
employees of the Company and participating subsidiaries to acquire an equity
interest in the Company through the purchase of Common Stock. They are also
intended to provide to United States employees participating in the plan the tax
benefits available under Section 421 of the Internal Revenue Code. At June 30,
1995, approximately 4,466 of 8,337 eligible employees were participants in the
plans.
The Board of Directors has adopted, subject to stockholder approval, an
amendment to these plans to increase the aggregate number of shares issuable
under the two plans by 1,000,000 shares to 15,000,000 shares. As of August 1,
1995, approximately 509,253 shares remained available for issuance under these
plans. A summary of the principal provisions of these plans is set forth below.
If approved by stockholders, approximately 1,509,253 shares would be available
for issuance. Management expects this share increase to be sufficient for all
stock purchases under these plans for the next year.
DESCRIPTION OF PLANS
All regular employees, including executive officers and directors who are
employees, customarily employed more than 15 hours per week and more than five
months per year by the Company or a participating subsidiary are eligible to
participate in these plans as of the first quarterly enrollment date following
employment. Participants may elect to make contributions up to a maximum of 15%
of base earnings. On the last trading date of each period, the Company applies
the funds then in each participant's account to the purchase of shares. The
purchase dates are the last trading day of January, April, July, and October.
The cost of each share purchased is 85% of the lower of the closing prices for
Common Stock on (i) the first trading day in the enrollment period in which the
purchase is made and (ii) the purchase date. (The closing price of the Company's
Common Stock on the New York Stock Exchange composite tape on August 21, 1995,
was $44.625 per share.) The length of the enrollment period may not exceed 12
months. Enrollment dates are the first business day of February, May, August,
and November. The Board has limited the maximum number of shares that may be
purchased by a participant during any enrollment period, and no participant's
right to acquire shares may accrue at a rate exceeding $25,000 of fair market
value of Common Stock (determined as of the first business day in an enrollment
period) in any calendar year.
The Board of Directors administers these plans but has delegated routine
matters to management committees. The Board of Directors may amend or terminate
these plans at any time and may provide for an adjustment in the purchase price
and the number and kind of securities available under the plan in the event of a
reorganization, recapitalization, stock split, or other similar event. However,
amendments that would increase the number of shares reserved for purchase,
materially increase the benefits to participants, or materially modify the
requirements for participation under these plans require stockholder approval.
Shares available under these plans may be either outstanding shares repurchased
by the Company or newly issued shares.
FEDERAL INCOME TAX CONSEQUENCES
In general, participants who are citizens or residents of the United States
("U.S. Participants") will not have taxable income or loss under these plans
until they sell or otherwise dispose of shares acquired under these plans (or
die holding such shares). If the shares are held, as of the date of sale or
disposition, for longer than both (i) two years after the beginning of the
enrollment period during which the shares were purchased, and (ii) one year
following purchase, a U.S. Participant will have taxable ordinary income equal
to 15% of the fair market value of the shares on the first day of the enrollment
period (but not in excess of the gain on the
14
<PAGE> 17
sale). Any additional gain from the sale will be long-term capital gain. The
Company is not entitled to an income tax deduction if the holding periods are
satisfied.
If the shares are disposed of within either of the foregoing holding
periods (a "disqualifying disposition"), a U.S. Participant will have taxable
ordinary income equal to the excess of the fair market value of the shares on
the purchase date over the purchase price. In addition, the U.S. Participant
will have taxable capital gain (or loss) measured by the difference between the
sale price and the U.S. Participant's purchase price plus the amount of ordinary
income recognized, which gain (or loss) will be long-term if the shares have
been held as of the date of sale for more than one year. The Company is entitled
to an income tax deduction equal to the amount of ordinary income taxable to a
U.S. Participant in a disqualifying disposition.
Special rules apply to U.S. Participants who are directors or officers. The
consequences to non-U.S. Participants are governed by foreign laws, which
typically do not offer the same tax advantages as United States law.
PROPOSED AMENDMENT
At the annual meeting, the Company's stockholders will be asked to approve
the increase in the total number of shares authorized under both plans by
1,000,000 shares to 15,000,000 shares.
The following table shows the "Dollar Value" and number of shares purchased
by the named individuals and groups under the Amended and Restated 1984 Employee
Stock Purchase Plan and/or the Amended and Restated 1985 Supplemental Employee
Stock Purchase Plan during the fiscal year ended June 30, 1995. The "Dollar
Value" is the difference between the fair market value of the stock at the date
of purchase and the participant's purchase price for the stock.
PLAN BENEFITS
AMENDED AND RESTATED 1984 EMPLOYEE STOCK PURCHASE PLAN AND
AMENDED AND RESTATED 1985 SUPPLEMENTAL EMPLOYEE STOCK PURCHASE PLAN(a)
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE($) OF SHARES
---------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Robert J. Saldich..................................................... $ 4,063 733
President and Chief Executive Officer
Harry O. Postlewait................................................... 4,016 720
Executive Vice President
Michael T. Everett.................................................... 3,835 688
Senior Vice President
Raymond J. Sims....................................................... 3,865 691
Senior Vice President and Chief Financial Officer
Joseph G. Wirth....................................................... 0 0
Senior Vice President and Chief Technical Officer
Executive Officers as a Group (19 persons)............................ 66,181 11,807
Non-Executive Director Group(b)....................................... 0 0
Non-Executive Officer Employee Group.................................. 5,195,747 892,854
</TABLE>
---------------
(a) Future benefits or amounts received cannot be calculated as they are
dependent on each individual's decision as to the amount of salary to be
deducted to be used for stock purchases and the stock price in effect at
the time of purchase.
(b) Members of the Board of Directors are ineligible to participate in these
Plans, unless they are also an employee of the Company. Presently, only Mr.
Saldich is eligible.
RECOMMENDATION
The Board of Directors believes that the proposed amendment is in the best
interests of the Company, its stockholders, and its employees and unanimously
recommends a vote "FOR" approval. Approval of the amendment requires the
affirmative vote of the holders of a majority of the voting power of the
Company's outstanding shares of Common Stock.
15
<PAGE> 18
ADDITION OF SHARES TO 1990 INCENTIVE PLAN
BACKGROUND
In order to attract, retain, and motivate selected employees of, and
consultants to, the Company and its subsidiaries and affiliates, the Board of
Directors adopted, and the stockholders approved, the 1990 Incentive Plan. The
1990 Incentive Plan provides for the discretionary award of options, restricted
stock, performance share awards, or any combination of these (collectively, the
"awards") to eligible employees, including executive officers, and consultants.
The Incentive Plan is administered by the Board of Directors. The Board may
delegate its authority to a committee composed of not less than three outside
directors and may delegate routine matters to management.
A total of 3,700,000 shares of Common Stock is reserved for issuance under
the Incentive Plan. To the extent an award is paid in cash, the number of shares
of Common Stock, based on the fair market value thereof on the payment date,
that represent the value of the cash payment will not be available for later
grant under the Incentive Plan. No award may be granted under the Incentive Plan
after October 31, 2000, but outstanding awards may extend beyond that date.
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Incentive Plan to increase the aggregate number of shares
issuable under the plan by 1,250,000 shares to 4,950,000 shares. As of June 30,
1995, approximately 500,555 shares remained available for issuance under the
plan. A summary of the principal provisions of the Incentive Plan is set forth
below. If approved by stockholders, approximately 1,750,555 shares would be
available for issuance. Management expects this share increase to be sufficient
for all grants made under the plan for the next year.
DESCRIPTION OF PLAN
As stated, awards may be granted in the form of stock options, restricted
stock, or performance shares (as defined in the Incentive Plan). Since the
Incentive Plan was approved by the stockholders in 1990, the Board has granted
only stock option awards. The other forms of awards were included in the
Incentive Plan in order to provide the Board with sufficient flexibility to
respond to such circumstances as changes in accounting rules or tax laws, a
different competitive environment for attracting and retaining employees, or
unforeseen conditions. The Board has broad discretion to determine the amount
and type of awards and the terms and conditions of awards. If approved by
stockholders, any award may be granted either alone or in addition to other
awards granted under the Incentive Plan. The Board may condition the grant of an
award upon the attainment of specified Company, group, division, or subsidiary
performance goals or other criteria, which need not be the same for all
participants, and may adjust the performance goals and measurements applicable
to awards. The Board also may waive in whole or in part any or all restrictions,
conditions, vesting, or forfeiture with respect to any outstanding award.
The consideration payable in connection with an award (including any
related taxes) may, as authorized by the Board, be paid by promissory note of
the participant, or by delivery of other property, including securities of the
Company. Except as provided in the Incentive Plan or in an award agreement,
awards generally terminate 90 days after termination of a participant's
employment, with the following exceptions: if the employment termination is due
to the participant's death, disability, or retirement (and the award was made
prior to August 2, 1991), then the award may be exercised for two years after
the date of termination. For awards made after August 2, 1991, if termination
was due to retirement, then the award may be exercised for three years after the
date of termination. For awards made after August 12, 1994, if termination was
due to retirement, then the award may be exercised for five years after the date
of termination.
The Board may amend, alter, or discontinue the Incentive Plan or any award
at any time, except that the consent of a participant is required if the
participant's existing rights under an outstanding award would be impaired. In
addition, to the extent required under applicable tax and securities laws and
regulations, the stockholders of the Company must approve any amendment,
alteration, or discontinuance of the Incentive Plan that would (i) increase the
total number of shares reserved under the Incentive Plan, (ii) permit incentive
stock options to be exercisable at less than fair market value on the date of
grant, (iii) extend the
16
<PAGE> 19
maximum option exercise period, (iv) change the class of employees or
consultants eligible to participate in the Incentive Plan, or (v) materially
increase the benefits accruing to participants under the Incentive Plan.
The Incentive Plan is an unfunded plan for incentive and deferred
compensation. Although it has not done so, the Board may establish trusts or
other arrangements to meet the obligations under the Incentive Plan to deliver
stock or make payments.
Options. Stock Options granted under the Incentive Plan may be incentive
stock options under Section 422 of the Internal Revenue Code ("ISOs") or
non-qualified stock options ("Non-Qualified Options"). The exercise price of
ISOs may not be less than the fair market value of the shares subject to the
option on the date of grant. The exercise price of Non-Qualified Options must be
at least 85% of the fair market value of the shares subject to the option on the
date of grant. The term of any ISO granted under the Incentive Plan may not
exceed ten years, and the term of any Non-Qualified Option may not exceed 15
years. Certain other limitations are also applicable to ISOs in order to take
advantage of tax treatment that may be favorable to holders of ISOs. No one
participant may receive grants of options to purchase more than 200,000 shares
of Common Stock under the Incentive Plan in any one-year period.
Restricted Stock. Restricted Common Stock awards consist of
nontransferable shares of Common Stock of the Company. The Board may provide for
the lapse of the transfer restrictions over a period of not more than ten years,
or may accelerate or waive such restrictions, in whole or in part, based on
service, performance, or other criteria.
Performance Shares. Performance shares, which are shares of stock issuable
upon the attainment of certain performance criteria, may also be granted under
the Incentive Plan. At the time a grant is made, the Board will determine the
number of shares of Common Stock to be awarded at the end of the performance
period if and to the extent that the specified performance targets are met. The
Board will determine the performance period, which must be at least two years
and not more than six years, the performance objectives to be used in granting
the awards, and the extent to which awards have been earned. Performance periods
may overlap, and participants may be awarded performance shares having different
performance criteria. Performance share awards may be payable in cash or stock,
at the discretion of the Board, and may bear interest or earn dividends.
Change in Control. In the event of a "change in control" of the Company,
as defined in the Incentive Plan, the Board may, in its discretion and subject
to certain limitations, elect to accelerate the vesting provisions of awards or
may cash out the awards. A "change in control" is defined to include the
acquisition of 20% or more of the voting power of the Company's outstanding
stock, a proxy solicitation for one or more directors without support of the
then-current Board, and certain mergers or reorganizations or other changes in
ownership of the Company's assets or stock.
FEDERAL INCOME TAX CONSEQUENCES
In general, an employee who is a citizen or resident of the United States
("U.S. Employee") will not have taxable income (and the Company will receive no
deduction) upon the grant or exercise of an ISO. However, exercise of an ISO by
a U.S. Employee could give rise to liability for alternative minimum tax.
A U.S. Employee generally will be entitled to long-term capital gain
treatment upon the sale of shares ("Option Shares") acquired upon the exercise
of an option if the shares have been held for more than two years after the
grant date and for more than one year after the exercise date. If the Option
Shares are disposed of before both of these holding periods have expired, the
U.S. Employee will have taxable ordinary income and/or capital gain (or loss) in
the year of sale determined as if the option had been a Non-Qualified Option
(see below), except that the amount of ordinary income will not exceed the
actual gain on the sale, and the Company will be entitled to a corresponding
deduction.
In general, a U.S. Employee will not have taxable income upon the grant of
a Non-Qualified Option or performance share award. Upon exercise or conversion
of either of these instruments, the U.S. Employee will generally have ordinary
income subject to withholding taxes (and the Company will be entitled to a
corresponding deduction) in the amount by which the fair market value of the
stock at that time exceeds the
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<PAGE> 20
purchase (or conversion) price. A U.S. Employee will generally not have taxable
income upon the grant of restricted stock but will have taxable income upon the
lapse of any restrictions. A U.S. Employee receiving restricted stock, however,
may make an election to be taxable at grant on any excess of fair market value
over the amount paid, in which case the lapse of any restrictions will not be a
taxable event. If shares are held at least one year after the date the U.S.
Employee has taxable income from acquiring them, then upon sale of the shares
the employee will have long-term capital gain or loss equal to the difference
between the sale price and the fair market value of the shares on the date
income is recognized. Under current federal income tax law, long-term capital
gain is taxable at a maximum rate of 28%, while ordinary income is taxable at a
maximum stated rate of 39.6% (disallowances of deductions at certain income
levels may result in a higher implicit rate).
The tax consequences to non-U.S. Employees are governed by foreign law,
which typically does not offer the same tax advantages as United States law.
Special rules apply to participants who are directors or officers.
PROPOSED AMENDMENT
At the annual meeting, the Company's stockholders will be asked to approve
the proposal to amend the Amended and Restated 1990 Incentive Plan to increase
the number of shares authorized under the plan by 1,250,000 shares to 4,950,000
shares.
The following table shows the number of shares of Common Stock currently
issuable upon exercise of options granted to the named individuals and groups
under the 1990 Incentive Plan during the fiscal year ended June 30, 1995.
PLAN BENEFITS
1990 INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
NAME AND POSITION OPTIONS(a) EXERCISE PRICE
-------------------------------------------------------------------- ---------- --------------
<S> <C> <C>
Robert J. Saldich................................................... 50,000 $ 35.875
President and Chief Executive Officer
Harry O. Postlewait................................................. 28,000 $ 35.875
Executive Vice President
Michael T. Everett.................................................. 14,000 $ 35.875
Senior Vice President
Raymond J. Sims..................................................... 12,000 $ 35.875
Senior Vice President
and Chief Financial Officer
Joseph G. Wirth..................................................... 12,000 $ 35.875
Senior Vice President and Chief Technical Officer
Executive Officers as a Group (19 persons).......................... 237,500 $ 35.941
Non-Executive Director Group(b)..................................... 25,000 $ 35.875
Non-Executive Officer Employee Group................................ 761,700 $ 36.084
</TABLE>
---------------
(a) All options granted at fair market value as of date of grant.
(b) Only officers and other key employees (including consultants) are eligible
to participate in this Plan.
The closing price of the Common Stock in the New York Stock Exchange on
August 21, 1995 was $44.625 per share.
RECOMMENDATION
The Board of Directors believes that the proposed amendment is in the best
interests of the Company, its stockholders, and its employees and unanimously
recommends a vote "FOR" approval. Approval of of the amendment requires the
affirmative vote of the majority of the votes cast at a duly held stockholders
meeting at which a quorum of the voting power is represented.
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<PAGE> 21
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, from July 1, 1994, through the fiscal year ended June 30,
1995, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were complied with
except that Mr. Vizas filed nine days late a Form 4 to report the purchase of
1,700 shares of Common Stock. In addition, Peter Brooks, a Vice President of the
Company, filed forty-five days late an Initial Statement of Beneficial Ownership
of Securities on Form 3 pursuant to Section 16(a) of the Securities Act of 1934.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends to the stockholders ratification of the
appointment of Price Warehouse LLP as the Company's independent accountants.
Price Warehouse LLP has been serving as the Company's independent accountants
since fiscal year 1984.
Representatives of Price Warehouse LLP will be present at the meeting. They
do not expect to make any statement, but will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
Mr. Cook is a director and stockholder of Chemfab Corporation, a New
Hampshire company founded by Mr. Cook's brother and principally engaged in the
manufacture and sale of flexible, high-performance materials for use in severe
environments. Mr. Cook has been a director of Chemfab Corporation for many years
and has been a major stockholder since his brother's death in 1977. While
Chemfab is not in direct competition with Raychem, the company possesses wire
coating technology which may be useful to competitors of Raychem. Chemfab is
producing a composite film product which it sells to customers who use it to
manufacture wire and cable. At the present time, it does not appear likely that
Chemfab itself would compete directly with Raychem in the wire and cable
business. In the past, Chemfab has had discussions with Raychem concerning the
possibility of Chemfab and Raychem working together. The parties mutually
concluded that such a relationship was unlikely to be productive for either
company at that time.
ANNUAL REPORT
The Company's annual report for the 1995 fiscal year is being mailed with
this proxy statement to stockholders entitled to notice of the meeting.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented
for consideration at the meeting. If other matters are properly brought before
the meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented on such matters in accordance
with their best judgment.
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<PAGE> 22
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1996 annual meeting of stockholders must be received by the Company no
later than May 24, 1996, in order to be considered for inclusion in the proxy
statement and proxy related to the meeting.
Stockholder proposals for nominees to the Board of Directors must be
submitted in writing to the nominating committee in care of the Corporate
Secretary by August 1, 1996, or 90 days prior to the annual meeting of
stockholders, whichever is earlier.
By Order of the Board of Directors
Robert J. Vizas
Secretary
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<PAGE> 23
PROXY RAYCHEM CORPORATION PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 1, 1995
Richard A. Kashnow, Robert J. Vizas, and Catherine M. Bonwick, or any of
them, each with the power of substitution and revocation, are hereby
authorized to represent the undersigned, with all powers which the
undersigned would possess if personally present, to vote the Common Stock
of the undersigned at the annual meeting of stockholders of RAYCHEM
CORPORATION to be held at the Company's principal office, 300 Constitution
Drive, Menlo Park, California 94025-1164, at 10:00 A.M.on Wednesday,
November 1, 1995, and at any postponements or adjournments of that meeting,
as set forth below, and in their discretion upon any other business that
may properly come before the meeting.
This proxy will be voted as specified or, if no choice is specified, will
be voted FOR the election of the nominees named and FOR each of the other
proposals specified herein.
/ / Check here for address change.
/ / Check here if you plan to attend the meeting.
New address: __________________________________________
_______________________________________________________
_______________________________________________________
(Continued and to be signed on reverse side.)
<PAGE> 24
RAYCHEM CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. Nominees:
Paul M. Cook, Richard Dulude, James F. Gibbons, Richard A. Kashnow,
John P. McTague, Dean O. Morton, Isaac Stein and Cyril Yansouni.
For All
For Withheld Except nominees written in below.
/ / / / / /
__________________________________________
Nominee Exception
2. To approve an amendment to the Company's Amended and Restated 1984 Employee
Stock Purchase Plan and Amended and Restated 1985 Supplemental Employee Stock
Purchase Plan to provide additional shares.
For Against Abstain
/ / / / / /
3. To approve an amendment to the Company's Amended and Restated 1990 Incentive
Plan to provide additional shares.
For Against Abstain
/ / / / / /
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants.
For Against Abstain
/ / / / / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE, OR IN REPRESENTATIVE CAPACITY, SIGN NAME AND INDICATE TITLE.
_________________________________________________
Signature Date
_________________________________________________
Signature Date
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
