<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
Raychem Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not applicable.
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
Not applicable.
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
Not applicable.
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
Not applicable.
- --------------------------------------------------------------------------------
(3) Filing Party:
Not applicable.
- --------------------------------------------------------------------------------
(4) Date Filed:
Not applicable.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
[LOGO]
RAYCHEM CORPORATION
300 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025-1164
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 6, 1998
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
94025-1164, on Friday, November 6, 1998, at 10:00 a.m. local time, for the
following purposes:
1. To elect directors;
2. To ratify the appointment by the Company's Board of Directors of
PricewaterhouseCoopers LLP to audit the accounts of the Company and its
subsidiaries for the 1999 fiscal year; and
3. To consider and transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the record date for the determination of
stockholders entitled to notice of the meeting, and entitled to vote at the
meeting, as the close of business on September 8, 1998.
By Order of the Board of Directors
RICHARD A. KASHNOW
Chairman of the Board,
President and Chief Executive Officer
Menlo Park, California
September 18, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS 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. The meeting will be held at the Company's
principal office on November 6, 1998, at 10:00 a.m. local time. At the meeting,
the stockholders of record as of the close of business on September 8, 1998 will
be entitled to vote. On September 8, 1998, the Company had issued and
outstanding 79,768,045 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 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 preparing,
assembling, 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, for forwarding 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 solicitations by 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,
1998.
<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 a successor is elected and qualified, or until death,
resignation, or removal. There are eight nominees for the eight positions on the
Board of Directors. All eight nominees are currently directors of the Company,
having been elected by the stockholders at the 1997 Annual Meeting of
Stockholders.
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.
NOMINEES
The following is information regarding the nominees, including information
furnished by them as to their principal occupations for the last five years,
directorships of public companies and certain other directorships, and their
ages as of June 30, 1998.
<TABLE>
<CAPTION>
DIRECTOR
AGE SINCE
--- --------
<S> <C> <C>
Richard Dulude is a retired Vice Chairman of Corning
Incorporated and was a director of Dow Corning Corporation
and Corning Incorporated. He is also a retired Chairman
and Chief Executive Officer of Corning Vitro Corporation
and a former director of Grumman Corporation. He is a
director of AMBAC, Inc., Landec Corporation, and HCIA
Inc. ..................................................... 65 1991
James F. Gibbons is Special Counsel to the President,
Stanford University. He is a Professor of electrical
engineering and served as the Dean of the School of
Engineering at Stanford University from 1984 to 1996. He
holds the professorial title of Reid Weaver Dennis
Professor of Electronics, Stanford University. He is a
director of Lockheed-Martin Corporation, Cisco Systems,
Inc., Centigram Communications Corporation and El Paso
Natural Gas............................................... 66 1987
Richard A. Kashnow is Chairman of the Board, President and
Chief Executive Officer of the Company. From 1991 to 1995,
he was President of Schuller International Group, a
wholly-owned subsidiary of Manville Corporation. He is a
director of Applied Power, Inc. .......................... 56 1995
John P. McTague is the Vice President of Technical Affairs
for Ford Motor Company. He is a director of Ballard Power
Systems................................................... 59 1994
Dean O. Morton is a retired Executive Vice President,
Director and Chief Operating Officer of Hewlett-Packard
Company. He is the Chairman of Centigram Communications
Corporation and is a director of ALZA Corporation, BEA
Systems, Inc., KLA-Tencor Corporation, and The Clorox
Company. He is also a trustee of the Metropolitan Series
Fund, Inc. and State Street Research Funds Group and
Portfolios Inc. .......................................... 66 1989
Isaac Stein is the President of Waverley Associates, Inc. He
is a director of ALZA Corporation, the Benham Group of
Mutual Funds, and CV Therapeutics, Inc. He is also
Chairman of UCSF-Stanford Health Care and is a Trustee of
Stanford University....................................... 51 1993
Chang-Lin Tien is the NEC Distinguished Professor of
Engineering at the University of California, Berkeley,
where he served as Chancellor from 1990 to 1997. He is a
director of AirTouch Communications, Chevron Corporation,
Kaiser Permanente, and Wells Fargo & Co. ................. 62 1996
Cyril J. Yansouni is Chairman and Chief Executive Officer of
Read-Rite Corporation. He is a director of PeopleSoft,
Inc. and Informix Corporation............................. 56 1994
</TABLE>
STOCK OWNERSHIP
The following table sets forth certain information, as of June 30, 1998,
regarding beneficial ownership of the Company's Common Stock (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
2
<PAGE> 5
officer named in the Summary Compensation Table herein, and (iv) by all
executive officers and directors as a group. Except as indicated below, each
person has sole investment and voting power with respect to the shares
indicated, subject to applicable laws.
All information in this proxy statement regarding Common Stock ownership,
including ownership of restricted stock and options to purchase shares of Common
Stock, has been adjusted to reflect a two-for-one stock split effective November
17, 1997.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE OF
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED(a)(b) OUTSTANDING(c)
---------------- --------------- ---------------
<S> <C> <C>
Neuberger & Berman, LLC..................................... 6,655,471(d) 8.0%
605 Third Avenue
New York, NY 10158-3698
State Farm Insurance Companies.............................. 5,918,600(e) 7.1%
One State Farm Plaza
Bloomington, Illinois 61710-0001
FMR Corporation............................................. 5,099,033(f) 6.2%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Richard Dulude.............................................. 20,851
James F. Gibbons............................................ 37,012
Richard A. Kashnow.......................................... 285,533
John P. McTague............................................. 18,882
Dean O. Morton.............................................. 30,788
Isaac Stein................................................. 97,202
Chang-Lin Tien.............................................. 6,453
Cyril J. Yansouni........................................... 20,741
Raymond J. Sims............................................. 74,751
Ralph H. Harnett............................................ 130,040
John D. McGraw.............................................. 92,946(g)
L. Frans Berthels........................................... 49,869
All executive officers and directors as a group
(19 persons) ............................................. 1,276,142 1.5%
</TABLE>
- ---------------
(a) The figures include options to purchase shares of Common Stock exercisable
within 60 days following June 30, 1998, and held by: Mr. Dulude, 19,351
shares; Dr. Gibbons, 34,412 shares; Dr. Kashnow, 212,500 shares; Mr.
McTague, 10,882 shares; Mr. Morton, 18,686 shares; Mr. Stein, 88,500 shares;
Dr. Tien, 6,453 shares; Mr. Yansouni, 12,741 shares; Mr. Sims, 47,000
shares; Mr. Harnett, 94,600 shares; Mr. McGraw, 59,550 shares; Mr. Berthels,
38,500 shares; and all executive officers and directors as a group, 954,845
shares.
(b) The figures include restricted stock awarded on July 17, 1996, and October
17, 1997, and held by: Dr. Kashnow, 22,000 shares; Mr. Sims, 9,000; Mr.
Harnett, 9,000; Mr. McGraw, 9,000; and Mr. Berthels, 6,600; and restricted
stock awarded to all executive officers and directors as a group, 94,700
shares.
(c) Percentages of less than 1.00% are not shown.
(d) This information was obtained from a response dated August 17, 1998 from
Neuberger & Berman, LLC ("Neuberger"). Neuberger is an investment adviser
and broker dealer registered with the Securities and Exchange Commission.
Neuberger has also informed the Company that: 1) it has shared dispositive
power, and in certain cases sole voting power, over its clients' securities
positions; 2) it does not have any economic interest in the securities of
those clients, and its clients are the actual owners of the securities and
have the sole right to receive, and the power to direct, the receipt of
dividends from or proceeds from the sale of such securities; and 3) of the
6,655,471 shares held by Neuberger, Neuberger had sole voting power over
3,991,596 shares; shared voting power over 1,895,400 shares; sole power to
dispose of -0- shares; and shared power to dispose with respect to 6,665,471
shares.
3
<PAGE> 6
(e) This information was obtained from a letter dated July 20, 1998, from State
Farm Insurance Companies.
(f) This information was obtained from a letter dated September 3, 1998, from
FMR Corporation.
(g) Includes shares/options held by the spouse of Mr. McGraw, also an employee
of the Company.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has standing audit, compensation, and organization
committees.
The functions of the audit committee are as follows: to review and report
to the Board on the annual audit by the Company's independent accountants,
including the scope and general extent of their examination, the audit
procedures that are 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 Drs. Gibbons and Tien were the members
of the audit committee in fiscal year 1998. In the opinion of the Board of
Directors, all members of the audit committee satisfy the independence
requirements of Section 303.00 of the Listed Company Manual of the New York
Stock Exchange.
The functions of the compensation committee are to determine the general
compensation policies of the Company, to establish compensation plans, and to
set specific compensation levels for executive officers. The members of the
compensation committee in fiscal year 1998 were Messrs. Morton, Yansouni, and
McTague. A Report of the Compensation Committee on Executive Compensation is
included in this proxy statement.
The organization committee of the Board focuses on board membership and the
general operation and governance of the Board. Messrs. Stein, Dulude, and Morton
and Dr. Gibbons are the members of the organization committee. In fiscal year
1998, the organization committee recommended, and the Board adopted, new
Corporate Governance Guidelines.
Stockholder proposals for Board nominees will be accepted by the
organization 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 (containing certain information
specified in the Bylaws) to the organization committee in care of the Corporate
Secretary at the principal executive offices of the Company not less than 90
days nor more than 120 days prior to the first anniversary of the preceding
year's annual meeting.
During the fiscal year ended June 30, 1998, the Board of Directors held
fourteen meetings, the audit committee held four meetings, the compensation
committee held six meetings, and the organization committee held three meetings.
Each director attended at least 75% of the aggregate number of Board meetings
and meetings of committees of which he was a member that were held during the
fiscal year.
4
<PAGE> 7
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)
-------------------------
ANNUAL COMPENSATION(a) RESTRICTED SECURITIES
NAME AND -------------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(c) OPTIONS/SARS COMPENSATION
------------------ ---- -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Kashnow................. 1998 $735,000 $ 0 $1,014,068 220,000 $ 3,390(d)
Chairman, President and 1997 700,000 670,000 0 0 200,000(e)
Chief Executive Officer 1996 486,000(f) 200,000 1,650,000 425,000 865,000(g)
Raymond J. Sims.................... 1998 $340,000 $ 0 $ 322,658 70,000 $ 3,570(d)
Senior Vice President and 1997 320,000 200,000 61,875 40,000
Chief Financial Officer 1996 284,000 75,000 0 62,000
Ralph H. Harnett................... 1998 $340,000 $ 0 $ 322,658 70,000 $ 4,900(d)
Senior Vice President 1997 320,000 180,000 61,875 40,000
1996 284,000 75,000 0 32,000
John D. McGraw..................... 1998 $310,000 $ 0 $ 322,658 70,000(h) $ 5,400(d)
Senior Vice President 1997 262,000 170,000 61,875 32,000
1996 215,000 75,000 0 24,000
L. Frans Berthels.................. 1998 $260,000 $ 0 $ 230,470 40,000
Senior Vice President 1997 228,000 140,000 49,500 20,000 $ 95,000(i)
1996 193,000 50,000 0 35,000 51,000(i)
</TABLE>
- ---------------
(a) In accordance with Securities and Exchange Commission regulations,
perquisites less than the lesser of (a) $50,000 or (b) 10% of the total of
annual salary and bonus are not shown.
(b) Adjusted for a two-for-one Common Stock split effective November 17, 1997.
(c) 75,000 shares of restricted stock were awarded to Dr. Kashnow on October 1,
1995. The fair market value on the date of the award was $22.50 per share. A
par value payment equal to $0.50 per share was paid by Dr. Kashnow in
connection with the award. Restrictions as to 37,500 shares lapsed on
December 8, 1995, and as to the remaining 37,500 shares on February 8, 1996.
Dr. Kashnow received 128 shares of restricted stock in lieu of dividends
payable on the original award; restrictions on these shares lapsed ratably
with the original award. On July 17, 1996, 2,000 shares of restricted stock
were awarded to each of Mr. Sims, Mr. Harnett, and Mr. McGraw, and 1,600
shares of restricted stock were awarded to Mr. Berthels. The fair market
value on the date of the awards was $31.438 per share. Par value payments
equal to $0.50 per share were paid by Messrs. Sims, Harnett, McGraw, and
Berthels in connection with the awards. Dividends on these shares are paid
in cash. Restrictions will lapse as to these shares on July 17, 1999 if the
recipients are still employed by the Company on that date, or, if any
recipient is not employed by the Company on July 17, 1999, at such time as
may apply under the terms of the Company's executive termination
compensation policy. On October 17, 1997, 22,000 shares of restricted stock
were awarded to Dr. Kashnow; 7,000 shares of restricted stock were awarded
to each of Mr. Sims, Mr. Harnett, and Mr. McGraw, and 5,000 shares of
restricted stock were awarded to Mr. Berthels. The fair market value on the
date of the awards was $46.594. A par value payment equal to $0.50 per share
was paid in connection with the award. Restrictions will lapse as to these
shares on October 17, 2000 if the recipients are still employed by the
Company on that date, or, if any recipient is not employed by the Company on
October 17, 2000, at such time as may apply under the terms of the Company's
executive termination compensation policy. As of June 30, 1998, restricted
stock was held as follows: Dr. Kashnow, 22,000 shares; Mr. Sims, 9,000
shares; Mr. Harnett, 9,000 shares; Mr. McGraw, 9,000 shares; and Mr.
Berthels, 6,600 shares.
5
<PAGE> 8
(d) This amount represents Company matching 401(k) contributions.
(e) Cash bonus paid pursuant to terms of employment agreement to repay $200,000
of outstanding principal of interest-free $1 million relocation loan.
(f) This amount represents salary for employment commencing October 1, 1995.
(g) This amount represents a transition payment to offset forfeited compensation
and benefits from a prior employer.
(h) Does not include options granted to Mr. McGraw's spouse, also an employee of
the Company: 14,000 shares in fiscal year 1996; 10,000 shares in fiscal year
1997; and 10,000 shares in fiscal year 1998.
(i) This amount represents a special allowance paid to Mr. Berthels, who was a
Belgian-based employee prior to February 1, 1997, to cover additional costs
of living in the United States.
STOCK OPTIONS
The following table shows certain information regarding options granted
during fiscal year 1998 for each executive officer named in the Summary
Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(a)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(c)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(b) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------ ------------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Kashnow...... 220,000 8.8% $46.594 10/17/07 $6,446,598 $16,336,944
Raymond J. Sims......... 70,000 2.8% $46.594 10/17/07 $2,051,190 $ 5,198,119
Ralph H. Harnett........ 70,000 2.8% $46.594 10/17/07 $2,051,190 $ 5,198,119
John D. McGraw(d)....... 70,000 2.8% $46.594 10/17/07 $2,051,190 $ 5,198,119
L. Frans Berthels....... 40,000 1.6% $46.594 10/17/07 $1,172,109 $ 2,970,353
</TABLE>
- ---------------
(a) No grants of Stock Appreciation Rights were made to any named executive
officer during the fiscal year ended June 30, 1998.
(b) All options granted to executive officers in fiscal year 1998 become
exercisable in four equal annual installments commencing on the first
anniversary of the grant date. Exercisability of options may be accelerated
by the Board of Directors. At the time of exercise, the 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 actual value, if any, that an
executive officer may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised.
(d) Does not include options to purchase 10,000 shares granted to Mr. McGraw's
spouse, also an employee of the Company.
6
<PAGE> 9
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 1998 and options outstanding as of June 30, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(a)
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(b)(c)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ---------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Richard A. Kashnow.......... 0 $ 0 212,500/432,500 $1,500,888/$1,500,888(d)
Raymond J. Sims............. 29,700 807,980 41,000/137,000 94,000/ 163,750
Ralph H. Harnett............ 16,000 520,620 87,600/123,000 833,615/ 175,375
John D. McGraw(e)........... 50,250 1,392,528 26,550/110,000 263,349/ 117,000
L. Frans Berthels........... 0 0 36,000/ 75,000 208,938/ 87,813
</TABLE>
- ---------------
(a) No Stock Appreciation Rights were outstanding at June 30, 1998, nor were any
grants of Stock Appreciation Rights made to any named executive officer
during the year ended June 30, 1998.
(b) The market value of the underlying securities at the fiscal year-end minus
the exercise price of in-the-money options. Such market value as of June 30,
1998 was $29.563 per share.
(c) The average per-share exercise price of all options outstanding for each
named executive officer is: Dr. Kashnow, $30.718; Mr. Sims, $38.250; Mr.
Harnett, $32.332; Mr. McGraw, $37.852; and Mr. Berthels, $35.783.
(d) The values of Dr. Kashnow's exercisable and unexercisable in-the-money
options are the same because his grants were exactly 50% vested at fiscal
year-end.
(e) Does not include options held and exercised by Mr. McGraw's spouse, also an
employee of the Company. Also does not include 27,250 exercisable and 26,250
unexercisable options held by Mr. McGraw's spouse as of June 30, 1998.
EMPLOYMENT/CONSULTING AGREEMENTS
In August 1995, the Company entered into an agreement with Dr. Kashnow, who
became President, Chief Executive Officer, and Chairman of the Board of
Directors on October 1, 1995. Supplemental agreements were entered into on
February 5, 1996 and June 30, 1997.
DIRECTORS' FEES AND STOCK OPTIONS
During fiscal year 1998, directors not employed by the Company (all
directors except Dr. Kashnow) were paid an annual retainer of $27,500 plus
$1,000 for each Board and committee meeting attended in person and $500 for
participation in each telephone Board and committee meeting. In addition, the
chairs of the audit committee, the compensation committee, and the organization
committee each received an annual retainer of $5,000.
The Company entered into a consulting agreement with Dr. Gibbons effective
December 12, 1996. In addition to Dr. Gibbons' normal Board responsibilities, he
will from time to time provide consulting services to the Board and the Chief
Executive Officer at the request of the Chairman of the Board/Chief Executive
Officer. Dr. Gibbons will provide such services upon request at a per diem rate
of $3,000. In fiscal year 1998, he earned $12,000 (for four days of service)
under this agreement.
Effective as of July 1, 1996, the Company's consulting agreement with Mr.
Stein was amended to delete the monthly retainer and monthly expense
contribution paid to Waverley Associates, Inc. Under the amended agreement, Mr.
Stein now provides services upon request at a per diem rate of $3,000 plus
reasonable expenses. In fiscal year 1998, he earned $3,000 (for one day of
service) under this agreement.
7
<PAGE> 10
Under the 1996 Directors Stock Option Plan, each director who is not an
employee of the Company or of any subsidiary or affiliate of the Company
automatically receives an option to purchase 10,000 shares of Common Stock on
the date he or she is first elected to the Board. Thereafter, each eligible
director then in office automatically receives an option to purchase 5,000
shares of Common Stock upon re-election to the Board at the Company's annual
meeting. The 1996 Directors Stock Option Plan also provided for the one-time
grant of an option to purchase 4,000 shares of Common Stock to directors then in
office on the date of the Company's 1996 annual meeting. A total of 400,000
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, 1998,
each director (except Dr. Kashnow, who was not eligible) received an option
under this Plan to purchase 2,500 shares of Common Stock at a grant price of
$47.313 per share.
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 state that within a three-year period from the later of August 1995,
or the director's election, each director should own Common Stock having a value
of at least five times the director's annual retainer.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The compensation committee of the Board of Directors (the "Compensation
Committee") determines the general compensation policies of the Company,
establishes compensation plans, and sets specific compensation levels for
executive officers. During the 1998 fiscal year, the Compensation Committee was
composed of Messrs. Morton (Chairman), Yansouni, and McTague. All of the
Compensation Committee members are "non-employees" as that term is defined under
the Securities and Exchange Commission's Rule 16b-3, and "outside directors" as
that term is defined under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code").
The Compensation Committee reviews executive compensation matters at least
once per year. At the request of the Compensation Committee, the Company's Human
Resources Department presents analyses and recommendations on executive
compensation for the next fiscal year. The Compensation Committee thereafter
makes specific determinations for the Company's Chief Executive Officer (CEO)
and reviews and approves recommendations by the CEO for each other executive
officer of the Company.
Executive officer compensation typically consists of three components: base
salary, an annual cash bonus award, and long-term incentives in the form of
stock options and restricted stock awards. Individual salaries, along with
"target" levels for cash bonuses, stock option grants, and restricted stock
awards, are established by the Compensation Committee based on competitive
market levels indicated in pay surveys and other information obtained by the
Company regarding select U.S. companies of similar size, complexity, and quality
to the Company.
The Compensation Committee believes that officers' interests should be
closely aligned with those of the Company's stockholders. The Compensation
Committee therefore encourages and expects officers to have a meaningful
ownership stake in the Company, and has established officer ownership guidelines
to support this objective. The guidelines state that the Chief Executive Officer
should own shares having value of at least four times annual salary, senior vice
presidents should own shares having a value of at least two times annual salary,
and vice presidents should own shares having a value of at least one time annual
salary. Each officer has three years to reach the designated ownership level.
Base Salaries. For fiscal year 1998, as for recent prior years, the
Compensation 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
8
<PAGE> 11
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, competitive
data may be adjusted to reflect relative sales volume and differences in
business unit size, as appropriate. Base salaries are set to correspond to the
median salary paid to comparable executives. Additionally, the Compensation
Committee considers each executive officer's individual experience and sustained
performance, as well as salary levels of others within the Company. Salary
adjustments for fiscal year 1999 were made for officers effective July 1, 1998.
Annual Bonuses. The Compensation Committee has adopted an annual incentive
structure that aligns the interests of executive officers with stockholders by
putting a significant portion of such officers' annual compensation at risk
based on the Company's achievement of predetermined financial performance goals
and on individual performance. Award opportunities are intended to position the
total cash compensation of executive officers between the median and the
seventy-fifth percentile of competitive total compensation when superior results
are achieved. For fiscal year 1998, the Compensation Committee adopted an
incentive structure for annual bonuses based on the Company's growth in pre-tax
income.
At its August 1996 meeting, the Board adopted, on the recommendation of the
Compensation Committee and subject to stockholder approval, an Officer Variable
Pay Plan (the "Plan"). The Company received stockholder approval for the Plan at
its 1996 annual meeting. Under the Plan, awards relating to the financial
performance of the Company are paid to officers designated by the Compensation
Committee as participants in the Plan. Payments under the Plan qualify as
performance-based under Section 162(m) of the Code. The Plan has a minimum
payout if 80% of the specified target is met and a maximum payout if 120% of the
specified target is met. The maximum bonus that may be paid to any one
participant for any one year is $2,500,000. The bonus may be paid in cash,
stock, restricted stock, or other property as determined in each case by the
Board. Dr. Kashnow was the only officer designated as a participant in the Plan
for fiscal year 1998, although under the annual incentive structure adopted by
the Compensation Committee, other executive officers receive awards under
substantially the same criteria.
For fiscal year 1998, no bonuses were paid to officers of the Company
pursuant to the Plan or otherwise because the Company did not achieve the
applicable financial performance targets.
Long-Term Incentives. The Compensation Committee believes that stock
options and restricted stock play an important role in attracting, retaining,
and motivating executives. Stock options also provide executives with a means of
increasing Company stock ownership, which is a key objective of the executive
compensation program and serves to align executives' interests with those of
stockholders. The Compensation Committee's general practice is to grant options
annually at an exercise price equal to 100% of the fair market value of the
Company's Common Stock at the date of grant. Options typically vest at a rate of
25% per year over four years. Restricted stock granted to date has typically
vested in full three years from the date of grant.
The Compensation Committee determines option and restricted stock grant
levels for executive officers based on competitive data gathered from relevant
comparison companies by independent consultants, and uses competitive practice
as a guideline for determining appropriate grant levels. The Compensation
Committee also considers the aggregate stock option shares granted throughout
the Company, individual experience and performance of recipients, and past
individual grant amounts in determining individual grant levels.
In fiscal year 1998, restricted stock grants were made to key individuals,
including Messrs. Sims, Harnett, and McGraw, who each received 7,000 shares, and
Mr. Berthels, who received 5,000 shares.
Chief Executive Officer Compensation. The Compensation 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 for individual performance. The
Compensation Committee reviews CEO compensation packages and related financial
performance data at selected comparison companies to determine a reasonable
level and mix for compensation of the Company's CEO.
For fiscal year 1998, Dr. Kashnow's base salary was $735,000. Consistent
with the treatment of all other officers and employees of the Company, Dr.
Kashnow did not receive a bonus for fiscal year 1998, as the Company did not
meet applicable financial performance targets. Dr. Kashnow was awarded a stock
option
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<PAGE> 12
grant of 220,000 shares and a restricted share grant of 22,000 shares. For
fiscal year 1999, Dr. Kashnow was awarded a stock option grant of 225,000 shares
and a restricted share grant of 5,000 shares.
On August 11, 1995, the Company entered into an initial employment
agreement with Dr. Kashnow which provides for, among other things, an
interest-free $1 million relocation loan and $200,000 annual cash bonus to repay
the loan beginning in fiscal year 1997. The loan extends for five years subject
to his continued employment with the Company. This agreement was amended in 1997
to provide for the repayment of the remaining $800,000 loan balance at the end
of the original five year term, with a cash bonus payable at that time equal to
the outstanding principal balance of the loan, subject to his continued
employment with the Company.
Officer Severance Benefits. The Company provides severance benefits for all
employees whose employment is terminated due to a reduction in force. Since
fiscal year 1995, there has been a separate executive termination compensation
policy for officers. Each eligible officer terminated involuntarily for a reason
other than cause is, upon execution of an appropriate release agreement, paid
one full year of base salary and given selected benefits continuation. Up to a
second year of base salary and benefits continuation may be paid, provided the
officer is not employed during the second year. If, in the second year, the
officer is employed but his or her total compensation is less than the officer's
base salary while employed by the Company, the officer is eligible to receive a
salary differential.
Company Policy Toward Deductibility of Executive Officer
Compensation. Section 162(m) of the Code places a $1 million per person limit on
the deduction that a publicly held corporation may take for compensation paid to
certain officers (generally the Chief Executive Officer and its four other
highest-paid executive officers) unless, in general, the compensation is exempt
as "performance-based." Compensation resulting from the exercise of stock
options or upon award of performance shares will be treated as
"performance-based" and excluded from the limit on deductibility if, among other
things, the plan under which the awards are granted specifies limits on the
number of shares issuable to any participant under the plan and these limits are
approved by the issuer's stockholders. In the case of performance shares, the
stockholders must also approve the performance goals for the awards.
In adopting and administering executive compensation plans and
arrangements, the Compensation Committee considers whether the deductibility of
such compensation will be limited under Section 162(m) of the Code and, when
appropriate, strives to structure such compensation so that any such limitation
will not apply.
Compensation Committee Members -- Mr. Morton (Chair), Mr. McTague, and Mr.
Yansouni
10
<PAGE> 13
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, 1998, against the Standard & Poor's 500 Stock Index and
the Standard & Poor's Electrical Equipment 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 Equip
Raychem S&P 500 Index
<S> <C> <C> <C>
6/30/93 100.00 100.00 100.00
6/30/94 91.93 101.42 99.16
6/30/95 98.54 127.85 123.60
6/30/96 186.34 161.11 180.82
6/30/97 194.05 217.02 258.58
6/30/98 155.35 282.48 346.93
</TABLE>
- ---------------
(a) Total return assumes reinvestment of dividends. Assumes $100 invested June
30, 1993.
(b) S&P Electrical Equipment Index includes AMP, Emerson Electric, General
Electric, General Signal, Honeywell, Raychem, Rockwell, and Thomas & Betts.
PENSION PLANS
The Company has a defined benefit pension plan that provides retirement
benefits to eligible United States employees. The Company has also adopted a
supplemental executive retirement plan for all United States employees who defer
base salary or whose benefits under the Company's pension plan are limited by
United States federal tax laws. The following aggregate lump sum amounts are
payable, from both plans, upon retirement at age 65.
11
<PAGE> 14
ESTIMATED LUMP SUM BENEFITS
<TABLE>
<CAPTION>
AVERAGE YEARS OF CREDITED SERVICE
ANNUAL --------------------------------------------------------------
COMPENSATION(a) 15 20 25 30 35
- --------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$200,000 $ 384,436 $ 501,323 $ 578,210 $ 626,654 $ 655,098
300,000 584,436 761,323 878,210 951,654 995,098
400,000 784,436 1,021,323 1,178,210 1,276,654 1,335,098
500,000 984,436 1,281,323 1,478,210 1,601,654 1,675,098
600,000 1,184,436 1,541,323 1,778,210 1,926,654 2,015,098
700,000 1,384,436 1,801,323 2,078,210 2,251,654 2,355,098
800,000 1,584,436 2,061,323 2,378,210 2,576,654 2,695,098
900,000 1,784,436 2,321,323 2,678,210 2,901,654 3,035,098
</TABLE>
- ---------------
(a) Highest average base salary received over any three consecutive years of
credited service out of the last ten years of vesting service.
The covered compensation for pension benefit calculations is only the base
salary portion of the compensation disclosed in the Summary Compensation Table.
The years of credited service for the individuals listed in the Summary
Compensation Table are: Dr. Kashnow, 3 years; Mr. Sims, 15 years; Mr. Harnett,
25 years; Mr. McGraw, 18 years, and Mr. Berthels, 1 year. The benefit amounts
listed in the table are not subject to reductions for Social Security. Pursuant
to the terms of Dr. Kashnow's employment agreement with the Company, Dr. Kashnow
was credited with an additional 6 years of service under the supplemental
executive retirement plan. Under such agreement, the amount of Dr. Kashnow's
increased pension benefit from the Company attributable to such additional years
of service will be reduced by the actuarial equivalent of the pension benefit he
will receive from his former employer. Mr. Berthels became a United States
employee effective February 1, 1997. Prior to that time, Mr. Berthels was
covered by the pension plan of the Company's Belgian subsidiary. Under that
plan, Mr. Berthels has 25 years of credited service and at age 60 will be
entitled to a lump sum pension benefit of approximately $600,000.
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 accrues at rates
ranging from 5.0% to 7.05% per year, payable in annual installments. The maximum
amounts of such indebtedness outstanding during the fiscal year ended June 30,
1998, together with the amounts outstanding at June 30, 1998, 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, are as
follows: $81,675.00 (the principal amount) and $81,675.00 (the principal amount)
for Peter Brooks.
The Company has also extended to certain executive officers loans on a
secured basis for relocation expense. The loans are interest free and are
generally repayable over five years. As of June 30, 1998, the maximum amount of
such indebtedness outstanding during the 1998 fiscal year, together with the
amount outstanding at June 30, 1998, for each such executive officer for whom
the principal amount exceeded $60,000 at any time during such period was as
follows: Dr. Kashnow, $800,000 and $800,000; Mr. Berthels, $500,000 and
$500,000; Timothy Burch, $400,000 and $400,000; Arati Prabhakar, $400,000 and
$400,000.
In April 1998, due to Mr. Berthels' previous status as a foreign service
employee, Raychem made Mr. Berthels an interest-free advance in the amount of
$140,000 under the Guidelines of Tax Equalization for Foreign Services Employees
for U.S. taxes assessed in the 1997 calendar year. Required repayment of the
advance will be in approximately November 1998.
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<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and the New York Stock Exchange 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, 1997, through the fiscal year ended June 30,
1998, all Section 16(a) filing requirements applicable to its executive
officers, directors, and greater than 10% beneficial owners were complied with.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends to the stockholders ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants. PricewaterhouseCoopers LLP has been the Company's independent
accountant since fiscal year 1984.
Representatives of Pricewaterhousecoopers 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
questions.
ANNUAL REPORT
The Company's annual report for the 1998 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. However, the accompanying proxy confers
discretionary authority on the persons named therein to vote on any other matter
properly brought before the meeting. Consequently, if any such other matters are
properly brought before the meeting, it is the intention of the persons named in
the accompanying proxy to vote the represented shares in their discretion on
such matters.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's Proxy Statement and
form of Proxy relating to the Company's 1999 Annual Meeting of Stockholders must
be received by May 21, 1999. Under the Company's Bylaws, business to be brought
before an annual meeting by a stockholder who is entitled to vote must be
submitted in writing to the Secretary of the Company at the principal executive
offices of the Company (containing certain information specified in the Bylaws)
not less than 90 days nor more than 120 days prior to the first anniversary of
the preceding year's annual meeting. If the Company is not notified of a
stockholder proposal by August 8, 1999, then proxies held by management of the
Company may provide the discretion to vote against such stockholder proposal,
even though such proposal is not discussed in the Proxy Statement.
A copy of the full text of the Bylaw provisions discussed above may be
obtained by writing to the Company's Corporate Secretary.
By Order of the Board of Directors
RICHARD A. KASHNOW
Chairman of the Board,
President and Chief Executive Officer
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<PAGE> 16
PROXY RAYCHEM CORPORATION PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 6, 1998
Richard A. Kashnow and Karen O. Cottle, or either 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, as set forth below, 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, on Friday, November 6, 1998 at 10:00 a.m. local time, and in their
discretion to vote upon any other business that may properly come before the
meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED, 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 if you plan to attend the meeting.
[ ] Check here for address change.
New address: ____________________________________
_________________________________________________
_________________________________________________
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 17
1. Nominees:
Richard Dulude, James F. Gibbons,
Richard A. Kashnow, John P. McTague, For Withheld For All Except
Dean O. Morton, Isaac Stein, All All nominees written
Chang-Lin Tien, Cyril J. Yansouni in below
/ / / / / /
Nominee Exceptions ________________________
2. To ratify the appointment by the
Company's Board of Directors of For Against Abstain
PricewaterhouseCoopers LLP to audit / / / / / /
the accounts of the Company and its
subsidiaries for the 1999 fiscal year.
Dated:_______________, 1998
Signature(s)_________________________
_____________________________________
(Signature, if held jointly)
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS.
IF ACTING AS ATTORNEY, EXECUTOR, TRUSTEE,
OR IN REPRESENTATIVE CAPACITY, SIGN NAME
AND INDICATE TITLE.
- ------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
