UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
[ ] 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 Section 240.14a-12
Farmstead Telephone Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] 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.
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SEC 1913 (02-02) Persons who are to respond to the collection of
information contained in this form are not required to
respond unless the form displays a currently valid OMB
control number.
FARMSTEAD LOGO
April 23, 2004
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of Farmstead Telephone Group, Inc. (the
"Company") to be held on Thursday, June 10, 2004, at 10:00 a.m. local time,
at the Company's offices located at 22 Prestige Park Circle, East Hartford,
Connecticut. Your Board of Directors and management look forward to
greeting those stockholders who are able to attend.
The Notice of Annual Meeting of Stockholders and Proxy Statement
containing information pertaining to the business to be transacted at the
Meeting appear on the following pages.
Whether or not you plan to attend, it is important that your shares
be represented and voted at the Meeting. Please complete, sign, date, and
mail the enclosed proxy card at your earliest convenience. Most
stockholders can also vote their shares over the Internet or by telephone.
If Internet or telephone voting is available to you, voting instructions
are printed on the proxy card sent to you.
On behalf of the Board of Directors and management, I would like to
thank you for your interest and participation in the affairs of the
Company.
Sincerely,
/s/ GEORGE J. TAYLOR, JR.
Chairman of the Board,
President, and Chief Executive
Officer
FARMSTEAD TELEPHONE GROUP, INC.
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NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
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TIME 10:00 a.m. EST
Thursday, June 10, 2004
PLACE Farmstead Telephone Group, Inc.
22 Prestige Park Circle
East Hartford, CT 06108
ITEMS OF BUSINESS (1) To elect five directors, each to serve
a one-year term.
(2) To ratify the appointment, by the Board
of Directors, of independent auditors
to audit the Company's books and
records for the year ending December
31, 2004.
(3) To transact such other business as may
properly come before the Meeting or any
adjournments or postponements thereof.
RECORD DATE Holders of Farmstead common stock at the
close of business on April 16, 2004 are
entitled to vote at the meeting.
PROXY VOTING It is important that your shares be
represented and voted at the meeting. Because
many of our stockholders cannot personally
attend the Meeting, it is necessary that a
large number be represented by proxy.
Therefore, if you do not expect to attend the
meeting, but wish your stock to be voted for
the business to be transacted thereat, please
complete, sign and date the enclosed proxy
card and return it by mailing it in the
accompanying postage-paid envelope. Most
stockholders can also vote their shares over
the Internet or by telephone. If Internet or
telephone voting is available to you, voting
instructions are printed on the proxy card
sent to you. If you attend the meeting and
vote at it, your vote at the meeting will
replace any earlier vote by telephone,
internet or proxy.
By order of the Board of Directors,
April 23, 2004 /s/ ROBERT G. LAVIGNE
Executive Vice President,
Chief Financial Officer and
Secretary
PROXY STATEMENT FARMSTEAD LOGO
2004 Annual Meeting of Stockholders
June 10, 2004
INTRODUCTION
Solicitation of Proxies
This Proxy Statement and the accompanying Proxy Card are being
furnished in connection with the solicitation by the Board of Directors
(the "Board") of Farmstead Telephone Group, Inc., a Delaware corporation
(the "Company" or "Farmstead"), of proxies to be voted at the Annual
Meeting of Stockholders of the Company (the "Meeting") to be held on
Thursday, June 10, 2004 at 10:00 a.m. local time at the Company's offices
located at 22 Prestige Park Circle, East Hartford, Connecticut 06108, or
any adjournments or postponements thereof, for the purposes set forth in
the attached Notice of Annual Meeting of Stockholders. This Proxy Statement
and the accompanying Proxy Card are first being mailed to stockholders on
or about April 23, 2004. A copy of the Company's Annual Report for the year
ended December 31, 2003, is included with this Proxy Statement.
Voting Rights and Required Votes
Only the holders of record of the Company's common stock, par value
$.001 per share ("Common Stock"), as of the close of business on April 16,
2004 (the "Record Date"), are entitled to notice of, and to vote on, all
matters properly brought before the Meeting or any adjustments or
postponements thereof. As of February 27, 2004, there were 3,311,601 common
shares outstanding.
Each stockholder is entitled to one vote for each share of Common
Stock held by him or her at the close of business on the Record Date.
Pursuant to the Company's Amended and Restated By-laws, to constitute a
quorum for the transaction of business at any meeting of stockholders,
there must be present, in person or by proxy, the holders of no less than
one-third of the voting power of the issued and outstanding shares of
voting stock of the Company. Once a share is represented for any purpose at
the meeting, it is deemed present for quorum purposes for the remainder of
the meeting. A plurality of the votes cast by the shares of stock entitled
to vote, in person or by proxy, at the Meeting will elect directors as long
as a quorum is present. Except as otherwise required by law, the Company's
Restated Certificate of Incorporation or the Company's Amended and Restated
By-laws, if a quorum exists, action on each other question to be voted upon
will be approved if votes, in person or by proxy, cast by stockholders
favoring the action exceed the vote cast by stockholders opposing the
action. When proxies in the enclosed form are returned properly executed,
the shares represented thereby will be voted at the Meeting and, where
instructions have been given by the stockholder, will be voted in
accordance therewith. If the stockholder does not otherwise specify, the
stockholder's shares will be voted FOR each of the nominees for director
and FOR the proposal to ratify the appointment of the independent auditors,
all as set forth in this Proxy Statement. As to any other business, which
may come before the Meeting, the proxy holders will vote in accordance with
their best judgment. Votes will be counted manually. A stockholder
executing the accompanying proxy has the power to revoke it at any time
prior to the exercise thereof by appearing at the Meeting and voting in
person or by filing with the Secretary of the Company, (i) a duly executed
proxy bearing a later date, or (ii) a written instrument revoking the
proxy.
In certain circumstances, a stockholder will be considered to be
present at the Meeting for quorum purposes, but will not be deemed to have
voted in the election of directors or in connection with other matters
presented for approval at a meeting. Abstentions and broker "non-votes" are
counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has
not received instructions from the beneficial owner. Therefore, abstentions
and broker "non-votes" have no effect for purposes of the election of
directors, since the election of directors requires a plurality vote as
described above. However, on all other proposals that require a majority
vote as described above, an abstention has
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the effect of a vote against the proposal, and broker non-votes will not be
counted at all. A stockholder executing the accompanying proxy has the
power to revoke it at any time prior to the exercise thereof by appearing
at the Meeting and voting in person or by filing with the Secretary of the
Company, a properly executed, later-dated proxy (including an Internet or
telephone vote), or a written instrument revoking the proxy. Most
stockholders have a choice of voting over the Internet, by using a toll-
free telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Please refer to your proxy card or the
information forwarded by your bank, broker or other holder of record to see
which options are available to you. Please be aware that if you vote over
the Internet, you may incur costs such as telephone and Internet access
charges for which you will be responsible, and that there may be some risk
a stockholder's vote might not be properly recorded or counted because of
an unanticipated electronic malfunction.
Costs of Solicitation
The solicitation of proxies in the accompanying form is made by, and
on behalf of, the Board of Directors. We have engaged the services of
Computershare Trust Co., Inc., the Company's Transfer Agent, and ADP
Investor Communication Services, to assist us in the distribution and
processing of proxies, for which total fees and expenses of approximately
$7,000 will be paid. There will be no solicitation by officers and
employees of the Company. The Transfer Agent will make arrangements with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of proxy materials to the beneficial owners of shares held of
record by such persons, and such persons will be reimbursed for reasonable
expenses incurred by them in connection therewith.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Amended and Restated By-laws of the Company provide that the
Board of Directors shall be fixed solely and exclusively by resolution duly
adopted from time to time by the Board of Directors. The Board has fixed
the current number of directors at five. Each director presently is elected
for a one-year term at each annual meeting of the stockholders. Officers
are elected by, and serve at the pleasure of, the Board of Directors.
Five directors are to be elected at the Meeting to hold office until
the next Meeting or until their successors have been duly elected and
qualified. It is the intention of the persons named in the accompanying
Proxy Card to vote FOR the election of the five persons named in the table
below as directors of the Company, unless authority to do so is withheld.
All of the nominees are currently directors of the Company, and they have
consented to being nominated and named herein, and to serve as directors if
elected at the Meeting. In the event that any of the nominees for director
should become unavailable for election for any presently unforeseen reason,
the persons named in the accompanying Proxy Card have the right to use
their discretion to vote for a substitute.
The Board of Directors recommends a vote "FOR" the election of the
nominees as Director.
For each nominee, each of whom is an incumbent, and for each executive
officer and Section 16 officer of the Company other than such nominees, there
follows a brief listing of their principal occupation for at least the past
five years, other major affiliations, and age as of January 1, 2004.
Nominees:
George J. Taylor, Jr., Chairman of the Board of Directors and Chief
Executive Officer of the Company (including its predecessors) since 1984,
and President since 1989. President of Lease Solutions, Inc. (formerly
Farmstead Leasing, Inc.), a business products and automobile leasing
company, from 1981 to 1993. Vice President - Marketing and Sales for
National Telephone Company from 1977 to 1981. Mr. Taylor was one of the
founders of the National Association of Telecommunication Dealers, has been
a member of, or advisor to, its Board of Directors since its inception in
1986, and for two years served as its President and Chairman. Brother of
Mr. Hugh M. Taylor, a director of the Company. Age: 61.
Harold L. Hansen, Director of the Company since 1992. An independent
management consultant since January 1997. A member of the Audit Committee
(Chairman until January 2, 2003) and the Compensation Committee. President
of Hansen Associates, a management and financial consulting firm from 1995
to 1997. President of H2O Environmental, Inc., an environmental and
geotechnical services company, from 1994 to 1995.
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President of Hansen Associates from 1993 to 1994. Prior to 1983, Mr. Hansen
served in various corporate executive capacities including Executive Vice
President and Chief Operating Officer of Gestetner Corporation, Vice
President and General Manager of the Office Products Division of Royal
Business Machines and Vice President and General Manager of the Business
Products Group of Saxon Industries. Age: 73.
Joseph J. Kelley, Director of the Company since April 1995. Chairman
of the Compensation Committee and a member of the Audit Committee.
Currently an Executive-in-Residence at the Olin Graduate School of Business
at Babson College, Wellesley, Massachusetts. President of East Haven
Associates, a telecommunications consulting firm located in Wellesley,
Massachusetts, from 1995 to 2001. Group Vice President of NYNEX, in 1994,
responsible for the State of Massachusetts operations. From 1985 to 1994 he
served in various executive level positions with NYNEX , or associated
companies including Vice President - Operations of New England Telephone
(1991 - 1993), Vice President - New England Telephone, Network Department
(1990 - 1991), Corporate Director of Business Development, NYNEX Marketing
(1988 - 1990) and Vice President of New England Telephone - Maine (1985 -
1988). Mr. Kelley has been involved in the telecommunications industry
since 1963. Age: 64.
Ronald P. Pettirossi, Director of the Company since January 3, 2003.
Chairman of the Audit Committee. President of ER Ltd., a consulting company
since 1995. From February 1997 to August 1998, Mr. Pettirossi was the Chief
Financial Officer of Discas, Inc. a Waterbury, Connecticut based
proprietary plastic and rubber compounds manufacturer. Mr. Pettirossi is a
former audit partner of Ernst & Young, LLP, who worked with public and
privately held companies for 31 years. Mr. Pettirossi is a member of the
Board of Directors of Magellan Petroleum Corporation. Age: 60.
Hugh M. Taylor, Director of the Company since 1993. A member of the
Compensation Committee. Managing Director of Newbury, Piret & Company,
Inc., an investment banking firm located in Boston, MA since 1994. CEO,
President and a director of the Berlin City Bank, Berlin, New Hampshire,
from 1993 to 1994. Executive Vice President of Fleet Bank of Massachusetts
from 1992 to 1993. Executive Vice President and Chief Operating Officer of
Fleet Bank of Boston from 1990 to 1992. From 1973 to 1990 he was employed
by the New England Merchants Bank, later the Bank of New England, where he
held various executive management positions within the Commercial Banking
Division, and the bank's venture capital subsidiary. Brother of Mr. George
J. Taylor, Jr. Age: 59.
Other Executive Officers:
Michael R. Johnson, Executive Vice President since August 2001. Sales
Vice President, Avaya Inc. from 2000 to 2001; Vice President - Global
Accounts, Lucent Technologies, from 1996 to 2000. From 1979 though 1996,
Mr. Johnson held various product management and sales management positions
with AT&T Corporation. While employed by Avaya, Lucent and AT&T, Mr.
Johnson was assigned sales management responsibilities covering many of
their largest commercial customers located in New York. Age: 57.
Robert G. LaVigne, Executive Vice President since July 1997. Chief
Financial Officer, Corporate Secretary and Treasurer since 1988. Vice
President - Finance & Administration from 1988 until July 1997. Director of
the Company from 1988 to 2001. Controller of Economy Electric Supply, Inc.,
a distributor of electrical supplies and fixtures, from 1985 to 1988.
Corporate Controller of Hi-G, Inc., a manufacturer of electronic and
electromechanical components, from 1982 to 1985. Certified Public
Accountant. Age: 52.
Other Section 16 Officers:
Stephen W. Chrystone, Vice President, Sales since January 2003. Sales
Account Executive for the New York/Connecticut region from January 2002 to
2003. From 1996 to 2001, Mr. Chrystone was District Sales Manager for
Avaya Inc./Lucent Technologies with responsibility for the Connecticut and
Western Massachusetts marketplaces. Age: 49
Frederick E. Robertson, Jr., Vice President, Operations since January
2003. Director of Provisioning from March 2001 to January 2003. Senior
Director of Merchandising for Staples Communications, Inc. from 1999 to
2001. Director of Corporate Purchasing and Logistics for Claricom, Inc.
from 1998 to 1999. Corporate Manager, Cost Control and Purchasing for
Executone Information Systems, Inc. from 1996 to 1998. Age: 45.
3
Meetings and Committees of the Board of Directors
During 2003, the Board held five meetings. In addition, certain
actions were approved by unanimous written consent resolutions of the
directors. No director attended less than 75% of all Board and applicable
committee meetings held. During 2003, the Board had two ongoing committees:
an Audit Committee and a Compensation Committee.
The Audit Committee, consisting of Messrs. Pettirossi (Chairman),
Hansen and Kelley, consults with the independent auditors and management
with respect to the adequacy of internal controls and the Company's audited
financial statements. In the Board's judgment, each member of the Audit
Committee is financially literate. The Board has reviewed the
qualifications and experience of each of the Audit Committee members and
determined that Mr. Pettirossi qualifies as "audit committee financial
expert" as that term has been defined by the SEC. They also review the
Company's internal quarterly financial statements with management and, when
deemed necessary, with the independent auditors as well. The Audit
Committee also recommends to the Board of Directors the appointment of
independent auditors for the following year. The Audit Committee held five
meetings during 2003.
The Compensation Committee, consisting of Messrs. Kelley (Chairman),
Hansen and H. Taylor, determines the compensation and benefits of the Chief
Executive Officer and reviews and approves, or modifies if deemed
appropriate, the recommendations of the Chief Executive Officer with
respect to the compensation and benefits of the other executive officers.
The Compensation Committee also approves the issuance of grants pursuant to
the Company's stock option plans. The Compensation Committee held one
meeting during 2003.
PROPOSAL 2 - RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Carlin,
Charron & Rosen, LLP ("CC&R") as our independent auditors for the year
ending December 31, 2004. CC&R, and its predecessor company, DiSanto
Bertoline & Company, P.C., have been our independent auditors since October
2001. We are submitting the selection of CC&R for stockholder ratification
at the Annual Meeting. In the event the stockholders fail to ratify the
appointment, the Audit Committee will reconsider this appointment. Even if
the appointment is ratified, the Audit Committee, in its discretion, may
direct the appointment of a different independent auditing firm at any time
during the year if the Audit Committee determines that such a change would
be in the best interests of Farmstead and its stockholders.
A representative of CC&R is expected to be present at the Meeting,
will be afforded the opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate questions from
stockholders.
The Board of Directors recommends a vote FOR ratification of the
appointment of Carlin, Charron & Rosen, LLP as independent auditors of the
Company for the year ending December 31, 2004.
Principal Accountant Fees and Services
The Audit Committee or a designated member thereof, pre-approves each
audit and non-audit service rendered by CC&R to Farmstead. The following
table shows information about fees billed to Farmstead by CC&R (including
its predecessor, DiSanto Bertoline & Company, P.C. in 2002) for
professional services rendered for the years ended December 31, 2003 and
2002:
Fee Category 2003 2002
------------ ---- ----
Audit Fees $54,200 $45,700
Audit-Related Fees 6,500 7,488
Tax Fees 7,500 12,280
All Other Fees 1,850 3,885
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Total Fees $70,050 $69,353
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Audit Fees. Consists of fees billed for professional services
rendered for the audit of Farmstead's consolidated financial statements and
reviews of interim consolidated financial statements included in quarterly
reports filed with the Securities and Exchange Commission.
Audit-Related Fees. Consists of fees billed for professional services
rendered for the audit of Farmstead's 401(K) Plan.
Tax Fees. Consists of fees billed for professional services rendered
for the preparation of federal and state tax returns.
All Other Fees. For 2003, consists of fees for services rendered in
meeting with the Audit Committee and attendance at the Annual Meeting.
There were no management consulting services provided in 2003. For 2002,
consists of fees for services rendered in meeting with the Audit Committee,
attendance at the Annual Meeting and consultations regarding accounting and
other business matters.
CORPORATE GOVERNANCE
At Farmstead, we are committed to operating in an ethical, legal and
environmentally sensitive and socially responsible manner, while creating
long-term value for our shareholders. Farmstead maintains a corporate
governance page on its website which includes key information about its
corporate governance initiatives, including its Code of Ethical Conduct (a
copy of which is included herein in Appendix A) and charters for the
committees of the Board of Directors. The corporate governance page can be
found at www.farmstead.com by clicking on "About Farmstead", then "Corporate
Governance". Stockholders may obtain copies of these documents, free of
charge, by sending a written request to our principal executive office at
22 Prestige Park Circle, East Hartford, CT 06108, Attention: Corporate
Secretary.
Farmstead also has a "hotline" available to all employees, and the
Audit Committee has established procedures for the confidential and anonymous
submission of employee complaints on accounting, internal controls or auditing
matters.
Independence of Directors
Our policy provides that the Board must be composed of a majority of
independent directors. No director qualifies as independent unless the
Board affirmatively determines that the director has no material
relationship with Farmstead either directly or as a partner, stockholder or
officer of an organization that has a relationship with Farmstead. Our
Board of Directors has determined that all non-management directors are
independent in accordance with the American Stock Exchange listing standards.
The Board has made this determination based on the following objective
standards, in addition to any other relevant facts and circumstances:
* A director who is an employee, or whose immediate family member
is an executive officer, of Farmstead is not independent until
three years after the end of such employment relationship.
* A director who receives, or whose immediate family member
receives, more than $100,000 per year in direct compensation
from Farmstead, other than director and committee fees and
pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any
way on continued service), is not independent until three years
after he or she ceases to receive more than $100,000 per year
in such compensation.
* A director who is affiliated with or employed by, or whose
immediate family member is affiliated with or employed in a
professional capacity by, a present or former internal or
external auditor of Farmstead is not independent until three
years after the end of either the affiliation or the auditing
relationship.
* A director who is employed, or whose immediate family member is
employed, as an executive officer of
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another company where any of Farmstead's present executives
serves on that company's compensation committee is not
independent until three years after the end of such service or
the employment relationship.
* A director who is an executive officer or an employee, or whose
immediate family member is an executive officer, of another
company that makes payments to, or receives payments from,
Farmstead for property or services in an amount which, in any
single fiscal year, exceeds the greater of $1 million or 2% of
such other company's consolidated gross revenues is not
independent until three years after falling below such
threshold.
Executive Sessions
Non-management directors meet at least once per year in executive
session without management. "Non-management" directors are all those who
are not company officers. Executive sessions are led by a "Presiding
Director." An executive session may be held in conjunction with a regularly
scheduled Board meeting and other sessions may be called by the Presiding
Director in his or her own discretion or at the request of the Board. Mr.
Pettirossi has been designated as the Presiding Director.
Nomination of Directors
It is the policy of the Board of Directors to consider candidates for
director recommended by stockholders. In order to recommend a candidate,
stockholders must submit the individual's name and qualifications in
writing to the Board (in care of the Secretary at Farmstead's principal
executive office at 22 Prestige Park Circle, East Hartford, CT 06108) and
otherwise in accordance with all of the procedures outlined under
"Nominations and Stockholders' Proposals for Year 2005 Annual Meeting of
Stockholders" for a director nomination.
In identifying and evaluating nominees for Director, the Board of
Directors takes into account the applicable requirements for directors
under the Securities Exchange Act of 1934, as amended, and the listing
standards of the American Stock Exchange. In addition, the Board of
Directors may take into consideration such factors and criteria as it deems
appropriate, including the nominee's character, judgment, business
experience and acumen. In addition to nominees recommended by stockholders,
the Board of Directors also considers candidates recommended by management
or other members of the Board. The Board evaluates candidates recommended
for Director by stockholders in the same way that it evaluates any other
nominee.
Communications with the Board of Directors
The Board has established a process for stockholders and other
interested parties to communicate with the Board or an individual director,
including the Presiding Director or the non-management directors as a
group. A stockholder may contact the Board of Directors or an individual
director by writing to their attention at Farmstead's principal executive
offices at 22 Prestige Park Circle, East Hartford, CT 06108. Communications
received in writing are distributed to the Board or to individual directors
as appropriate in accordance with procedures approved by Farmstead's
independent directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock, $.001 par value, as of February
27, 2004 by (i) each person known by the Company to own beneficially more
than five percent of the Company's outstanding shares of Common Stock, (ii)
all directors and nominees for director of the Company, (iii) each Named
Executive Officer and Other Section 16 Officers (as defined below in
"Compensation of Officers, and Directors") and (iv) all directors, nominees
for director, named executive officers and other section 16 officers of the
Company as a group. In addition to being a beneficial owner of more than
five percent of the Company's outstanding shares of Common Stock, Mr.
George J. Taylor, Jr. is a director of the Company.
6
Percentage of
Number of Shares Outstanding
Name and Address of Beneficial Owner (1) Beneficially Owned (2) Common Stock
---------------------------------------- ---------------------- -------------
Five Percent Stockholders:
George J. Taylor, Jr. 1,132,884(3) 27.0%
Robert G. LaVigne 272,500(4) 7.6%
Other Directors (and Nominees):
Harold L. Hansen 44,229(5) 1.3%
Hugh M. Taylor 50,703(6) 1.5%
Joseph J. Kelley 33,229(5) 1.0%
Ronald P. Pettirossi 7,500(5) *
Other Named Executive Officers:
Michael R. Johnson 51,500(7) 1.5%
Other Section 16 Officers:
Frederick E. Robertson, Jr. 12,367(8) *
Directors, Nominees and Named Executive
Officers and Section 16 Officers as a Group
(8 persons) 1,604,912(9) 34.5%
___________________
* Less than 1%.
Unless otherwise indicated, the address of each named beneficial
owner is c/o the Company, 22 Prestige Park Circle, East Hartford, CT
06108.
Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting
or investment power with respect to securities. Shares of Common
Stock subject to options currently exercisable or exercisable within
sixty (60) days, are deemed outstanding for computing the percentage
of the person holding such options but are not deemed outstanding for
computing the percentage of any other person. Except as otherwise
indicated, the Company believes each person named in the table has
sole voting and investment power with respect to all shares
beneficially owned by him. Information with respect to beneficial
ownership is based upon information furnished by such stockholder.
Includes 885,782 shares issuable upon exercise of currently
exercisable stock options. Also includes 27,020 shares held by his
children.
Includes 265,500 shares issuable upon exercise of currently
exercisable stock options.
Consists of shares issuable upon exercise of currently exercisable
stock options.
Includes 47,316 shares issuable upon exercise of currently
exercisable stock options and 2,000 shares held by his children.
Includes 50,500 shares issuable upon exercise of currently
exercisable stock options.
Includes 7,500 shares issuable upon exercise of currently exercisable
stock options.
Includes 1,341,556 shares issuable upon exercise of currently
exercisable stock options.
7
Compensation of Officers and Directors
The following table sets forth all compensation paid or accrued by
the Company for services rendered during the three years ended December 31,
2003 to the Chief Executive Officer ("CEO") and to each executive officer
(the "Named Executive Officers") and Other Section 16 Officers whose total
annual compensation exceeded $100,000 in 2003.
Summary Compensation Table
Long-term
Annual Compensation (1) Compensation
----------------------------------- Awards (1)
Other Annual ------------ All Other
Bonus Compensation Options Compen-
Name and Principal Position Year Salary ($) ($) ($) (#) sation ($)
--------------------------- ---- ---------- ----- ------------ ---------- ----------
CEO:
George J. Taylor, Jr. 2003 160,000 - 6,511(2) - 11,968(3)
Chairman of the Board, President 2002 180,462 - 3,127(2) - 14,367(3)
And Chief Executive Officer 2001 254,500 - 11,181(2) - 13,950(3)
Named Executive Officers:
Robert G. LaVigne 2003 112,000 - 6,570(2) 20,000 623(4)
Executive Vice President, Chief 2002 125,697 - 6,731(2) 20,000 13,663(4)
Financial Officer, Secretary and 2001 125,684 - 3,016(2) 20,000 20,767(4)
Treasurer
Michael R. Johnson 2003 100,000 - - - -
Executive Vice President(5) 2002 112,819 - - 2,000 -
2001 42,982 - - 125,000 -
Other Section 16 Officers:
Frederick E. Robertson, Jr. 2003 100,000 - 1,346(2) 15,000 -
Vice President Operations (6) 2002 100,000 - - 2,000 -
2001 78,461 - - 10,000 -
The Company did not grant any restricted stock awards or stock
appreciation rights ("SARS") or make any long-term incentive plan
payments during the fiscal years presented.
Includes payouts of unused vacation and/or sick time of $4,538 for
2003, $1,154 for 2002 and $9,255 for 2001 for Mr. Taylor; $6,570 for
2003, $6,731 for 2002 and $3,016 for 2001 for Mr. LaVigne; and $1,346
for 2003 for Mr. Robertson. For Mr. Taylor, also includes a value for
the personal use of a company-owned vehicle in the amount of $1,973
for 2003 and 2002, and $1,926 for 2001.
Consists of life and disability insurance premiums paid by the
Company on personally-owned policies, aggregating $11,036 for 2003,
$11,937 for 2002 and $11,695 for 2001, and imputed income on a
split-dollar life insurance policy amounting to $932 for 2003, $2,430
for 2002 and $2,255 for 2001. Not included are annual premium
payments of $16,500 made in 2002 and 2001 under the split-dollar
insurance policy. There were no premium payments made during 2003
and, in December 2003, the Company terminated Mr. Taylor's split-
dollar insurance policy, transferring the policy's $26,548 cash
surrender value into a Company-owned life insurance policy for the
benefit of Mr. Taylor.
Includes insurance premiums paid under an employee-owned split-dollar
life insurance policy of $0 for 2003, $13,075 for 2002 and $19,911
for 2001. The 2002 and 2001 payments approximated 10% of Mr.
LaVigne's compensation paid during these years. The cash surrender
value of this policy vests to his benefit at the rate of 10% per year
over a ten year period. Upon termination of employment, the unvested
portion of the cash
8
surrender value is refunded to the Company. During the years ended
December 31, 2003, 2002 and 2001, $4,565, $3,694 and $6,635,
respectively, vested with Mr. LaVigne. These amounts are not included
in the above table. There were no payments made into the split-dollar
policy during 2003 and in December 2003, the policy was converted
into a Company-owned policy.
Supplemental Executive Retirement Plan ("SERP"). The Company
maintains a SERP for the benefit of Mr. Taylor. The SERP is a defined
benefit plan, structured to provide Mr. Taylor with an annual retirement
benefit, payable over 15 years beginning at age 65, in an amount equal to
one-third of his average final three-year salary, however in no event less
than $100,000 per year. The SERP is an unfunded plan; however, it is being
informally funded through a Company-owned life insurance policy with an
annual premium payment of $50,000 for ten years.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning individual
grants of options to purchase shares of the Company's Common Stock made to
the CEO and each Named Executive Officer and Other Section 16 Officers
during the year ended December 31, 2003:
Number of % of Total
Securities Options Potential
Underlying Granted to Exercise or Realizable Value
Options Employees in Base Price Expiration -----------------
Name Granted (#) Fiscal Year ($/SH) Date 5% ($) 10% ($)
---- ----------- ----------- ---------- ---------- ------ -------
George J. Taylor, Jr. - - - - - -
Robert G. LaVigne 20,000 19.70% .28 2/3/2013 3,522 8,925
Michael R. Johnson - - - - - -
Frederick E. Robertson, Jr. 15,000 14.78% .28 1/2/2013 2,641 6,694
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table provides information on the number and value of
unexercised options held at December 31, 2003, by the CEO and each Named
Executive Officer and Other Section 16 Officers:
No. of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares 12/31/03 (#) 12/31/03 ($)
Acquired on Value ---------------------------- ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
George J. Taylor, Jr. - - 885,782 - - -
Robert G. LaVigne - - 245,500 - 9,400 -
Michael R. Johnson - - 50,500 76,500 125 375
Frederick E. Robertson, Jr. - - 4,500 22,500 - 7,050
Long-Term Incentive Plans - Awards in Last Fiscal Year: None.
Compensation of Directors
Non-employee directors receive a $5,000 annual retainer, $1,000 for
each board meeting attended and $500 for each committee meeting attended.
The directors are also reimbursed for their expenses in attending each
meeting. For each year of service on the board, non-employee directors
receive a non-qualified option to purchase 5,000 shares of Common Stock, at
an exercise price equal to the closing market price of the Common Stock on
the date of grant. In addition, Mr. Pettirossi receives an annual fee of
$4,000 for serving as Chairman of the Audit Committee. Directors who are
also employees of Farmstead receive no compensation for serving as
directors.
9
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
The Company has an employment agreement with the Chief Executive
Officer ("CEO") dated January 1, 1998 and as amended August 1, 2001,
January 1, 2003 and January 1, 2004 (the "Agreement"). Under the Agreement,
the CEO will be employed on a full-time basis until December 31, 2004 (the
"Active Period") at a base salary of $160,000. Commencing January 1, 2005,
the CEO will be employed on a limited basis for a five-year period expiring
December 31, 2009 (the "Limited Period"). During each year of the Limited
Period, the CEO will be paid a base salary equal to one-third of the base
salary rate in effect at the time of commencement of the Limited Period,
but not less than $100,000, as consideration for up to fifty days of active
service per year. In addition, during the first year of the Limited Period,
the CEO will receive an additional payment of $142,423. The CEO will also
be eligible for an annual bonus of up to 50% of base salary during the term
of the Agreement. The Agreement provides severance pay should the CEO
terminate the Agreement for "good cause", as defined, or should the Company
terminate the Agreement without cause, or in the event of a change in
control of the Company, as defined. During the Active Period, severance pay
would amount to three times (i) the amount of the then-current base pay
(deemed to be $300,000 for purposes of severance pay calculations), plus
(ii) the average bonus paid during the three most recent calendar years.
During the Limited Period, severance pay will equal the total amount of
base salary that would have been due for the time remaining in the Limited
Period. The CEO will not be entitled to any severance or other compensation
during the Active Period or Limited Period if he voluntarily terminates his
employment or if the Company terminates the Agreement "for cause", as
defined.
Mr. Robert G. LaVigne has a one-year employment agreement with the
Company, which expires December 31, 2004. The agreement provides for a
minimum base salary of $112,000 (subject to increases in the Board's
discretion). The agreement also provides for an annual bonus of up to 50%
of base salary during the term of the agreement, at the discretion of the
Board of Directors and based upon the attainment of performance objectives
set or approved by the Board of Directors and CEO. In the event that the
Company terminates this agreement without cause, or in the event Mr.
LaVigne terminates this agreement for good reason (as defined), Mr. LaVigne
would be entitled to severance pay amounting to one-half of (i) the then-
current base salary, (ii) the average bonus paid during the last two years
and (iii) split-dollar insurance plan contributions made during the prior
year. In addition, he would be entitled to receive 100% of the policy
reserves in a Company-owned life insurance policy on his behalf. In the
event of a change in control (as defined), Mr. LaVigne would receive
severance pay of approximately a full year's salary, bonus and benefits. In
addition, all unvested stock options would immediately vest. The agreement
also contains provisions regarding confidentiality and a non-compete
covenant, which prohibits him from competing with the Company during his
employment and for six months thereafter.
The aforementioned agreements were approved by the Compensation
Committee and the Board of Directors.
Compliance with Section 16 (a) of the Exchange Act: Section 16 of the
Securities Exchange Act of 1934 requires directors and executive officers
and persons, if any, owning more than ten percent of a 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 the Company's equity and equity derivative securities. Based solely upon
a review of the copies of such reports furnished to the Company, or written
representations from reporting persons, the Company believes that during
2003 all required reports were timely filed, with the exception of the
following: on February 13, 2004 a Form 5 was filed on behalf of Frederick
Robertson, Jr. to report a March 5, 2002 purchase of 1,447 shares of common
stock through the Company's Employee Stock Purchase Plan. This transaction
should have been reported in 2002.
Certain Business Relationships and Transactions with Management: None.
Compensation Committee Interlocks and Insider Participation: During
the year ended December 31, 2003, the members of the Compensation Committee
were Joseph J. Kelley (Chairman), Hugh M. Taylor and Harold L. Hansen. The
Committee members are not employees of the Company and have no interlocking
relationships as defined by the Securities and Exchange Commission.
10
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is comprised of three outside directors. The Board of
Directors delegates to the Compensation Committee the responsibility for
developing and administering the policies that govern the total
compensation program for executive officers of the Company. The Committee
also administers the Company's 2002 Stock Option Plan, for all plan
participants, including awards made to the executive officers of the
Company. In making pay decisions for the named executives whose
compensation is detailed in this proxy statement (other than the Chief
Executive Officer), the Committee also takes into consideration the views
and recommendations of the Chief Executive Officer concerning each
executive's overall contribution to the Company's performance. The
Committee has prepared the following report to summarize the executive
compensation approach of the Company and describe specific decisions made
by the Committee with respect to the Chief Executive Officer's compensation
and future compensation guidelines.
The compensation philosophy for executive officers conforms generally
to the compensation philosophy followed for all of the Company's employees.
The Company's compensation is designed to maintain executive compensation
programs and policies that enable the Company to attract and retain the
services of highly qualified executives. The goal of the Committee is to
achieve fair compensation for the individuals and to enhance shareholder
value by continuing to closely align the financial rewards of management
with those of the Company's shareholders. In addition to base salaries,
executive compensation programs and policies consisting of discretionary
cash bonuses and periodic grants of stock options are designed to reward
and provide incentives for individual contributions as well as overall
Company performance. The Compensation Committee consults with independent
compensation consultants when appropriate.
Key elements of the Company's compensation program consist of base
salary, discretionary annual cash bonuses and periodic grants of stock
options. The Company's policies with respect to these elements, including
the basis for the compensation awarded the Company's Chief Executive
Officer, are discussed below. While the elements of compensation described
below are considered separately, the Compensation Committee takes into
account the full compensation package offered by the Company to the
individual, including healthcare and other insurance benefits and
contributions made by the Company.
Base Salaries: The Company has established competitive annual base
salaries for all executive officers, including the named executive
officers. In determining the salary of each senior executive, the Company's
Chief Executive Officer makes recommendations to the Committee with respect
to the base salary of each senior executive other than himself. The
Committee discusses these recommendations, and the relevant data, and then
determines the senior executives' base salary. The Committee meets
separately to determine the base salary of the Company's Chief Executive
Officer. The Company has an employment agreement with George J. Taylor,
Jr., President and Chief Executive Officer and with Robert G. LaVigne,
Executive Vice President, Chief Financial Officer, Secretary and Treasurer.
No other named executive officer currently has a formal employment
agreement with the Company. The annual base salaries for each of the
Company's executive officers, including the Company's Chief Executive
Officer, reflect the subjective judgment of the Compensation Committee (and
with respect to the other executive officers, the recommendations of the
Chief Executive Officer) based on the consideration of the executive
officer's position with the Company, the executive officer's tenure, the
Company's needs, and the executive officer's individual performance,
achievements and contributions to the growth of the Company
Annual Bonus: At the conclusion of each fiscal year, the Committee
reviews with the Company's Chief Executive Officer the performance of each
senior executive officer against financial and operational goals
established at the beginning of the year. Based upon the overall
performance of the Company and the contribution by the individuals in
achieving that performance by attaining the originally established goals
(taking into account any goals added or modified during the course of the
year), the Company's Chief Executive Officer recommends to the Committee
annual bonus compensation levels for each senior executive. The Committee
considers his recommendations, and the relevant data, and then determines
the annual bonus compensation for each senior executive. The Committee
meets separately to evaluate the performance of the Chief Executive Officer
and determine his annual bonus compensation award.
11
Stock Options: Grants of stock options are made to executives,
directors and other employees of the Company under the Company's 2002 Plan.
The Plan is administered by the Compensation Committee in accordance with
the requirements of Rule 16b-3. Grants of stock options under the Plan are
made to such executives and other key employees to enable them to
participate in the creation of stockholder value in the Company as well as
to permit the accumulation of an equity interest in the Company, thereby
aligning the interests of executives with those of stockholders. Individual
grants under the Plan are determined based upon the level of position held,
individual contribution to the achievement of the Company's financial
goals, the executive officer's tenure with the Company, his or her total
cash compensation for the prior year, the executive officer's acceptance of
additional responsibilities, his or her contributions toward the Company's
attainment of strategic goals, and such other performance factors as
management and the Committee may consider.
Chief Executive Officer's Fiscal 2003 Compensation
Mr. George J. Taylor Jr.'s (the "CEO") compensation for 2003 was
based upon his employment agreement with the Company, as amended and as
further described in the preceding section entitled "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements". As set
forth in the Summary Compensation Table above, the CEO's total annual
compensation for the year ended December 31, 2003 was $160,000. There was
no bonus award for 2003.
Section 162(m) Limitations
Under Section 162(m) of the Code, a tax deduction by corporate
taxpayers, such as the Company, is limited with respect to the compensation
of certain executive officers unless such compensation is based upon
performance objectives meeting certain regulatory criteria or is otherwise
excluded from the limitation. Based upon the Compensation Committee's
commitment to link compensation with performance as described in this
report, the Compensation Committee currently intends to qualify
compensation paid to the Company's executive officers for deductibility by
the Company under Section 162(m) of the Code.
COMPENSATION COMMITTEE
Joseph J. Kelley, Chairman
Hugh M. Taylor
Harold L. Hansen
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised of three
outside directors who meet the American Stock Exchange standards for
independence. The Audit Committee operates under a written charter adopted
by the Board of Directors. The Audit Committee's function is one of
oversight as set forth in its Charter. Its primary duties include (a)
assisting the Board of Directors in its oversight of (i) the integrity of
our financial statements and significant accounting policies, (ii) our
financial, investment and risk management policies in operating our
business activities, and (iii) the work of the independent auditors; (b)
deciding whether to appoint, retain or terminate the Company's independent
auditors and to pre-approve all audit, audit-related and other services, if
any, to be provided by the independent auditors, (c) establishing
procedures for the receipt, retention and treatment of complaints received
by the Company regarding accounting or auditing matters, and (d) preparing
any report of the Audit Committee required by the rules and regulations of
the Securities and Exchange Commission.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's
system of internal controls. The independent auditors are responsible for
auditing the financial statements and for expressing an opinion as to
whether those audited financial statements fairly present the financial
position, results of operations, and cash flows of the Company in
conformity with accounting principles generally accepted in the United
States of America.
12
The Audit Committee has reviewed the Company's audited financial
statements, and met separately with both management and Carlin, Charron &
Rosen LLP (the "Auditors") to discuss those financial statements and
reports prior to issuance. Management has represented, and the Auditors
have confirmed, that the financial statements were prepared in accordance
with generally accepted accounting principles.
The Audit Committee discussed with the Auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees". In addition, the Audit Committee
received from the Auditors a formal written statement describing all
relationships between the Auditors and the Company that might bear on the
Auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed
with the Auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the Auditors' independence.
Based on the review and discussions referred to above, the Audit
Committee has recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual
Report on Form 10- K for the year ended December 31, 2003 for filing with
the Securities and Exchange Commission.
AUDIT COMMITTEE
Ronald P. Pettirossi, Chairman
Harold L. Hansen
Joseph J. Kelley
Report of the Compensation Committee, Audit Committee and Audit Committee
Charter
In accordance with the rules of the Securities and Exchange
Commission, the Report of the Compensation Committee and the Report of the
Audit Committee shall not be incorporated by reference into any of the
Company's future filings made under the Securities Exchange Act of 1934 or
the Securities Act of 1933, and shall not be deemed to be soliciting
material or to be filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 or the Securities Act of 1933.
13
STOCK PERFORMANCE GRAPH AND CUMULATIVE TOTAL RETURN
The following chart compares the yearly change in the cumulative
total stockholder return on the Company's Common Stock during the five
fiscal-year period ended December 31, 2003 with the cumulative total return
on the Russell 2000 Index and an index constructed from a peer group of
companies (Telephone & Telegraph Apparatus) that are classified in the same
Standard Industrial Classification ("SIC") code as the Company for that
same period. The comparison assumes $100 was invested on December 31, 1998
in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
[Graph]
Cumulative Total Return
-------------------------------------------------------------
December 31 1998 1999 2000 2001 2002 2003
----------- ---- ---- ---- ---- ---- ----
Farmstead Telephone Group $100.00 $ 42.50 $ 42.52 $ 28.40 $11.20 $ 30.00
SIC Code Index $100.00 $242.79 $157.26 $ 60.79 $24.96 $ 46.62
Russell 2000 Stock Index $100.00 $119.59 $114.43 $115.60 $90.65 $131.78
This graph shall not be incorporated by reference into any of the
Company's future filings made under the Securities Exchange Act of 1934 or
the Securities Act of 1933, and shall not be deemed to be soliciting
material or to be filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 or the Securities Act of 1933.
ANNUAL REPORT/FORM 10-K
The Company's 2003 Annual Report to its stockholders is a
reproduction of its Form 10-K filed with the Securities and Exchange
Commission ("SEC"), excluding the Index to Exhibits and any filed exhibits
or financial statement schedules, and is being mailed to all stockholders
concurrently with this Proxy Statement. Additional copies of the Company's
Form 10-K (without exhibits or financial statement schedules) as filed with
the SEC may be obtained at no cost by writing to the Corporate Secretary,
Farmstead Telephone Group, Inc., 22 Prestige Park Circle, East Hartford, CT
06108. The Company's Form 10-K may also be accessed on the Internet at
http://www.farmstead.com. Exhibits or financial statement schedules listed
in the Company's Form 10-K are available upon request to the Corporate
Secretary at a nominal charge for printing and mailing.
14
NOMINATIONS AND STOCKHOLDERS' PROPOSALS
FOR YEAR 2005 ANNUAL MEETING OF STOCKHOLDERS
The Amended and Restated By-laws of the Company require that all
nominations for persons to be elected directors, other than those made by
the Board of Directors, be made pursuant to written notice to the Secretary
of the Company. The notice must be received not less than 90 nor more than
120 days prior to the date on which the Company released its proxy
statement to stockholders in connection with the preceding year's Meeting
(or if the date of the Meeting is advanced or delayed by more than 30 days
from the date of the preceding year's Meeting not less than 90 nor more
than 120 days prior to the date of the Meeting or not later than 10 days
after notice of public disclosure of such meeting date is first made). The
notice must set forth all information relating to each nominee that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required pursuant to the Securities Exchange Act
of 1934, as amended. The notice must also include the stockholder's name
and address as they appear on the Company's books and the class and number
of shares of stock beneficially owned by such stockholder.
In addition, the Amended and Restated By-laws require that for
business to be properly brought before an annual meeting by a stockholder,
the Secretary of the Company must have received written notice thereof not
less than 90 nor more than 120 days prior to the Meeting (or if the date of
the Meeting is advanced or delayed by more than 30 days from the date of
the preceding year's Meeting not less than 90 nor more than 120 days prior
to the date of the Meeting or not later than 10 days after notice of public
disclosure of such meeting date is first made). The notice must set forth
(i) a brief description of the business desired to be brought before the
meeting; (ii) the stockholder's name and address as they appear on the
Company's books; (iii) the class and number of shares of stock beneficially
owned by the stockholder; and (iv) any material interest of the stockholder
in such business.
Any proposal of a stockholder intended to be presented at the
Company's 2005 Annual Meeting of Stockholders and included in the proxy
statement and form of proxy for that meeting must be received by the
Company no earlier than December 27, 2004 and no later than January 27,
2005. Proposals should be sent to: Corporate Secretary, Farmstead Telephone
Group, Inc., 22 Prestige Park Circle, East Hartford, CT 06108. Such
proposals must meet the requirements set forth in the rules and regulations
of the SEC in order to be eligible for inclusion.
OTHER MATTERS - STOCKHOLDER PROPOSALS
Our management does not intend to bring any other business before the
meeting for action and has not been notified of any other business proposed
to be brought before the meeting. However, if any other matters properly
come before the Meeting, the persons named in the enclosed form of proxy
are expected to vote the proxy in accordance with their best judgment on
such matters.
April 23, 2004 George J. Taylor, Jr.
Chairman of the Board and
Chief Executive Officer
15
APPENDIX A
FARMSTEAD TELEPHONE GROUP, INC.
CODE OF ETHICAL CONDUCT
Adopted March 29, 2004
One of the critical goals of Farmstead Telephone Group, Inc. and its
subsidiaries ("Farmstead") involves promoting professional and ethical
conduct with respect to its business practices. In my role as a senior
officer or a finance manager of Farmstead, I recognize that senior officers
and financial managers each hold an important and elevated role in
corporate governance. This Code provides principles to which senior
officers and financial managers are expected to adhere and advocate, rules
regarding individual and peer responsibilities, and responsibilities to
other employees, Farmstead, the public and other stakeholders.
I certify that I will adhere to and advocate the following principles and
responsibilities governing my professional and ethical conduct, as well as
any other Farmstead policies or guidelines relating to the areas covered by
this Code, including those contained in Farmstead's Policies and Procedures
Manual. In addition to my normal reporting responsibilities, I acknowledge
that I am expected to report to Farmstead's Audit Committee Chairman any
activity that appears to be in violation of this Code and that any
violations of this Code may result in disciplinary action, up to and
including dismissal.
To the best of my knowledge and ability, in connection with the performance
of my work-related responsibilities for Farmstead, I will:
(1) act with honesty and integrity, avoid actual or apparent
conflicts of interest between my personal and professional
relationships, and report to my supervisor and Farmstead's
Audit Committee Chairman any material transaction or
relationship that reasonably could be expected to give rise to
such a conflict;
(2) provide information that is accurate, complete, objective,
relevant, timely and understandable;
(3) comply with laws and regulations of applicable national, state,
and local governments and regulatory agencies;
(4) prepare and develop all information and data for which I am
responsible in a manner that facilitates full, fair, accurate,
timely, and understandable disclosure in reports and documents
that Farmstead files with, or submits to, the Securities and
Exchange Commission or uses in other public communications;
(5) act in good faith, responsibly, with due care, competence and
diligence, without misrepresenting material facts or allowing
my independent, professional judgment to be subordinated;
(6) maintain the confidentiality of information acquired in the
course of my work, except when authorized or otherwise legally
obligated to disclose such information;
(7) refrain from using confidential information acquired in the
course of my work for personal advantage;
(8) share knowledge and maintain skills important and relevant to
the needs of Farmstead and other employees;
(9) proactively promote ethical behavior as a responsible
professional among peers in my work environment and business
community; and
A-1
(10) exercise responsible use of and control over all Farmstead
assets and resources employed or entrusted to me.
/s/ George J. Taylor, Jr. Date: 3/29/04
----------------------------------- --------------
George J. Taylor, Jr.
Chairman of the Board, President
and Chief Executive Officer
/s/ Robert G. LaVigne Date: 3/29/04
----------------------------------- --------------
Robert G. LaVigne
Executive Vice President and
Chief Financial Officer
/s/ Michael R. Johnson Date: 3/29/04
----------------------------------- --------------
Michael R. Johnson
Executive Vice President
A-2
APPENDIX B
Form of Proxy
FARMSTEAD TELEPHONE GROUP, INC.
22 Prestige Park Circle, East Hartford, CT 06108 (860) 610-6000
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - June 10, 2004
The undersigned, as a Stockholder of FARMSTEAD TELEPHONE GROUP, INC. (the
"Company"), hereby appoints George J. Taylor, Jr. and Robert G. LaVigne or
any one of them, the true and lawful proxies and attorneys-in-fact of the
undersigned to attend the Annual Meeting (the "Meeting") of the
Stockholders of the Company, to be held June 10, 2004, at 10:00 a.m. local
time at the Company's offices located at 22 Prestige Park Circle, East
Hartford, CT 06108 and any adjournments or postponements thereof, and any
of them to vote, as designated below, the number of shares which the
undersigned would be entitled to vote, as fully and with the same effect as
the undersigned might do if personally present, on the following matters as
set forth in the Proxy Statement and Notice dated April 23, 2004.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTORS, AND "FOR" THE
RATIFICATION OF THE APPOINTMENT OF CARLIN, CHARRON & ROSEN LLP, AS SET
FORTH ON THE REVERSE SIDE.
[X] Please mark votes as shown in this example.
The Board of Directors recommends a vote FOR all proposals.
1. Election of Directors
Nominees: George J. Taylor, Jr., Harold L. Hansen, Joseph J. Kelley,
Ronald P. Pettirossi and Hugh M. Taylor
[ ] FOR [ ] WITHHELD [ ] For all nominees except as noted below:
___________________________________________________________________________
[CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE]
2. Ratification of the appointment of Carlin, Charron & Rosen, LLP as
independent auditors of the Company for the year ending December 31,
2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
or postponements thereof.
This Proxy is revocable and the undersigned reserves the right to
attend the Meeting and vote in person. The undersigned hereby revokes any
proxy heretofore given in respect of the shares of the Company. Please sign
B-1
exactly as the name(s) appear on your Stock Certificate. When attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If more than one name is shown, as in the case of joint tenancy, each
party should sign.
THE BOARD OF DIRECTORS URGES THAT YOU COMPLETE, SIGN AND DATE THE PROXY AND
RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
Mark here if you plan to attend the Meeting [ ]
Mark here for address change and note new address below [ ]
Signature:_______________ Date:_____ Signature:_______________ Date:_____
B-2