DSC COMMUNICATIONS CORP, DEF 14A, 1994-03-31

DSC COMMUNICATIONS CORP
DEF 14A, 1994-03-31
TELEPHONE & TELEGRAPH APPARATUS

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<PAGE>
SCHEDULE 14A INFORMATION

Information Required in Proxy Statement

REG. SECTION 240.14A-101.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

DSC COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
WILLIAM R. TEMPEST
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[DSC LOGO]

March 31, 1994

Dear Fellow Stockholder:

This year's Annual Meeting of Stockholders will be held at The Grand
Kempinski Hotel, 15201 Dallas Parkway, Dallas, Texas, on Wednesday, April 27,
1994, at 10:00 AM local time. You are cordially invited to attend. The matters
you are asked to consider are described in the attached Proxy Statement and
Notice of Annual Meeting. The Company's Board of Directors recommends (i)
election of management's three nominees for the Board of Directors; (ii)
approval of an amendment to the Company's Restated Certificate of Incorporation
increasing the authorized number of shares of Common Stock, $.01 par value, from
100,000,000 to 250,000,000; and (iii) approval of the DSC Communications
Corporation 1994 Long-Term Incentive Compensation Plan.

To be certain that your shares are voted at the meeting, whether or not you
plan to attend in person, please sign, date and return the enclosed proxy card
as soon as possible. Your vote is important.

At the meeting, I will review the Company's activities during the past year
and its plans and prospects for the future. An opportunity will be provided for
questions by the stockholders. I hope you will be able to join us.

Sincerely,

/s/ JAMES L. DONALD

JAMES L. DONALD
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD APRIL 27, 1994

Notice is hereby given that the Annual Meeting of Stockholders of DSC
Communications Corporation, a Delaware corporation (the "Company"), will be held
at The Grand Kempinski Hotel, 15201 Dallas Parkway, Dallas, Texas, on Wednesday,
April 27, 1994, at 10:00 AM local time for the following purposes:

1. To elect three Class I Directors for terms expiring in 1997.

2. To approve an amendment to the Company's Restated Certificate of
Incorporation increasing the authorized number of shares of Common Stock, $.01
par value, from 100,000,000 to 250,000,000.

3. To approve adoption of the DSC Communications Corporation 1994 Long-Term
Incentive Compensation Plan.

4. To transact such other business as may properly come before the meeting
or any adjournments thereof.

The accompanying Proxy Statement contains information regarding the business
to be considered at the meeting.

Only stockholders of record at the close of business on March 1, 1994, are
entitled to notice of, and to vote at, the Annual Meeting of Stockholders or any
adjournment thereof. A list of stockholders will be made available at the
Company's offices located at 4570 West Grove Drive, Addison, Texas at least 10
days prior to such meeting for examination by any stockholder for any purpose
germane to the meeting.

You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND DATE THE ACCOMPANYING PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. If you attend
the meeting, you may vote in person if you wish, whether or not you have
returned your proxy. A proxy may be revoked at any time before it is exercised.

By Order of the Board of Directors

WILLIAM R. TEMPEST
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL

Plano, Texas
March 31, 1994
<PAGE>
DSC COMMUNICATIONS CORPORATION

1000 COIT ROAD
PLANO, TEXAS 75075

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

The accompanying proxy, mailed with this Proxy Statement, is solicited on
behalf of DSC Communications Corporation (the "Company") for use at the Annual
Meeting of Stockholders of the Company to be held Wednesday, April 27, 1994, at
10:00 AM local time, at The Grand Kempinski Hotel, 15201 Dallas Parkway, Dallas,
Texas.

This Proxy Statement and accompanying form of proxy will first be mailed to
stockholders of record on or about March 31, 1994.

ELECTION OF DIRECTORS

The Company's Restated Certificate of Incorporation provides that the
Company's Board of Directors shall consist of not less than seven nor more than
fifteen persons and that the Board shall be divided into three classes serving
staggered three year terms with each class to consist as nearly as possible of
one-third of the directors; provided, that once elected, no director's term
shall be reduced. The Board currently consists of nine members. Three Class I
directors, to serve until the 1997 Annual Meeting, will be elected at the Annual
Meeting.

Management's three nominees for election as Class I Directors listed below
are currently members of the Board of Directors.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AGE AS OF DIRECTOR OF
OR EMPLOYMENT MARCH 1, 1994 COMPANY SINCE
----------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Frank J. Cummiskey............... Vice Chairman of the Company. Retired Vice President 67 1988
of International Business Machines Corporation
("IBM"). Served in a variety of domestic and
international executive positions including President
and director of IBM Europe, S.A., President and
director of IBM World Trade Europe Middle East,
Africa Corporation, and President of IBM's General
Business Group/International.
Raymond J. Dempsey............... Retired; former President and Chief Executive Officer 58 1992
of European American Bank; Director of Freuhauf
Trailer Corp.
James L. Fischer................. Retired; former Executive Vice President, principal 67 1989
financial officer and manager of corporate staff
functions of Texas Instruments Incorporated ("TI").
During his 29 years at TI, he held a number of senior
management level positions.
</TABLE>

VOTE REQUIRED FOR ELECTION OF DIRECTORS

To be elected as a Director, each nominee must receive the favorable vote of
a plurality of the total number of shares of Common Stock represented and
entitled to vote at the Annual Meeting or any adjournment thereof.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
THREE NOMINEES NAMED ABOVE.
<PAGE>
PROPOSAL TO AMEND RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK

The Company's Restated Certificate of Incorporation provides for 100,000,000
shares of Common Stock having a par value of $.01 per share ("Common Stock").
The proposed amendment to the Company's Restated Certificate of Incorporation
would amend Subsection (a) of Article Fourth to increase the authorized shares
of the Company's Common Stock from 100,000,000 to 250,000,000 shares. The text
of this amended Subsection is set forth below:

"(a) the total number of shares of Common Stock which the
Corporation shall have authority to issue shall be two hundred
fifty million (250,000,000) shares of the par value of $.01 each."

At March 1, 1994, 61,636,630 shares of Common Stock were issued and
outstanding or were reserved for issuance under the Company's existing
compensation plans, leaving a balance of 38,363,370 shares of Common Stock
available for other purposes.

The Company has not made any decision respecting the issuance of additional
shares of Common Stock. However, management deems it wise to increase the number
of authorized shares of Common Stock at this time because, in its opinion, it is
important that management have available to it the means and flexibility to take
advantage of any opportunities that may occur without incurring the expense or
delay involved with holding a special meeting of stockholders to increase the
number of authorized shares. Some or all of such additional shares would be
available for issuance in connection with a stock split or stock dividend, for
sale to raise additional equity for the Company or for issuance in the event the
Company acquired a business for consideration which was payable in whole or in
part in shares of the Company's Common Stock. All or a portion of such shares
would also be available for such other purposes as the Board of Directors of the
Company might authorize. Further authorization for the issuance of such Common
Stock by a vote of security holders would not be solicited prior to such
issuance unless required by law. In the event shares of such Common Stock were
issued, other than pursuant to a stock split or stock dividend, the percentage
ownership of the Company of each stockholder would be proportionately reduced.
No other rights of stockholders would be affected. Stockholders have no
pre-emptive right to subscribe for or purchase any additional shares issued by
the Company. Upon effectiveness of the proposed amendment, the Company will have
188,363,370 shares of the 250,000,000 total authorized shares available for
issuance.

An affirmative vote of the holders of a majority of the outstanding Common
Stock is necessary for the adoption of the proposed amendment.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE
PROPOSED AMENDMENT.

PROPOSAL TO ADOPT THE DSC COMMUNICATIONS CORPORATION
1994 LONG-TERM INCENTIVE COMPENSATION PLAN

Effective January 1, 1994, the Board of Directors adopted the DSC
Communications Corporation Long-Term Incentive Compensation Plan (the "1994
LTIP" or the "Plan"), subject to stockholder approval. The 1994 LTIP is designed
to promote the interests of the Company and its stockholders by helping the
Company to retain the services of participants in the Plan and stimulating the
efforts of the participants on behalf of the Company by giving them a direct
interest in the performance of the Company. The following summary of the 1994
LTIP contains all material provisions of the Plan, but does not purport to be
complete, and is subject in all respects to, and qualified by, the provisions of
the Plan which appears as Exhibit A to this Proxy Statement.

The Plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee").

Participants in the 1994 LTIP will be designated by the Committee in its
sole discretion and shall include only key employees of the Company who, in the
Committee's judgment, will significantly

2
<PAGE>
impact the growth of the business. In selecting participants in the Plan and in
determining the number of Units to be awarded to each participant, the Committee
shall take into account factors such as time in position, experience, knowledge,
advancement potential, responsibilities and past and anticipated contributions
to Company performance.

A maximum of 300,000 Units may be awarded to participants under the Plan. No
Units may be awarded after December 31, 2003. Each Unit shall have a term of
five years from the date of award unless sooner terminated in accordance with
the provisions of the 1994 LTIP. A Unit vests 40% after two years from the award
date and 20% each year thereafter. However, each Unit shall become fully vested
upon the occurrence of any of the following: (i) attainment of the Maximum
Cumulative Value (as hereinafter defined); (ii) a Change in Control of the
Company (as defined in the Plan); (iii) termination without cause; or (iv) the
participant's death, disability or retirement on or after age 65.

The Measuring Price (herein so called) for each Unit is the closing price
per share of the Company's Common Stock on December 31 of the year immediately
prior to the year in which his participation commences, but shall not be lower
than the fair market value of the Common Stock on December 31, 1993. With
respect to any Units awarded to a participant in 1994, the Measuring Price will
be $61.50. The Incremental Unit Value (herein so called) with respect to any
calendar year shall be equal to the product of the Measuring Price multiplied by
eight-tenths of the percentage by which the Earnings Per Share (as defined in
the Plan) for that calendar year exceed the Earnings Per Share for the calendar
year ending December 31 immediately prior to the year in which his participation
commences, but in no event shall this be less than zero. The Incremental Unit
Value of each Unit shall be cumulated to determine the Cumulative Unit Value. In
no event shall the value of any Unit exceed four times the Measuring Price
("Maximum Cumulative Value").

Any Unit that is fully vested shall be exercised. A partially vested Unit
may be exercised at any time to the extent vested. Upon exercising of a Unit, a
participant shall be entitled to receive the Cumulative Unit Value of the vested
portion of his Units being exercised. In the event a participant elects to
exercise a partially vested Unit, the unvested portion shall be forfeited.
Except upon a Change in Control, when payment shall be made solely in cash, not
less than 40% of the amount due shall be paid in cash and the balance, as
determined by the Committee in its discretion, shall be paid in cash or in
shares of common stock or both. The Board of Directors may amend or terminate
the Plan at any time, but no such amendment or termination may adversely affect
the right of any participant with respect to any outstanding Units held by him
without his consent.

To date, no Units have been awarded and there are no participants in the
Plan. It is anticipated that executive officers of the Company will participate
in the Plan, but no determination has been made as to the identity of any
participant or the number of Units to be awarded to any participant. It is the
intention of the Committee that no executive officer will simultaneously
participate in both the Plan and the DSC Communications Corporation 1990
Long-Term Incentive Compensation Plan.

Approval of the 1994 LTIP will require the affirmative vote of a majority of
the total number of shares of Common Stock represented and entitled to vote at
the Annual Meeting or any adjournment thereof.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
DSC COMMUNICATIONS CORPORATION 1994 LONG-TERM INCENTIVE COMPENSATION PLAN.

3
<PAGE>
PERFORMANCE GRAPH

The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.

The graph below compares the cumulative total stockholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the S&P 500 Index and the S&P High Technology Composite Index over the
same period (assuming the investment of $100 in the Company's Common Stock, the
S&P 500 Index and the S&P High Technology Composite Index on December 31, 1988
and reinvestment of all dividends).

DSC COMMUNICATIONS CORPORATION
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

<TABLE>
<CAPTION>
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
DSC................................................... $ 100 $ 187 $ 89 $ 50 $ 284 $ 794
S&P "500"-R- Index.................................... 100 132 128 166 179 197
S&P-R- High Tech Composite Index...................... 100 99 101 115 120 147
</TABLE>

4
<PAGE>
EXECUTIVE COMPENSATION

The following executive compensation disclosures reflect all plan and
non-plan compensation awarded to, earned by, or paid to the named executive
officers and directors of the Company. The "named executive officers" are the
Company's Chief Executive Officer (the "CEO"), regardless of compensation level,
and the four most highly compensated executive officers other than the CEO
serving as such on December 31, 1993. Where a named executive officer has served
during any part of the year ended December 31, 1993, the disclosures reflect
compensation for the full year in each of the periods presented.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------
ANNUAL COMPENSATION
------------------------------------------------------------------ AWARDS
BONUS ----------
($)
------------------------------------------ (C)
1990 (B) RESTRICTED
LONG-TERM OTHER ANNUAL STOCK
NAME AND SALARY INCENTIVE COMPENSATION AWARDS
PRINCIPAL POSITION YEAR ($) CASH PLAN TOTAL ($) ($)
- ------------------------------------ ---- ------- ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Donald .................... 1993 687,682 1,460,000(F) 2,588,000(A) 4,048,000 411,346 809,375
Chairman of the Board, President 1992 650,004 300,000 -- 300,000 17,546 313,500
and Chief Executive Officer 1991 634,619 -- -- -- 235,125
Gerald F. Montry ................... 1993 347,198 170,000 388,200(A) 558,200 160,367 226,625
Senior Vice President and Chief 1992 314,512 125,000 -- 125,000 4,518 49,500
Financial Officer 1991 310,845 -- -- -- 60,919
David M. Holland ................... 1993 270,910 100,000 388,200(A) 488,200 161,276 226,625
Senior Vice President 1992 259,412 90,000 -- 90,000 5,034 49,500
1991 254,222 -- -- -- 60,919
Allen R. Adams ..................... 1993 226,400 130,000 -- 130,000 126,751 395,375
Senior Vice President 1992 195,258 90,000 -- 90,000 -- 49,500
1991 170,415 -- -- -- 21,375
Hensley E. West .................... 1993 216,240 130,000 -- 130,000 84,490 145,688
Senior Vice President 1992 161,978 99,426 -- 99,426 -- 44,775
1991 * * * * *

(D) PAYOUTS
SECURITIES -------
UNDERLYING (E) (B)
OPTIONS/ LTIP ALL OTHER
NAME AND SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION (#) ($) ($)
- ------------------------------------ ---------- ------- ----------
<S> <C> <C> <C>
James L. Donald .................... 50,000 --(A) 50,089
Chairman of the Board, President -- -- 34,515
and Chief Executive Officer 300,000 --
Gerald F. Montry ................... 30,000 --(A) 15,595
Senior Vice President and Chief -- -- 24,445
Financial Officer 83,333 --
David M. Holland ................... 20,000 --(A) 7,183
Senior Vice President -- -- 4,959
64,200 --
Allen R. Adams ..................... 30,000 -- 6,855
Senior Vice President -- -- 4,364
10,000 --
Hensley E. West .................... 30,000 -- 6,351
Senior Vice President -- -- 33,466
* *
<FN>
- ----------------------------------
* Not applicable as Mr. West became an executive officer during 1992.

(A) Amounts earned under the Company's 1990 Long-Term Incentive Compensation
Plan. No amounts earned were paid in 1993. Of the amounts earned,
$1,725,382, $258,807 and $258,807 were vested at the end of 1993 for Mr.
Donald, Mr. Montry and Mr. Holland, respectively, and $862,618, $129,393
and $129,393, respectively, will fully vest by the end of 1995.
(B) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted by
the Securities and Exchange Commission, information for years ending prior
to December 15, 1992 is not required to be disclosed. Amounts of "Other
Annual Compensation" are amounts reimbursed during the respective year for
the payment of taxes. For fiscal 1993, "All Other Compensation" consists
of the following for the named executive officers:
</TABLE>

<TABLE>
<CAPTION>
COMPANY CONTRIBUTIONS
--------------------------------------
THRIFT RESTORATION SPLIT DOLLAR
PLAN PLAN LIFE INSURANCE
--------- ----------- --------------
<S> <C> <C> <C>
James L. Donald......................................................................... $ 4,497 $ 19,151 $ 26,441
Gerald F. Montry........................................................................ 4,497 9,034 2,064
David M. Holland........................................................................ 3,855 1,038 2,290
Allen R. Adams.......................................................................... 4,497 1,561 797
Hensley E. West......................................................................... 4,464 811 1,076

TOTAL
---------
<S> <C>
James L. Donald......................................................................... $ 50,089
Gerald F. Montry........................................................................ 15,595
David M. Holland........................................................................ 7,183
Allen R. Adams.......................................................................... 6,855
Hensley E. West......................................................................... 6,351
<FN>
Other compensation represents the unvested portion of amounts earned under
awards granted in 1990 under the Company's 1990 Long-Term Incentive
Compensation Plan. These amounts will fully vest in 1996.
</TABLE>

5
<PAGE>
(C) The amounts reported in the table represent the market value of the shares
at the date of grant. Awards of restricted stock vest in equal annual
increments over a three year period with the initial increment vesting on
the first anniversary of the date awarded. Holders of the restricted shares
retain all rights of a stockholder (including the right to receive
dividends if and when paid on Common Stock), except the restricted shares
cannot be sold until they are vested. Upon termination of employment of the
holder, all unvested shares are forfeited to the Company. No dividends have
been declared or paid on the restricted stock. During 1993, the following
restricted shares were awarded: Mr. Donald 25,000, Mr. Montry 7,000, Mr.
Holland 7,000, Mr. Adams, 10,000 and Mr. West 4,500.

Aggregate restricted stock holdings at December 31, 1993 consisted of:

<TABLE>
<CAPTION>
MARKET
VALUE AT
DECEMBER 31,
SHARES 1993
--------- ------------
<S> <C> <C>
James L. Donald.................................................................... 47,000 $2,890,500
Gerald F. Montry................................................................... 15,850 974,775
David M. Holland................................................................... 15,850 974,775
Allen R. Adams..................................................................... 17,000 1,045,500
Hensley E. West.................................................................... 10,500 645,750
</TABLE>

(D) Represents the number of stock options granted to the named executive
officer for the year noted. The Company has not made any grants of SARs.

(E) No cash payouts have been made under the Company's 1990 Long-Term Incentive
Compensation Plan (the "LTIP").

(F) Includes a special award of $1,000,000 in recognition of performance during
1993.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table shows all individual grants of stock options to the
named executive officers during the year ended December 31, 1993.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/ POTENTIAL REALIZABLE
SECURITIES SARS VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF STOCK
OPTIONS/ EMPLOYEES EXERCISE PRICE APPRECIATION
SARS IN OR BASE FOR OPTION TERM
GRANTED* FISCAL PRICE EXPIRATION -----------------------------------
NAME (#) YEAR ($/SH) DATE 5%($)** 10%($)**
- ------------------------------ ---------- ---------- -------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James L. Donald .............. 50,000 7.41% 32.375 4/26/03 $ 1,018,000 $ 2,579,850
Chairman of the Board,
President and Chief
Executive Officer
Gerald F. Montry.............. 20,000 2.96% 32.375 4/26/03 407,200 1,031,940
Senior Vice President and 10,000 1.48% 56.250 12/15/03 353,750 896,480
Chief Financial Officer
David M. Holland ............. 20,000 2.96% 32.375 4/26/03 407,200 1,031,940
Senior Vice President
Allen R. Adams................ 20,000 2.96% 32.375 4/26/03 407,200 1,031,940
Senior Vice President 10,000 1.48% 56.250 12/15/03 353,750 896,480
Hensley E. West............... 10,000 1.48% 32.375 4/26/03 203,600 515,970
Senior Vice President 20,000 2.96% 56.250 12/15/03 707,500 1,792,960
All stockholders.............. 989,854,458(A) 2,508,522,617(A)
1,945,898,307(B) 4,931,332,620(B)
<FN>
- ------------------------------
* Options have a ten year life, vest in equal annual increments over three
years and are priced at fair market value on this date of grant.
** These are hypothetical values using assumed growth as prescribed by the
Securities and Exchange Commission.
(A) The potential realizable value is calculated from $32.375, the exercise
price of the options listed above, granted on April 26, 1993, based on the
number of outstanding shares of Common Stock on April 26, 1993.
(B) The potential realizable value is calculated from $56.25, the exercise
price of the options listed above, granted on December 15, 1993, based on
the number of outstanding shares of Common Stock on December 15, 1993.
</TABLE>

6
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

The following table shows aggregate exercises of options (or tandem stock
appreciation rights) and freestanding stock appreciation rights during the year
ended December 31, 1993, by each of the named executive officers.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
DECEMBER 31, OPTIONS/SARS AT
1993 (#)(A) DECEMBER 31, 1993
SHARES EXERCISABLE (E)/ (A)(B)
ACQUIRED ON VALUE UNEXERCISABLE EXERCISABLE (E)/
NAME EXERCISE (#) REALIZED (U) UNEXERCISABLE (U)
- --------------------------------------------- -------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
James L. Donald ............................. -- $ -- 850,000E $46,625,000E
Chairman of the Board, President 100,000U 4,106,250U
and Chief Executive Officer
Gerald F. Montry ............................ 41,000 1,559,958 245,666E 13,330,588E
Senior Vice President and Chief 46,667U 1,547,102U
Financial Officer
David M. Holland ............................ 53,333 1,689,991 -- E -- E
Senior Vice President 33,334U 1,289,202U
Allen R. Adams .............................. 13,000 371,745 14,089E 770,842E
Senior Vice President 33,334U 811,702U
Hensley E. West ............................. -- -- 32,000E 1,793,500E
Senior Vice President 33,000U 555,250U
- ------------------------
(A) The Company has not made any grants of SARs.
(B) Amounts shown are based upon the closing price of the Company's Common
Stock on December 31, 1993, which was $61.50.
</TABLE>

7
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company has entered into severance agreements (collectively, the
"Severance Agreements") with Messrs. Montry, Adams and West.

Each of the Severance Agreements provides that if a Change in Control (as
defined below) occurs and within two years of the Change in Control either (i)
the officer voluntarily terminates his employment for "good reason"; or (ii) the
officer's employment is involuntarily terminated other than for cause, death or
disability, the Company will pay to the officer a lump sum amount equal to three
times the officer's "base amount" income. The Severance Agreements provide that
sums otherwise payable by the Company will be reduced by the value of any
benefits received by the individual which are attributable to the Change in
Control other than those provided for in the Severance Agreements. The Severance
Agreements further provide that each of the officers will be reimbursed for
excise taxes payable pursuant to Section 4999 of the code by reason of payments
made pursuant to the Severance Agreements.

The "base amount" is defined by the Tax Reform Act of 1984 as the average of
all compensation (including compensation from the exercise of stock options)
received by the officer in each of the five taxable years preceding the year in
which the Change in Control occurs.

A "Change in Control" of the Company is defined in the Severance Agreements
as any of the following: (i) consummation of a merger in which the Company is
not the surviving entity; (ii) sale or transfer of substantially all of the
assets of the Company; (iii) liquidation or dissolution of the Company; (iv)
acquisition of at least 20% of the Company's Common Stock by a third party; or
(v) under certain circumstances, a change of a majority of the members of the
Company's Board of Directors during any two-year period.

"Good reason" is defined in the Severance Agreements as any reduction in
compensation, duties, status or benefits or relocation of the Company's
principal place of business.

In addition, each such agreement provides that in the event of a Change in
Control as defined in the Severance Agreements, all restrictions relating to
stock options and restricted stock held by such officer automatically lapse.

No sums have been paid under any of the Severance Agreements. Should payment
of severance compensation be triggered in 1994, the maximum aggregate amount
payable pursuant to the Severance Agreements, would be as follows: Mr. Adams
approximately $1,413,000, Mr. Montry approximately $3,012,400, and Mr. West
approximately $863,100. These amounts will change during each calendar year and
do not take into account any additional tax or other payments which are
indeterminable at this time.

None of the named executive officers will be entitled to severance pay until
a Change in Control has occurred. The officer's right to receive severance pay
lapses (i) if he continues to be employed by the Company for a period of two
years after the Change in Control; or (ii) on July 23, 1994, unless a Change in
Control occurs prior to such date.

In addition, the Company's stock option plans provide that in the event of a
Change in Control, all restrictions on employee stock options and restricted
stock grants lapse.

DONALD AGREEMENTS

In 1990, the Compensation Committee approved an employment agreement (the
"Donald Employment Agreement") with Mr. Donald.

TERM. The term of employment pursuant to the Donald Employment Agreement
commenced on January 1, 1990, and continues for a period of six and one-half
years. The Donald Employment Agreement renews daily, but in no event will it
extend beyond the date Mr. Donald reaches the age of 75, or such earlier date as
may be specified in a written notice given by either party to the other and

8
<PAGE>
delivered six years and six months prior to such specified date. Mr. Donald may
relinquish the office as Chief Executive Officer at any time after July 5, 1996,
without terminating his employment under the Donald Employment Agreement.

COMPENSATION. Mr. Donald's base salary is reviewed annually and is subject
to discretionary increases by the Board of Directors, which increases cannot be
less than the average percentage increase during the prior calendar year of the
base salaries of those executives reporting directly to Mr. Donald. Pursuant to
the Donald Employment Agreement, Mr. Donald will also be eligible to receive
annual incentive awards at the discretion of the Board of Directors and will be
eligible to participate in any benefit and stock plans the Company maintains for
its employees.

TERMINATION. If, in the absence of a Change in Control (as defined in the
Donald Employment Agreement), Mr. Donald's employment is constructively
terminated or terminated without cause, the Company will be required to pay Mr.
Donald for each year remaining on the term of the Donald Employment Agreement
(i) his then base salary; (ii) annual incentive awards equal to the average of
the three highest annual incentive awards he received during the last ten years
of his employment; and (iii) all other benefits that were payable to Mr. Donald
at the time of his termination. He will also be entitled to continued
participation for the remainder of the term of the Donald Employment Agreement
in all employee benefit plans in which he was a participant on the date of his
termination and to medical benefits for himself and his wife for life and for
his children until they reach age 23.

CHANGE IN CONTROL. If, within two years following a Change in Control, Mr.
Donald's employment is constructively terminated or terminated without cause,
Mr. Donald will be entitled to receive a lump sum cash payment within 30 days
following termination, equal to the sum of (i) his then-base salary for each
year remaining on the term of the Donald Employment Agreement; (ii) the average
of his three highest annual incentive awards received during the last ten years
of his employment multiplied by the number of years remaining on the term of the
Employment Agreement; (iii) any accrued incentive awards; (iv) the aggregate
difference between the option price and the fair market value of the Company's
stock subject to the unexercisable options that Mr. Donald holds at the time of
termination; and (v) the fair market value of each share of restricted stock not
vested held by Mr. Donald at the time of termination. Mr. Donald will also be
entitled to continued participation for the remainder of the term of the Donald
Employment Agreement in all employee benefit plans in which he was participating
on the date of termination and to medical benefits for himself and his wife for
life and for his children until they reach age 23. Should the severance
compensation be triggered in 1994, the maximum amount payable to Mr. Donald
under the Donald Employment Agreement would be approximately $15,995,000. This
amount will change during each calendar year and does not take into account any
additional tax or other payments which are indeterminable at this time.

ADDITIONAL PAYMENTS. If the Internal Revenue Service determines that any
payment made to Mr. Donald pursuant to the Donald Employment Agreement or
otherwise constitutes an "Excess Parachute Payment" within the meaning of the
Code, the Company will make a "gross-up" payment in the amount necessary to pay
any excise taxes imposed by Section 4999 of the Code and any income taxes on the
payment to him. Any "gross-up" payment made to Mr. Donald would be a
non-deductible expense of the Company.

DISCLOSURE OF CONFIDENTIAL INFORMATION AND AGREEMENT NOT TO COMPETE. Under
the terms of the Employment Agreement, Mr. Donald may not disclose at any time
confidential information about the Company that he acquires during his
employment. In addition, he is subject to an agreement not to compete with the
Company during the term of employment and for one year thereafter.

INCOME CONTINUATION PLAN. Effective January 1, 1990, Mr. Donald and the
Company entered into an Income Continuation Plan agreement (the "Continuation
Plan"). The Continuation Plan is administered by the Compensation Committee. The
Compensation Committee consists of not less than two non-employee directors.

9
<PAGE>
If Mr. Donald terminates his employment with the Company on or after his
reaching age 65, he will receive an amount equal to 3% of the average of his
compensation for the highest three calendar years of his final ten years of
employment as the Company's Chief Executive Officer multiplied by the number of
years of service (the "Accrued Benefit"). If Mr. Donald terminates his
employment with the Company due to disability prior to age 65, he will receive
the Accrued Benefit except that his years of service shall be deemed to continue
until age 65; provided, however, that in the event of his death following
termination of employment due to disability and prior to reaching age 65, no
further benefits shall be paid.

If Mr. Donald's employment is terminated without cause, other than due to
death or disability, the Company will pay Mr. Donald the Accrued Benefit on the
date his base salary ceases pursuant to the terms of the Donald Employment
Agreement described above provided that Mr. Donald's years of service shall be
deemed to continue until his Accrued Benefit becomes payable; and, provided,
further, that in the event of Mr. Donald's death following termination of
employment and prior to the date the Accrued Benefit would otherwise be payable,
no further sums shall be paid.

If Mr. Donald voluntarily terminates his employment other than because of
his death or disability or if the Company terminates Mr. Donald for cause, Mr.
Donald shall receive the Accrued Benefit on his reaching age 65 or his
termination of employment, whichever is later.

The Accrued Benefit shall be paid in the form of monthly payments for life.
However, Mr. Donald may elect to take the Accrued Benefit in the form of a
ten-year certain and life annuity.

In the event Mr. Donald dies following the commencement of the monthly
benefit payment described above, his surviving spouse shall receive 50% of the
monthly amount otherwise payable (the "Survivor Benefit"). If neither Mr. Donald
nor his spouse survives for ten years after commencement of the monthly benefits
then, upon the latter of the date of death of Mr. Donald or his spouse, the
Survivor Benefit shall be paid in equal shares to his children until the latter
of (1) the tenth anniversary of the date benefits commenced; or (2) the death of
the last surviving child of Mr. Donald. The Company has agreed to establish a
trust to fund Accrued Benefits payable to Mr. Donald. As of December 31, 1993,
no trust fund has been established.

At December 31, 1993, the estimated annual Accrued Benefit payable to Mr.
Donald under the Income Continuation Plan was approximately $476,000 and at
normal retirement date, such Accrued Benefit would be approximately $595,000.
Under the terms of the Income Continuation Plan, benefits will be adjusted to
reflect changes in Mr. Donald's compensation.

LIFE INSURANCE. Effective January 1, 1990, the Company and Mr. Donald
entered into an agreement pursuant to which the Company will provide Mr. Donald
with a $5,000,000 life insurance policy which replaces a previous life insurance
policy of $7,000,000. Mr. Donald pays the portion of the premium on the policy
that is equal to the amount of economic benefit that would be taxable to him but
for such payment. The balance of such premiums are paid by the Company.
Dividends attributable to the policy shall be applied to purchase additional
insurance. Upon Mr. Donald's death, the Company shall be entitled to receive an
amount equal to the cumulative premiums paid by the Company, provided that Mr.
Donald's designated beneficiary shall receive not less than $5,000,000.

1990 LONG-TERM INCENTIVE COMPENSATION PLAN

The DSC Communications Corporation 1990 Long-Term Incentive Compensation
Plan (the "1990 Plan") provides for the award of up to 300,000 Units ("Units")
to individuals participating in the 1990 Plan and to date, 260,000 Units have
been awarded. There are currently three participants in the 1990 Plan, Mr.
Donald, Mr. Holland and Mr. Montry who hold 200,000, 30,000 and 30,000 Units,
respectively. The 1990 Plan will terminate on December 31, 1995, unless earlier
terminated by the Board of Directors. All benefits under the 1990 Plan will be
paid in cash.

Units awarded under the 1990 Plan vest over a six-year period beginning
January 1, 1990, and ending December 31, 1995. Units become fully vested upon
(i) the attainment of the Maximum

10
<PAGE>
Cumulative Unit Value (as determined by the Committee) with respect to the
Units; (ii) the occurrence of certain "change in control" events with respect to
the Company; and (iii) the termination of the participant's employment by reason
of retirement, death or disability, or termination of the participant's
employment other than for "cause".

Units that have vested may be exercised at any time during a participant's
employment for an amount equal to the then-current Cumulative Unit Value (as
defined below) of the Units and a corresponding number of Units will be
canceled. The Company also will pay the participant an amount equal to the
Cumulative Unit Value of the then outstanding Units upon the termination of the
1990 Plan. The "Cumulative Unit Value" of a Unit is determined by a formula
which establishes and totals the Incremental Unit Value for each completed
Performance Year. The Incremental Unit Value of the Unit for a Performance Year
is established by the Committee.

Upon the occurrence of a "change in control" of the Company, a participant
will be entitled to receive in respect of any Unit then outstanding a lump sum
cash payment equal to the greater of (a) the Cumulative Unit Value per
outstanding Unit held by the participant (but not more than the amount
established by the Committee as the Maximum Cumulative Unit Value of $108.75),
$12.94 as of December 31, 1993; or (b) the then fair market value of a share of
the Company's Common Stock on the date of the "change in control," multiplied by
five times the number of Units held by the participant, or $265.00 per Unit
based on the closing sales price of the Company's Common Stock as reported by
the NASDAQ National Market on March 28, 1994.

In addition, if the Internal Revenue Service determines that such payment
constitutes an "Excess Parachute Payment" as defined in the Internal Revenue
Code of 1986 (the "Code"), as amended, the Company will make a "gross-up"
payment to the participant in an amount necessary to pay any excise taxes
imposed by Section 4999 of the Code and any income taxes on the payment to the
participant. Any "gross-up" payment made to a participant will be a
nondeductible expense of the Company.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

The provisions of the Severance Agreements, the 1990 Long-Term Incentive
Compensation Plan, and the Donald Employment Agreement may be deemed to have an
anti-takeover effect and may delay, defer, or prevent a tender offer or takeover
attempt that a stockholder may consider to be in that stockholder's best
interest, including attempts that might result in a premium over the market
price for shares held by stockholders.

DIRECTORS CONTINUING IN OFFICE

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AGE AS OF DIRECTOR OF
OR EMPLOYMENT MARCH 1, 1994 COMPANY SINCE
-------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Clement M. Brown, Jr. (1).......... Retired; former President of Squibb Europe (SEV) 73 1981
S.A.
James L. Donald (2)................ Chairman of the Board, President and Chief 62 1981
Executive Officer; employed by the Company since
1981
Sir John Fairclough (1)............ Chairman, Rothschild Venture Ltd. since 1990; 63 1992
Chief Scientific Adviser, Cabinet Office, U.K.
1986-1990; Director of N.M. Rothschild & Sons
(banking); Lucas Industries PLC (aerospace);
Oxford Instruments Group PLC (scientific
instruments)
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AGE AS OF DIRECTOR OF
OR EMPLOYMENT MARCH 1, 1994 COMPANY SINCE
-------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Robert S. Folsom (2)............... Chairman of the Board, Folsom Properties, Inc. 67 1983
(real estate development) for more than the past
five years; Director of BeautiControl Cosmetics,
Inc. (cosmetics); FM Properties (real estate)
Gerald F. Montry (1)............... Senior Vice President and Chief Financial Officer 55 1989
of the Company since 1986
James M. Nolan (2)................. Marketing Consultant to the Company; sole 59 1981
stockholder of Nolan Consulting, Inc. since 1978;
Director of Capital Southwest Corporation
(investment company)
<FN>
- ------------------------
(1) Term expires in 1995.
(2) Term expires in 1996.
</TABLE>

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

During the year ended December 31, 1993, the Board of Directors met five
times.

The Audit Committee, which currently consists of Messrs. Fischer and
Dempsey, (i) annually recommends selection of the Company's independent auditors
to the Board of Directors; (ii) meets with the independent auditors concerning
the audit; (iii) evaluates non-audit services and financial statements and
accounting developments that may affect the Company; (iv) and meets with
management concerning matters similar to those discussed with outside auditors.
The Audit Committee met five times during the year ended December 31, 1993.

The Compensation Committee, which currently consists of Messrs. Brown,
Dempsey and Folsom, (i) makes recommendations to the full Board concerning
remuneration arrangements for senior management and directors; (ii) administers
the Company's stock option and stock purchase plans; (iii) reviews, approves and
recommends to the Board of Directors new benefit plans or modifications to
existing plans; and (iv) makes such reports and recommendations from time to
time to the Board of Directors upon such matters as the Committee may deem
appropriate or as may be requested by the Board. During the year ended December
31, 1993, the Compensation Committee met six times. See "Report of Compensation
Committee" on page 16.

The Company does not have a Nominating Committee. Nominations for directors
of the Company are considered by the entire Board. Stockholders wishing to
recommend a candidate for consideration by the Board can do so in writing to the
Secretary of the Company at its corporate offices in Plano, Texas, giving the
candidate's name, biographical data and qualifications. Any such recommendation
must be accompanied by a written statement from the individual of his or her
consent to be named as a candidate and, if nominated and elected, to serve as a
director.

During the year ended December 31, 1993, each member of the Board attended
not less than 75% of the aggregate number of (i) board meetings and (ii)
meetings of committees of which such person was a member.

COMPENSATION OF DIRECTORS

Non-employee directors are paid $1,500 per month and $1,000 for each Board
of Directors meeting attended. Members of the Audit and Compensation Committees
each receive $800 for each committee meeting attended. The Chairmen of the Audit
and Compensation Committees each receive an additional $417 per month. The
Company pays Clement M. Brown, Jr., a Director of the Company, $1,000 per month
for services performed as a member of the Boards of Directors of two of the
Company's European subsidiaries.

12
<PAGE>
The Company has entered into a Management Consulting Agreement with Nolan
Consulting, Inc. and James M. Nolan pursuant to which the Company paid Nolan
Consulting, Inc. $228,666 for the year ended December 31, 1993. Mr. Nolan is the
sole stockholder of Nolan Consulting, Inc. and a member of the Board of
Directors of the Company.

The Company has entered into a consulting agreement with Frank J. Cummiskey,
a member of the Company's Board of Directors, pursuant to which the Company pays
Mr. Cummiskey $16,700 per month. He serves as Vice Chairman of the Company's
Board of Directors, Chairman of the Company's Long-Range Strategy Committee and
Chairman of the Board of a wholly-owned subsidiary of the Company. During the
year ended December 31, 1993, Mr. Cummiskey received $200,400 for consulting
services.

The Company has entered into a consulting agreement with Sir John
Fairclough, a director of the Company, which provides for the payment of
approximately $11,250 per quarter. He also serves as a director of two other
Company subsidiaries. During the year ended December 31, 1993, Sir John received
$45,000 for consulting services.

NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

In 1993 the Board of Directors adopted, and the stockholders approved, the
DSC Communications Corporation 1993 Non-Employee Directors Stock Option Plan
(the "Directors Plan"). Under the terms of the Directors Plan, on April 26, 1993
Messrs. Brown, Cummiskey, Dempsey, Fairclough, Fischer, Folsom and Nolan each
received an option to purchase 5,000 shares of the Company's Common Stock at an
exercise price per share of $32.38, the reported closing price per share of the
Company's Common Stock on that date. Each such option is exercisable for a
period of not longer than ten years from the date of grant. Each Non-Employee
Director continuing in office will receive a similar option under similar terms
following the 1994 annual meeting.

LITIGATION

On January 26, 1994, C.L. Grimes, a shareholder of the Company, filed a suit
in Delaware Chancery Court, derivatively purportedly on behalf of the Company as
the real party in interest and as a shareholder of the Company, seeking a
declaration that the Employment Agreement of James L. Donald, his Executive
Income Continuation Plan and the 1990 Long-Term Incentive Compensation Plan as
it applies to Mr. Donald and all other benefits of Mr. Donald, including
previously granted Company stock options, are null and void. The defendants in
the suit are Mr. Donald, all current non-employee Directors and two former
directors of the Company. The Company itself is a nominal defendant. The
plaintiff contends that Mr. Donald's employment contract contains an improper
delegation of Board of Directors' authority to Mr. Donald and excess payments.
The suit also contends that the salary and benefits established for Mr. Donald
pursuant to the Donald agreements referred to above and approved by the
Company's Board of Directors are excessive and constitute a diversion and waste
of corporate assets. The suit seeks an injunction restraining Mr. Donald from
exercising any stock options, taking any action to implement any of the Donald
agreements, or declaring a constructive termination of his employment and also
seeks unspecified damages against the defendants and Grimes' legal fees. The
individual defendants will file a responsive pleading and intend to vigorously
contest Grimes' claims.

13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 1, 1994 (except as otherwise
indicated) by (a) each director and named executive officer of the Company; (b)
all current executive officers and directors of the Company as a group; and (c)
each person known to the Company who is a beneficial holder of more than five
percent of the shares of its Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- --------------------------------------------------------------- ---------------------- ----------
<S> <C> <C>
FMR Corp. (3).................................................. 4,590,022 7.98%
82 Devonshire Street
Boston, MA 02109-3614
Allen R. Adams................................................. 72,646 *
Clement M. Brown, Jr. ......................................... 18,000 *
Frank J. Cummiskey............................................. 21,000 *
Raymond J. Dempsey............................................. 5,000 *
James L. Donald................................................ 1,111,780 1.93%
Sir John Fairclough............................................ 15,000 *
James L. Fischer............................................... 12,000 *
Robert S. Folsom............................................... 30,000 *
David M. Holland............................................... 49,184 *
Gerald F. Montry............................................... 317,303 *
James M. Nolan (4)............................................. 190,006 *
Hensley E. West................................................ 84,899 *
All directors and current executive officers as a group (23
persons)...................................................... 2,273,908 3.95%
<FN>
- ------------------------
*Ownership of less than 1% of the outstanding Common Stock.
(1) Each individual, unless otherwise noted, has sole voting and investment
power with respect to all shares owned by such individual. Includes shares
that a person has a right to acquire if such right is exercisable within
sixty days as follows: Allen R. Adams, 47,423 shares; Clement M. Brown,
Jr., 15,000 shares; Frank J. Cummiskey, 5,000 shares; Raymond J. Dempsey,
5,000 shares; James L. Donald, 950,000 shares; Sir John Fairclough, 15,000
shares; James L. Fischer, 5,000 shares; Robert S. Folsom, 5,000 shares;
David M. Holland, 33,334 shares; Gerald F. Montry, 225,667 shares; James M.
Nolan, 105,000 shares; Hensley E. West, 65,000 shares; and all directors
and current executive officers as a group (23 persons), 1,739,425 shares.
(2) Based upon 55,770,595 shares of Common Stock outstanding as of March 1,
1994, plus any shares of Common Stock under options of the particular
director, executive officer or stockholder, or, in the case of all
directors and current executive officers as a group, under options of all
directors and current executives officers as a group.
(3) Based upon Form 13G dated February 11, 1994, filed with the Securities and
Exchange Commission. At December 31, 1993, FMR Corp. had sole voting power
for 297,206 shares, sole investment power for 4,590,022 shares and no
shared voting or investment power.
(4) Includes 35,000 shares held by Mr. Nolan's spouse.
</TABLE>

14
<PAGE>
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than ten percent stockholders are required by
SEC regulations 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, during the year ended December 31, 1993, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with except that one form relating
to one stock option grant was filed three days late on behalf of each of the
following persons, each of whom is an officer of the Company: Allen Adams, Wylie
Basham, Michael Berniquie, Gerald Carlton, Robert Clark, John Montgomery,
Kenneth Vines, Gerald Montry and Hensley West. In addition, one form relating to
one other transaction was filed late on behalf of Mr. West and two forms
relating to two transactions were filed late on behalf of Mr. Carlton. It is the
practice of the Company to attend to the filing of Section 16(a) forms on behalf
of officers of the Company.

INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors of the Company selected the firm of Ernst & Young as
independent auditors for the fiscal year ending December 31, 1994. A
representative of Ernst & Young is expected to attend the Annual Meeting of
Stockholders with the opportunity to make a statement if such representative
desires to do so and to be available to respond to appropriate questions.

STOCKHOLDER PROPOSALS

Any stockholder of the Company desiring to present a proposal for action at
the Annual Meeting of Stockholders to be held in 1995 must deliver the proposal
to the executive offices of the Company no later than December 1, 1994, unless
the Company notifies the stockholders otherwise. Only those proposals that are
proper for stockholder action and otherwise proper may be included in the
Company's Proxy Statement.

QUORUM; VOTING

The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining whether a quorum is present. If a quorum is not present or
represented by proxy, the stockholders entitled to vote thereat, present in
person or represented by proxy, have the power to adjourn the meeting from time
to time, without notice other than an announcement at the meeting until a quorum
is present or represented. At any such adjourned meeting at which a quorum is
presented or represented, any business may be transacted that might have been
transacted at the meeting as originally called.

On all matters (including election of directors) submitted to a vote of the
stockholders at the meeting or any adjournment thereof, each stockholder will be
entitled to one vote for each share of Common Stock owned of record by such
stockholder at the close of business on March 1, 1994. Abstentions and broker
non-votes will be treated as a vote against the proposed amendment to the
Company's Restated Certificate of Incorporation. Abstentions will have the
effect of a vote against the proposal to adopt the DSC Communications
Corporation 1994 Long-Term Incentive Compensation Plan, and broker non-votes
will have no effect in determining the adoption of the proposal to adopt the DSC
Communications Corporation 1994 Long-Term Incentive Compensation Plan.
Abstentions and broker non-votes will have no effect on the election of the
nominees to the Board of Directors.

15
<PAGE>
ACTIONS TO BE TAKEN UNDER THE PROXY

Proxies in the accompanying form which are properly executed and returned
will be voted at the meeting and any adjournment thereof and will be voted in
accordance with the instructions thereon. Any proxy upon which no instructions
have been indicated with respect to a specified matter will be voted as follows
with respect to such matters:

(1) FOR election of management's three Class I Directors to serve until
1997;

(2) FOR approval of an amendment to the Company's Restated Certificate
of Incorporation increasing the authorized number of shares of Common Stock,
$.01 par value, from 100,000,000 to 250,000,000;

(3) FOR approval of the DSC Communications Corporation 1994 Long-Term
Incentive Compensation Plan.

Each of the nominees for election as directors has agreed in writing to
serve if elected. The Company knows of no reason why any of the nominees for
election as directors would be unable to serve. Should any or all of the
nominees be unable to serve, all proxies returned to the Company will be voted
in accordance with the best judgment of the persons named as proxies except
where a contrary instruction is given.

The Company knows of no other matters, other than those stated above, to be
presented for consideration at the meeting. If, however, other matters properly
come before the meeting or any adjournments thereof, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their judgment on any such matters. The persons named in the accompanying proxy
may also, if it is deemed advisable, vote such proxy to adjourn the meeting from
time to time.

PROXY SOLICITATION

The expense of the solicitation of proxies will be borne by the Company.
Solicitation of proxies may be in person or by mail, telephone or telegraph by
directors, current executive officers and regular employees of the Company. The
Company will request banking institutions, brokerage firms, custodians, nominees
and fiduciaries to forward solicitation material to the beneficial owners of
Common Stock of the Company held of record by such persons, and the Company will
reimburse the forwarding expense. The Company has retained the services of
Kissel-Blake, Inc., 25 Broadway, New York, New York 10004 to solicit proxies by
mail, telephone, telegraph or personal contact. The estimated cost of the
professional solicitation will be approximately $9,500 plus out-of-pocket
expenses.

REVOCATION OF PROXY

Any stockholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise (a) by giving written notice to the Company of
such revocation; (b) by voting in person at the meeting; or (c) by executing and
delivering to the Company a later dated proxy.

REPORT OF COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the "Committee"),
which is composed of three independent nonemployee directors (see page 12),
develops and administers the Company's executive compensation strategy. The
strategy is implemented through policies and programs designed to support the
achievement of the Company's business objectives and the enhancement of
stockholder value. The Committee reviews on an ongoing basis all aspects of
executive compensation and has retained an independent compensation consulting
firm to assist in assessing executive compensation policies and programs. The
Committee met six times during the past fiscal year.

The Committee's executive compensation policies and programs support the
following objectives:

- To reinforce management's concern for enhancing stockholder value.

16
<PAGE>
- To align management's compensation with the annual and long-term
performance of the Company.

- To provide competitive compensation opportunities for exceptional
performance.

The basic elements of the Company's executive compensation strategy are:

BASE SALARY. The Committee annually reviews each executive's base salary.
In determining salary adjustments, the Committee considers the executive's
individual performance level, growth in earnings and revenues, as well as other
individualized factors relating to the particular executive's responsibilities.
Additionally considered are the executive's time in position, experience,
skills, potential for advancement, responsibility and current salary in relation
to the expected level of pay for the position. The expected level of pay for
each position is established at between the 50th and 75th percentile of
comparable positions of the companies included in the executive compensation
surveys in which the Company participates. These surveys included companies with
whom this Company competes for senior-level executives but are not the same
companies as those included in the S&P High Tech Composite Group which has been
selected to compare stockholder returns. However, several of the compensation
surveys in which the Company participates include 40 of the 49 companies listed
in the S&P High Tech Composite Group which is used in the Five-Year Performance
Comparison graph on page 4. The Committee exercises its subjective judgment
based upon the above criteria and does not apply a specific formula or assign a
weight to each factor considered. The Committee decided upon the 1993 salary
changes for executive officers after reviewing an explanation of each officer's
duties and performance level and considering the Chief Executive Officer's
recommendations.

ANNUAL INCENTIVE COMPENSATION. At the beginning of each year, the Committee
establishes goals and objectives for that year, including target increases in
sales, net income and earnings per share, as well as more subjective goals with
respect to quality, product development and manufacturing. Additionally, at the
beginning of each year, the Committee establishes incentive award "guidelines."
The Committee believes that the Company's executive officers are responsible for
the overall financial performance of the Company and, consequently, has tied
their "guideline" incentive awards to targeted earnings per share. If the
Company's actual earnings per share equal or exceed the target, the "guideline"
incentive awards will range from approximately 32% to 72% of the executive
officers' base compensation, depending upon the relationship between actual
earnings per share and the target. At the end of the year, based upon these
pre-established guidelines, the Committee determines each executive officer's
"guideline" incentive award. The Committee then adjusts each executive's
"guideline" incentive award based upon its own subjective review of the
performance of the particular executive, taking into consideration his areas of
responsibility and the Committee's pre-established goals and objectives, as well
as, in the case of executives other than the Chief Executive Officer, the
recommendations of the Chief Executive Officer. For 1993, actual earnings per
share exceeded the pre-established target. Consequently, cash incentive awards
accounted for approximately 46% of the executive officers' total compensation in
1993.

LONG-TERM INCENTIVE COMPENSATION. The Company's long-term incentive
compensation consists of the Company Stock Option Plans and the 1990 Long-Term
Incentive Compensation Plan. See pages 10 and 11.

The Committee views the granting of stock options and restricted stock
awards as a significant method of aligning management's long-term interests with
those of the stockholders. Awards to executives are based upon criteria which
include responsibilities, compensation, past and expected contributions to the
achievement of the Company's long-term performance goals, and current
competitive practice determined by the compensation surveys in which the Company
participates. The Committee determines the number of stock options and/or
restricted stock awards based upon compensation surveys and a subjective
evaluation of the criteria described. The Committee generally does not consider
prior stock option and restricted stock awards when approving additional awards.
The stock option exercise price is the closing price on the date of grant. Stock
option and restricted stock

17
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awards are designed to focus executives on the long-term performance of the
Company by giving them an opportunity to share in any increases in value of the
Company's stock. Restricted stock grants are used selectively to attract and
retain executives and to recognize outstanding performance.

The Committee encourages executives, individually and collectively, to
maintain a long-term ownership position in the Company's stock. The Committee
believes this ownership, combined with a significant performance-based incentive
compensation opportunity, forges a strong linkage between the Company's
executives and its stockholders.

In order to reinforce this linkage, the Committee, with the approval of the
Board of Directors, is recommending that the stockholders approve the 1994
Long-Term Incentive Compensation Plan (the "Plan"). The Plan would provide a
payment of cash and Common Stock of the Company to participants based upon
increases in Earnings Per Share (see pages 2 and 3). The Committee will
determine the allocation between cash and Common Stock. The Committee strongly
supports the approval of this Plan as an effective performance-based vehicle
that will provide a financial reward for building stockholder value.

The Omnibus Reconciliation Act of 1993 places a limit on the deductibility
to the Company of certain types of compensation for each of the executive
officers effective January 1, 1994. This limit is consistent with the
Committee's continuing strategy of designing and implementing total compensation
policies and programs that are incentive-driven and that support the achievement
of long-term performance objectives and enhance stockholder value. The Company
is reviewing the implications of the $1 million deduction cap of Section 162(m)
of the Internal Revenue Code for the Plan.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Mr. James L. Donald is Chief Executive Officer, President and Chairman of
the Board of Directors of the Company. The Committee considered the Company's
excellent record in all aspects of its business in its annual review of Mr.
Donald's performance.

The Committee recognized that the Company's 1993 revenue of $730.8 million
and earnings of $81.7 million grew to record levels with increases over 1992 of
36 percent and 604 percent, respectively. At the same time, debt was reduced to
$70 million from $140 million.

Cash and marketable securities increased to over $313 million, order backlog
grew to $320 million and shareholders' equity exceeded $617 million, which is a
growth of over $400 million in 1993. In addition, the Company continued strong
programs in quality improvement, product development and introduction of a
number of new telecommunications services and applications.

At the end of 1993, the Company is well positioned from a product portfolio
perspective. Its financial condition is exceptionally strong as a result of
positive acceptance of its products, stringent cost controls and a successful
public offering of its Common Stock.

Pursuant to an employment agreement between Mr. Donald and the Company, Mr.
Donald's base salary is reviewed annually and is subject to discretionary
increases by the Board of Directors, which increases cannot be less than the
average percentage increase during the calendar year of the base salaries of
those executives reporting directly to Mr. Donald. The Board approved an
increase in Mr. Donald's annual base salary to $690,040 effective February 22,
1993. An annual incentive award for 1993 of $460,000 was granted to him based
upon the criteria discussed above under ANNUAL INCENTIVE COMPENSATION. Mr.
Donald's annual incentive award under the annual incentive plan was 67% of his
1993 base annual earnings. The Board also granted Mr. Donald stock options for
50,000 shares and a restricted stock award of 25,000 shares, which will both
vest in equal annual increments over a three-year period. These actions were in
accordance with the policies and procedures set forth on page 17.

In recognition of the significant increase in stockholder value in 1993 and
of Mr. Donald's extraordinary performance on behalf of the Company in 1993, as
well as his past and expected

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<PAGE>
contributions to the Company's achievement of short and long-term performance
goals, the Board voted him a special incentive award of $1,000,000. In approving
this special award, the Committee considered the factors set forth above in this
section, without attaching a specific weighting to any specific factor.

COMPENSATION COMMITTEE
CLEMENT M. BROWN, JR., CHAIRMAN
RAYMOND J. DEMPSEY
ROBERT S. FOLSOM

The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under either Act.

OUTSTANDING COMMON STOCK

The only outstanding voting securities of the Company are shares of its
Common Stock, each share of which entitles the holder thereof to one vote. At
March 1, 1994, there were outstanding and entitled to vote 55,770,595 shares of
its Common Stock. Only stockholders of record at the close of business on March
1, 1994 are entitled to notice of, and to vote at, the 1994 Annual Meeting of
Stockholders and any adjournments thereof.

By Order of the Board of Directors
WILLIAM R. TEMPEST
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL

Plano, Texas
March 31, 1994

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EXHIBIT A

DSC COMMUNICATIONS CORPORATION
1994 LONG-TERM INCENTIVE COMPENSATION PLAN

PURPOSE OF THE PLAN

The 1994 Long-Term Incentive Compensation Plan is intended to promote the
financial interests of DSC Communications Corporation (the "Company") and its
stockholders by (i) helping the Company to retain the services of the
participants and (ii) stimulating the efforts of the participants on behalf of
the Company by giving them a direct interest in the performance of the Company,
and by giving suitable recognition to their services to the Company.

II.

DEFINITIONS

2.1 AWARD CERTIFICATE: Any written instrument or document evidencing the
award of Units under the Plan to a Participant.

2.2 BASE YEAR EPS: Earnings Per Share for the calendar year ended December
31, 1993, which is $2.05, or in the case of an employee who becomes a
Participant subsequent to the Effective Date, Earnings Per Share for the
calendar year ended December 31 immediately prior to the January 1 as of which
his participation commences.

2.3 BOARD: The Board of Directors of the Company.

2.4 CHANGE IN CONTROL: shall mean:

(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (b) the combined voting
power of the then outstanding-voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (a) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of a conversion
privilege), (b) any acquisition by the Company (excluding any acquisition by
any successor of the Company), (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (d) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (a), (b) and (c) of subsection (iii) of this Section
2.4 are satisfied; or

(ii) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least two-thirds
(2/3) of the directors then constituting the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest subject to Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

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(iii) approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (a) more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger, or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be (for purposes of determining whether such percentage test
is satisfied, there shall be excluded from the number of shares and voting
securities of the resulting corporation owned by the Company's stockholders,
but not from the total number of outstanding shares and voting securities of
the resulting corporation, any shares or voting securities received by any
such stockholder in respect of any consideration other than shares or voting
securities of the Company), (b) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company, any qualified
employee benefit plan of such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly
or indirectly, twenty percent (20%) or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (c) at least a
majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or

(iv) (a) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or (b) the first to occur of (1)
the sale or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company, or
(2) the approval by the, stockholders of the Company of any such sale or
disposition, other than, in each case, any such sale or disposition to a
corporation, with respect to which immediately thereafter, (A) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be (for purposes of determining whether such percentage test
is satisfied, there shall be excluded from the number of shares and voting
securities of the transferee corporation owned by the Company's
stockholders, but not from the total number of outstanding shares and voting
securities of the transferee corporation, any shares or voting securities
received by any such stockholder in respect of any consideration other than
shares or voting securities of the Company), (B) no Person (excluding the
Company and any employee benefit plan (or related trust) of the Company, any
qualified employee benefit plan of such transferee corporation and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, twenty percent (20%) or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding shares of
common stock of such

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transferee corporation and the combined voting power of the then outstanding
voting securities of such transferee corporation entitled to vote generally
in the election of directors and (C) at least a majority of the members of
the board of directors of such transferee corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or
action of the board providing for such sale or other disposition of assets
of the Company.

2.5 COMMITTEE: The Compensation Committee of the Board, or such members
thereof as the Compensation Committee may designate.

2.6 COMMON STOCK: Common stock of the Company, $.01 par value per share.

2.7 COMPANY: DSC Communications Corporation and consolidated Subsidiaries,
a Delaware corporation, or any successor thereto.

2.8 CUMULATIVE UNIT VALUE: The amount determined in accordance with
Section 7.2.

2.9 DISABILITY: Disability as defined in either a Participant's Employment
Agreement or, absent such Agreement, in the Company's group disability insurance
contract.

2.10 EARNINGS: For any year, the consolidated income of the Company and
its Subsidiaries from continuing operations before income taxes, prepared in
accordance with generally accepted accounting principals, as reported in the
Company's audited consolidated financial statements for that year; adjusted (a)
to exclude in its entirety any item of nonrecurring gain or loss in excess of
$2,500,000 and (b) to add back amortization of (i) technology acquired after
December 31, 1993 and (ii) the excess of cost over net assets acquired
(goodwill) after December 31, 1993.

2.11 EARNINGS PER SHARE: For any Performance Year, Earnings divided by the
weighted average number of shares of Common Stock outstanding during such
Performance Year, as reported in the Company's audited consolidated financial
statements for the Performance Year.

2.12 EFFECTIVE DATE: The effective date of the Plan, which is January 1,
1994.

2.13 EMPLOYMENT AGREEMENT: The employment agreement or similar agreement
between the Company and a Participant, as at any time in effect.

2.14 FAIR MARKET VALUE: The Fair Market Value of a share of a Common Stock
on a particular date shall mean (i) if the Common Stock is listed on stock
exchange, the closing price per share of the Common Stock on the principal stock
exchange on which such securities are listed on such date, or, if there shall
have been no sale on that date, on the last preceding date on which such a sale
or sales were so reported, (ii) if the Common Stock is not listed on a stock
exchange, the closing price for the Common Stock as reported by the National
Association of Securities Dealers NASDAQ National Market System (or if there
were no sales on such date, the closing price on the last preceding date on
which such a sale was so reported),or if not reported by such system the mean
between the closing bid and asked price as quoted by such quotation source as
shall be designated by the Committee, or (iii) if such securities are not so
listed or traded, the value determined in good faith by the Committee, which
determination shall be conclusive.

2.15 INCREMENTAL UNIT VALUE: The amount determined in accordance with
Section 7.1.

2.16 MAXIMUM CUMULATIVE UNIT VALUE: The product obtained by multiplying
the Measuring Price by 4.

2.17 MEASURING PRICE: For each Unit, the closing price of a share of
Common Stock as reported on the NASDAQ National Market System on December 31,
1993, which was $61.50, or in the case of an employee who becomes a Participant
subsequent to the Effective Date, the closing price of a share of Common Stock
as thus reported on December 31 immediately prior to the January 1 as of which
his participation commences, but not less than $61.50.

2.18 PARTICIPANT: Any key employee of the Company selected by the
Committee to participate in the Plan.

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2.19 PERFORMANCE YEAR: Any calendar year during the Term of the Plan.

2.20 PLAN: The DSC Communications Corporation 1994 Long-Term Incentive
Compensation Plan.

2.21 SUBSIDIARY: Any corporation in which the Company owns, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock.

2.22 TERM OF THE PLAN: The period commencing on the Effective Date and
ending five years after the final award of Units under the Plan (or on such
earlier date as the Maximum Cumulative Unit Value of such Units may be
achieved).

2.23 TERMINATION WITHOUT CAUSE: Any termination of the Participant's
employment by the Company without "Cause," as defined in the Participant's
Employment Agreement, or if the Participant has no Employment Agreement defining
"Cause," then "Termination Without Cause" shall mean the termination of the
Participant's employment by the Company for any reason other than (i) a
termination due to the continuing and material failure by the Participant to
fulfill his employment obligations or willful misconduct or gross neglect in the
performance of such duties, (ii) a termination due to the Participant's
committing fraud, misappropriation or embezzlement in the performance of his
duties as an employee of the Company, or (iii) a termination due to the
Participant's committing any felony for which he is convicted and which, as
determined in good faith by the Board of Directors of the Company, constitutes a
crime involving moral turpitude and may result in material harm to the Company.

2.24 UNIT: A unit of participation in the Plan awarded to a Participant in
accordance with Article V.

2.25 VALUATION DATE: The last day of each Performance Year.

III.
ADMINISTRATION OF THE PLAN

3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum. Committee decisions and determinations
shall be made by a majority of its members present at a meeting at which a
quorum is present, and they shall be final. The actions of the Committee with
respect to the Plan shall be binding on all affected Participants. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a vote at a meeting
duly called and held. The Committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.

3.2 The Committee shall have full authority, from time to time: (i)
subject to the provisions of this Plan, to select Participants and determine the
extent and terms of their participation; (ii) adopt, amend and rescind such
rules and regulations as, in its opinion may be advisable in the administration
of the Plan; (iii) to construe and interpret the Plan, the rules and regulations
adopted thereunder and any notice or Award Certificate given to the Participant;
and (iv) to make all other determinations that it deems necessary or advisable
in the administration of the Plan. The Committee may request advice or
assistance or employ such persons as it deems necessary for the proper
administration of the Plan and may rely on such advice or assistance; provided,
however, that in making any determinations with respect to the administration of
the Plan, the Committee shall at all times be obligated to act in good faith and
in conformity with the terms of the Plan.

3.3 In the event of any stock split, stock dividend, reclassification,
recapitalization or other change that affects the character or amount of
outstanding Common Stock and Earnings Per Share while any of the Units are
outstanding and unexercised, the Committee shall make such adjustments in the
number of such unexercised Units and/or the Measuring Price as shall, in the
sole judgment of the Committee, be equitable and appropriate in order to make
the value of such Units, as nearly as

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may be practicable, equivalent to the value of Units outstanding and unexercised
immediately prior to such change. In no event, however, shall any such
adjustment give any participant any additional benefits.

3.4 The Committee shall be precluded from increasing the amount of
compensation payable to a participant under the Plan, including the acceleration
of payment or increasing the amount payable to a participant under the Plan,
unless specifically provided for by the Plan.

IV.

ELIGIBILITY TO PARTICIPATE

4.1 Only key employees of the Company who, in the Committee's judgment,
will significantly impact the growth of the business shall be eligible to become
Participants. The Committee, in its sole discretion, shall select the
Participants.

4.2 In selecting Participants and in determining the number of Units to be
awarded to each Participant, the Committee shall take into account such factors
as the individual's position, experience, knowledge, responsibilities,
advancement potential and past and anticipated contribution to Company
performance.

AWARD OF UNITS

5.1 A maximum of 300,000 Units may be awarded under the Plan. A Participant
who has been awarded Units may be awarded additional Units from time to time and
new Participants may be awarded Units, both in the discretion of the Committee;
provided, however, that no Units shall be awarded after December 31, 2003.

5.2 Units shall be awarded solely by the Committee and shall be evidenced
by an Award Certificate, as provided in Article X.

5.3 The maximum number of units granted to any one individual shall not
exceed 100,000 units during the duration of the Plan.

VI.

TERM AND VESTING OF UNITS

6.1 Each Unit shall have a term of five years from the date of award,
subject to earlier termination (i) upon exercise by a Participant, (ii) as
provided in Article XI or (iii) upon achievement before five years of the Unit's
Maximum Cumulative Unit Value. Units shall be deemed to be awarded as of the
Effective Date or any subsequent January 1 during the Term of the Plan, as the
case may be.

6.2 Units shall become vested as follows:

<TABLE>
<CAPTION>
VESTED
PERCENTAGE OF FROM DATE OF
UNITS AWARDED AWARD
- -------------- -------------
<S> <C>
40% 2 Years
60% 3 Years
80% 4 Years
100% 5 Years
</TABLE>

6.3 Notwithstanding Section 6.2, each Unit shall immediately become fully
vested in the event of (i) attainment of the Maximum Cumulative Unit Value, (ii)
a Change in Control, (iii) a Participant's Termination Without Cause or (iv)
termination of a Participant's employment with the Company by reason of his
retirement on or after attainment of age 65, his death or his Disability.

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VII.

DETERMINATION OF VALUE OF A UNIT

7.1 The Incremental Unit Value of each Unit for each Performance Year shall
be equal to the product of (i) the Measuring Price, multiplied by (ii)
eight-tenths of the percentage by which Earnings Per Share for such Performance
Year exceed Base Year EPS. In the event Base Year EPS exceeds Earnings Per Share
for any Performance Year, the Incremental Unit Value for such Performance Year
shall be zero. The Committee shall notify each Participant of the Incremental
Unit Value of his Units for each Performance Year as soon as practicable after
the Valuation Date for the year.

7.2 The Incremental Unit Value of each Unit for any Performance Year shall
be cumulated with the Incremental Unit Value of such Unit for all prior
Performance Years. The cumulative amount thus determined shall be the then
Cumulative Unit Value of such Unit.

VIII.

PAYMENT

8.1 A Unit may be exercised, to the extent that it is vested, at any time
prior to becoming fully vested; provided, however, that any partially vested
Unit that is exercised shall be canceled and its nonvested portion forfeited.
Except as provided in Article XI, a Unit that becomes fully vested, in
accordance with Article VI, shall thereupon be exercised.

8.2 In order to exercise a partially or fully vested outstanding Unit, a
Participant (i) shall give written notice of exercise, as provided in Section
8.3, specifying the number of Units being exercised, and (ii) shall deliver his
Award Certificate to the Secretary of the Company, who shall endorse thereon a
notation of such exercise and return the same to the Participant. The date of
exercise of a Unit shall be the date on which the Company receives the required
documentation. Upon exercise of a Unit, Participant shall be entitled to receive
the Cumulative Unit Value of his Vested Units being exercised, determined as of
the concurrent or immediately preceding Valuation Date, but not in excess of the
Maximum Cumulative Unit Value.

8.3 Any notice of exercise of a partially or fully vested Unit shall be in
writing and addressed to the Secretary of the Company. Payment of the amount due
under the Plan shall be made not later than five days following the date of
exercise or the date of such other event as shall entitle the Participant to
payment; provided, however, that the Committee must certify in writing that all
performance criteria have been met prior to any payments being made under the
Plan. Except upon a Change in Control, when payment shall be made solely in
cash, not less than 40 percent of any amount due shall be paid in cash; the
balance shall be paid in cash or in shares of Common Stock or both, as
determined by the Committee in its discretion.

IX.

LIMITS ON TRANSFERABILITY OF UNITS

9.1 A Unit shall not be transferable by a Participant, except that, upon
the death of a Participant, a Unit may be transferred (i) by beneficiary
designation filed in accordance with Section 9.2, or (ii) if no such beneficiary
designation has been filed, by will or will substitute or by the laws of descent
and distribution.

9.2 A Unit may be exercised only by the Participant to whom it was awarded,
except in the event of the Participant's death. In the event of the death of a
Participant a Unit may be exercised by the person to whom the Participant's
rights were transferred by a properly filed beneficiary designation form or, if
no such designation form was filed, by will or the laws of descent and
distribution. A Participant shall be entitled to select (and change, to the
extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any benefits hereunder following the Participant's death by giving the
Committee or the Secretary of the Company written notice thereof.

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9.3 Except as provided in Section 9.1, a Participant will not be permitted
to assign, alienate or hypothecate his benefits under the Plan.

AWARD CERTIFICATE

The Company shall, promptly following the making of an award, deliver to the
recipient thereof an Award Certificate, specifying the terms and conditions of
the Unit. This writing shall be in such form and contain such provisions not
inconsistent with the Plan as the Committee shall prescribe.

XI.

TERMINATION OF UNITS

11.1 An outstanding Unit awarded to a Participant shall be canceled and all
rights with respect thereto shall expire upon the earlier to occur of (i) its
exercise or (ii) the termination of the Participant's employment with the
Company, except that if such termination occurs by reason of the death,
Disability or retirement of the Participant on or after attainment of age 65,
Termination Without Cause, or for any other reason specifically approved in
advance by the Committee, the term of such Unit shall continue for a period of
14 months from the date of the occurrence (the "Extended Term"). For purposes of
this Section 11.1, the Cumulative Unit Value with respect to such Unit shall be
determined as of the Valuation Date concurrent with or immediately preceding the
end of the Extended Term or any earlier exercise date, whichever is applicable.
In the event the term of a Unit is continued for an Extended Term, such Unit
shall be deemed to be automatically exercised as of the last Valuation Date
within the Extended Term, unless sooner exercised by the Participant or his
legal representative.

11.2 Nothing contained in Section 11.1 shall be deemed to extend the term
of any Unit beyond the end of the Term of the Plan.

XII.

TERMINATION AND AMENDMENT OF THE PLAN

The Plan shall terminate on December 31, 2003, and no Units shall be awarded
after that date. The Company reserves the right to amend or terminate the Plan
at any time, by action of the Board, but no such amendment or termination shall
adversely affect the rights of any Participant with respect to outstanding Units
held by him without the Participant's written consent.

XIII.

RIGHT TO TERMINATE EMPLOYMENT

Nothing in the Plan, nor the award of any Unit, shall confer a right to
continue in the employment of the Company or affect any right of the Company to
terminate a Participant's employment.

XIV.

GENERAL PROVISIONS

14.1 The Plan shall be governed by and construed in accordance with the
laws of the State of Texas without reference to principles of conflict of laws.

14.2 The Company shall be authorized to withhold from any award or payment
it makes to a Participant under the Plan the amount of withholding taxes due
with respect to such award or payment and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.

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14.3 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval if such
approval is required, and such arrangements may be either generally applicable
or applicable only in specific cases.

14.4 Participants shall not be required to make any payment or provide any
consideration for awards under the Plan other than the rendering of services.

DSC COMMUNICATIONS CORPORATION
By: __________________________________

Attest:
______________________________________
Secretary

A-8
<PAGE>
DSC COMMUNICATIONS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 1994

The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of DSC Communications Corporation (the "Company") to be
held on April 27, 1994, and the Proxy Statement in connection therewith, each
dated March 31, 1994; (b) appoints James L. Donald, Gerald F. Montry and William
R. Tempest as Proxies, or any of them, each with the power to appoint a
substitute; (c) authorizes the Proxies to represent and vote, as designated
hereon, all the shares of Common Stock of the Company, held of record by the
undersigned on March 1, 1994, at such Annual Meeting and at any adjournment(s)
thereof; and (d) revokes any proxies heretofore given.

The Board of Directors recommends a vote FOR each of these proposals:

<TABLE>
<S> <C>
1. Election of Directors
Nominees are: Frank J. Cummiskey Raymond J. Dempsey James L. Fischer
For: / /
Withheld: / /
For, except vote withheld from the following nominee(s):
2. Approval of an amendment to the Company's Restated Certificate of Incorporation increasing the authorized number of
shares of Common Stock, $.01 par value, from 100,000,000 to 250,000,000
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)

<TABLE>
<S> <C>
3. Adoption of the DSC Communications Corporation 1994 Long-Term Incentive Compensation Plan
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other business as may come before the meeting or
any adjournment thereof.
</TABLE>

THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS INDICATED,
THIS PROXY WILL BE VOTED (I) FOR ELECTION OF ALL NOMINEES LISTED IN THIS PROXY
TO THE BOARD OF DIRECTORS; (II) FOR APPROVAL OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF SHARES OF COMMON
STOCK, $.01 PAR VALUE, FROM 100,000,000 TO 250,000,000; AND (III) FOR ADOPTION
OF THE DSC COMMUNICATIONS CORPORATION 1994 LONG-TERM INCENTIVE COMPENSATION
PLAN.
Date: ____________________________
_____________________________________
Signature(s)
_____________________________________
Signature(s)
Please sign your name above
exactly as it appears on your
stock certificate, date, and
return promptly. When signing on
behalf of a corporation,
partnership, estate, trust, or in
any other representative capacity,
please sign your name and title.
For joint accounts, each joint
owner must sign.