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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
Filed by the registrant (X)
Filed by a party other than the registrant ( )
Check the appropriate box:
(X) Preliminary proxy statement ( ) Confidential, For Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
( ) Definitive proxy statement
( ) Definitive additional materials
( ) Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Tellabs, Inc.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
(X) No fee required.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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( ) Fee paid previously with preliminary materials:
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( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
- 0 -
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(2) Form, schedule or registration statement no.:
PRE 14A
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(3) Filing party:
Tellabs, Inc.
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(4) Date filed:
February 17, 1997
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Tellabs, Inc., 4951 Indiana Avenue, Lisle, Illinois 60532
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Notice of Annual Meeting of Stockholders To Be Held April 16, 1997
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The Annual Meeting of Stockholders of Tellabs, Inc., a Delaware
corporation, will be held on Wednesday, April 16, 1997, at 3:00 p.m.
local time, in the Grand Ballroom of the Holiday Inn Naperville,
1801 Naper Boulevard, Naperville, Illinois 60563, for the following
purposes:
1. To elect three directors to serve until the 2000 Annual Meeting of
Stockholders;
2. To consider and vote upon a proposed amendment to the Tellabs, Inc.
Restated Certificate of Incorporation to increase the authorized
shares of common stock from 200,000,000 to 500,000,000; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February
17, 1997, as the record date for the meeting, and only stockholders of
record at that time are entitled to notice of and to vote at the
meeting.
All stockholders are cordially invited to attend the meeting.
Whether or not you expect to attend the meeting, please fill in, date
and sign the accompanying proxy and mail it promptly in the enclosed
envelope.
By Order of the Board of Directors,
Carol Coghlan Gavin
Secretary
March 14, 1997
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Proxy Statement
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Tellabs, Inc.
4951 Indiana Avenue
Lisle, Illinois 60532
The enclosed proxy is solicited by the Board of Directors of
Tellabs, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at 3:00 p.m. on Wednesday,
April 16, 1997.
Only stockholders of record as of the close of business on February
17, 1997, will be entitled to notice of and to vote at the meeting. At
the close of business on that date, the Company had ____________ shares
of common stock outstanding.
Stockholders are entitled to one vote for each share held. Any
proxy given may be revoked by a stockholder at any time before it is
voted by filing a written revocation notice with the Secretary of the
Company or by duly executing a proxy bearing a later date. Proxies may
also be revoked by any stockholder present at the meeting who expresses
a desire to vote his or her shares in person. Subject to any such
revocation, all shares represented by properly executed proxies that are
received prior to the meeting will be voted in accordance with the
directions on the proxy. If no direction is made, the proxy will be
voted (i) FOR the election of directors; and (ii) FOR the approval of
the amendment to the Restated Certificate of Incorporation to increase
the authorized shares of common stock from 200,000,000 to 500,000,000.
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Votes cast in person or by proxy at the Annual Meeting of
Stockholders will be tabulated by the inspectors of election appointed
for the meeting who will determine whether a quorum, a majority of the
shares entitled to be voted, is present. Abstentions will be treated as
shares present and entitled to vote for purposes of determining whether
a quorum is present, but not voted for purposes of the election of
directors and the other proposal. If a proxy returned by a broker
indicates that the broker does not have discretionary authority to vote
some or all of the shares covered thereby with respect to the election
of directors or with respect to the other proposal and does not
otherwise authorize the voting of such shares, such shares, or
"non-votes," will be considered to be present for the purpose of
determining whether a quorum is present, but will not be considered to
be present and entitled to vote with respect to the election of
directors or the other proposal. Assuming a quorum is present, the
favorable vote of a plurality of the shares present and entitled to vote
at the Annual Meeting will be necessary for a nominee to be elected as a
director; abstentions and shares for which authority to vote is not
given will thus have no effect on the election of directors. Shares
cannot be voted for more than three nominees; there is no right to
cumulative voting. Approval of the proposed amendment to the Company's
Restated Certificate of Incorporation requires the affirmative vote of
the holders of a majority of the outstanding shares of the Company's
common stock; therefore, abstentions and non-votes will be taken into
account as if such shares were voted against the proposal.
A separate notice of stockholders meeting, proxy statement and proxy
will be provided to each participant in the Tellabs Advantage Program
(the "Program"). Pursuant to the Program, each participant is entitled
to direct the trustee with respect to voting of the shares of common
stock allocated to the participant's accounts. Subject to its fiduciary
duties, the trustee will vote allocated shares in accordance with the
instructions received, and will vote shares with respect to which no
instructions are received in the same proportions as the shares with
respect to which instructions are received. Program participants should
return the proxy as directed therein. Pursuant to the Program, the
trustee will not disclose the directions set forth on the proxy to the
Company or its directors or officers, except as may otherwise be
required by law.
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A copy of the Annual Report of the Company for the fiscal year ended
December 27, 1996, accompanies this proxy statement. The approximate
date on which this proxy statement and the accompanying form of proxy
are first being sent to stockholders is March 14, 1997.
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Election of Directors
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The Company has three classes of directors, with staggered terms,
with the members of each class serving a three-year term. At this
Annual Meeting, the terms of the Class II directors will expire.
The three nominees for Class II director are John D. Foulkes, Ph.D.,
Peter A. Guglielmi and Jan H. Suwinski. Messrs. Foulkes and Guglielmi
are currently Class II directors of the Company. Mr. Suwinski has been
nominated by the Board of Directors to replace Mr. Thomas H. Thompson,
who has informed the Company that he is retiring from the Board and will
not stand for re-election. These persons have been nominated for
election to three-year terms expiring in 2000 or until their successors
are elected and qualified. Unless otherwise instructed by the
stockholder, it is intended that the shares represented by the enclosed
proxy will be voted for the nominees named below, each of whom has been
selected by the Board of Directors. Class I and Class III directors
will continue in office for the remainder of their terms.
Management is not aware of any other proposed nominees for
directors. Although management anticipates that all of the nominees
will be able to serve, if any nominee is unable to serve at the time of
the meeting, the proxy will be voted for a substitute nominee chosen by
management.
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<TABLE>
<CAPTION>
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Principal Occupation or Employment Director
Name Age for Past Five Years Since
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Nominees for Election Whose Terms Will Expire in 2000
<S> <C> <C> <C>
John D. Foulkes, Ph.D. 72 Director of Engineering Studies (retired), 1988
University of Puget Sound; Professor (retired),
University of Washington
Peter A. Guglielmi 54 President, since 1993, Tellabs International, 1993
Inc.; Executive Vice President, Chief Financial
Officer, 1990-present, Secretary, 1988-1993,
Treasurer, 1988-present, Tellabs, Inc.
Jan H. Suwinski 55 Business Consultant, Visiting Professor of
Management-Johnson School, Cornell University,
since 1996; Executive Vice President (retired),
Opto-Electronics Group, Corning Incorporated
(optical fiber and cable manufacturer); prior
positions with Corning Incorporated included
Senior Vice President and General Manager,
Telecommunications Products Division, Vice
President, General Manager-Asia, and Vice
President of Corning Latin America/Asia
Pacific, Inc.
Class I Directors Continuing in Office Until 1999
Brian J. Jackman 55 President, since 1993, Tellabs Operations, 1993
Inc.; Executive Vice President, 1990-
present, Tellabs, Inc.
Stephanie Pace Marshall, Ph.D. 51 Executive Director, since 1986, Illinois 1996
Mathematics and Science Academy
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William F. Souders 68 Chairman and Chief Executive Officer 1990
(retired), Emery Air Freight Corporation
(air freight carrier); formerly Executive
Vice President, Xerox Corporation (business
machines and systems)
Class III Directors Continuing in Office Until 1998
Michael J. Birck 59 President and Chief Executive Officer, 1975
Tellabs, Inc.
Frederick A. Krehbiel 55 Chairman of the Board, since 1993, Vice 1985
Chairman, 1988-1993, Chief Executive
Officer, since 1988, Molex Incorporated
(electrical components manufacturer)
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</TABLE>
Mr. Birck is currently also a director of USF&G Corporation, Molex
Incorporated, Illinois Tool Works Inc. and Professional Training
Centers, Inc. Mr. Krehbiel is a director of Molex Incorporated,
Northern Trust Corporation, Nalco Chemical Company and DeVry Inc. Mr.
Foulkes is a director of Dantel, Inc. Mr. Guglielmi is a director of The
Cherry Corporation and Internet Communications Corporation. Mr. Jackman
is a director of Universal Electronics Inc. and Advanced Fibre
Communications, Inc. No director has any family relationship with any
other director.
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The Board of Directors has a standing Audit Committee, the members
of which are Messrs. Krehbiel and Souders. The Audit Committee is
responsible for reviewing the auditor's examination and reporting to the
Board with respect thereto. In addition, the Board has a standing
Compensation Committee, the members of which are Messrs. Foulkes,
Souders and Thompson and Ms. Marshall. The Board contemplates adding Mr.
Suwinski to the Compensation Committee if he is elected as a director.
The Compensation Committee is responsible for determining compensation
for the executive officers of the Company and for administering the
Company's stock option plans. During 1996, eight meetings of the Board
of Directors, two meetings of the Audit Committee and four meetings of
the Compensation Committee were held. Each of the directors attended at
least 75 percent of the aggregate of the total number of Board meetings
and the meetings of the committees on which such director served during
fiscal 1996.
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Security Ownership of Management and Certain Other Beneficial Owners
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The table below sets forth certain information as of February 17,
1997, with respect to each person known by the Company to be the
beneficial owner of more than 5 percent of its outstanding shares of
common stock, each director, each Named Executive Officer (as
hereinafter defined), and all current executive officers and directors
as a group.
<TABLE>
<CAPTION>
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Beneficial Amount of
Name Ownership Percent (1)
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<S> <C> <C>
Michael J. Birck 19,911,711 (2)
Putnam Investments, Inc. 10,822,979 (3)
American Century Companies, Inc. 10,697,400 (4)
Charles C. Cooney 1,829,955 (5)
Peter A. Guglielmi 536,987 (6)
Brian J. Jackman 410,569 (7)
Richard T. Taylor 114,478 (8)
Frederick A. Krehbiel 111,000 (9)
William F. Souders 60,000 (10)
John D. Foulkes, Ph.D. 28,000 (11)
Thomas H. ("Tommy") Thompson 25,200 (12)
Stephanie Pace Marshall, Ph.D. 6,667 (13)
Jan H. Suwinski 500
All current executive officers 23,794,680 (14)
And directors as a group
(18 persons)
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</TABLE>
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(1) Based on __________ shares of common stock outstanding as of
February 17, 1997, and __________ shares which may be acquired
under stock options exercisable within 60 days of such date. All
figures reported herein reflect the effect of a 2-for-1 stock split
in the form of a stock dividend effective November 15, 1996.
(2) Includes 584,000 shares held by Mr. Birck's spouse. Mr. Birck
disclaims beneficial ownership of such shares. Also includes
12,500,000 shares held by Oak Street Investments, L.P., a limited
partnership of which Mr. Birck is a general partner. The address
of Mr. Birck is 4951 Indiana Avenue, Lisle, Illinois 60532.
(3) Putnam Investments, Inc., a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., has shared voting power with respect to
816,674 shares and shared dispositive power with respect to
10,822,979 shares. Putnam Investments, Inc. is the parent holding
company to two investment advisors: Putnam Investment Management,
Inc. which has shared dispositive power with respect to 9,431,829
shares and The Putnam Advisory Company, Inc. which has shared
voting power with respect to 816,674 shares and shared dispositive
power with respect to 1,391,150 shares. Marsh & McLennan
Companies, Inc. has no voting or dispositive power with respect to
the shares. The address of Putnam Investments, Inc. is One Post
Office Square, Boston, Massachusetts 02109.
(4) Each of American Century Companies, Inc. parent holding company,
American Century Investment Management, Inc., its wholly-owned
investment adviser and James E. Stowers, Jr., an individual that
controls American Century Companies, Inc. through his beneficial
ownership of its stock, has sole voting power with respect to
10,567,900 shares, shared voting power with respect to 129,500
shares and sole dispositive power with respect to 10,697,400
shares. The address of American Century Companies, Inc. is 4500
Main Street, PO. Box 418210, Kansas City, Missouri 64141-9210.
(5) Includes 1,614,572 shares held by Mr. Cooney as trustee of a trust
and 215,000 shares which Mr. Cooney has rights to acquire under
currently exercisable stock options.
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(6) Includes 470,500 shares which Mr. Guglielmi has rights to acquire
under currently exercisable stock options.
(7) Includes 370,000 shares which Mr. Jackman has rights to acquire
under currently exercisable stock options.
(8) Includes 110,000 shares which Mr. Taylor has rights to acquire
under currently exercisable stock options.
(9) Includes 24,000 shares which Mr. Krehbiel has rights to acquire
under currently exercisable stock options.
(10) Includes 48,000 shares which Mr. Souders has rights to acquire
under currently exercisable stock options.
(11) Includes 4,000 shares held by Mr. Foulkes as trustee of a trust for
the benefit of his minor grandchildren. Mr. Foulkes disclaims
beneficial ownership of such shares. Also includes 12,000 shares
which Mr. Foulkes has rights to acquire under currently exercisable
stock options.
(12) Includes 12,000 shares which Mr. Thompson has rights to acquire
under currently exercisable stock options.
(13) Includes 667 shares which Ms. Marshall has rights to acquire under
currently exercisable stock options.
(14) Includes 588,000 shares of which Messrs. Birck and Foulkes disclaim
beneficial ownership, as noted above. Also includes 1,793,430
shares which certain officers have rights to acquire under
currently exercisable stock options. Also includes 96,667 shares
which certain outside directors have rights to acquire under stock
options, as noted above.
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Executive Compensation
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The table below sets forth certain information for fiscal years
1996, 1995 and 1994 with respect to the annual and other compensation
paid by the Company to (i) the chief executive officer and (ii) the
other four executive officers of the Company who were most highly
compensated in fiscal 1996 (collectively, the "Named Executive
Officers") for services in all capacities to the Company and its
subsidiaries.
<TABLE>
<CAPTION>
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Summary Compensation Table
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Long Term
Compensation
Annual Compensation Awards
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Name Other Securities
and Annual Underlying All Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation(1) SARs #(2) sation(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Birck 1996 $366,700 $195,000 $11,031 0 $149,071
President ----
and Chief Executive Officer 1995 $341,354 $150,000 $18,621 0 $129,351
----
1994 $317,304 $165,000 $13,036 0 $110,429
Peter A. Guglielmi 1996 $252,347 $135,000 $8,010 40,000 $74,688
President, ----
Tellabs International, Inc. 1995 $234,808 $100,000 $12,797 40,000 $44,583
and Chief Financial Officer ----
1994 $220,385 $115,000 $8,463 0 $40,066
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Brian J. Jackman 1996 $252,347 $135,000 $11,138 40,000 $67,194
President, ----
Tellabs Operations, Inc. 1995 $234,808 $110,000 $13,519 40,000 $54,970
----
1994 $220,385 $115,000 $10,908 0 $48,414
Charles C. Cooney 1996 $167,839 $83,000 $5,683 20,000 $22,561
Vice President, ----
Sales and Service, 1995 $158,922 $65,000 $8,587 20,000 $22,561
Tellabs Operations, Inc. ----
1994 $153,462 $80,000 $5,370 0 $18,819
Richard T. Taylor 1996 $156,924 $76,000 $2,276 20,000 $24,659
Vice President and General Manager, ----
Digital Systems Division, 1995 $141,153 $60,000 $3,723 20,000 $20,512
Tellabs Operations, Inc. ----
1994 $128,308 $55,000 $4,677 0 $19,693
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</TABLE>
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1. Amounts of Other Annual Compensation are amounts paid as
reimbursement to the Named Executive Officers for taxes paid on
certain medical and life insurance benefits. All Other Compensation
for 1996 includes amounts accrued as preferential above-market
interest on deferred compensation, contributions to the deferred
compensation plan to provide benefits in excess of applicable tax
law limitations, premiums paid for life insurance policies owned by
the Named Executive Officers, matching contributions under the
Company's Profit Sharing and Savings Plan, and contributions under
the Company's Retirement Plan in the respective amounts of $42,813,
$16,354, $20,294, $4,500 and $6,000 for Mr. Birck; $48,870, $4,653,
$10,665, $4,500 and $6,000 for Mr. Guglielmi; $33,776, $9,088,
$13,830, $4,500 and $6,000 for Mr. Jackman; $0, $0, $12,061, $4,500
and $6,000 for Mr. Cooney; and $9,365, $0, $6,063, $3,956 and $5,275
for Mr. Taylor. All Other Compensation for 1996 for Mr. Birck also
includes $59,110, which represents the present value to Mr. Birck of
premiums paid by the Company with respect to a split dollar life
insurance arrangement between the Company and Mr. Birck. The
present value was calculated as an interest-free loan of the whole
life portion of the premium over the maturation of the policy. Mr.
Birck pays the term portion of the premium.
2. Figures for the year 1996 reflect the effect of the 2-for-1 stock
split in the form of a stock dividend effective November 15, 1996.
Figures for the year 1995 reflect the effect of the 2-for-1 stock
splits in the form of stock dividends effective November 15, 1996
and May 19, 1995.
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The table below sets forth certain information with respect to stock
options granted during fiscal 1996 to the Named Executive Officers under
the Company's employee stock option plans.
<TABLE>
<CAPTION>
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Option Grants in Last Fiscal Year
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Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants(1) Option Term(2)
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% of Total
Options/
SARs
Options Granted to Exercise or
Granted Employees Base Price Expiration
Name (#)(1) in Fiscal Year ($/Shares) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Birck 0 N/A N/A N/A N/A N/A
Peter A. Guglielmi 40,000 1.3% $28.625 7/22/06 $721,352 $1,820,552
Brian J. Jackman 40,000 1.3% $28.625 7/22/06 $721,352 $1,820,552
Charles C. Cooney 20,000 .6% $28.625 7/22/06 $360,676 $910,276
Richard T. Taylor 20,000 .6% $28.625 7/22/06 $360,676 $910,276
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</TABLE>
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1. All options reported were granted on July 22, 1996 (and have been
adjusted to reflect the effect of the 2-for-1 stock split in the
form of a stock dividend effective November 15, 1996) and become
exercisable in cumulative annual installments of 25% of the shares
covered thereby on each of the first, second, third and fourth
anniversaries of the grant date. No stock appreciation rights
(SARs) were granted to the Named Executive Officers during fiscal
1996.
2. The amounts set forth represent the value that would be received by
the Named Executive Officer upon exercise of the option on the date
before the expiration date of the option based upon assumed annual
growth rates in the market value of the Company's common stock of 5%
and 10%, rates prescribed by applicable Securities and Exchange
Commission rules. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Company's common
stock and other factors such as the general condition of the stock
markets and the timing of the exercise of the options. The Company
did not use an alternative formula for a potential realizable value
as the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or
volatile factors.
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The table below sets forth certain information with respect to
options and SARs exercised by the Named Executive Officers during fiscal
1996 and with respect to options and SARs held by the Named Executive
Officers at the end of fiscal 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End
Option/SAR Value
- ----------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#)(1) FY-End ($)(2)
Number of Securities
Underlying Options/ Value Realized
SARs Exercised (#)(1) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Birck 0 0 0 0 0 0
Peter A. Guglielmi 32,500 $2,223,437 510,500 110,000 $18,093,292 $2,293,125
Brian J. Jackman 40,000 $2,443,750 410,000 110,000 $14,231,027 $2,293,125
Charles C. Cooney 0 0 275,000 55,000 $9,643,113 $1,146,563
Richard T. Taylor 15,000 $918,750 110,000 55,000 $3,686,405 $1,146,563
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
1. All figures have been adjusted to reflect the effect of the 2-for-1
stock split in the form of a stock dividend effective November 15,
1996. The Named Executive Officers did not have any unexercised SARs
as of 1996 fiscal year end.
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2. The value of unexercised options at the end of fiscal 1996 is based
on the closing price of $37.625 reported on the Nasdaq National
Market System on December 31, 1996, the last trading day of fiscal
1996.
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Employment Agreements
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The Company has entered into Employment Agreements (the
"Agreements") with each of the Named Executive Officers. These
Agreements become effective upon the occurrence of a change in control
of the Company (as defined in the Agreements). The Agreements provide
for (i) an employment term of three years, in the event of a change in
control not approved in advance by the Board of Directors, or one year,
in the event of a change in control approved in advance by the Board of
Directors, in either case commencing on the date of the change in
control; and (ii) compensation, including annual salary, incentive
bonuses and employee benefits, no less favorable than those in effect on
such date. In addition, if an individual's employment is terminated
within such employment term, he will be entitled to receive (i) a lump
sum cash payment equal to the sum of salary payments for 36 months (or
12 months, if the change in control is approved in advance by the Board
of Directors) plus a pro rata share of the estimated amount of any
target bonus which would have been payable for the bonus period that
includes the termination date; (ii) an amount equal to 36 months (or 12
months, if the change in control is approved in advance by the Board of
Directors) of bonus at the greater of (A) the monthly rate of the
target bonus payment for the bonus period immediately prior to his
termination date, or (B) the estimated amount of the target bonus for
the period which includes his termination date; and, (iii) the value of
the incentive compensation, if any, to which he would have been entitled
had he remained in the employ of the Company for 36 calendar months (or
12 months, if the change in control is approved in advance by the Board
of Directors). In addition, the Company will be obligated to continue
to maintain the individual's employee benefits for such 36-month period
(or 12- month period, if the change in control is approved in advance by
the Board of Directors) and to pay to the individual the amount of any
excise taxes, together with the additional income tax related thereto,
imposed upon the payments and benefits provided under the Agreements.
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Director Compensation
- ------------------------------------------------------------------------
Each director who is not an officer of the Company was paid an
annual retainer of $15,000 plus a fee of $1,500 and expenses for each
Board of Directors meeting attended for membership and services during
1996. No fees are paid for attendance at Audit Committee and
Compensation Committee meetings.
The Company's 1987 Stock Option Plan for Non-Employee Corporate
Directors (the "1987 Plan") provides for the non-discretionary grant of
options to non-employee directors of the Company. The 1987 Plan provides
that each non-employee director, on the date such person becomes a non-
employee director, will be granted options to purchase 10,000 shares of
the Company's stock and, provided such person is still serving as a non-
employee director, automatically will be granted options to purchase
6,000 additional shares each year thereafter on the anniversary of the
last day of the month in which the initial options were granted. All
outstanding grants were adjusted to reflect the effect of the stock
split in the form of a stock dividend which became effective on November
15, 1996.
The options for the initial 10,000 shares become exercisable in
cumulative annual installments equal to one-third of the total number of
shares covered. Annual options granted on the anniversaries of the
initial grants become exercisable in full six months from the date of
grant.
Options granted under the 1987 Plan may not be assigned and, during
the lifetime of the director, may be exercised only by him or her. If a
director ceases to be a director of the Company for any reason other
than death or disability, the option may be exercised, subject to the
expiration date of the option, for three months after such termination,
but only to the extent it was exercisable on the date of termination.
If a directorship is terminated because of death or disability, the
option may be exercised subject to the expiration date of the option,
for up to one year after such termination, but only to the extent it was
exercisable on the date of death or disability.
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Section 16(a) Beneficial Ownership Reporting Compliance
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Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. During 1996, all such persons filed on a timely basis all
reports required by Section 16(a) during the most recent fiscal year,
however, one report filed on behalf of Mr. Krehbiel in 1995 was amended
in 1996 to include the first installment of a two-part gift made during
1995 which had been inadvertently omitted from the prior report.
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Compensation Committee Interlocks and Insider Participation
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All decisions regarding the compensation of the executive officers
were made by the Compensation Committee of the Board of Directors, which
is comprised entirely of non-employee, independent members of the Board
of Directors. Although Mr. Birck made recommendations to the Committee
with regard to the compensation of the other executive officers,
including the other Named Executive Officers, he did not participate in
the Committee's deliberations with respect to his own compensation.
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Compensation Committee Report on Executive Compensation
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The Compensation Committee of the Board of Directors has furnished
the following report on executive compensation:
The Compensation Committee follows a compensation philosophy that
utilizes as a significant determinant the financial performance of the
Company, along with the achievement of non-financial corporate
objectives and the individual performance of the executive officers. By
doing so, it is the belief of the Compensation Committee that the
Company's management will focus on meeting both financial and
non-financial corporate goals which, in turn, should enhance stockholder
value. The Company's compensation package for executive officers is a
combination of base annual compensation, in the form of salary and other
benefits, annual incentives in the form of fiscal year-end bonuses, and
long-term compensation consisting of options and SARs awarded under the
Company's stock option plans.
In determining base salaries for the executive officers, including
the Named Executive Officers, for 1996, the Compensation Committee
considered the performance of each executive officer and the Company
during the preceding fiscal year, such executive officer's salary
history and, to a lesser extent, market survey data for comparable
positions. Mr. Birck's 1996 base salary was set based upon a
consideration of the same factors.
The 1996 annual bonus plan was structured based upon a series of
financial and non-financial objectives. The financial objectives
applied to all executive officers. Primary and secondary responsibility
for each of the non-financial objectives were divided among the
executive officers, including the Named Executive Officers, based upon
their respective areas of responsibilities. Achievement of the
financial objectives was a prerequisite to the funding of a bonus pool.
If those financial objectives were met, each of the non-financial
objectives would be considered for the individual bonus amounts.
Individual performance and overachievement of the financial objectives
were considered in determining whether bonuses in excess of the target
would be granted.
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For 1996, individual pay-outs for executive officers, including the
Named Executive Officers, were targeted at 30 percent of annual salary
and were contingent on achievement of both the financial and
non-financial objectives. The financial objectives included targets for
revenue, gross margin, operating and net income, earnings per share and
number of inventory turns. The fourteen non-financial objectives
focused on specific program and product achievements for the various
divisions of the Company, budgetary and personnel objectives, the
completion of a values program and the consummation and integration of
acquired businesses.
During 1996, all of the financial objectives were exceeded, and, in
most cases, the non-financial objectives were achieved or significant
strides were made toward their accomplishment. Based upon these
successes, the Compensation Committee awarded bonuses in excess of 30
percent to each of the Named Executive Officers, including Mr. Birck.
The final piece of the compensation package for executive officers
is awards under the Company's stock option plans. In general, the
Company has used stock options and SARs as an integral part of its
compensation program for executive officers and for employees throughout
the Company with a view toward giving the executive officers and
employees a stake in the Company's future and compensation opportunities
directly aligned with the creation of stockholder value. The
Compensation Committee granted options to each of the executive
officers, including the Named Executive Officers other than Mr. Birck,
during fiscal 1996 in furtherance of this long-standing philosophy. The
number of options granted to each executive officer reflects the
Compensation Committee's assessment of the particular officer's level of
responsibility. In light of Mr. Birck's personal holdings of Company
stock, the award of options or SARs was not deemed necessary by the
Compensation Committee in order to provide the incentives fostered by
grants to the other executive officers.
The Compensation Committee has adopted guidelines to encourage
outright share ownership by the executive officers. Starting in 1997,
the Compensation Committee will consider whether each executive officer
has met those guidelines in deciding whether to grant additional stock
options to such officer.
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The Compensation Committee does not believe that the provisions of
Code Section 162(m) relating to the deductibility of compensation paid
to the Named Executive Officers will limit the deductibility of such
compensation expected to be paid by the Company. The Compensation
Committee will continue to evaluate the impact of such provisions and
take such actions as it deems appropriate.
March 14, 1997 John D. Foulkes, Ph.D.,
Stephanie Pace Marshall, Ph.D.,
William F. Souders and
Thomas H. Thompson
Members of the Compensation
Committee as of December 27, 1996.
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Performance Graph
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The graph below sets forth a comparison of the yearly percentage
change in the cumulative total stockholder return on the Company's
common stock against the cumulative total return of the Nasdaq/NMS
Market Index, a broad-based market index, and the Dow Jones
Communications Technology Group, a peer group of common stocks of 236
communications technology manufacturers, for the five-year period
beginning January 1, 1992.
<TABLE>
<CAPTION>
A FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON
STOCK PERFORMANCE IN DOLLARS
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Company 1991 1992 1993 1994 1995 1996
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<S> <C> <C> <C> <C> <C> <C>
Tellabs, Inc. 100 114.45 327.58 773.02 1,026.07 2,190.79
Peer Group Index 100 136.53 202.65 225.11 298.88 366.26
NASDAQ Market Index 100 100.98 121.13 127.17 164.96 200.89
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Assumes $100 invested on January 1, 1992, dividends reinvested,
fiscal year ending December 27, 1996
</TABLE>
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Amendment to the Restated Certificate of Incorporation
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By resolution adopted on January 23, 1997, the Board of Directors of
the Company proposed the adoption by the stockholders of an amendment to
the Restated Certificate of Incorporation of the Company pursuant to
which the number of authorized shares of common stock of the Company,
$.01 par value, would be increased from 200,000,000 shares to
500,000,000 shares, and the Board of Directors directed that the
proposed amendment be submitted to a vote by the stockholders at the
Annual Meeting of Stockholders.
If the stockholders approve the amendment as proposed by the Board
of Directors, the Restated Certificate of Incorporation of the Company
will be amended and the number of authorized shares of common stock will
be increased to 500,000,000. Pursuant to the proposed amendment, the
first paragraph of Article Fourth of the Restated Certificate of
Incorporation of the Company will be amended to read as follows:
"1. Authorized Capital Stock. The aggregate number of shares of
stock which the Corporation has authority to issue is
505,000,000 shares, of which 500,000,000 shall be shares of
common stock, $.01 par value per share (hereinafter "Common
Stock"), and of which 5,000,000 shares shall be shares of
preferred stock, $.01 par value per share (hereinafter
"Preferred Stock")."
Of the 200,000,000 currently authorized shares of common stock, as
of February 17, 1997, ________ shares were outstanding. As of December
27, 1996, 15,364,183 shares were reserved for issuance under the
Company's employee stock option plans. Of the 5,000,000 currently
authorized shares of preferred stock, as of February 17, 1997, none were
outstanding or reserved for issuance.
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The Board of Directors believes that the authorization of additional
shares of common stock will enable the Company to meet possible future
developments without the expense and delay of holding a meeting of
stockholders to secure their authorization when a specific need for the
shares may arise. In addition, the Board of Directors believes that it
is desirable that the Company have the flexibility to issue a
substantial number of shares of common stock without further stockholder
action, except as otherwise provided by law. The availability of
additional shares will enhance the Company's flexibility in connection
with possible future actions, such as stock dividends, stock splits,
financings, employee benefit programs, corporate mergers, acquisitions
of property, the possible funding of new product programs or businesses
or other corporate purposes. The Board of Directors will determine
whether, when and on what terms the issuance of shares of common stock
may be warranted in connection with any of the foregoing purposes.
The availability for issuance of additional shares of common stock
or rights to purchase such shares could enable the Board of Directors to
render more difficult or discourage an attempt to obtain control of the
Company. For example, the issuance of shares of common stock in a public
or private sale, merger or similar transaction would increase the number
of outstanding shares, thereby possibly diluting the interest of a party
attempting to obtain control of the Company. The Company is not aware
of any pending or threatened efforts to obtain control of the Company
and the Board of Directors has no present intent to authorize the
issuance of additional shares of common stock to discourage such
efforts.
If the proposed amendment is approved, all or any of the authorized
shares of common stock or preferred stock may be issued without further
action by the stockholders and without first offering such shares to the
stockholders for subscription. The issuance of common stock otherwise
than on a pro rata basis to all current stockholders could have the
effect of diluting the earnings per share, book value per share and
voting power of current stockholders.
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Approval by Stockholders
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The affirmative vote of a majority of the outstanding shares of
common stock of the Company entitled to vote at the Annual Meeting of
Stockholders is required for approval of the proposed amendment. If the
proposed amendment is adopted by the stockholders, it will become
effective upon filing and recording a Certificate of Amendment as
required by the General Corporation Law of Delaware.
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Approval of the Amendment
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The Board of Directors recommends a vote for approval of the
proposed amendment to the Restated Certificate of Incorporation. Unless
otherwise instructed by the stockholder, it is intended that the shares
represented by the enclosed proxy will be voted for the amendment.
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Selection of Auditors
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Grant Thornton LLP, independent public accountants, performed the
audit for the Company in fiscal year 1996 as it has done for prior
years. A representative of Grant Thornton LLP is expected to be present
at the meeting to answer appropriate questions and if the representative
so desires, to make a statement.
On August 15, 1996, the Company determined to change its independent
accountants for fiscal 1997 by dismissing its current independent
accountants, Grant Thornton LLP. Such determination was considered and
approved by the Company's Audit Committee.
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The Company and Grant Thornton LLP have had no disagreements during
the two most recent fiscal years on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or
procedure. The Company received a letter from Grant Thornton LLP
concurring with the above statements.
The Company has selected Ernst & Young LLP as the Company's
independent accountants for fiscal year 1997. A representative of Ernst
& Young LLP is expected to be present at the meeting to answer
appropriate questions and if the representative so desires, to make a
statement.
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Other Matters
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Management knows of no other matters which will be brought before
the meeting, but if such matters are properly presented, the proxies
solicited hereby will be voted in accordance with the judgment of the
persons holding such proxies.
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Cost of Solicitation
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This proxy is solicited by the Board of Directors, and the cost of
solicitation will be paid by the Company. Additional solicitation may be
made by mail, personal interview, telephone and/or facsimile by Company
personnel, who will not be additionally compensated therefor. The cost
of any such additional solicitation will be borne by the Company.
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Stockholder Proposals
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For inclusion in the Company's proxy statement and form of proxy
with respect to the 1998 Annual Meeting of Stockholders, any proposals
of stockholders must be received by the Secretary of the Company no
later than November 14, 1997.
To nominate one or more directors for consideration at the 1998
Annual Meeting of Stockholders, a stockholder must provide notice of the
intent to make such nomination or nominations by personal delivery or by
mail to the Secretary of the Company no later than November 14, 1997.
The Company's bylaws set specific requirements which such written notice
must satisfy. Copies of those requirements will be sent to any
stockholder upon written request.
By Order of the Board of Directors,
Carol Coghlan Gavin
Secretary
March 14, 1997
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APPENDIX
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Appendix 1. Proxy Card
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Appendix 1
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PROXY
4951 Indiana Avenue, Lisle, Illinois 60532
This Proxy is Solicited By the Board of Directors
The undersigned stockholder(s) of Tellabs, Inc., a Delaware
corporation, does (do) hereby constitute and appoint Michael J. Birck
and Carol Coghlan Gavin, and each of them, the true and lawful
attorney(s) of the undersigned with full power of substitution, to
appear and act as the proxy or proxies of the undersigned at the Annual
Meeting of Stockholders of said corporation to be held at the Holiday
Inn Naperville, 1801 Naper Boulevard, Naperville, Illinois 60563, on
Wednesday, April 16, 1997, at 3:00 p.m., and at any adjournment thereof,
and to vote all the shares of said corporation standing in the name of
the undersigned, or which the undersigned may be entitled to vote, as
fully as the undersigned might or could do if personally present, as set
forth herein.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). If no direction is
made, this proxy will be voted FOR the election of directors and FOR the
approval of the amendment to the Tellabs, Inc. Restated Certificate of
Incorporation to increase the authorized shares of common stock from
200,000,000 to 500,000,000
(Please mark this proxy, date and sign it on the reverse side hereof and
return it in the enclosed envelope.)
(Continued and to be signed on the reverse side)
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<TABLE>
<CAPTION>
PLEASE MARK VOTE IN SQUARE IN THE FOLLOWING MANNER
USING DARK INK ONLY. (X)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE LISTED PROPOSALS.
<S> <C> <C> <C> <C>
1. Election of three directors-- FOR WITHHELD FOR ALL Except the following Nominee(s)
Nominees: John D. Foulkes, Ph.D., ( ) ( ) ( ) ___________________________________
Peter A. Guglielmi and Jan H. Suwinski
2. Approval of the amendment to the FOR WITHHELD ABSTAIN
Tellabs, Inc. Restated Certificate ( ) ( ) ( )
of Incorporation to increase the
authorized shares of common stock
from 200,000,000 to 500,000,000
</TABLE>
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting.
Please sign name exactly as imprinted (do not print). Please indicate
any change in address.
NOTE: Executors, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which
they sign. If shares are held jointly, EACH stockholder should
sign.
Dated: ______________, 1997
________________________________________________________
________________________________________________________
Signature of stockholder(s)
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY.
