<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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 Rule 14a-11(c) or Rule 14a-12
General DataComm Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
General DataComm Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
GENERAL DATACOMM INDUSTRIES, INC.
MIDDLEBURY, CONNECTICUT 06762-1299
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 6, 1997
------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
GENERAL DATACOMM INDUSTRIES, INC. (the "Corporation") will be held at the
Corporate offices of The Chase Manhattan Bank, 11th Floor, 270 Park Avenue, New
York, New York, on Thursday, February 6, 1997 at 4:00 P.M. for the following
purposes:
1. To elect two directors to serve for a term of three years and until
their successors are elected.
2. To consider and take action upon a proposal to adopt an amendment to the
199l Stock Option Plan by which an additional 925,000 shares of the
Corporation's Common Stock, $.10 par value, will be reserved for
issuance thereunder.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on December 10, 1996 has been fixed as the record
date for the determination of the stockholders entitled to receive notice of and
to vote at the Meeting.
By Order of the Board of Directors
HOWARD S. MODLIN,
Secretary
Dated: December 10, 1996
- --------------------------------------------------------------------------------
IMPORTANT: THE MANAGEMENT INVITES YOU TO ATTEND THE MEETING IN PERSON, BUT
IF YOU ARE UNABLE TO BE PRESENT, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN THE
ENCLOSED ENVELOPE AND IS MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE> 3
GENERAL DATACOMM INDUSTRIES, INC.
MIDDLEBURY, CONNECTICUT 06762-1299
------------------------
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
Board of Directors of General DataComm Industries, Inc. (the "Corporation") of
proxies in the accompanying form to be used at the Annual Meeting of the
Stockholders of the Corporation to be held on Thursday, February 6, 1997 and at
all adjournments thereof, for the purposes set forth in the accompanying notice
of the meeting. It is intended that this statement and the proxies solicited
hereby be mailed to stockholders on December 23, 1996. A stockholder who shall
sign and return a proxy in the form enclosed with this statement has the power
to revoke it any time before it is exercised by giving written notice to the
Corporation, Attention: Secretary, to such effect. A stockholder attending the
meeting in person may make his or her own nomination from the floor when the
election of directors is considered. Proxies properly executed and received in
time for the meeting will be voted.
The close of business on December 10, 1996 has been fixed as the record
date for the determination of the stockholders entitled to receive notice of and
to vote at the meeting. There were outstanding as of the close of business on
December 10, 1996 and entitled to be voted at the meeting, 18,852,558 shares of
Common Stock and 2,137,443 shares of Class B Stock. All of said shares are
entitled to one (l) vote on all matters voted on at the Annual Meeting, voting
as a single class. The holders of Class B Stock are entitled to ten (10) votes
per share in any election of directors if more than 15% of the shares of Common
Stock outstanding on the record date are owned beneficially by a person or a
group of persons acting in concert, or if a nomination for the Board of
Directors is made by a person or group of persons acting in concert (other than
the Board) provided such nomination is not made by one (l) or more holders of
Class B Stock, acting in concert with each other, who beneficially own more than
15% of the shares of Class B Stock outstanding on such record date. The Board of
Directors is not presently aware of any circumstance that would give holders of
Class B Stock the right to ten (10) votes per share for the election of
directors at the Annual Meeting.
The affirmative vote, in person or by proxy, of the holders of a majority
of the shares of Common Stock and Class B Stock voted, together as a single
class, is required to elect two (2) directors. The affirmative vote, in person
or by proxy, of the holders of a majority of the outstanding shares of Common
Stock and Class B Stock, together as a single class, is required to authorize
the amendment to the 199l Stock Option Plan authorizing an additional 925,000
shares.
The proxies in the accompanying form will be voted in favor of all of the
proposals set forth in the Notice of Annual Meeting. If any other specification
is made by a stockholder in the proxy, it will be voted as specified. In the
discretion of the proxy-holders, the proxies will also be voted for or against
such other matters as may properly come before the meeting. The Board of
Directors is not aware that any other matters are to be presented for action at
the meeting.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of December 10, 1996 with
respect to the beneficial ownership of the Corporation's Class B Stock and
Common Stock by all persons known by the Corporation to own more than 5% of the
Corporation's outstanding Class B Stock or Common Stock who are deemed to be
such beneficial owners of the Corporation's Class B Stock or Common Stock under
Rule 13d-3. Class B Stock is convertible into Common Stock at any time on a
share-for-share basis.
<TABLE>
<CAPTION>
PERCENT
TITLE NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF ALL
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS CLASSES
- ------------------- ----------------------------------- ----------------------- -------- --------
<S> <C> <C> <C> <C>
Class B Stock $.10 Charles P. Johnson 1,434,462* 67.1%* 8.1%*
par value General DataComm Industries, Inc.
Middlebury, CT 06762-1299
James R. Arcara 428,515** 20.0** 2.9**
General DataComm Industries, Inc.
Middlebury, CT 06762-1299
Common Stock $.10 Connor, Clark & Company, Ltd. 1,220,736*** 6.5*** 5.8***
par value 40 King Street West
Toronto, Ontario M5H 3Y2
Travelers Group, Inc. 2,260,010**** 12.0**** 10.8****
Smith Barney Holdings, Inc.
Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
</TABLE>
- ---------------
* The amount and percent of Class B Stock and percent of all classes do not
include 8,643 shares of Class B Stock or 10,857 shares of Common Stock
owned by trusts or in custody for the benefit of Mr. Johnson's daughter, or
l,250 shares of Class B Stock owned by his wife, the beneficial ownership
of which he disclaims. The percent of all classes includes 4,976 shares of
Common Stock owned by Mr. Johnson, 25,302 shares of Common Stock held in
the Corporation's 401(k) Stock Fund as of December 10, 1996, 222,657 shares
of Common Stock which Mr. Johnson could acquire by the exercise of stock
options within sixty (60) days following December 10, 1996 and 36,630
shares of Common Stock issuable upon conversion of the Corporation's 9%
Convertible Exchangeable Preferred Stock ("Preferred Stock").
** The amount and percent of Class B Stock and percent of all classes include
98,299 shares owned directly by Mr. Arcara and 330,216 shares, or 15.4% of
the outstanding Class B shares, held by Mr. Arcara as trustee under various
trusts for the benefit of the family of Mr. Johnson (318,016 shares) and as
trustee under an insurance trust for the benefit of Mr. Johnson (12,200
shares). Mr. Arcara has the sole power to vote and/or dispose of the shares
held as trustee. He disclaims beneficial ownership of these 330,216 shares.
In addition, the percent of all classes includes 83,145 shares of Common
Stock owned directly by Mr. Arcara with his wife, 21,256 shares of Common
Stock held in the Corporation's 401(k) Stock Fund, 57,928 shares of Common
Stock held by Mr. Arcara as trustee under various trusts for the benefit of
Mr. Johnson's children for which he disclaims beneficial ownership and
22,500 shares of Common Stock which Mr. Arcara could acquire by the
exercise of stock options within sixty (60) days following December 10,
1996.
*** Based on telephonic advice, Connor, Clark & Company Ltd. is an
institutional investment manager which has sole voting authority on the
above shares held in numerous accounts which it manages, none of which
individually holds more than 5% of the outstanding Common Stock. The number
of shares reported is as of December 10, 1996 and includes 65,75l shares of
Common Stock issuable upon conversion of the Corporation's Preferred Stock
owned by Connor, Clark & Company Ltd.
**** Based on Schedule 13G, Amendment No. 2, dated July 9, 1996 and telephonic
advice, Travelers Group Inc. ("Travelers"), a parent holding company, Smith
Barney Holdings Inc. ("SBH"), a corporation, and Smith Barney Inc., a
registered broker-dealer, share investment discretion and voting authority
on certain of the shares of Common Stock held in their accounts. Travelers,
which is deemed to own 2,260,010 shares (including the 2,115,010 shares
held by SBH and Smith Barney Inc.), is the sole common stockholder of SBH
which is deemed to own 2,115,010 shares (including the 1,719,710 shares
held by Smith Barney Inc.), and SBH is the sole common stockholder of Smith
Barney Inc. which owns 1,719,710 shares. The number of shares reported is
as of June 30, 1996.
2
<PAGE> 5
ITEM 1. ELECTION OF DIRECTORS
The nominees, Messrs. Lee M. Paschall and John L. Segall, were elected
directors of the Corporation at the 1994 and 1995 meetings of stockholders for a
three (3) year term and two (2) year term, respectively. Set forth opposite the
name of each nominee and each director whose term continues past the meeting is
his principal occupation for the past five (5) years, the name and principal
business of any corporation or other organization in which such employment is
carried on, other business directorships held, his age and the year in which the
term of office for which he is a nominee or the term of such office will expire.
Management has no reason to believe that the nominees are not available or
will not serve if elected, but if any nominee should become unavailable to serve
as a director, full discretion is reserved to the persons named as proxies to
vote for such other person as may be nominated.
<TABLE>
<CAPTION>
POSITION WITH THE CORPORATION, BECAME A TERM
NAME PRINCIPAL OCCUPATION AND AGE DIRECTOR EXPIRES
- ------------------------------------ ----------------------------------- -------- -------
<S> <C> <C> <C>
Charles P. Johnson.................. Chairman of the Board of Directors 1969 1998
and Chief Executive Officer; 69
Howard S. Modlin.................... Secretary of the Corporation and 1969 1998
member of the law firm of Weisman
Celler Spett & Modlin, P.C.;
Director of Fedders Corporation and
Trans-Lux Corporation; 65
Frederick R. Cronin................. Vice President, Corporate 1981 1999
Technology; 65
Lee M. Paschall..................... Consultant; former Chairman, 1981 2000
President of American Satellite
Company, 1981 to 1985;
Telecommunications Consultant
between August 1978 and August
1981. Previous thereto, he was a
Lieutenant General, United States
Air Force; Director of Radiation
Systems, Inc.; 74
John L. Segall...................... Consultant; Vice Chairman of GTE 1994 2000
199l-1994; Vice Chairman of Contel
Corp. 1989-199l; Director of Perot
Systems and Norwalk Savings
Society; 70
</TABLE>
3
<PAGE> 6
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
Each nominee, each director whose term continues past the meeting and each
executive officer listed in the Summary Compensation Table (on page 6) have
advised the Corporation that, as of December 10, 1996, he owned beneficially,
directly or indirectly, securities of the Corporation in the amounts set forth
opposite his name.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON PERCENT CLASS B PERCENT PERCENT OF
NAME STOCK OWNED OF CLASS STOCK OWNED(1) OF CLASS ALL CLASSES
- ---------------------------------- ----------- -------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Charles P. Johnson................ 289,565(2) 1.5% 1,434,462(2) 67.1% 8.1%
Howard S. Modlin.................. l,666(3) -- 6,750(3) 0.3% --
Frederick R. Cronin............... 86,199(4) 0.5% 25,000(4) 1.2% 0.5%
Lee M. Paschall................... 7,666(5) -- 5,770 0.3% 0.1%
John L. Segall.................... 2,666(6) -- -- -- --
Ross A. Belson.................... 149,277(7) 0.8% -- -- 0.7%
William S. Lawrence............... 107,303(8) 0.6% 36,558 1.7% 0.7%
James R. Arcara................... 184,829(9) l.0% 428,515(9) 20.0% 2.9%
V. Jay Damiano.................... 39,078(10) 0.2% -- -- 0.2%
Directors and Officers
as a group (15 individuals
including the above)............ 1,04l,526(11) 5.3% 1,959,055(11) 91.7% 13.9%
</TABLE>
- ---------------
(1) The Class B Stock is convertible into Common Stock at any time on a
share-for-share basis.
(2) Includes 222,657 shares of Common Stock which Mr. Johnson could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996, 25,302 shares of Common Stock held in the Corporation's 40l(k) Stock
Fund as of December 10, 1996 and 36,630 shares issuable upon conversion of
the Corporation's Preferred Stock shares held by him. Does not include
8,643 shares of Class B Stock, 10,857 shares of Common Stock owned by
trusts or in custody for the benefit of his daughter, nor 1,250 shares of
Class B Stock owned by his wife, the beneficial ownership of which he
disclaims.
(3) Includes l,666 shares of Common Stock which Mr. Modlin could acquire by the
exercise of stock options within sixty (60) days following December 10,
1996. Does not include 31,400 shares of Class B Stock nor 112,000 shares of
Common Stock owned directly by members of his immediate family, the
beneficial ownership of which Mr. Modlin disclaims.
(4) Includes 67,754 shares of Common Stock which Mr. Cronin could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996 and 2,363 shares of Common Stock held in the Corporation's 40l(k)
Stock Fund as of December 10, 1996. Does not include 15,900 shares of Class
B Stock owned directly by members of his immediate family, the beneficial
ownership of which he disclaims.
(5) Includes l,666 shares of Common Stock which Mr. Paschall could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996.
(6) Includes l,666 shares of Common Stock which Mr. Segall could acquire by the
exercise of stock options within sixty (60) days following December 10,
1996.
(7) Includes 123,977 shares of Common Stock which Mr. Belson could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996.
(8) Includes 87,776 shares of Common Stock which Mr. Lawrence could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996 and 18,127 shares of Common Stock held in the Corporation's 401(k)
Stock Fund as of December 10, 1996. Does not include 860 shares of Common
Stock owned by his wife, the beneficial ownership of which he disclaims.
(9) Includes 22,500 shares of Common Stock which Mr. Arcara could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996, 21,256 shares of Common Stock held in
4
<PAGE> 7
the Corporation's 401(k) Stock Fund as of December 10, 1996, 57,928 shares
of Common Stock held by Mr. Arcara as trustee under various trusts for the
benefit of Mr. Johnson's children (for which he disclaims beneficial
ownership) and 330,216 shares of Class B Stock held by Mr. Arcara as
trustee under various trusts for the benefit of the family of Mr. Johnson
(318,016 shares) and as trustee under an insurance trust for the benefit of
Mr. Johnson (12,200 shares). Mr. Arcara has the sole power to vote and/or
dispose of the shares as trustee, and he disclaims beneficial ownership of
these 330,216 shares.
(10) Includes 34,131 shares of Common Stock which Mr. Damiano could acquire by
the exercise of stock options within sixty (60) days following December 10,
1996 and 39l shares of Common Stock held in the Corporation's 40l(k) Stock
Fund as of December 10, 1996.
(11) Includes 633,551 shares of Common Stock which persons in the group have the
right to acquire by the exercise of stock options within sixty (60) days
following December 10, 1996, 75,082 shares of Common Stock held in the
Corporation's 401(k) Stock Fund as of December 10, 1996, 318,016 shares of
Class B Stock and 57,928 shares of Common Stock held by Mr. Arcara, Vice
President, Corporate Operations, as trustee under various trusts for the
benefit of Mr. Johnson's family, 12,200 shares of Class B Stock held by Mr.
Arcara as trustee under an insurance trust for the benefit of Mr. Johnson
and 36,630 shares of Common Stock issuable upon conversion of the
Corporation's Preferred Stock shares owned by Mr. Johnson. Does not include
61,917 shares of Class B Stock and 124,217 shares of Common Stock owned
directly by members of the directors' and officers' immediate families, the
beneficial ownership of which they disclaim.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS WITH MANAGEMENT
The following Summary Compensation Table sets forth the compensation paid
or awarded for the fiscal years ended September 30, 1996, 1995 and 1994 to the
Corporation's five (5) most highly compensated executive officers whose
compensation for the fiscal year ended September 30, 1996 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
-------------------------- ALL OTHER
NAME AND SALARY BONUS OPTIONS (#) OTHER COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) GRANTED ($) ($)(2)
- ---------------------------------- ----- -------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles P. Johnson................ 1996 498,658 135,000 90,000 16,868 58,520
Chairman of the Board of 1995 487,918 100,000 -- 15,756 58,520
Directors and Chief 1994 476,410 100,000 66,450 13,189 61,076
Executive Officer
Ross A. Belson.................... 1996 264,290 75,000 42,500 8,237 2,250
President and Chief 1995 257,575 55,000 -- 8,306 2,250
Operating Officer 1994 248,562 75,000 30,000 6,885 4,806
William S. Lawrence............... 1996 186,498 25,800 25,000 9,501 2,250
Senior Vice President 1995 182,471 19,000 -- 9,730 2,250
Finance and Chief 1994 178,136 34,000 15,000 7,879 4,121
Financial Officer
James R. Arcara................... 1996 154,584 16,125 15,000 13,843 2,250
Vice President 1995 151,361 11,875 -- 13,498 2,250
Corporate Operations 1994 148,101 23,750 10,000 12,374 2,788
V. Jay Damiano,................... 1996 149,596 55,737 20,000 6,767 2,250
Senior Vice President 1995 120,138 59,762 -- 5,299 2,250
U.S. Sales 1994 114,055 62,250 11,000 1,486 3,425
</TABLE>
- ---------------
(1) There are no restricted stock awards, stock appreciation rights or deferred
long-term incentive payouts.
(2) The Corporation's Board of Directors has approved the continued employment
of Mr. Charles P. Johnson to at least age 70. The Corporation is paying the
annual premium on a $1,000,000 life insurance policy on Mr. Johnson's life
at an approximate annual cost of $56,300, included in all other
compensation, so long as Mr. Johnson is an employee of the Corporation. Mr.
Johnson's designee is the owner of said policy. The balance of Mr. Johnson's
all other compensation and amounts reported for the other executives reflect
the Corporation's contributions under its 40l(k) plan.
In November 1995, the Corporation's principal bank lender issued a $200,000
letter of credit in favor of Mr. Johnson to secure Mr. Johnson's obligations to
make certain repairs in connection with construction of a new home. Mr. Johnson
reimbursed the Corporation for the $1,500 cost of the letter of credit and such
letter of credit expired without liability to the Corporation.
During the fiscal year ended September 30, 1996, $640,000 in fees, an
amount which the Corporation believes is fair, was paid to the law firm of which
Howard S. Modlin is a member.
BOARD COMPENSATION COMMITTEE REPORT
All matters concerning executive compensation for the Chief Executive
Officer and other executive officers are considered by the Corporation's entire
Board of Directors since there is no separate Compensation Committee. The salary
levels are intended to be consistent with competitive practice and level of
performance. In determining the total compensation to be paid to the Chief
Executive Officer and all other executive officers, the Board considers
management's recommendation based upon past salary levels, industry surveys,
experience, capability, normal salary increase levels in past years, and the
Corporation's and respective individual's performances during the last fiscal
year. The Chief Executive Officer's compensation and bonus are based upon the
above factors and include three-quarters (3/4) of one-percent (l%) of the
Corporation's pretax earnings, but in no event shall the Chief Executive
Officer's annual bonus be less than $100,000.
6
<PAGE> 9
LOANS
During fiscal 1996, the Corporation granted an unsecured loan to Mr.
William S. Lawrence, Senior Vice President, Finance and Chief Financial Officer
of the Corporation, in the amount of $85,000 at an 8.13% rate of interest. The
loan, which was payable on demand, was repaid in its entirety, including
interest, in October 1996. In October 1996, the Corporation granted an unsecured
loan to Mr. Dennis J. Nesler, Vice President and Treasurer of the Corporation,
in the amount of $68,200 at an 8.24% rate of interest. The loan is payable on
demand and remained outstanding at December 10, 1996. Both loans were for the
personal needs of the respective executive officers.
STOCK OPTION PLANS
Under the terms of the Corporation's Stock Option Plans, the Corporation
has reserved a total of 3,603,267 shares of Common Stock as of December 10,
1996, including the 925,000 shares authorized by the Board of Directors in April
1996 to be approved by the stockholders at the Annual Meeting in 1997. Officers
and key employees selected by the Chairman of the Board or the Stock Option
Committee, as the case may be, may be granted incentive stock options at an
exercise price equal to or greater than the market price per share on the date
of grant and non-incentive stock options at an exercise price equal to, greater
than or less than the market price per share on the date of grant. Once granted,
options become exercisable in whole or in part after the first year and expire
within ten (10) years. The Chairman of the Board or the Stock Option Committee,
as the case may be, determines the number of stock options to be granted to any
person, subject to the limitations on incentive stock options in Section 422 of
the Internal Revenue Code of 1986. There are no stock appreciation rights under
the Stock Option Plans.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
The following table is a summary of all stock options granted pursuant to
the Corporation's Stock Option Plans during the period October 1, 1995 through
September 30, 1996. There are no stock appreciation rights under the Plans. In
addition, the table shows the potential gain that could be realized if the fair
market value of the Corporation's Common Stock were to appreciate at a 5% or 10%
annual rate over the ten (10) year period of the option term.
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT
OPTIONS EXERCISE ASSUMED ANNUAL RATES
GRANTED TO OR BASE OF STOCK APPRECIATION
EMPLOYEES PRICE FOR OPTION TERM
OPTIONS(#) IN LAST PER EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---------------------- ---------- ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles P. Johnson.... 90,000 7.4% $12.3125 10/9/05 $696,653 $1,765,315
Ross A. Belson........ 42,500 3.5% 12.3125 10/9/05 328,975 833,621
William S. Lawrence... 25,000 2.1% 12.3125 10/9/05 193,515 490,365
James R. Arcara....... 15,000 1.2% 12.3125 10/9/05 116,109 294,219
V. Jay Damiano........ 20,000 1.6% 12.3125 10/9/05 154,812 392,292
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION TABLES
The following table sets forth number of shares acquired on exercise during
the fiscal year ended September 30, 1996 by the five highest compensated
executive officers, the value realized on exercise, the number of unexercised
options at September 30, 1996 and the value of unexercised in-the-money options
at September 30, 1996.
7
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY END FY END
NUMBER OF SHARES ------------------ ------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ---------------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C>
Charles P. Johnson........... 154,000 $2,213,400 156,207/196,450 $1,092,477/292,200
Ross A. Belson............... -- -- 101,477/112,500 747,420/305,000
William S. Lawrence.......... -- -- 87,776/ 40,000 655,714/ --
James R. Arcara.............. -- -- 20,000/ 35,000 150,200/ 71,250
V. Jay Damiano............... -- -- 26,931/ 36,000 160,177/ 35,250
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
The Corporation's 1979 Employee Stock Purchase Plan (the "Purchase Plan")
was approved by the stockholders in February 1980. A total of 265,704 shares of
Common Stock, after giving effect to stock splits in February and November, 1980
and May 1984, was originally reserved for issuance under the Purchase Plan. The
following amendments were authorized by the Board and approved by the
stockholders at previous meetings: an additional 2,360,000 shares, after
adjustment for the 1984 stock split, were added to the Purchase Plan; the
termination date of the Purchase Plan was extended to 200l; the minimum term of
employment for employees eligible for participation in the Purchase Plan was
reduced from six (6) months to 9l days; and participating employees were
required to end their participation at least two (2) business days instead of
one (l) prior to the end of any six (6) month period in which payroll amounts
are deducted for participants ("Payment Period"). On November l, 1990, the Board
amended the Purchase Plan to provide that: (i) if 85% of the average market
price per share of the Common Stock is less than the book value per share at the
beginning of a Payment Period, the Purchase Plan is suspended; (ii) if 85% of
the average market price per share at the end of a Payment Period is less than
the book value per share, the payroll deductions are refunded; and (iii) if 85%
of the average market price per share at the beginning of a Payment Period is
less than the book value per share at the end thereof, the purchase price is the
book value per share. Accordingly, the Purchase Plan was suspended in November
1990 as 85% of the average market price per share was less than the book value
per share. The Board can reinstate the Purchase Plan at any time that 85% of the
average market price per share exceeds the book value per share and the Payment
Period's starting and ending dates would be adjusted accordingly. The Plan was
reinstated March 1, 1992 and again suspended when market price per share fell
below book value per share. The Purchase Plan was again reinstated on March 1,
1993 and is currently in effect.
The following table sets forth information as to executive officers of the
Corporation as a group and all other employees who participated in the Purchase
Plan during the period October 1, 1995 through September 30, 1996:
<TABLE>
<CAPTION>
NUMBER AGGREGATE AVERAGE
NAME OF INDIVIDUAL OF SHARES PURCHASE PRICE PER
OR IDENTITY OF GROUP PURCHASED PRICE SHARE
--------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
All executive officers (4 persons in the Purchase
Plan)............................................ 6,232 $ 60,937 $9.78
All other employees (370 persons).................. 152,021 $1,468,640 $9.66
</TABLE>
EMPLOYEE RETIREMENT SAVINGS AND DEFERRED PROFIT SHARING PLAN
Under the retirement savings provisions of the Corporation's Employee
Retirement Savings and Deferred Profit Sharing Plan (the "Plan"), established
under Section 401(k) of the Code in fiscal 1987, U.S. employees are generally
eligible to contribute to the Plan after three (3) months of continuous service
in amounts determined by the Plan. The Corporation contributes an additional 50%
of the employee contribution up to certain limits not to currently exceed 1 1/2%
of total eligible compensation and 2% effective January 1, 1997. Employees
become fully vested in the Corporation's contributions after three (3) years of
continuous service, death, disability or upon reaching age 65. The Plan year for
the Retirement Savings 401(k) portion of
8
<PAGE> 11
the Plan coincides with the calendar year, and the Corporation's contribution is
paid in the following calendar year if the participant was employed on December
31 of the Plan year.
The deferred profit sharing provisions of the Plan include retirement and
other related benefits for substantially all of the Corporation's full-time
employees. Contributions under the Plan are funded annually and are based, at a
minimum, upon a formula measuring profitability in relation to revenues.
Additional amounts may be contributed at the discretion of the Corporation.
Contributions to the Plan are allocated to each participant based upon
individual earnings in proportion to the earnings of all participants. There
were no contributions made for deferred profit sharing in fiscal 1996.
The Corporation's contributions to the Retirement Savings 401(k) portion of
the Plan for calendar 1995, paid for in 1996, amounted to $827,657 for all
participants, including the $2,250 on behalf of each of the named officers in
the Summary Compensation Table.
FIVE YEAR CORPORATE PERFORMANCE GRAPH
The following graph compares the Corporation's total stockholder return
over the five (5) fiscal years ended September 30, 1996 with the total return on
the Standard & Poors 500 Stock Index ("S&P 500") and an industry peer group
("Peer Group") based upon the Value Line Computers & Peripherals Industry in
which the Corporation is included. The stockholder return shown on the graph is
not intended to be indicative of future performance of the Corporation's Common
Stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
GENERAL DATACOMM INDUSTRIES, INC., STANDARD & POORS 500 AND VALUE LINE
COMPUTER-PERIPHERAL INDEX
(PERFORMANCE RESULTS THROUGH 9/30/96)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) GDC S&P 500 COMPUTER-PERIPH.
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 133.33 111.20 91.73
1993 414.29 125.68 81.28
1994 1076.19 130.62 110.63
1995 561.90 169.56 170.90
1996 428.57 201.70 219.65
</TABLE>
Assumes $100 invested, at the close of trading on September 30, 1991, in General
DataComm Industries, Inc. Common Stock, Standard & Poors 500, and the Value Line
Computers & Peripherals Industry.
* Cumulative total return assumes reinvestment of dividends.
9
<PAGE> 12
ITEM 2. PROPOSED AMENDMENT TO THE 1991 STOCK OPTION PLAN
The 1991 Stock Option Plan (the "1991 Plan") was approved by the
stockholders at the April 2, 1992 Annual Meeting. It is intended to provide an
incentive to key employees, including officers and directors, who are employees
of the Corporation and its subsidiaries, and to offer an inducement in obtaining
the services of key personnel. The 1991 Plan is in addition to the Corporation's
existing 198l and 1984 Incentive Stock Option Plans, the 1979 Stock Option Plan,
the 1979 Employee Stock Purchase Plan and the 1983 and 1985 Stock Option Plans.
No further options may be granted under the 198l and 1984 Incentive Stock Option
Plans and the 1979, 1983 and 1985 Stock Option Plans. The Board of Directors has
previously authorized amendments to all such stock option plans to permit
payment to be made by delivery of shares of the Corporation's Common Stock
valued at the market price for such shares at the time of exercise, to conform
such plans to changes in the Tax Reform Act of 1986 and to conform such plans to
comply with Rule 16b-3 under the Securities Exchange Act of 1934.
Options granted under the 1991 Plan may be either "incentive stock options"
within the meaning of Section 422A of the Code as amended or nonstatutory
options. The 1991 Plan is not qualified under Section 401(a) of the Code and is
not subject to the Employee Retirement Income Security Act of 1974.
SUMMARY OF THE PLAN
The basic provisions of the 1991 Plan are as follows:
l. Six hundred twenty-five thousand (625,000) shares of the Common Stock,
$.10 par value, of the Corporation were originally authorized for issuance under
the Plan, and an additional aggregate of one million seven hundred seventy-five
thousand (1,775,000) shares were approved by the stockholders at the 1993, 1994
and 1995 Annual Meetings. An additional 925,000 shares are to be approved at the
1997 Annual Meeting. Of such 3,325,000 total as of December 10, 1996, 2,467,474
options have been granted (including 365,900 of the 925,000 shares subject to
stockholder approval at the 1997 Annual Meeting) and are outstanding, 352,249
options have been exercised, and 857,526 options remain available for grant,
including 559,100 of the additional 925,000 shares subject to stockholder
approval.
2. The 1991 Plan is administered by the Chairman of the Board of Directors
of the Corporation as to all employees other than employees subject to Section
16 of the Securities Exchange Act of 1934 (generally executive officers), who
reports to the Board of Directors the names of those granted stock options, the
number of shares covered by each option, the applicable option prices and the
type of option. The Stock Option Committee of the Board of Directors reports to
the Board of Directors with respect to the names of employees subject to Section
16 of the Securities Exchange Act of 1934 granted stock options, the number of
shares covered by each option, the applicable option prices and the type of
option.
3. The granting of an option under the 1991 Plan takes place whenever the
Chairman of the Board or Stock Option Committee, as the case may be, makes such
grant and designates the person for the receipt of the option. Each option is
evidenced by an appropriate Stock Option Contract.
4. The 1991 Plan terminates on December 4, 2001, and no option shall be
granted under the 1991 Plan after that date.
5. The option price at which non-incentive stock options may be granted
shall be the fair market value of the Common Stock on the date the option is
granted or such greater or lesser price as determined by the Chairman of the
Board or Stock Option Committee, as the case may be. The option price at which
incentive stock options may be granted shall not be less than the fair market
value of the Common Stock on the date the option is granted, except that if the
optionee would own more than 10% of the total outstanding shares of Common and
Class B Stock of the Corporation if the option were to be exercised on the date
of grant, the exercise price of such option shall be not less than 110% of the
market price for said shares on the date of grant.
6. The maximum term of each non-incentive stock option shall be for a
period not exceeding ten (10) years from the date of grant thereof and the term
of each incentive stock option shall likewise be for a period
10
<PAGE> 13
not exceeding ten (10) years from the date of grant thereof (but only five (5)
years if the optionee owns more than 10% of the voting power).
7. Except in limited situations as expressly provided in the 1991 Plan, no
option granted under the 1991 Plan may be exercised during the life of the
optionee, unless the optionee remains in the continuous employ of the
Corporation or one of its subsidiaries from the date of grant to the date of
exercise. The option shall be exercisable in whole or in part, from time to
time, during the term thereof, as may be determined by the Chairman of the Board
or Stock Option Committee, as the case may be, and stated in the option,
provided, however, that unless otherwise permitted by the Board of Directors as
to all outstanding options, no option may be exercised prior to the first
anniversary of the date of grant of such option.
8. Payment for shares purchased will be made in full in cash or by the
surrender of shares of Common Stock of the Corporation valued at the market
price for such shares at the time of exercise of the option under the 1991 Plan.
9. If an optionee holds more than one (l) non-incentive stock option under
the 1991 Plan or more than one (l) incentive stock option granted on or after
January 1, 1987, the options may be exercised by the optionee in any order.
FEDERAL INCOME TAX CONSEQUENCES
Tax Aspects -- Non-Incentive Stock Options
Messrs. Weisman Celler Spett & Modlin, P.C., the Corporation's legal
counsel, have advised that under existing Treasury regulations, with respect to
non-incentive stock options, (i) an optionee will not realize taxable income
upon the grant of an option; (ii) the difference between the option price and
the fair market value of the shares on the date of exercise is taxable as
ordinary income to the optionee at the time of exercise and is allowable to the
Corporation, as an income tax deduction; (iii) the ordinary income to the
optionee will be treated as compensation to the optionee which is subject to
income tax withholding by the Corporation; (iv) the optionee will take a basis
in the shares for tax purposes equal to the sum of the option price plus the
amount of his or her ordinary income; and (v) any gain or loss on a subsequent
sale of the shares, which will equal the difference between the sales proceeds
and the optionee's tax basis in the shares, will be capital gain or loss at the
time of sale.
Tax Aspects -- Incentive Stock Options
The Corporation has been advised by such legal counsel that the federal
income tax consequences of incentive stock options under present law are
generally as follows: if an option is an incentive stock option, the optionee
will recognize no income upon grant or exercise (except for purposes of
computing alternative minimum tax described below) of the incentive stock option
and as such, the Corporation will not be allowed a deduction for federal tax
purposes as it would in the case of the exercise of a non-statutory stock
option. Upon the sale of the shares by the optionee (assuming that the sale
occurs no sooner than two (2) years after grant of the option and one (l) year
after exercise of the option), any gain will be capital gain to the optionee. If
the optionee fails to hold the shares for the foregoing period, the disposal is
treated as a disqualifying disposition. The gain on such disposition is ordinary
income to the optionee to the extent of the difference between the option price
and the lower of either fair market value of the shares on the date of exercise,
or the net sales price realized upon disposition of the shares. In such event,
the Corporation will be entitled to an income tax deduction equal to the
ordinary income amount to the optionee.
In order for an option to qualify as an incentive stock option, (i) the
option must be granted pursuant to a plan which includes the aggregate number of
shares which may be issued under options and the employees (or class of
employees) eligible to receive options; (ii) such option is granted within ten
(10) years from the date such plan is adopted, or the date such plan is approved
by the stockholders, whichever is earlier; (iii) the option must be exercised
while the optionee is an employee of the Corporation or a subsidiary of the
Corporation, or no more than three months after the optionee's employment ceases
(twelve (12) months in the case of termination following the optionee's total
disability); (iv) the option may not by its terms be
11
<PAGE> 14
exercisable after the expiration of ten (10) years from the date it is granted;
(v) the option price must not be less than the fair market value of the stock at
the time such option is granted; (vi) the option plan must be approved by the
stockholders within twelve (12) months after the date such plan is adopted;
(vii) the option by its terms is non-transferable other than upon death of the
optionee and is exercisable only by the optionee during his or her lifetime;
(viii) if the optionee owns more than 10% of the voting power of all classes of
the Corporation's stock at the time the option is granted, the option price must
be at least 110% of the fair market value on the date of grant and the option
may not be exercised after five (5) years from the date of grant. The aggregate
fair market value, determined at time of grant, of stock for which an employee
may exercise incentive stock options for the first time in any calendar year
under all plans cannot exceed $100,000.
For purposes of computing the alternative minimum tax, the spread between
the fair market value of the stock on the exercise date and the option price is
no longer an item of tax preference. Rather, the spread is added to taxable
income as an adjustment in computing alternative minimum tax, and the basis of
the acquired stock is the fair market value on the date of exercise.
The selection of officers, executives and employees who will be granted
options, and the number of shares to be offered shall be made by the Chairman of
the Board or the Stock Option Committee, as the case may be. However, it is
presently expected that approximately l,700 such persons, of whom 15 are
executive officers or directors, will be eligible for consideration by the
Chairman of the Board or the Stock Option Committee, as the case may be. The
Corporation intends to register the additional shares covered by the 1991 Plan
under the Securities Act of 1933 before the options may be exercised.
The preceding summary of certain provisions of the 1991 Stock Option Plan
is qualified in its entirety by reference to the complete text of the 1991 Plan
which is set forth as Exhibit A of this Proxy Statement.
The affirmative vote of a majority of the shares entitled to vote is
required to approve the proposed amendment to the 1991 Plan authorizing 925,000
additional shares. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO THE 1991 PLAN AUTHORIZING
ADDITIONAL SHARES. IT IS INTENDED THAT PROXIES SOLICITED HEREBY WILL BE VOTED
FOR SUCH AMENDMENT TO THE PLAN UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand was selected by the Board of Directors as auditors for
the Corporation's fiscal year ended September 30, 1996, the twenty first year
such firm has been the auditors of the Corporation.
Representatives of such auditors are expected to be at the Annual Meeting
of Stockholders and will be permitted to make a statement to the stockholders if
they desire and to respond to any appropriate questions addressed by the
stockholders to such auditors. No decision has yet been made as to the selection
of the Corporation's auditors for the 1997 fiscal year.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Corporation's executive officers and directors are required under
Section 16(a) of the Securities Exchange Act of 1934 to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and New York Stock Exchange. Copies of those reports must also be furnished to
the Corporation.
Based solely on a review of the copies of reports furnished to the
Corporation and the Corporation's monthly reporting compliance program, the
Corporation believes that during the preceding year all filing requirements
applicable to executive officers and directors were met. During September 1996
Mr. Charles P. Johnson paid the Corporation $33,966 because his purchase of the
Corporation's Preferred Stock in a private transaction on September 30, 1996 was
deemed a purchase of the underlying Common Stock issuable on
12
<PAGE> 15
conversion thereof and matched against his prior sale of Common Stock in June
1996 at a price higher than the conversion price of the Preferred Stock.
MEETINGS OF THE BOARD OF DIRECTORS
During fiscal 1996, the Board of Directors had six (6) meetings. All of the
Directors attended at least 75% of such meetings. Non-employee directors
currently receive a fee of $1,200 for each meeting which they attend and an
annual fee of $8,000. Under a plan adopted by the Board of Directors in 1982,
non-employee directors have the opportunity to elect to defer receipt of all or
a portion of their fees plus interest thereon. On October 10, 1995 the
non-employee directors were each granted a non-statutory stock option to
purchase 5,000 shares of the Corporation's Common Stock at $12.3125 per share,
the fair market value on such date. Such options become exercisable in three
equal annual installments on the first, second and third anniversaries of the
date of grant.
The Corporation has an Audit Committee consisting of Messrs. Lee Paschall,
Howard S. Modlin and John L. Segall. Members of the Audit Committee receive an
annual fee of $3,000. As part of its responsibilities, the Audit Committee
reviews the audit function with the Corporation's independent auditors. During
fiscal 1996 the Audit Committee had two (2) meetings. The Corporation does not
have a nominating or compensation committee.
The Corporation has a Stock Option Committee consisting of Messrs. Lee
Paschall and Howard S. Modlin. Such Committee, which had no formal meetings
during fiscal 1996, determines which executive officers of the Corporation shall
be granted stock options under its stock option plans.
STOCKHOLDER PROPOSALS -- 1998 ANNUAL MEETING
If any stockholder desires to submit a proposal for action at next year's
annual meeting, it must be received by the Corporation, Middlebury, Connecticut
06762-1299, on or before August 10, 1997.
COST OF SOLICITATION
The cost of preparing and mailing material in connection with the
solicitation of proxies is to be borne by the Corporation. To the extent
necessary in order to assure sufficient representation at the meeting, such
solicitation will be made by the Corporation's regular employees in the total
approximate number of three (3). Solicitation will be made by mail, telegram,
telephone and in person.
By Order of the Board of Directors
HOWARD S. MODLIN
Secretary
Dated: Middlebury, Connecticut
December 10, 1996
13
<PAGE> 16
EXHIBIT A
1991 STOCK OPTION PLAN OF
GENERAL DATACOMM INDUSTRIES, INC.
(AS PROPOSED TO BE AMENDED)
1. Purpose of the Plan. This Plan (herein called the "Plan") is designed
to provide an incentive to key employees, including officers and directors who
are employees, of GENERAL DATACOMM INDUSTRIES, INC. (herein called the
"Corporation") and its subsidiaries, as defined in Section 425(f) of the
Internal Revenue Code of 1986 and to offer an additional inducement in obtaining
the services of key personnel.
2. Stock Subject to the Plan. "Incentive Stock Options" and "Non-Incentive
Stock Options" may be granted under the Plan to purchase in the aggregate not
more than 3,325,000* shares of Common Stock, $.10 par value, of the Corporation
(herein called "Common Stock"), which shares may, in the discretion of the Board
of Directors, consist either in whole or in part of authorized but unissued
shares of Common Stock or shares of Common Stock held in the treasury of the
Corporation. Any shares subject to an option which for any reason expires or is
terminated unexercised as to such shares shall again become available for
options under the Plan.
3. Administration of the Plan. The Plan shall be administered by the
Chairman of the Board and a Stock Option Committee, who shall report to the
Board of Directors the names of those granted options, the number of shares
covered by each option and the applicable option prices. The Stock Option
Committee shall consist of two (2) or more members of the Board of Directors
appointed by the Board of Directors who are not employees of the Corporation nor
entitled to receive options under the Plan. The Stock Option Committee shall
have the exclusive right to grant stock options to employees who are subject to
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act"), and the
Chairman of the Board shall have the exclusive right to make all other grants.
Except with respect to grants by the Stock Option Committee, the Chairman of the
Board shall have the full power to construe and interpret the Plan and to
establish and amend rules, regulations and forms for its administration. The
Plan may not be amended, however, without the approval of the Board of Directors
which shall also determine which employees are subject to Section 16(a) of the
1934 Act.
4. Eligibility. The Chairman of the Board and Stock Option Committee may,
consistent with the purposes of the Plan and Paragraph 3, grant options from
time to time, within ten (10) years from the date of adoption of the Plan by the
Board of Directors of the Corporation, to key employees, including officers and
directors who are employees of the Corporation or of any of its present
subsidiaries or future subsidiary corporations (herein called "Subsidiaries"),
and covering such number of shares of Common Stock as may be determined,
provided that no employee whose basic salary before bonuses or incentive
payments is less than $20,000 per year shall be eligible to receive an option.
Employees may receive more than one (l) option under the Plan, but the aggregate
fair market value (determined as of the time the option is granted) of the stock
for which any employee may exercise incentive stock options for the first time
in any calendar year (under all such plans of the Corporation and its
subsidiaries) shall not exceed $100,000.
5. Option Price. The purchase price of the Common Stock under each option
shall be determined by the Chairman of the Board and the Stock Option Committee,
as the case may be, but shall not be less than the fair market value of the
stock at the time of granting of the option except that in the case of
Non-Incentive Stock Options, the price may be such lesser price as determined by
the Chairman of the Board or Stock Option Committee, as the case may be. Such
fair market value shall be taken by the Chairman of the Board and Stock Option
Committee as the average between the high and low sale price on the date the
option is granted, or, if there is no such sale on that date, then on the last
previous day on which such a sale was reported. If the option holder owns more
than 10% of the total combined voting power of the Corporation, the
- ---------------
* As proposed to be amended by Item 2.
A-1
<PAGE> 17
purchase price of Incentive Stock Options shall not be less than 110% of the
fair market value on the date of grant.
6. Term of Option. The term of each option granted pursuant to the Plan
shall be for a period not exceeding ten (10) years from the date of granting
thereof, except that if the option holder owns more than 10% of the total
combined voting power of the Corporation and the option is an Incentive Stock
Option, such period shall not exceed five (5) years from the date of grant.
Options shall be subject to earlier termination as hereinafter provided.
7. Exercise of Option. The option shall be exercisable in whole or in part
from time to time during the term thereof as may be determined by the Chairman
of the Board or Stock Option Committee, as the case may be, and stated in the
option, provided, however, that unless otherwise authorized by the Board of
Directors as to all options outstanding under the Plan, no option may be
exercised prior to the first anniversary of the date of granting of such option.
The option shall be exercised by giving written notice to the Corporation at its
principal office, Middlebury, Connecticut, specifying the number of shares
purchased and accompanied by payment in full in cash of the aggregate purchase
price therefor, or in the alternative, payment may be made by delivery of Common
Stock of the Corporation valued at the closing price of such Common Stock on the
New York Stock Exchange on the date of exercise. Certificates representing the
shares of stock purchased shall be issued as promptly as practicable thereafter.
The holder of an option shall not have any rights of a stockholder with respect
to the shares covered by his or her option until the date of issuance of a stock
certificate for such shares. In no case may a fraction of a share be purchased
or issued under the Plan. If fractions of a share would result from any
adjustment, the adjustment shall be revised to the next higher whole number of
shares.
8. Termination of Employment. Any option holder whose employment has
terminated for any reason other than death or disability may exercise his or her
option, to the extent exercisable upon the effective date of such termination,
at any time within three (3) months after the date of termination, but in no
event after the expiration of the term of the option, provided, however, that if
employment be terminated either (i) for cause, or (ii) without the employee
giving reasonable notice (not less than 30 days unless waived in writing by the
Chairman of the Board) said option shall (to the extent not previously
exercised) terminate immediately. Options granted under the Plan shall not be
affected by any change of employment so long as the holder continues to be an
employee of the Corporation, of any of the Subsidiaries or of a corporation or
its parent or subsidiary issuing or assuming a stock option in a transaction to
which Section 425(a) of the Code applies.
9. Death or Disability of Employee. (a) If an option holder dies while he
or she is employed by the Corporation or any of the Subsidiaries or within three
(3) months after termination of the option holder's employment [unless such
termination was either (i) for cause, or (ii) without the option holder giving
reasonable notice (not less than 30 days unless waived in writing by the
Chairman of the Board)] the option may be exercised by his or her executor,
administrator or other person at the time entitled by law to the option holder's
rights under the option, at any time within one (l) year after death, but in no
event after the expiration of the term of the option, to the extent of the
following schedule:
<TABLE>
<CAPTION>
TIME FROM GRANT OF OPTION
- --------------------------------------------
TO THE END PERCENTAGE
FROM OF EXERCISABLE
- --------------- ---------- -----------
<S> <C> <C>
1 Day 12 Months 33%
12 Months 24 Months 67%
Over 24 Months 100%
</TABLE>
(b) In the event that an option holder becomes permanently and totally
disabled while in the employ of the Corporation or any of the Subsidiaries,
the option holder may, but only within one (l) year next succeeding the day
of the commencement of such disability, exercise an option to the extent of
the above schedule, but in no event after the expiration of the option. For
this purpose, an option holder shall be considered permanently and totally
disabled if unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to last for a continuous period of not less than twelve (12)
months. An option holder shall not be considered to be
A-2
<PAGE> 18
permanently and totally disabled unless he or she furnishes proof of the
existence thereof in such form and manner, and at such times as a committee
appointed by the Chairman of the Board may require. The committee shall
consist of three (3) employees who may be officers of the Corporation. Said
committee's determination of whether the option holder is permanently and
totally disabled shall be final and absolute, and shall not be subject to
question by the option holder, a representative of the option holder or the
Corporation.
10. Stock Option Contract. Each option shall be evidenced by an
appropriate Stock Option Contract which shall provide, among other things, (a)
that the employee agrees that he or she will remain in the employ of the
Corporation or its Subsidiaries, at the election of the Corporation, for a
period of at least one (l) year from the later of (i) the date the option is
granted or (ii) the date to which he or she is then otherwise obligated to
remain in the employ of the Corporation, and (b) that in the event of exercise
of such option, unless the shares have been registered under the Securities Act
of 1933, as amended, the shares subject to option will be acquired for
investment and not with a view to distribution thereof. Nothing in the Plan or
in any option contract entered into pursuant hereto shall confer upon any
employee any right to continue in the employ of the Corporation or the
Subsidiaries or interfere in any way with the right of the Corporation or the
Subsidiaries to terminate his or her employment at any time without liability to
the Corporation or the Subsidiaries.
11. Adjustments Upon Changes in Common Stock. If additional shares of
Common Stock are issued by the Corporation pursuant to a stock split or stock
dividend in excess of 5% in any one (1) year, the number of shares of Common
Stock then covered by each outstanding option granted hereunder shall be
increased proportionately with no increase in the total purchase price of the
shares then so covered, and the number of shares of Common Stock of the
Corporation reserved for the purposes of this Plan shall be increased by the
same proportion. In the event that the shares of Common Stock of the Corporation
are reduced at any time by a combination of shares, the number of shares of
Common Stock then covered by each outstanding option granted under the Plan
shall be reduced proportionately with no reduction in the total price of the
shares then so covered, and the number of shares of Common Stock reserved for
the purposes of this Plan shall be reduced proportionately with no reduction in
the total price of the shares then so covered, and the number of shares of
Common Stock reserved for the purposes of this Plan shall be reduced by the same
proportion. If the Corporation shall be reorganized, consolidated or merged with
another corporation, or if all or substantially all of the assets of the
Corporation shall be sold or exchanged, each employee to whom an option has been
granted under this Plan shall, at the time of issuance of the stock under such a
corporate event, be entitled to receive upon the exercise of the option, the
same number and kind of shares of stock or the same amount of property, cash or
securities as the employee would have been entitled to receive upon the
happening of any such corporate event as if the employee had been, immediately
prior to such event, the holder of the number of shares covered by the option.
No option adjustment shall be made for stock dividends which are not in excess
of 5% (even though the cumulative total of such stock dividends over the life of
an option may be in excess of 5%), cash dividends or the issuance to
stockholders of the Corporation of rights to subscribe for additional Common
Stock or other securities.
12. Amendments and Termination of the Plan. The Plan shall terminate on
December 4, 200l, and an option shall not be granted under the Plan after that
date. The Board of Directors without further approval of the shareholders, may
at any time suspend or terminate the Plan or amend it from time to time in such
respects as it may deem advisable in order that options granted hereunder as
Incentive Stock Options shall be "Incentive Stock Options" as defined in Section
422A of the Internal Revenue Code of 1986, or to conform to any change in
applicable law or to regulations or rulings of administrative agencies, or may
so amend it in any other respect not involving a substantial departure from the
principles herein set forth; provided, however, that no amendment shall be
effective without prior approval of a majority of the holders of the issued and
outstanding shares of Common Stock of the Corporation, which would: (a) except
as specified in Paragraph ll, increase the number of shares for which options
may be granted under the Plan; or (b) change the eligibility requirements for
individuals entitled to receive options hereunder. No termination, suspension or
amendment of the Plan shall, without the consent of the holder of an existing
option, adversely affect the holder's rights under such option.
A-3
<PAGE> 19
13. Non-Transferability of Option. No option granted under the Plan shall
be transferable otherwise than by Will or the laws of descent and distribution;
and options may be exercised, during the lifetime of the holder thereof, only by
such holder.
14. Restriction on Issuance of Shares. The Corporation shall not be
obligated to sell or issue any shares pursuant to any stock option agreement
unless:
(a) the shares with respect to which the option is being exercised
have been registered under the Securities Act of 1933, as amended, or are
exempt from such registration;
(b) the prior approval of such sale or issuance has been obtained from
any State regulatory body having jurisdiction; and
(c) in the event the stock has been listed on any stock exchange, the
shares with respect to which the option is being exercised have been duly
listed on such exchange in accordance with the procedure specified
therefor.
15. Stockholders' Approval. The Plan shall be subject to approval by the
affirmative vote of the holders of a majority of the outstanding shares of stock
of the Corporation at a meeting of its stockholders held within twelve (12)
months after the date the Plan is adopted by the Board of Directors and any
options granted hereunder prior to such approval shall be conditioned thereon.
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GENERAL DATACOMM INDUSTRIES, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS --
FEBRUARY 6, 1997
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of General
DataComm Industries, Inc., hereby constitutes and appoints CHARLES P. JOHNSON,
HOWARD S. MODLIN and GERALD GORDON, and each and any of them, the attorneys and
proxies of the undersigned with full power of substitution to vote for and in
the name, place and stead of the undersigned, at the Annual Meeting of the
Stockholders of said Corporation, to be held at The Chase Manhattan Bank, 11th
Floor, 270 Park Avenue, New York, New York, on February 6, 1997 at 4:00 P.M.,
and at any adjournments thereof, the number of votes the undersigned would be
entitled to cast if present:
(1) FOR [ ]NOT FOR [ ] the election of Lee M. Paschall and John L. Segall to
the Board of Directors for a term of three (3) years and until their successors
are elected. Authority is withheld with respect to the following nominee:
(2) FOR [ ] AGAINST [ ] ABSTAIN [ ] the proposal to add 925,000 shares to
the Corporation's 199l Stock Option Plan.
(3) In their discretion, upon such other matters as may properly come before
the meeting or any adjournments thereof.
Unless you specify otherwise, this Proxy will be voted "FOR" the election of
the nominees as directors and "FOR" the amendment to the 199l Stock Option Plan.
A majority of said attorneys and proxies, or their substitute at said
meeting, or any adjournments thereof (or if only one (l), that one (l)) may
exercise all of the powers hereby given. Any proxy to vote any of the shares,
with respect to which the undersigned is or would be entitled to vote,
heretofore given to any person or persons other than the persons named above is
hereby revoked.
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IN WITNESS WHEREOF, the undersigned has signed and sealed this proxy and
hereby acknowledges receipt of a copy of the notice of said meeting and proxy
statement in reference thereto both dated December 10, 1996.
Dated: 199_
------------------------------------------
(Stockholder(s) Signature)
------------------------------------(L.S.)
------------------------------------(L.S.)
NOTE: THIS PROXY, PROPERLY COMPLETED,
DATED AND SIGNED, SHOULD BE RETURNED
IMMEDIATELY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO GENERAL DATACOMM INDUSTRIES,
INC.
