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Check the appropriate box:
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ADC Telecommunications, Inc.
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ADC Telecommunications, Inc.
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
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1) Title of each class of securities to which transaction applies:
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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
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<PAGE>
[LOGO] Definitive
ADC Telecommunications, Inc.
4900 West 78th Street
Minneapolis, Minnesota 55435-5480
(612) 938-8080
---------------------------------------------
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
TO BE HELD FEBRUARY 27, 1996
--------------------------------------------
TO THE SHAREHOLDERS OF ADC TELECOMMUNICATIONS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Shareholders' Meeting of ADC
Telecommunications, Inc. (the "Company") will be held at the Lutheran
Brotherhood Building, 625 Fourth Avenue South, Minneapolis, Minnesota 55415, on
Tuesday, February 27, 1996, at 3:30 p.m. Central Standard Time, for the purpose
of considering and acting upon:
(1) The election of three directors for terms expiring in 1999.
(2) A proposal to amend the Company's Restated Articles of Incorporation
to increase the number of authorized shares of Common Stock from 100,000,000 to
300,000,000.
(3) Such other business as may properly come before the meeting and any
adjournments thereof.
Shareholders of record on January 11, 1996, are the only persons entitled
to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. If you do not
expect to be present at the meeting, please fill in, sign, date and mail the
enclosed Proxy as promptly as possible in order to save the Company further
solicitation expense. There is enclosed with the Proxy an addressed envelope
for which no postage is required if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID F. FISHER
Secretary
January 24, 1996
<PAGE>
[LOGO] Definitive
ADC Telecommunications, Inc.
4900 West 78th Street
Minneapolis, Minnesota 55435-5480
(612) 938-8080
---------------
PROXY STATEMENT
---------------
ANNUAL SHAREHOLDERS' MEETING
TO BE HELD FEBRUARY 27, 1996
The enclosed Proxy is solicited by the Board of Directors of ADC
Telecommunications, Inc. (the "Company") in connection with the Annual
Shareholders' Meeting of the Company to be held on February 27, 1996, and at
any and all adjournments thereof (the "Annual Meeting"). The costs of
solicitation, including the cost of preparing and mailing the Notice of Annual
Shareholders' Meeting and this Proxy Statement, are being paid by the Company.
In addition, the Company will, upon the request of brokers, dealers, banks,
voting trustees and their nominees who are holders of record of shares of the
Company's Common Stock on the record date specified below, bear their
reasonable expenses for mailing copies of this material to the beneficial
owners of such shares. Officers and other regular employees of the Company who
will receive no extra compensation for their services may solicit Proxies in
person or by telephone or facsimile. In addition, the Company has retained
Morrow & Co., Inc. to assist in the solicitation of Proxies for a fee estimated
to be $5,000 plus out-of-pocket expenses. The Proxy Statement and accompanying
form of Proxy will be first mailed to shareholders on or about January 24,
1996.
The Proxy may be revoked at any time prior to its exercise by giving
written notice of revocation to an officer of the Company or by filing a new
written appointment of a proxy with an officer of the Company. Unless so
revoked, properly executed Proxies will be voted in the manner set forth in
this Proxy Statement or as otherwise specified by the shareholder giving such
Proxy.
Shareholders of record on January 11, 1996, are the only persons entitled
to vote at the Annual Meeting. As of that date, there were issued and
outstanding 62,775,883 shares of Common Stock, the only outstanding voting
securities of the Company.
The Company declared a dividend of one share for each share held,
effective February 28, 1995, for shareholders of record as of February 15,
1995, and all references to shares in this Proxy Statement reflect this
dividend. Each shareholder is entitled to one vote for each share held.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1995, unless otherwise
noted, certain information with respect to all shareholders known to the
Company to have been beneficial owners of more than five percent of its Common
Stock, and information with respect to the Company's Common Stock beneficially
owned by directors of the Company, the executive officers of the Company
included in the Summary Compensation Table set forth under the caption
"Executive Compensation" below and all directors and executive officers of the
Company as a group. Except as otherwise indicated, the shareholders listed in
the table have sole voting and investment powers with respect to the Common
Stock owned by them.
<TABLE>
<CAPTION>
Percent of
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------- -------------------- ------------
<S> <C> <C>
State Farm Mutual Automobile 6,895,748 11.0%
Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710
FMR Corp. 6,528,500<1> 10.0%
82 Devonshire Street
Boston, MA 02109
Kopp Investment Advisors, Inc. 4,432,283<2> 7.0%
6600 France Avenue South, Suite 672
Edina, Minnesota 55435
Perrybell Investments, Inc. 3,513,590<3> 5.6%
600 South Highway 169, Suite 850
Saint Louis Park, Minnesota 55426
William J. Cadogan 292,687<4> *
Lynn J. Davis 228,208<4> *
Frederick D. Lawrence 37,270<4> *
Robert E. Switz 22,901<4> *
Richard S. Gilbert 10,730<4> *
Warde F. Wheaton 25,020<5> *
Thomas E. Holloran 23,000<5> *
Charles W. Oswald 22,000<5> *
Donald M. Sullivan 18,000<5> *
John D. Wunsch 14,000<5,6> *
Jean-Pierre Rosso 12,400<5> *
B. Kristine Johnson 12,200<5> *
James C. Castle 9,500<5> *
Alan E. Ross 8,000<5> *
All executive officers and directors 828,746<7> 1.3%
as a group (19 persons)
_______________
*Less than 1%
</TABLE>
1 FMR Corp. ("FMR"), certain of FMR's subsidiaries and Edward C. Johnson 3d
were beneficial owners of 6,528,500 shares of Common Stock as of December 31,
1995. Such entities and related persons possess sole voting power with respect
to 9,500 of such shares and sole dispositive power with respect to all of such
shares.
<PAGE>
2 Kopp Investment Advisors, Inc. ("KIA") serves as an investment advisor for
the accounts of individual clients. KIA does not possess voting power
regarding shares held in client accounts but exercises limited investment power
regarding such shares. As of December 31, 1995, KIA client accounts
collectively owned 3,500,891 shares of Common Stock and the remaining 931,392
shares were controlled by LeRoy C. Kopp, President of KIA, and/or members of
his family.
3 As of December 31, 1995, Perrybell Investments Inc. ("Perrybell"), an
investment advisory company, had custody of 3,513,590 shares of Common Stock
for accounts of its clients and trusts. Mr. Wunsch is President of Perrybell.
Perrybell may vote shares held on behalf of its clients if they fail to direct
the manner in which the shares are to be voted and may exercise limited
investment powers with respect to the shares. Title to all shares is held by
Forsam & Co. (of which Mr. Wunsch is a general partner) or Cede & Co., as
nominee for Perrybell.
4 Includes (a) shares issuable pursuant to stock options exercisable within 60
days after the date of this Proxy Statement and (b) shares held in trust for
the benefit of the executive officers benefit pursuant to the CompanyOs
Retirement Savings and Stock Ownership Plan (the "Retirement Plan"). For Mr.
Cadogan (a) 224,196 options and (b) 1,411 shares; for Mr. Davis (a) 179,016
options and (b) 3,592 shares; for Mr. Lawrence (a) 30,666 options and (b) 44
shares; for Mr. Switz (a) 22,856 options and (b) 45 shares; and for Mr. Gilbert
(a) 10,500 options and (b) 230 shares.
5 Includes shares issuable pursuant to options exercisable within 60 days after
the date of this Proxy Statement granted under the Company's Nonemployee
Director Stock Option Plan. For Mr. Wheaton options to purchase 14,000 shares;
for Mr. Holloran options to purchase 14,000 shares; for Mr. Oswald options to
purchase 14,000 shares; for Mr. Sullivan options to purchase 14,000 shares; for
Mr. Wunsch options to purchase 14,000 shares; for Mr. Rosso options to purchase
14,000 shares; for Ms. Johnson options to purchase 10,000 shares; for Dr.
Castle options to purchase 8,000 shares; and for Mr. Ross options to purchase
8,000 shares.
6 Does not include 3,513,590 shares held in custody by Perrybell, of which Mr.
Wunsch is President. See footnote 3 above.
7 Includes (a) 637,190 shares issuable pursuant to stock options exercisable
within 60 days after the date of this Proxy Statement and (b) 9757 shares held
in trust for the benefit of executive officers pursuant to the Retirement Plan.
ELECTION OF DIRECTORS
The number of directors is currently set at ten, and the directors are
divided into three classes. The members of each class are elected to serve
three-year terms with the term of office of each class ending in successive
years. James C. Castle, Ph.D., Donald M. Sullivan and John D. Wunsch are the
directors in the class whose term expires at the Annual Meeting. The Board of
Directors has nominated Dr. Castle and Messrs. Sullivan and Wunsch for election
to the Board at the Annual Meeting for terms expiring at the Annual
Shareholders' Meeting in 1999.
The affirmative vote of a majority of the shares of Common Stock present
and entitled to vote at the meeting is required for the election of the above
nominees to the Board of Directors. Proxies solicited by the Board of
Directors will, unless otherwise directed, be voted to elect Dr. Castle and
Messrs. Sullivan and Wunsch. Shares represented by proxies as to which the
authority to vote for a nominee has been withheld will be deemed present and
entitled to vote for purposes of determining the existence of a quorum and
calculating the numbers of votes cast, but will be deemed not to have been
voted in favor of the candidate with respect to whom the proxy authority has
been withheld. In the unlikely event that the nominees are not candidates for
election at the Annual Meeting, the persons named as proxies will vote for such
other persons as the Board of Directors or proxies may designate.
<PAGE>
The table below gives certain information concerning the nominees and
other directors:
<TABLE>
<CAPTION>
NAME AGE NOMINEE OR CONTINUING DIRECTOR AND TERM
-------------------- --- ---------------------------------------------
<S> <C> <C>
James C. Castle, Ph.D. 59 Director; nominee with term expiring in 1999
Donald M. Sullivan 60 Director; nominee with term expiring in 1999
John D. Wunsch 47 Director; nominee with term expiring in 1999
Thomas E. Holloran 66 Director with term expiring in 1998
Charles W. Oswald 67 Director with term expiring in 1998
Alan E. Ross 60 Director with term expiring in 1998
Warde F. Wheaton 66 Director with term expiring in 1998
William J. Cadogan 47 Director with term expiring in 1997
B. Kristine Johnson 44 Director with term expiring in 1997
Jean-Pierre Rosso 55 Director with term expiring in 1997
</TABLE>
Dr. Castle has been a director of the Company since 1994. He has been the
Chairman of the Board and Chief Executive Officer of U.S. Computer Services,
the leading provider worldwide of computer services to the cable industry and a
provider of billing services to the cable, telephony, financial services and
utility industries, since 1992. For one year prior to such time, he was
President of Teradata Corporation, until that company merged with NCR
Corporation, a subsidiary of AT&T. From 1987 to 1991 he was Chairman of the
Board, President, Chief Executive Officer and a director of Infotron Systems
Corporation. Dr. Castle is a director of Par Technology Corporation, Leasing
Solutions, Inc. and Digital Sound Corporation.
Mr. Sullivan has been a director of the Company since 1990. He has served
as President and a director of MTS Systems Corporation, a manufacturer of
products, systems and software that analyze engineering designs, evaluate
materials and automate production processes, since 1982. He has been Chief
Executive Officer since 1987 and Chairman of the Board since 1994. His prior
positions with MTS include Chief Operating Officer, Executive Vice President
and Vice President. Mr. Sullivan is a director of TSI Incorporated and MTS
Systems Corporation.
Mr. Wunsch has been a director of the Company since 1991. He has served
as President of Perrybell Investments, Inc., a registered investment advisory
company, since 1990. He was Executive Director of the law firm of Bogle &
Gates from 1988 to 1990.
Mr. Holloran has been a director of the Company since 1985. He has held
the position of Professor in the Graduate School of Business at the University
of St. Thomas, St. Paul, Minnesota, since 1985. From 1976 to 1985, Mr.
Holloran served as Chairman of the Board and Chief Executive Officer of Inter-
Regional Financial Group, Inc. Mr. Holloran is a director of Flexsteel
Industries, Inc., Medtronic, Inc., MTS Systems Corporation and National City
Bancorporation.
Mr. Oswald has been a director of the Company since 1985. He has served
as a director of National Computer Systems, Inc., a provider of information
systems and services to education, commercial and financial markets, since
1970. He was Chief Executive Officer of that company from 1970 to 1994 and
Chairman of the Board from 1970 to 1995.
Mr. Ross has been a director of the Company since 1994. From 1993 until
his retirement on January 2, 1996, he served as President of the
Telecommunications Division at Rockwell International Corporation, where he had
been employed since 1988. From 1990 to 1993 Mr. Ross was Vice President of the
Digital Communications Division at Rockwell International Corporation, and from
1988 to 1990 he was Vice President and General Manager of the Network
Transmission Systems of that company.
Mr. Wheaton has been a director of the Company since 1980. He served as
President of the Defense and Marine Systems Business of Honeywell Inc., a
manufacturer of control and information systems, from 1988 until his retirement
in 1989. Prior to such time he served as Executive Vice President of
Honeywell's Aerospace and Defense Business.
<PAGE>
Mr. Cadogan has been a director of the Company since 1991. He has been
President and Chief Operating Officer of the Company since 1990, Chief
Executive Officer since 1991, and Chairman of the Board since 1994. He was
Senior Vice President of the Telecom Group of the Company from 1989 to 1990 and
served as a Vice President from 1987 to 1989. Prior to joining the Company Mr.
Cadogan was employed by Intelsat, most recently as General Manager of Business
Development. Mr. Cadogan is a director of Banta Corp.
Ms. Johnson has been a director of the Company since 1990. She is a Vice
President of Medtronic, Inc., a manufacturer of cardiac pacemakers and other
medical products, and President of its Tachyarrhythmia Management business.
She has served as a Vice President of Medtronic since 1984. Ms. Johnson is a
director of six closed-end investment companies managed by Voyageur Fund
Managers, Inc.
Mr. Rosso has been a director of the Company since 1993. Mr. Rosso is
President, Chief Executive Officer and a director of Case Corporation, a
manufacturer of construction and agriculture equipment. Mr. Rosso was
President of the Home and Building Control division of Honeywell, Inc. from
1991 to 1994 and President of Honeywell Europe, in Brussels, Belgium, from 1987
to 1991. Mr. Rosso is a director of Inland Steel Industries.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended October 31, 1995, the Board of Directors held
nine meetings and acted by three written actions. Each director attended at
least 75% of the aggregate of the total number of meetings of the Board of
Directors plus the total number of meetings of all committees of the Board on
which he or she served, except Dr. Castle. The Board of Directors has an Audit
Committee and a Compensation and Organization Committee.
The Audit Committee recommends to the Board of Directors the selection of
independent accountants and reviews the activities and reports of the
independent accountants as well as the internal accounting controls of the
Company. The Audit Committee is comprised of Messrs. Sullivan, Holloran,
Oswald and Castle. During fiscal 1995 the Audit Committee held four meetings.
The Compensation and Organization Committee determines the compensation
for executive officers of the Company, establishes the Company's compensation
policies and practices and recommends to the Board of Directors nominees for
directors. No procedures have been established for considering nominations by
shareholders. The Compensation and Organization Committee is comprised of
Messrs. Holloran, Ross, Rosso, Wheaton and Wunsch and Ms. Johnson. During
fiscal 1995 the Compensation and Organization Committee held four meetings.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual retainer
of $16,000 plus a fee of $1,000 for each Board meeting attended and $850 for
each committee meeting attended. In addition, directors acting as chairpersons
of Board committees receive an additional annual retainer of $1,500. Amounts
received by a director may be deferred pursuant to the Company's Restated
Compensation Plan for Directors. Interest is paid on deferred amounts based on
the prime commercial rate of Norwest Bank Minnesota, N.A.
Since 1990, the Company has maintained the Directors' Supplemental
Retirement Plan (the "Supplemental Plan") for nonemployee directors. The
Supplemental Plan covers directors who die or retire from the Board after at
least five years of continuous service as a director. The Supplemental Plan
provides for monthly benefits for a period of time based on the directorOs
service or, in the event of death before all benefits are paid, for death
benefits payable to the director's estate. The monthly amount of the benefit
is equal to 1/12 of the director's annual retainer in effect at the directorOs
retirement or death. The benefit is payable monthly for the period
<PAGE>
of months equal to the director's service but cannot exceed 120 months.
Benefits are payable upon the later of (i) the date the director attains age 65
or (ii) the date the director ceases to be a director. In the event of a
change in control of the Company, unpaid benefits are commuted to a present
value lump sum and paid within five days of the change in control. In the
event of the director's death, unpaid benefits are commuted to a present value
lump sum and paid to the director's estate.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Since 1991, the Company has maintained a Nonemployee Director Stock Option
Plan (the "Director Option Plan"). A total of 220,000 shares of Common Stock
are reserved for issuance under the Director Option Plan. Each director of the
Company is eligible to participate in the Director Option Plan unless such
director is an employee of the Company or any subsidiary of the Company. Under
the Director Option Plan, a new nonemployee director automatically is granted
an option to purchase 8,000 shares of Common Stock at the time such director is
first elected to the Board of Directors. In addition, each incumbent
nonemployee director who has previously received such an initial option grant
automatically is granted an option to purchase 4,000 shares at the time of each
annual meeting of the Company's shareholders thereafter; provided that the
Company's "return on equity" for the fiscal year immediately preceding such
annual meeting was at least 10%. For purposes of the Director Option Plan,
"return on equity" is defined as the percentage determined by dividing (i) the
net income of the Company for such fiscal year by (ii) the total shareholdersO
investment in the Company as of the end of the next preceding fiscal year. All
options granted under the Director Option Plan have an exercise price equal to
the fair market value of the Company's Common Stock on the date of grant and
become exercisable one year after the date of grant. The option exercise price
is payable in cash. The options expire 10 years from the date of grant
(subject to earlier termination in the event of death) and are not transferable
(except by will or the laws of descent and distribution).
EXECUTIVE COMPENSATION
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation and Organization Committee (the "Committee") of the Board of
Directors is responsible for the Company's executive compensation philosophy,
major compensation policies and Board governance. The Committee is also
responsible for determining all aspects of the compensation paid to the Chief
Executive Officer, and reviews and approves recommendations for compensation
paid to the other executive officers. The Committee has access to an
independent compensation consultant and to competitive compensation data. The
Committee is comprised entirely of outside, independent directors.
The primary objectives of the Company's executive compensation program are to:
- - Provide compensation that will attract, retain and motivate a superior
executive team.
- - Motivate the achievement of important Company performance goals.
- - Align the interests of the executive officers with those of Company
shareholders.
The executive compensation program provides an overall level of compensation
opportunity that is competitive with comparably sized companies within the
telecommunications and electronics industries ("Comparable Companies"). Many
of these companies are included in the Telecommunications Equipment Company
Index ("Telco Index"), a broad industry index with approximately 147 companies,
which appears in the "Comparative Stock Performance Table" below.
<PAGE>
The sections below describe the Company's approach to executive compensation,
and provide commentary on each major element of the program. The Committee,
however, retains the right to consider additional factors in setting executive
compensation levels for individual officers. These include individual
performance, potential and retention. The Committee may also factor in
various measures of Company performance above and beyond those formally
included in the Company's incentive plans.
The Committee noted and took into account that, in fiscal 1995 the Company grew
its revenue by 31% and its operating income by 25% over fiscal 1994, and that
the total shareholder return on the Common Stock of the Company in fiscal 1995
was 69%.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program is comprised of base salary,
annual incentive compensation, long-term incentive compensation, and various
benefits generally available to all full-time employees of the Company.
Base Salary
Base salary levels for the Company's executives are targeted at the 50th
percentile in comparison to the Comparable Companies. In determining actual
salaries, the Committee also takes into account individual experience,
performance during the preceding 12 months, future potential, and other issues
particular to the executive and the Company. Salaries for the Company's
executives generally fall within a band of plus or minus 25% from the average
salaries paid by the Comparable Companies.
Annual Incentive Compensation
The Management Incentive Plan ("MIP") is the Company's annual incentive program
for executives and key managers. MIP awards are based primarily upon overall
Company and business unit performance as compared to predetermined financial
goals; additionally, individual performance is taken into account in
determining actual MIP payouts. Target MIP award levels are set at
approximately the 50th percentile level of similar incentive programs offered
by the Comparable Companies.
For each MIP goal, the Company predetermines three levels of financial
performance and how these will relate to MIP award payouts. A threshold level
of performance is established that will produce an award equal to 30% of target
payout. Targeted performance produces an award of 100% of target payout, and a
maximum level of performance generates an award of 200% of target payout. The
financial performance goals and standards are approved and monitored by the
Committee. MIP awards are not made unless the Company achieves an after-tax
return on equity of at least 10%.
For fiscal 1995, the following measures of Company performance and weighting
were selected: 30% on corporate and business unit revenue, 40% on corporate
and business unit operating income, 10% on a key corporate or divisional goal
(the corporate goal was international revenue), and 20% on individual
contribution. In fiscal 1995, all targeted corporate measures were
significantly exceeded.
Effective for fiscal 1996, the Committee approved a plan whereby Vice
Presidents and above who meet a certain salary grade level may elect to receive
up to 50% of their annual incentive payout in the form of stock options.
Options are valued using the Black Scholes methodology and are awarded at a
multiple of ten times the cash equivalent. The option price is the fair market
value of the stock on the day the options are granted by the Committee
(approximately December 15, 1996). The options will vest one-third on each of
October 31, 1998, 1999 and 2000.
<PAGE>
Long-Term Incentive Compensation
The Company's long-term incentive compensation program is comprised exclusively
of stock-based awards issued under the 1991 Stock Incentive Plan. Through this
Plan, the Company provides periodic stock option and restricted stock awards to
the Company's executives and key managers.
Long-term incentives are granted at approximately the 50th percentile level
compared to similar programs at the Comparable Companies. In addition to
industry competitive practice data, the Committee takes into consideration
factors such as overall Company performance and the amounts of stock options
and restricted stock already outstanding or previously granted in determining
the size of stock option grants. The Company has developed and implemented
stock ownership guidelines for its officers. Minimum ownership guidelines
range from one to four times salary for the group and should be achieved
within four years of achieving officer status. The Committee considers each
officer's actual stock ownership compared to the guidelines in making ongoing
stock option awards. Prior to 1993, the Company provided long-term incentive
compensation through a combination of stock options and restricted shares, each
granted on a periodic basis. In 1993, the Committee determined that senior
executives would receive regular long-term incentive awards solely in the form
of stock options. In 1994, this practice was extended to other executives.
Restricted stock is used selectively by the Committee as circumstances warrant.
Stock options are generally granted to each eligible executive and manager
every three years. Stock options have an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant, have a ten-
year term, and have exercise restrictions that lapse ratably over a three-year
period. Consistent with the Committee policy to award grants on a cyclical
basis, eligible executives and managers received stock option grants in fiscal
year 1995. One-third of the options vest on each of October 31, 1995, 1996 and
1997. For stock awards granted in fiscal 1995, the Committee took into
consideration past company performance and meeting the stock ownership targets
in determining the size of the awards.
Benefits
The Company provides medical and pension benefits to its executives that are
generally similar to those available to Company employees. The Company does
provide a flexible perquisite benefit to its senior executives that does not
exceed 10% of salary for any named executive officer.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Cadogan's base salary at the beginning of the fiscal year was $400,000. He
received a 10% merit increase during the year, which raised his salary to
$440,000. In determining to raise Mr. Cadogan's salary, the Committee
considered such factors as the Company's financial performance in comparison to
that of other companies, the Company's strategic product and market
positioning, Mr. Cadogan's leadership within the Company and the industry, his
performance on personal objectives, and his pay in relation to the pay of the
chief executive officers of the Comparable Companies. The base salary of
$440,000 places Mr. Cadogan's pay at approximately the median of the salaries
of chief executive officers of the Comparable Companies.
Mr. Cadogan's annual incentive award in fiscal 1995 was determined in
accordance with the MIP program. The award was $356,067, which represented
170% of his target award under the MIP. In addition to the Company's financial
results, the Committee also considered, without assigning relative weights, Mr.
Cadogan's performance with respect to the following objectives (set at the
beginning of the fiscal year): leadership; strategic planning; human
resources; communication with stockholders; and community, industry and board
relations. The Committee believes Mr. Cadogan has demonstrated effective
leadership, has placed the Company in a strong position for future growth, and
has enabled the Company to achieve extremely strong results in fiscal 1995.
In accordance with the Company's long-term incentive program described above,
Mr. Cadogan received a stock option grant in fiscal 1995 of 109,800 shares.
These options will vest one-third on each October 31, 1995, 1996 and 1997.
<PAGE>
162(m) POLICY
The Committee does not believe that annual compensation provided to any of the
executive officers named in the table entitled "Summary Compensation Table"
below will exceed $1 million within the meaning of Section 162(m) of the
Internal Revenue Code. Under 162(m), all compensation in excess of $1 million
for any such officer must meet certain requirements related to company
performance and shareholder approval in order for the Company to fully deduct
these amounts. In fiscal 1995, the Company's 1991 Stock Incentive Plan was
amended to provide that options granted under the Plan would not be included in
calculations under 162(m). It is the Committee's intention to keep all
executive compensation fully deductible now and in the future, but the
Committee reserves the right to provide non-deductible compensation if it deems
it to be in the best interests of the Company and its shareholders.
Thomas E. Holloran, Chairman
B. Kristine Johnson
Alan E. Ross
Jean-Pierre Rosso
Warde F. Wheaton
John D. Wunsch
Members
Compensation and Organization Committee
<PAGE>
Summary Compensation Table
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------- ------------
Securities
Other Underlying All Other
Salary Bonus(1) Annual Options/ Compen-
Name and Principal Position Year ($) ($) Compensation SARs (#) sation(2)($)
- ---------------------------- ---- ------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Cadogan, Chairman 1995 $439,119 $356,007 -0- 109,800/-0- $42,815
of the Board, President, 1994 $356,780 $300,000 $163,836(3) 208,000/-0- $30,791
Chief Executive Officer and 1993 $289,424 $160,000 $132,676(3) -0-/-0- $22,384
Chief Operating Officer
Lynn J. Davis, Senior Vice 1995 $242,062 $172,462 -0- 40,500/-0- $27,876
President, President Broadband 1994 $199,439 $105,033 $122,877(3) 6,750/-0- $20,496
Connectivity Group 1993 $168,769 $ 96,631 $ 76,283(3) -0-/-0- $13,213
Frederick D. Lawrence, Senior 1995 $304,270 $107,904 -0- -0-/-0- $1,500
Vice President, President 1994 $175,577 $123,778 -0- 70,000/-0- -0-
Transmission Group(4)
Robert E. Switz, Vice President, 1995 $186,218 $114,207 -0- -0-/-0- $8,761
Chief Financial Officer(5) 1994 $144,712 $ 95,668 -0- 43,950/-0- $30,000
Richard S. Gilbert, Senior 1995 $190,288 $ 97,973 -0- 35,500/-0- $16,314
Vice President, President 1994 $128,863 $ 68,202 $105,701(3) 25,500/-0- $2,635
Enterprise Networking Group(6) 1993 $ 40,192 $ 38,914 -0- 3,000/-0- $19,583
</TABLE>
___________________
1 The bonus amounts are payable pursuant to the Company's Management Incentive
Plan described above under the caption "Compensation and Organization Committee
Report on Executive Compensation."
2 The compensation reported includes (a) Company contributions (excluding
employee earnings reduction contributions) under the Company's Retirement
Savings Plan and (b) amounts credited under the Company's 401(k) Excess Plan
(excluding employee deferred compensation). Company contributions under the
Retirement Savings Plan accrued during fiscal 1995 were as follows: $8,760 to
Mr. Cadogan; $8,648 to Mr. Davis; $0 to Mr. Lawrence; $7,261 to Mr. Switz; and
$8,637 to Mr. Gilbert. The amounts credited under the 401(k) Excess Plan
during fiscal 1995 were as follows: $32,555 to Mr. Cadogan; $17,728 to Mr.
Davis; $0 to Mr. Lawrence; $0 to Mr. Switz; and $6,176 to Mr. Gilbert. In the
case of Mr. Switz the compensation reported for 1994 was a hiring bonus. In
the case of Mr. Gilbert the compensation reported for 1994 includes the Company
contribution under the Retirement Savings Plan accrued during fiscal 1994 in
the amount of $889; the compensation reported for 1993 was a hiring bonus.
3 Represents Company reimbursement of income taxes payable by this executive
officer upon the lapsing in fiscal 1994 and 1993 of restrictions on previously
granted restricted stock awards pursuant to the 1991 Stock Incentive Plan.
4 Mr. Lawrence became employed by the Company in March 1994.
5 Mr. Switz became employed by the Company in January 1994.
6 Mr. Gilbert became a Vice President of the Company in December 1994,
President of Kentrox in October 1994 and President of Fibermux in June 1995.
The Enterprise Networking Group is comprised of Kentrox Industries Inc. and
Fibermux Corporation, which are wholly owned subsidiaries of the Company.
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants and exercises during fiscal
1995 to or by the executive officers named in the Summary Compensation Table
above, and the value of the options and SARs held by such persons at the end of
fiscal 1995. No SARs were granted or exercised during fiscal 1995.
Option/SAR Grants in Fiscal 1995
---------------------------------
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------
Number of % of Total Potential Realizable Value at Assumed
Securities Options Annual Rates of Stock Price Appreciation
Underlying Granted to Exercise or for Option Term Compounded Annually
Options/SARs Employees in Base Price Expiration ----------------------------------------
Name Granted (#) Fiscal Year ($/Share) Date 0% 5% 10%
- ------------- ------------ ------------ ----------- ---------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William J. 109,800(1) 6.76% $23.50 11/01/04 $0 $1,527,817 $3,871,804
Cadogan
Lynn J. 40,500(2) 2.49% $23.50 11/01/04 $0 $461,900 $1,170,552
Davis
Frederick D. 0 0% $0 0 $0 $0 $0
Lawrence
Robert E. 0 0% $0 0 $0 $0 $0
Switz
Richard S. 25,500(3) 1.57% $23.50 11/01/04 $0 $211,368 $535,651
Gilbert 10,000(4) 0.62% $30.00 5/12/05 $0 $125,784 $318,763
</TABLE>
__________________
1 These options were granted on November 1, 1994, and have or will become
exercisable as follows: 36,600 on October 31, 1995; 36,600 on October 31,
1996; and 36,600 on October 31, 1997.
2 These options were granted on November 1, 1994, and have or will become
exercisable as follows: 13,500 on October 31, 1995; 13,500 on October 31,
1996; and 13,500 on October 31, 1997.
3 These options were granted on November 1, 1994, and have or will become
exercisable as follows: 8,500 on October 31, 1995; 8,500 on October 31, 1996;
and 8,500 on October 31, 1997.
4 These options were granted on May 12, 1995, and have or will become
exercisable as follows: 3,333 on May 1, 1996; 3,334 on May 1, 1997; and 3,333
on May 1, 1998.
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Fiscal Year 1995 and
--------------------------------------------------------
Value of Options and SARs at End of Fiscal 1995
------------------------------------------------
Number of Unexercised
Options/SARs at End Value of Unexercised In-the-
Shares Value of Fiscal 1995 Money Options/SARs at End of
Acquired on Realized(1) (Exercisable/ Fiscal 1995 (Exercisable/
Exercise (#) ($) Unexercisable) Unexercisable)(2)
- ---------------------- ------------ ------------ ---------------------- -------------------------------
<S> <C> <C> <C> <C>
William J. Cadogan 73,216 $2,566,097 224,196/275,868(3) $6,589,213/$5,340,495(3)
Lynn J. Davis 0 $0 179,016/29,250(4) $5,946,112/$494,156(4)
Frederick D. Lawrence 0 $0 30,666/39,334(5) $632,486/$811,263(5)
Robert E. Switz 0 $0 22,856/21,094(5) $507,105/$468,011(5)
Richard S. Gilbert 6,134 $93,924 10,500/28,000(5) $183,500/$402,125(5)
__________________
</TABLE>
1 Value determined by subtracting the exercise price per share from the market
value per share of the Company's Common Stock at date of exercise.
2 Value determined by subtracting the exercise price per share from the market
value per share of the Company's Common Stock at the end of fiscal 1995.
3 The amounts indicate the number and value of unexercised options held by Mr.
Cadogan as of October 31, 1995. As of such date, Mr. Cadogan also held
unexercised Limited Stock Appreciation Rights ("LSARs") with respect to 16,664
shares, all of which are exercisable in the event of a change in control and as
of the end of fiscal 1995 are valued at $566,576. Such LSARs were granted in
tandem with options granted in fiscal 1990. The exercise of an option reduces
the number of LSARs by a corresponding number of shares, and the exercise of an
LSAR would similarly reduce the number of shares subject to the related option.
4 The amounts indicate the number and value of unexercised options held by Mr.
Davis as of October 31, 1995. As of such date, Mr. Davis also held unexercised
LSARs with respect to 40,000 shares, all of which are exercisable in the event
of a change in control and as of the end of fiscal 1995 are valued at
$1,360,000. Such LSARs were granted in tandem with options granted in fiscal
1990. The exercise of an option reduces the number of LSARs by a corresponding
number of shares, and the exercise of an LSAR would similarly reduce the number
of shares subject to the related option.
5 The amounts indicate the number and value of unexercised options held as of
October 31, 1995. As of such date, no SARs or LSARs were held by such
executive officer.
PENSION PLANS
The Company's Retirement Savings and Stock Ownership Plan (the "Retirement
Plan"), which is a tax qualified defined benefit pension plan, provides for
monthly benefits for life upon retirement and survivor benefits for the spouse
of an employee who dies before retirement. Benefit payments are based on the
sum of a "past service benefit" and a "future service benefit." The past
service benefit is calculated on the basis of a formula which multiplies the
number of years of credited service prior to January 1, 1988, by a dollar
amount equal to 1% of the employee's average annual compensation for the five
years prior to January 1, 1988, plus .5% of the employee's average annual
compensation in excess of $30,000. The future service benefit equals the sum
of the benefit amounts determined separately under a formula for each calendar
year of service after December 31, 1987, including the year of retirement. The
benefit amount for the plan
<PAGE>
year ended December 31, 1988, is calculated on the basis of a formula which
divides the number of days of plan participation in 1988 by 365 and multiplies
that figure by a dollar amount equal to 1% of the employee's annualized
compensation for the year plus .5% of the employee's annualized compensation in
excess of the Social Security table wage base for that year. The benefit
amounts for the plan year ended December 31, 1989, and all plan years
thereafter are calculated on the basis of a formula which divides the number of
days of plan participation in each such year by 365 and multiplies that figure
by a dollar amount equal to 1% of the employee's annualized compensation for
the year up to the adjusted covered compensation for the year plus 1.4% of the
employee's annualized compensation for the year in excess of the adjusted
covered compensation for that year. Adjusted covered compensation is a rounded
amount which is 150% of the average of the Social Security taxable wage bases
in effect for the 35-year period ending in the year the benefit is being
determined for an individual who attains Social Security retirement age in such
year. Adjusted covered compensation for the 1995 plan year was $39,000. No
more than 30 years can be taken into account in determining the past and future
service benefits. Effective January 1, 1994, the Retirement Plan was amended
to provide a minimum benefit for both past and future service equal to $25 for
each month of benefit service. In order to be eligible for the minimum benefit
for service prior to January 1, 1994, a participant must have had average
annual hours of employment for the ten year period ended December 31, 1993 (or
total employment, if less than ten years) of at least 1,872. Eligibility for
the minimum benefit for service since December 31, 1993, requires a minimum of
1,872 total hours of employment for each plan year. The pension benefit will
be equal to the greater of (a) the past and future service formula
calculations, or (b) the minimum benefit. If a participant does not qualify
for the minimum benefit, the pension benefit will be based on the results of
the past and future service formulas. The estimated annual benefits payable to
Messrs. Cadogan, Davis, Lawrence, Switz and Gilbert upon normal retirement at
age 65 are $53,598, $59,352, $35,588, $32,595, and $47,464, respectively.
These estimates are based on the assumption that each such employee's
compensation remains equal to the employee's current salary plus his current
target bonus payable under the Company's Management Incentive Plan.
The Company maintains a 401(k) Excess Plan (the "Excess Plan") intended to
compensate certain employees, as determined in the discretion of the Board of
Directors, for the amount of benefits lost under the Retirement Plan due to
participation in the Company's Deferred Compensation Plan (which permits
employees to defer until retirement payments made to them under the Company's
Management Incentive Plan) and for benefits which cannot be paid from the
Retirement Plan because of maximum benefit and compensation limitations under
the Internal Revenue Code of 1985, as amended (the "Code"). Upon termination
of employment, participants receive a lump sum payment equal to the amount of
such benefits. The estimated annual benefits payable under the Excess Plan to
Messrs. Cadogan, Davis, Lawrence, Switz and Gilbert upon normal retirement at
age 65 are $143,167, $46,157, $68,676, $27,337 and $36,032, respectively.
These estimates are based on the assumption that each employee's compensation
until retirement remains equal to the individual's current salary plus his
current target bonus payable under the Company's Management Incentive Plan.
In March 1993 the Company entered into a Supplemental Executive Retirement
Plan with Mr. Cadogan, effective as of November 1, 1990 (the "SERP"). The SERP
provides for supplemental retirement income benefits that allow Mr. Cadogan,
upon the termination of his employment with the Company and subject to certain
conditions, to receive a single lump sum payment on the first day of the
calendar month following his termination of employment with the Company. The
amount payable to Mr. Cadogan is derived from a formula based upon an amount
equal to 50% of Mr. Cadogan's average monthly compensation during the preceding
five years less the total of all benefits attributable to employer
contributions which are payable to Mr. Cadogan from the Company's Pension Plan
and Pension Excess Plan and certain Social Security benefits payable to him.
Reductions from this amount are made if Mr. Cadogan's employment termination
occurs prior to his 50th birthday. Benefits payable under the SERP are
unfunded and will be paid only from the general assets of the Company.
<PAGE>
Change In Control Arrangements
The Company maintains a Severance Pay Plan to provide severance pay in the
event of a change in control of the Company for executive officers and other
employees of the Company who are participants in the Management Incentive Plan.
The Severance Pay Plan provides for severance pay to those covered employees
who terminate employment, either voluntarily or involuntarily, during the two-
year period following a change in control. Payment is based on the sum of the
employee's base salary and bonus under the Management Incentive Plan, if any.
The Severance Pay Plan also provides for a pro rata payment of the employee's
bonus under the Management Incentive Plan. Payment will be made in a lump sum
upon termination. If there had been a "change in control" (as defined in the
Severance Pay Plan) as of the end of fiscal 1995 and the employment of the five
executive officers named in the Summary Compensation Table were immediately
terminated, then Messrs. Cadogan, Davis, Lawrence, Switz and Gilbert would have
been entitled to receive, pursuant to the terms of the Severance Pay Plan, lump
sum payments upon termination of $2,325,558, $797,048, $792,348, $589,770, and
$556,330, respectively.
The Company has certain other compensatory arrangements with its executive
officers which will result from a change in control of the Company. All stock
option agreements outstanding under the Company's employee stock option and
stock award plans provide for the acceleration of exercisability of options if
the optionee's employment is terminated within two years following a change in
control (except in certain cases where the optionee is terminated for "cause"
or resigns without "good reason"). All restricted stock award agreements
provide for pro rata vesting of all outstanding shares of restricted stock
following a change in control and for full vesting of such shares if the
holder's employment is terminated within two years following a change in
control. The Retirement Plan and Excess Plan prohibit any decrease in benefits
payable under such plans during the two-year period following a change in
control of the Company. The Retirement Plan prohibits any decrease in benefits
payable under the Retirement Plan during such two-year period and credits up to
two years of additional service for employees who terminate employment during
this period. The Excess Plan prohibits any decrease in benefits during the
two-year period following a change in control of the Company.
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The table below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the Telecommunications Equipment Company
Index over the same period (assuming the investment of $100 in the Company's
Common Stock, the S&P 500 Index and the Telecommunications Equipment Company
Index on October 31, 1990, and reinvestment of all dividends).
<TABLE>
<CAPTION>
TOTAL RETURN
<S> <C> <C> <C>
YEAR ADC S&P 500<1> TELCO INDEX<2>
- ---- --- --------- --------------
1990 100 100 100
1991 149 132 163
1992 221 145 174
1993 446 167 392
1994 576 173 417
1995 977 219 722
</TABLE>
1 Total return calculations for the S&P 500 Index were performed by Investor's
Business Daily and are price value calculations.
2 The Telecommunications Equipment Company Index (consisting of approximately
147 companies) is maintained and reported by Investor's Business Daily. Total
return calculations for the Index as it appears above were performed by
Investor's Business Daily and are price value calculations.
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than ten-percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during the fiscal year ended October 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with, except that (i)
Frederick D. Lawrence was late in filing one Form 4 report relating to a single
stock purchase transaction and (ii) John A. Schofield, a current employee and
former executive officer of the Company, was late in filing three Form 4
reports relating in each case to a single stock sale transaction.
<PAGE>
PROPOSAL TO AMEND RESTATED ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
GENERAL
The Board of Directors has determined that Article 3 of the Company's
Restated Articles of Incorporation should be amended and has voted to submit an
amendment to the Company's shareholders for adoption. The proposed amendment
to Article 3 would increase the number of authorized shares of Common Stock,
par value $.20, from 100,000,000 to 300,000,000. The number of shares of
Preferred Stock currently authorized by the Company's Restated Articles of
Incorporation will remain at 10,000,000. If the amendment is approved by the
Company's shareholders, the first sentence of Article 3 of the Company's
Restated Articles of Incorporation will read as follows:
The aggregate number of shares which this corporation shall have authority
to issue is 310,000,000 shares, divided into 300,000,000 shares of Common
Stock, par value $.20 per share, and 10,000,000 shares of Preferred Stock, no
par value.
As of December 31, 1995, there were 62,767,483 shares of Common Stock
outstanding, 4,566,024 shares of Common Stock reserved for future issuance
under the Company's 1991 Stock Incentive Plan, 1,946,788 shares of Common Stock
reserved for future issuance pursuant to the Company's Stock Option and
Restricted Stock Plan, and 104,000 shares of Common Stock reserved for future
issuance pursuant to the Company's Nonemployee Director Stock Option Plan. As
of December 31, 1995, there were no shares of Preferred Stock outstanding.
The additional shares of Common Stock for which authorization is sought
would be a part of the existing class of Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. Such additional shares would not (and the shares of
Common Stock presently outstanding do not) entitle the holders thereof to
preemptive or cumulative voting rights.
PURPOSES AND EFFECTS OF THE AMENDMENTS
Except for shares reserved as noted above, the Company has no agreements
or understandings concerning the issuance of any additional shares of Common
Stock. However, the Board believes that additional authorized shares of Common
Stock will enable the Company, as the need may arise, to take timely advantage
of market conditions and the availability of favorable financing and
acquisition opportunities without the delay and expense associated with
convening a special shareholders' meeting. The shares of Common Stock could be
used for acquisition by the Company of businesses or properties, equity
financing, stock dividends and other general corporate purposes.
Unless required by law or by the rules of any stock exchange on which the
Company's Common Stock may in the future be listed, no further authorized vote
by the shareholders will be sought for any issuance of shares of Common Stock.
Under existing National Association of Securities Dealers, Inc. regulations,
approval by a majority of the holders of Common Stock would nevertheless be
required prior to the original issuance of additional shares of Common Stock,
other than in a public offering for cash, (i) if the Common Stock (including
securities convertible into or exercisable for Common Stock) has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of the Common Stock; or (ii) if the number of
shares of Common Stock to be issued is or will be equal to or in excess of 20%
of the number of shares outstanding before the issuance of the Common Stock; or
(iii) if the issuance would result in a change in control of the Company.
The authorized but unissued shares of Common Stock could make more
difficult or discourage a merger, tender offer, proxy contest or change in
control of the Company and the removal of management, which shareholders might
otherwise deem favorable. Under certain
<PAGE>
circumstances, such shares of Common Stock could be used to create voting
impediments, or to frustrate an attempt by a person or entity to effect a
takeover or otherwise gain control of the Company, since the issuance of new
shares could be used to dilute the stock ownership of such person or entity.
Such shares could be sold privately to purchasers who might side with the Board
in opposing a takeover bid that the Board determines is not in the best
interests of the Company.
Certain provisions of the Company's Restated Articles of Incorporation
(the "Articles") and Bylaws, Minnesota law and the Company's Amended and
Restated Rights Agreement (the "Rights Plan") may also have the effect of
discouraging certain types of tender offers and other transactions that involve
a change in control of the Company. The Articles currently require an 80%
shareholder vote in order to approve certain business combinations involving
the Company and a related shareholder and to amend provisions of the Articles
governing the number, classifications, terms of office, removal and replacement
of directors. Under the Company's Articles and Bylaws, the Company's Directors
are elected for three-year staggered terms and cumulative voting in the
election of Directors is prohibited. This prevents anyone from gaining control
of the Board at any single election, thus thwarting this means as a takeover
strategy. The Company is also subject to certain provisions of the Minnesota
Business Corporation Act which limit the voting rights of shares acquired in
"control share acquisitions" and restrict certain "business combinations." In
addition, under the Rights Plan rights to purchase Common Stock were issued as
a dividend to holders of Common Stock in order to protect the interests of the
Company's shareholders against inadequate and coercive offers by encouraging
anyone seeking to acquire the Company to negotiate with the Board of Directors.
The overall effect of the foregoing provisions of the Company's Articles
and Bylaws, Minnesota law, the Rights Plan and the ability of the Board of
Directors to issue additional shares of Common Stock may be to delay or prevent
attempts by other persons or entities to acquire control of the Company without
negotiations with the Company's Board of Directors.
BOARD RECOMMENDATION AND SHAREHOLDER VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK. Unless otherwise
directed, the persons named in the accompanying proxy intend to vote the
proxies held by them in favor of such proposal. The affirmative vote of the
holders of a majority of the shares of Common Stock present and entitled to
vote at the Annual Meeting on this item of business is required for the
approval of the proposal (provided that the number of shares voted in favor of
the proposal constitute more than 25% of the outstanding shares of the Common
Stock of the Company).
If a shareholder abstains from voting as to this proposal, then the shares
held by such shareholder shall be deemed present at the Annual Meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to this proposal, but shall not be deemed to have been voted in favor
of this proposal. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on this proposal, then the shares covered by such non-vote
shall be deemed present at the meeting for purposes of determining a quorum,
but not for purposes of calculating the vote with respect to this proposal.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited the books and records of the Company since
1960, and the Board of Directors intends to reappoint Arthur Andersen LLP for
the Company's fiscal year ending October 31, 1996. Representatives of Arthur
Andersen LLP will be present at the Annual Meeting with the opportunity to make
a statement if they desire and will be available to respond to questions. The
Audit Committee of the Board of Directors meets at least annually with
representatives of Arthur Andersen LLP to review audit and accounting matters
and the scope and level of fees for services rendered.
<PAGE>
SHAREHOLDERS PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholders wishing to present proposals to be considered at the 1997
annual meeting of shareholders should submit the proposals to the Company in
accordance with all applicable rules and regulations of the SEC no later than
September 26, 1996.
OTHER MATTERS
The Company knows of no other matters to come before the Annual Meeting.
If other matters are properly brought before the Annual Meeting, it is the
intention of the persons named as proxies in the enclosed Proxy to vote as they
deem in the best interest of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
David F. Fisher
Secretary
January 24, 1996
