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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
(Mark One)
/X/ For the fiscal year ended October 31, 1996
OR
/ / For the Transition period from ___________ to ___________
Commission File No. 0-1424
ADC Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 41-0743912
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12501 Whitewater Drive
Minnetonka, Minnesota 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 938-8080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.02 par value
Common Stock
Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. /X/ Yes / / No
The aggregate market value of voting stock held by nonaffiliates of the
registrant, as of January 2, 1997, was approximately $3,950,151,836 (based on
the last sale price of such stock as reported by the Nasdaq Stock Market
National Market).
The number of shares outstanding of the registrant's common stock, $.20
par value, as of January 2, 1997, was 130,481,850.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. / /
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G(3), the responses to Items 10, 11, 12
and 13 of Part III of this report are incorporated herein by reference to the
information contained in the Company's definitive proxy statement for its
1997 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission on or before February 25, 1997.
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PART I
ITEM 1. BUSINESS
ADC designs, manufactures and markets transmission and enterprise
networking systems and connectivity products for use in fiber optic, twisted
pair, coaxial and wireless broadband global networks. The Company's wide
range of products employ fiber optic, hybrid fiber coax, wireless and
traditional copper-based technologies. The Company's customers include:
public network providers, which consist of all seven of the Regional Bell
Operating Companies (RBOCs), other telephone companies, long distance
carriers, wireless service providers, major cable TV operators and other
domestic public network providers; private and governmental network providers
(such as various large business customers and governmental agencies);
international network operators; and major telecommunications Original
Equipment Manufacturers (OEMs). The Company's products enable these network
providers to build and upgrade their networks to support increasing user
demand for voice, data and video services.
As used in this report, unless the context otherwise requires, the terms
"Company" and "ADC" refer to ADC Telecommunications, Inc. and its wholly
owned and majority owned subsidiaries; 1994, 1995 and 1996 refer to the
Company's fiscal years ended October 31, 1994, 1995 and 1996, respectively;
and 1997 refers to the Company's fiscal year ending October 31, 1997.
INDUSTRY BACKGROUND
Since the 1970's, the telecommunications equipment industry has grown and
changed substantially, primarily as a result of continuous technological
development; increased demand for the high speed transmission of data and
video traffic and the convergence of all network traffic into integrated
multimedia services over public and private networks; and a changing
regulatory and competitive environment. The Company believes that these
trends will continue to drive changes in the telecommunications equipment
industry for the foreseeable future.
Several important technological developments have spurred the evolution
of the telecommunications equipment industry. One important technological
change has been the deployment of fiber optic transmission systems. In a
fiber optic system, lasers transmit voice, data and video traffic in the form
of analog or digital coded light pulses through glass fibers. The increasing
shift to fiber optic transmission systems has been principally due to the
ability of fiber optics to carry large volumes of information at high speeds,
its insensitivity to electromagnetic interference and the high transmission
quality made possible by the physical properties of light.
The development of cost-effective digital technology has allowed greater
capacity (or speed) in network transmission and has resulted in an increasing
trend over the past decade to replace analog technology in copper, fiber and
wireless transmission networks. In analog technology, information is
converted to a voltage or current wave form for processing or transmission.
In digital technology, information is converted to digital bits and then
processed or transmitted using computer based components. Very high-speed
digital technology
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developments such as cell based Asynchronous Transfer Mode (ATM) technologies
and Synchronous Optical NETwork (SONET) technologies have enabled network
providers to transmit increasing amounts of data and video communications.
Another important technological change in the telecommunications
marketplace is the use of integrated circuits in both public and private
telecommunications networks, facilitating significantly more complex
networks. Network equipment utilizing integrated circuits is increasingly
performing the high speed switching, network performance monitoring, network
management, information compression, data translation and other complex
functions required to address expanding users' needs.
More recently, wireless technology developments are having an impact on
the telecommunications equipment industry. There has been substantial growth
in wireless communications such as cellular telephone services and
satellite-based services, and significant preparations for increasing use of
Personal Communications Services (PCS) communications, Multichannel,
Multipoint Distribution Systems (MMDS) for wireless cable services and
wireless data and paging services. This growth has been spurred by the
convenience of mobility and the limits of wireline infrastructure. In
particular, in countries without reliable or extensive wireline systems,
wireless service could ultimately provide the primary service platform for
both mobile and fixed telecommunications applications, because of the
potential savings in installation time and cost. The Company believes that
in future years the continuing development of wireless communications
technology could substantially extend the reach of current communications
networks.
Finally, over the past two years, Digital Subscriber Line (DSL)
technology advancements have resulted in a resurgence of copper-based
transmission of high bandwidth services to business customers. The Company
believes that in future years the continuing development of DSL technology
could enable network providers to transport residential broadband services
over copper-based systems in certain applications.
Demands on network infrastructure have grown substantially in the past
decade. Networks increasingly are required to transmit large volumes of data
and video for the purpose of communicating information, conducting business
and delivering entertainment. In addition, both public and private network
customers are requesting the convergence of their voice, data and video
traffic into integrated multimedia services transmitted over one network.
Such demands have prompted the development and use of "broadband" networks,
which feature the improved reliability and increased speed of transmission
generally required for data and video transmission over the network.
Specifically, the industry term "broadband" refers to all transmission speeds
of T1 (1.544 million bits per second) and higher. Growth in broadband
network applications has fueled increased infrastructure investment by
network operators in order to expand network capacity and provide new
applications and services to meet users' needs.
The evolution in technology and user needs has been accompanied by
changes in the domestic and international regulatory environment. Since the
divestiture of the AT&T regional operating companies in 1984 (under a consent
decree), the RBOCs have been prevented from
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manufacturing equipment for use in telecommunications networks. As the RBOCs
have embarked on aggressive expansion plans, significant opportunities have
been created for independent telecommunications equipment manufacturers such
as the Company.
In February 1996, the U.S. Congress enacted the Telecommunications Reform
Act of 1996 (the Telecommunications Act), which opened competition for local
loop access services to local telephone companies, long distance telephone
companies, cable TV companies, electric utilities and potentially others.
The Telecommunications Act represents a fundamental change from the
Communications Act of 1934 (the basis of the U.S. telephone industry
structure prior to 1996) which protected franchised monopolies in local
telephone service. The Telecommunications Act also allows the RBOCs to
provide long distance service and manufacture telecommunications equipment
under certain circumstances, a significant change from the 1984 consent
decree which required divestiture of the AT&T regional operating companies.
The objective of the Telecommunications Act is to reduce regulation and
stimulate competition in telecommunications services, which in turn is
expected to result in more rapid introduction of new technologies and
services, better quality of service, a broader range of service options,
lower costs to consumers and stimulation of the overall economy through an
improved information system infrastructure.
Since the passage of the Telecommunications Act, the Federal
Communications Commission (FCC) and the federal courts, as well as various
state governments and agencies, have initiated activities to define and
establish rules for implementation of the new law. The Company believes that
the impact of the Telecommunications Act in reducing regulation of and
restrictions on the U.S. telecommunications industry will unfold over the
next several years.
Outside the United States, the telecommunications equipment market has
also expanded and changed significantly in recent years, as network users
have increasingly demanded access to voice, data and video communications
capabilities. Many countries without reliable or extensive wireline systems
are seeking to develop and enhance their telecommunications infrastructure.
This growth in demand for network services and infrastructure has been
accompanied by changes in the international regulatory environment. In many
countries, government operated telecommunications monopolies are being
converted to private network services providers, and competition among such
carriers is expected to intensify. Policies of deregulation and
privatization are currently being followed in many countries, thereby
increasing opportunities for independent companies to supply products and
services within public telephone system markets and within private voice,
data and video communications markets.
The Company believes that "broadband global networking" (the emerging
series of worldwide broadband networks) represents a key enabling capability
for meeting the information needs of network users. The addition of high
speed data and video traffic has driven the need for broadband infrastructure
and has enabled the creation of a wide range of new applications, including
broadband Internet access and e-mail, video on demand, electronic commerce,
distance learning, telecommuting and remote medical imaging. The Company
participates in this emerging broadband global network market by providing a
broad variety of equipment, services and integrated product solutions.
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STRATEGY
ADC's strategy is to capitalize on opportunities in the evolving global
telecommunications market by providing equipment, services and integrated
solutions for its customers' voice, data and video telecommunications
networks. ADC's broad range of products addresses key areas of the
telecommunications network infrastructure, and these products are used to
connect physical networks, access network services, transport network traffic
and manage networks. ADC's diverse product offerings address the needs of
its customers, which include the RBOCs, other telephone companies, long
distance carriers, wireless service providers, the major cable TV operators,
other public network providers, private network providers and
telecommunications OEMs.
Key components of the Company's strategy include:
FOCUS ON BROADBAND NETWORK OPPORTUNITIES. In recent years, broadband
requirements for both public and private networks have grown significantly.
Accordingly, ADC is focusing its product development and marketing efforts on
opportunities in emerging broadband networks. In the public network market,
broadband deployment has been driven by telephone and cable television
providers seeking to establish the infrastructure required to offer Internet
access, new data, video and telephony services, entertainment and other
interactive services to residential customers over a single network. In the
private network market, broadband requirements have been driven by the growth
of data, voice and video applications utilizing increasing amounts of
bandwidth. Examples of products developed by ADC to target these
opportunities include the Company's Homeworx-TM- system, which has been
designed to enable telephone and cable television companies to provide a
range of voice, video and data services to residential customers; the
Soneplex-Registered Trademark- product platform, which allows public network
providers to cost effectively deliver and manage broadband services over the
public network for their business customers; the AAC-3-TM- ATM access
concentrator, which allows customers to gain access to high speed switched
voice, data and video traffic on public networks from their private networks;
and the Company's family of CityWide-TM- wireless systems, which provide
access to, add to and extend cellular communications coverage. In addition,
ADC's 1996 acquisitions and joint ventures improved the Company's ability to
target broadband network opportunities. See "PURSUE STRATEGIC ALLIANCES AND
ACQUISITIONS" strategy discussion below.
PROVIDE END-TO-END NETWORK SOLUTIONS. ADC offers a broad line of
telecommunications equipment that addresses customers' key network needs from
the central office, through the local loop (the portion of a network that
connects a subscriber's equipment to a local central office), into the
customer premise and across enterprise networks. Through internal
development, acquisitions and joint ventures, ADC has formed its expertise in
three major network areas: transmission, enterprise networking and broadband
connectivity. In addition, during 1996, ADC significantly enhanced its
network management and systems integration capabilities through acquisitions,
joint ventures and internal developments to enable it to offer customers more
complete solutions to their network needs.
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LEVERAGE TECHNOLOGICAL CAPABILITIES ACROSS PRODUCT GROUPS. ADC has
developed substantial expertise in fiber optics, broadband, video and
wireless technologies. The Company has built these core competencies through
internal development, acquisitions, joint ventures and technology licensing
arrangements. ADC's strategy is to leverage these core competencies across
its product groups in order to develop new product architectures and network
management tools for its customers' evolving voice, data and video network
needs in various market areas. For example, the Company is continuing
development of its wireless technologies for use in converging wired and
wireless applications, such as potential wireless local loop products. See
"PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS" strategy discussion below for
recent wireless technology additions.
EXPAND INTERNATIONAL PRESENCE. ADC believes that significant growth in
the telecommunications equipment market will occur outside the United States
as a result of deregulation and the need of many foreign countries to
substantially expand or enhance their telecommunications services. ADC's
strategy is to continue to expand its international presence by increasing
its international sales and marketing resources, leveraging its existing
customer relationships, developing additional international distribution
channels and seeking strategic alliances and acquisitions. During 1996, this
strategy resulted in ADC increasing its international sales approximately
65%, to a level representing approximately 21% of total sales. Two of the
companies ADC acquired during 1996 and several of its new strategic alliance
partners have their principal operations outside the United States.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. ADC has sought and intends
to continue to seek alliances and acquisitions which will: (i) add key
technologies that it can leverage across its businesses, (ii) broaden its
product offerings, (iii) permit the Company to enter attractive new markets
and (iv) expand or enhance its distribution channels. Recent examples of
such alliances and acquisitions include: (i) the acquisition of Da Tel
Fibernet, a provider of engineering, design and installation services and
manufacturer of telecommunications infrastructure products, (ii) the
acquisition of Information Transmission Systems Corp. (ITS), a manufacturer
of television transmission products for the wireless cable and broadcast
industry, (iii) the acquisition of Metrica Systems Ltd., a United Kingdom
software design firm specializing in applications-based network management
tools for global wireless and, increasingly, wireline networks, (iv) the
acquisition of Skyline Technology, Inc., a manufacturer of ISDN/Frame Relay
access products for Internet and other high-speed digital connections, (v)
the acquisition of Solitra Oy, a Finnish wireless infrastructure company that
designs, manufactures and markets radio frequency filters and other wireless
base station equipment components and subsystems; (vi) the acquisition of the
wireless infrastructure equipment group of Pacific Communication Sciences,
Inc. (PCSI-Registered Trademark-), a provider of systems level design and
wireless base station equipment in various wireless technologies; (vii) ADC's
joint venture investment in PCS Solutions, LLC, a Personal Communications
Services (PCS) company that designs, manufactures and markets cable microcell
integrators; (viii) ADC's joint venture with Nanjing Panda Electronics
Company, Ltd. to provide hybrid fiber coax technology for telephony and data
services delivery in China; (ix) ADC's joint development and marketing
alliance with Nippon Telephone & Telegraph International (NTTI) for public
network ATM access products; and (x) ADC's distribution
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agreement with Nanjing Telecommunications Equipment Factory to market fiber
optic cabling systems throughout China.
The ability of the Company to effectively implement its strategy is
subject to many uncertainties and there can be no assurance of any future
results of the Company's activities.
PRODUCT GROUPS
The Company's products can be categorized into three general functional
groups: (i) transmission, (ii) enterprise networking and (iii) broadband
connectivity. These product groups accounted for approximately 37%, 18% and
45%, respectively, of the Company's net sales during 1996. Each of these
product groups is discussed below.
TRANSMISSION
ADC's transmission products provide electronic and optical signal
generation within predominantly global, public networks. Certain of the
transmission products also provide access to the network in order to monitor,
test and reroute circuits within telecommunications transmission systems.
ADC's transmission products are designed for use in copper-based, coax-based,
fiber-based or wireless transmission networks and are sold to telephone
companies, cable TV companies, other public network providers and to users of
private voice, data and video networks. Transmission products and services
include fiber optic video delivery products, other high speed voice, data and
video delivery and access platforms, wireless cable and broadcast TV
transmission equipment, wireless microcell systems, wireless performance and
network management systems, test and monitoring systems, digital repeaters
and systems integration services and products. Certain of the Company's
transmission products are described below.
DV6000-TM- SYSTEM AND OTHER FIBER VIDEO DELIVERY EQUIPMENT. The DV6000
system transmits a variety of signal types using a high speed, uncompressed
digital format (at speeds up to 10 billion bits per second) over fiber in the
super trunking portions of broadcast and interactive video networks. This
system is used in significant public residential broadband networks, such as
Viacom Cable's San Francisco Bay Area video backbone network, the regional
headend network in Florida of TCI Cablevision of Florida, Inc., and new video
networks installed by telephone companies, including Southern New England
Telephone Corporation (SNET) and Ameritech Corporation. The Company also
manufactures various analog video transmission systems used in cable TV and
broadcast applications and interactive systems for distance learning and
campus interconnects.
HOMEWORX-TM- ACCESS TRANSPORT PLATFORM. The Company's Homeworx access
transport platform is a customer loop transmission system for small business
and residential customers utilizing hybrid fiber coax technology. The
Homeworx system has been designed for deployment on video-only, integrated
video and telephony and telephony-only broadband networks provided by
telephone operating companies, cable TV companies and other
telecommunications common carriers. The Homeworx system has been selected
for video-only use in the residential broadband networks of Ameritech
Corporation, SNET, MediaOne, Cox Cable Communications, Inc. and Cable
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Bahamas. Test trials for the enhanced telephony version of the Homeworx
system have commenced with a number of customers. Optus Vision Pty. Ltd. in
Australia has elected to use the telephony capability of the integrated video
and telephony Homeworx system in its residential broadband network
deployment, and the Company commenced shipping this product in commercial
volumes in the first quarter of 1997. Recently, a unit of a Malaysian
telecommunications company, Binariang Sdn, Bhd., selected ADC's cable
telephony equipment for construction of a network which is expected to
provide telephony, data and cable television services to more than 100,000
residential and commercial customers by the end of calendar 1997. Finally,
the cable data modem portion of the system (developed in partnership with
NetComm Limited of Sydney, Australia) is being tested by a limited number of
the Company's customers both in the United States and internationally. The
Company currently expects to begin shipping commercial volumes of the cable
data modem product in the second half of 1997.
SONEPLEX-Registered Trademark- SERVICE DELIVERY PLATFORM. The Company's
Soneplex platform is an intelligent loop access platform enabling public
network providers to deliver T1-based services over copper or fiber for
business customers. The Company's Soneplex family of platforms and modules
employ electrical-to-optical conversion for transport of voice, data and
video over fiber facilities and High bit-rate Digital Subscriber Line (HDSL)
transmission technology for transport of high bandwidth services over
copper-based systems. Soneplex products also integrate remote provisioning,
circuit performance monitoring and test access capabilities to help public
network carriers provide reliable service at a low operational cost. The
Company introduced new modules and capabilities for the Soneplex platform
(including SONET interworking and HDSL-based Internet and LAN access and
routing) during 1996, and has the next-generation Soneplex platform under
development for anticipated testing by a limited number of customers in 1997.
WIRELESS CABLE/BROADCAST TELEVISION TRANSMISSION EQUIPMENT. During 1996, the
Company entered the wireless cable and television broadcast markets with its
purchase of ITS, which is headquartered in McMurray, Pennsylvania. ITS
designs and manufactures television transmission products for these markets.
Shortly after the acquisition, ITS entered into a contract to supply
transmitters, combiners, back-up equipment and antennas to CAI Wireless
Systems, Inc., the first wireless cable operator to enter into a supply
agreement with RBOCs for Multichannel Multipoint Distribution Services
(MMDS). ITS's wireless products complement and expand ADC's residential
broadband product portfolio.
CITYWIDE-TM- PRODUCTS. The Company's family of CityWide wireless systems
products includes the CityCell-Registered Trademark- wideband digital
microcells for adding and extending cellular communication coverage, both
out-of-doors and in-building. The CitySector-Registered Trademark- microcell
is the first fully sectorized microcell offering 25 to 100 watts of Radio
Frequency (RF) power per sector. Fully transparent to analog or digital
modulation, the CityWide products have been commercially deployed by six RBOC
cellular network providers. The next generation wideband CityCell microcell,
currently in customer test trials, utilizes T1 copper transport rather than
fiber transport. The Company has begun shipping its CityRFX-Registered
Trademark- cellular indoor antenna distribution systems and has under
development PCS and Global System for Mobile Communications (GSM) versions of
these systems. The Company also offers advanced intelligent network
solutions for its CityWide product family.
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PCS EQUIPMENT. During 1996, the Company made a joint venture investment in
PCS Solutions, LLC, a company that designs, manufactures and markets cable
microcell integrators (utilizing Remote Antenna Distribution or RAD
technology). In addition, ADC significantly advanced its PCS developments
with its recent acquisition of the wireless infrastructure equipment group
from PCSI-Registered Trademark-, a provider of systems level design and
wireless base station equipment for various PCS, Cellular Digital Packet Data
(CDPD) and paging technologies. The Company also has developed and begun
shipping in-building distributed antenna systems. ADC expects to introduce
various PCS products and systems during 1997, and to begin customer field
trials for several of these new products during 1997.
WIRELESS PERFORMANCE AND NETWORK MANAGEMENT SYSTEMS. Through its acquisition
of London-based Metrica Systems Ltd. in 1996, the Company significantly
expanded its software product offerings. Metrica Systems is a software
design firm specializing in network performance management tools. Its
software systems are used in the infrastructure management systems of several
wireless and, increasingly, wireline public network operators throughout the
world.
TEST AND MONITORING SYSTEMS. The Company manufactures a variety of remote
digital test and performance monitoring products for copper-based and
fiber-based systems.
DIGITAL REPEATERS. The Company's copper-based digital repeaters are used
primarily in central office applications to regenerate digital signals that
have degraded because of transmission over long distances.
SYSTEMS INTEGRATION SERVICES AND PRODUCTS. During 1996, ADC significantly
increased its systems integration capabilities with the acquisition of Da Tel
Fibernet, a provider of engineering, design and installation services and a
manufacturer of telecommunications infrastructure products. Systems
integration services relating to the Company's transmission product group are
provided in the following areas: overall project management; technical
consulting and design; implementation; product support; performance
assessment; and training services. ADC's systems integration products
consist of multimedia systems from several ADC product areas designed
specifically for integrated voice, data and video applications such as
distance learning, business, medical and government networks. The Company
supplies its systems integration services and products primarily to telephone
operating companies, other common carriers and users of private
telecommunications networks.
ENTERPRISE NETWORKING
ADC's enterprise networking products provide interconnection and
transmission of voice, data and video signals within a private network and
also provide access to the public network. These products are designed for
use in copper-based, fiber optic and wireless global networks and are sold to
users of private voice, data and video networks, either directly or through
telecommunications common carriers or Value Added Resellers (VARs).
Enterprise Networking products include public network access equipment,
internetworking products and data network
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management products. Certain of the Company's enterprise networking products
are described below.
PUBLIC NETWORK ACCESS EQUIPMENT. The Company manufactures a family of
Channel Service Unit (CSU) and Data Service Unit (DSU) products which are
used to interconnect digitally the public network and the private network.
This equipment monitors circuits and provides system protection and other
network management functions. Certain of these products also enable the
customer to test the performance of its voice network and allow connection of
voice, data and video circuits. These products support T1, T3 (44.6 million
bits per second) and OC3 (155 million bits per second) services and a variety
of data protocols, including Frame Relay, Switched Multi-megabit Data Service
(SMDS), ATM, ISDN, HDSL and the Internet protocols. During 1996, the Company
enhanced its AAC-1-TM- and AAC-3-TM- ATM access concentrators. These products
adapt, aggregate, multiplex and manage voice, data and video signals in
various speeds, technologies and protocols for transport over T1, E1, T3 and
E3 speed ATM networks. The Company also acquired Skyline Technology, Inc., a
manufacturer of ISDN and Frame Relay access products for Internet and other
high-speed digital connections and commercially released several remote
access and routing products, some specifically designed for Internet access.
The Company has entered into agreements with ATM equipment suppliers to
integrate ADC's ATM adaptation and concentration technologies into those
companies' ATM switching and routing products, and to jointly market ADC's
ATM access concentrators. During 1996, ADC entered into an agreement with
NTTI to jointly develop and market public network ATM access products, and
agreements with Ericsson and Lucent Technologies to market ADC's ATM access
concentrators.
INTERNETWORKING PRODUCTS. Internetworking products include fiber optic
backbones used to transport high speed multiple voice, data and video signals
simultaneously over private networks and link Local Area Networks (LANs),
mainframes, minicomputers, personal computers, telephone systems and video
equipment with diverse protocols within private networks or over the public
network; intelligent wiring hub products which interconnect workstations,
personal computers and terminals, utilizing many different LAN protocols and
types of cables; and network management systems.
PATCH/SWITCH SYSTEM AND PATCHMATE-TM- MODULE. The Company's Patch/Switch
system is a data network management product which provides access to and
monitors, tests and reconfigures digital data circuits and permits local or
remote switching to alternate circuits or backup equipment. This system is
modular, permitting the user to select and combine the particular functions
desired in a system. The PatchMate module is a manually operated
electromechanical device used to gain access to the network in order to
monitor, test and reconfigure digital data circuits.
Recognizing changes in the competitive environment for LAN equipment,
during 1995 the Company realigned its Kentrox and Fibermux subsidiaries into
one business unit to better address the industry trend toward integration of
LAN and Wide Area Network (WAN) technologies and products. This group combines
LAN and WAN expertise in order to develop, manufacture and distribute
advanced network access and transport products for use in current and
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future broadband enterprise networks. The Company recorded a 1995 charge of
$3.9 million related to a personnel reduction at the Fibermux facility and
other expenses resulting from the integration of Kentrox and Fibermux.
Further integration and consolidation of these two subsidiaries is planned
for 1997. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 2 of "Notes to Consolidated Financial
Statements."
BROADBAND CONNECTIVITY
ADC's broadband connectivity products provide the physical contact points
for connecting different telecommunications system components and gaining
access to telecommunications system circuits for the purpose of installing,
testing, monitoring or reconfiguring such circuits within global public and
private networks. These products are sold to the RBOCs, other telephone
companies, long distance carriers, other public network providers such as
cable TV companies and wireless services providers, international network
operators, private network providers and telecommunications OEMs. The
Company's broadband connectivity products are designed for use in
copper-based, coax, fiber optic or wireless transmission networks. Broadband
connectivity products and services include various network access/connection
devices for copper and coax networks, various network access/connection
devices for fiber optic networks, modular fiber optic cable routing systems,
outside plant cabinets and enclosures, wireless infrastructure equipment and
subsystems, broadband software infrastructure management systems and systems
integration services. Certain of the Company's broadband connectivity
products are described below.
JACKS, PLUGS AND PATCH CORDS. Jacks and plugs are the basic components used
to gain access to copper telecommunications circuits for testing and
maintenance. Patch cords are wires or cables with a plug on each end. ADC
incorporates its jacks, plugs and patch cords into its own products and also
sells them in component form, primarily to OEMs. These components are
generally manufactured to industry-recognized compatibility and reliability
standards as off-the-shelf items.
JACKFIELDS AND PATCH BAYS. A jackfield is a module containing an assembly of
jacks wired to terminal blocks or connectors and used by telecommunications
companies to gain access to copper communication circuits for testing or
patching the circuits. ADC manufactures jackfields in both longframe and
bantam formats, including prewired and connectorized models. When testing a
large number of circuits, series of jackfields are combined in specialized
rack assemblies, which often may include test modules. These assemblies are
called patch bays. ADC manufactures a range of jackfields and patch bays in
various configurations. Certain of these jackfields are specialized for use
in audio and visual transmission networks in the broadcast industry.
DSX PRODUCTS. ADC manufactures digital signal cross-connect (DSX) modules
and bays, which are jackfields and patch bays designed to gain access to and
cross-connect digital copper circuits for voice, data and video transmission.
Since the introduction of DSX products in 1977, the
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Company has continued to expand and refine its DSX product offerings, and has
become a leading manufacturer of products for the mechanical termination and
interconnection of digital circuits used in voice and data transmission. The
Digital Distribution Point (DDP) family of products within the DSX product
group are mechanical alternatives to hard-wiring equipment used for cable
management and circuit access with software based, electronic digital
cross-connect systems.
TERMINAL BLOCK AND FRAME PRODUCTS. Terminal blocks are molded plastic blocks
with contact points used to facilitate multiple wire interconnections. ADC
manufactures a wide variety of terminal blocks. The Company's cross-connect
frames are terminal block assemblies used to connect the external wiring of a
telecommunications network to the internal wiring of a telephone operating
company central office or to interconnect various pieces of equipment within
a telephone company central office or at a customer's premise.
VIDEO SIGNAL DISTRIBUTION PRODUCTS. ADC's series of Video Signal
Distribution (VSD) products are designed to meet the unique performance
requirements of Radio Frequency (RF) video transmission over coax cable.
This product family includes a series of splitter/combiner panels, a series
of video jacks and panels which monitor, patch and provide a test access
point and an analog video interface system panel designed for on-demand
testing.
FIBER OPTIC PATCH CORDS AND CABLE ASSEMBLIES. Fiber optic patch cords are
functionally similar to copper patch cords and are the basic components used
to gain access to fiber telecommunications circuits for testing, maintenance,
cross-connection and configuration purposes. The Company's
LightTracer-TM- fiber optic patch cords provide immediate identification of
fiber optic connections. The Company incorporates its fiber optic patch
cords and cable assemblies into its own products and also sells them in
component form.
FIBER OPTIC COUPLERS. Fiber optic couplers are passive connection devices
used in fiber optic transmission systems to conform to the stringent
environmental, reliability, performance and mechanical standards required in
global broadband network and test equipment markets. These products, which
include optical splitters and wavelength division multiplexers, enable
efficient and cost-effective deployment of broadband networks. Fiber optic
couplers were added to ADC's product line through the acquisition of AOFR
Pty. Ltd. in Australia during 1995.
FIBER DISTRIBUTION PANELS AND FRAMES. Fiber distribution panels and frames
are functionally similar to copper jackfields and frames designed with
special considerations of fiber optic properties. They also provide
interconnection points between fiber optic cables entering a building and
fiber optic cables connected to fiber optic equipment within the building.
FIBERGUIDE-Registered Trademark- SYSTEM. The FiberGuide system is a modular
routing system which provides a segregated, protected method of storing and
routing fiber patch cords and cables within buildings.
OUTSIDE PLANT PRODUCTS. Outside plant (OSP) products consist of cabinets and
other enclosures configured to locate and integrate the functions of passive
fiber optic equipment outside the
12
<PAGE>
telephone central office/cable TV headend switching and transmission
facilities. The Company's OSP products provide flexible management of the
network and environmental protection for various telecommunications
topologies and architectures.
WIRELESS INFRASTRUCTURE EQUIPMENT AND SUBSYSTEMS. During 1996, ADC acquired
Solitra Oy, a Finland-based, wireless infrastructure company that designs,
manufactures and markets radio frequency filters and other wireless base station
and subscriber equipment components and subsystems. As a result of the Solitra
Oy acquisition, ADC significantly expanded its broadband wireless connectivity
product portfolio. These products are sold primarily to wireless OEMs.
BROADBAND SOFTWARE INFRASTRUCTURE MANAGEMENT SOLUTIONS. ADC has developed a
number of software products which provide management of fiber optic
infrastructure connectivity, geographical tracking of equipment, cables and
other network elements in the telephone company central office, cable TV company
headend and outside plant portion of those networks, and extensive database
reporting.
SYSTEMS INTEGRATION SERVICES. The Company's systems integration services
relating to the Company's broadband connectivity product group are divided into
three areas: technical service design and management; operations and
implementation; and training and documentation services. These services
usually consist of layout and installation of new telecommunications networks,
modification of existing networks or the addition of equipment to existing
networks. The Company provides its systems integration services primarily to
telephone operating companies, other common carriers and users of private
telecommunications networks.
SALES AND MARKETING
ADC sells its products to customers in three primary markets: (i) the
United States public telecommunications network market, which consists of all
seven of the RBOCs, other telephone companies, long distance carriers, wireless
service providers, the major cable TV operators and other domestic public
network providers; (ii) the private and governmental voice, data and video
network market in the United States, such as various large business customers
and governmental agencies that own and operate their own voice, data and video
networks for internal use; and (iii) the international public and private
network market. The U.S. public, U.S. private and governmental and
international market segments accounted for 58%, 21% and 21%, respectively of
the Company's net sales for the year ended October 31, 1996; 58%, 24% and 18%,
respectively of the Company's net sales for the year ended October 31, 1995; and
57%, 28% and 15%, respectively, of the Company's net sales for the year ended
October 31, 1994. The Company also sells product for each of these customer
groups to the major telecommunications OEMs.
Purchases of products by public network providers and the OEMs which supply
such companies have accounted for the largest portion of the Company's net sales
in recent periods. The Company's transmission and broadband connectivity
products for public network providers are primarily located in central
transmission facilities (such as telephone company network central offices,
cable TV company network supertrunks and headend offices, and wireless
13
<PAGE>
network global switching centers and base stations, all of which contain the
equipment used in switching and transmitting incoming and outgoing circuits).
Increasingly, portions of the Company's public network transmission systems
are located in the public network outside plant facilities (outside the
central transmission buildings) and on customers' premises. The Company's
private and governmental network customers generally purchase the Company's
enterprise-wide communications systems and public network access equipment
for installation in the networks located at their premises. The Company also
markets its products outside the United States primarily to telephone
operating companies and cable TV companies for public telecommunications
networks.
A majority of the Company's sales are made by a direct sales force, and
the Company maintains sales offices throughout the United States as well as
in Canada, Europe, Asia, Australia and Central and South America. The
Company's products are sold in the United States by field sales
representatives located in 13 sales offices throughout the country, and by
several dealer organizations and distributors. The Company products are
sold outside the United States by independent sales representatives located
in 20 field sales offices and distributors, as well as through United States
public and private network providers who also distribute outside the United
States.
The Company has a customer service group that supports field sales
personnel and is responsible for application engineering, customer training,
entering orders and supplying delivery status information, and a field service
engineering group that provides on-site service to customers.
RESEARCH AND DEVELOPMENT
The Company believes that its future success depends on its ability to
adapt to the rapidly changing telecommunications environment, to maintain its
significant expertise in core technologies and to continue to meet and
anticipate its customers' needs. The Company continually reviews and evaluates
technological changes affecting the telecommunications market and invests
substantially in applications-based research and development. The Company
intends to continue an ongoing program of new product development that combines
internal development efforts with acquisitions, joint ventures and licensing or
marketing arrangements relating to new products and technologies from sources
outside the Company.
In recent years, increasingly significant portions of new
telecommunications equipment purchased by public network providers and private
network customers have utilized fiber optic transmission technology and have
employed digital technology. In the future, these telecommunications network
equipment purchasing trends will include increasingly sophisticated, software
intensive, switching and network management systems. In addition, there has
been significantly increased demand for wireless communications services and
higher speed transmission technologies. As a result, the Company's internal and
external product development activities are directed at the integration of fiber
optic technology into additional products, the continuing development of its
Homeworx system for telephony, data and integrated video,
14
<PAGE>
telephony and data applications, the development of network systems software,
the continuing development of wireless products, the incorporation of ATM
technology into voice, data and video products for both public and private
telecommunications networks, and the addition of video compression technology
to its product line. The Company is also developing copper and fiber optic
products for applications in local loop systems.
New product development often requires long-term forecasting of market
trends, development and implementation of new processes and technologies and
a substantial capital commitment. As a result of these and other factors,
development and customer acceptance of new products is inherently uncertain,
and there can be no assurance that such products will be developed on a
timely basis or achieve market acceptance.
COMPETITION
Competition in the telecommunications equipment industry is intense, and
the Company believes that competition may increase substantially with the
deployment of broadband networks and regulatory changes. Many of the Company's
foreign and domestic competitors have more extensive engineering, manufacturing,
marketing, financial and personnel resources than those of the Company. The
Company's transmission products are competitive with products offered by several
other companies, including Lucent Technologies, Northern Telecom, Inc. and
Motorola, Inc. The Company's enterprise networking products are competitive
with the products of a number of other companies, two of which (Bay
Networks, Inc. and Cabletron Systems Inc.) are dominant in its intelligent
wiring hub markets, and the Company's products face both strong price
competition and pressure from alternative distribution strategies utilized by
these other companies. The Company's broadband connectivity products are
competitive with the products offered by numerous other companies, including
Lucent Technologies, Siecor, Telect and Augat. In addition, the Company faces
increasing competition from a number of other smaller competitors, none of which
is dominant at this time.
The rapid technological developments within the telecommunications industry
have resulted in frequent changes to the Company's group of competitors. The
Company believes its success in competing with other manufacturers of
telecommunications products depends primarily on its engineering, manufacturing
and marketing skills, the price, quality and reliability of its products and its
delivery and service capabilities. While the market for the Company's products
has not historically been characterized by significant price competition, the
Company may face increasing pricing pressures from current and future
competitors in certain or all of the markets for its products.
The Company believes that technological change, the increasing addition
of data, video and other services to integrated multimedia networks,
continuing regulatory change and industry consolidation or new entrants will
continue to cause rapid evolution in the competitive environment of the
telecommunications equipment market, the full scope and nature of which are
difficult to predict at this time. Increased competition could result in
price reductions, reduced margins and loss of market share by the Company.
The Company believes industry regulatory change may create new opportunities
for suppliers of telecommunications equipment. The
15
<PAGE>
Company expects, however, that such opportunities may attract increased
competition from others as well. In addition, the Company expects that
Lucent Technologies will continue to be a major supplier to the RBOCs, and
compete more extensively outside the RBOC market. The Company also believes
that the rapid technological changes which characterize the
telecommunications industry will continue to make the markets in which the
Company competes attractive to new entrants. There can be no assurance that
the Company will be able to compete successfully with its existing or new
competitors or that competitive pressures faced by the Company will not
materially and adversely affect its business, operating results and financial
condition.
MANUFACTURING AND SUPPLIES
The Company manufactures a wide variety of products which are fabricated,
assembled and tested in its own facilities or in subcontracted facilities. In
an effort to reduce costs, the Company also takes advantage of off-shore
assembly and sourcing. The manufacturing process for the Company's electronic
products consists primarily of assembly and testing of electronic systems built
from fabricated parts, printed circuit boards and electronic components. The
manufacturing process for the Company's electromechanical products consists
primarily of fabrication of jacks, plugs, and other basic components from raw
materials, assembly of components and testing. The Company's sheet metal,
plastic molding, stamping and machining capabilities permit the Company to
configure components to customer specifications.
The Company purchases raw materials and component parts, consisting
primarily of copper wire, optical fiber, steel, brass, nickel-steel alloys,
gold, plastics, printed circuit boards, solid state components, discrete
electronic components and similar items, from several suppliers. Although a few
of the components used by the Company are single sourced, the Company has
experienced no significant difficulties to date in obtaining adequate quantities
of these raw materials and component parts. This circumstance could change in
the future, however, and the Company cannot be sure that the quantity or quality
of raw materials and component parts will be as readily available in the future.
PROPRIETARY RIGHTS
The Company owns a number of United States and foreign patents relating to
its products. These patents, in the aggregate, constitute a valuable asset of
the Company. The Company, however, believes that its business is not dependent
upon any single patent or any group of related patents.
The Company has registered the initials ADC alone and in conjunction with
specific designs as trademarks in the United States and various foreign
countries.
16
<PAGE>
EMPLOYEES
As of October 31, 1996, there were approximately 4,620 persons employed by
the Company. The Company considers relations with its employees to be good.
ITEM 2. PROPERTIES
The Company's corporate headquarters are currently located in four leased
buildings in Minnetonka, Minnesota comprising an aggregate of approximately
286,400 square feet. Leases for the Company's headquarters expire at different
times through 2001.
The Company also owns and leases a variety of other facilities for the
Company's manufacturing, development, distribution, warehousing, sales and other
activities. These facilities, including sales offices, are located in various
cities in the United States, Canada, Mexico, Venezuela, the United Kingdom,
Belgium, Germany, Finland, Australia, Singapore, Argentina, Malaysia, Korea and
China.
The Company believes that the facilities used in its operations and
currently under development are suitable for their respective uses and adequate
to meet the Company's current needs.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
Name Office Officer Since Age
- ---- ------ ------------- ---
William J. Cadogan Chairman of the Board, 1987 48
President, Chief Executive
Officer and Chief Operating
Officer
Lynn J. Davis Senior Vice President, 1984 49
President Broadband
Connectivity Group
Richard S. Gilbert Senior Vice President, 1994 44
President Enterprise
Networking Group
Donald J. Render Senior Vice President, 1996 53
International Sales
William L. Martin III Vice President, President 1994 49
Network Services Division
Vivek Ragavan Vice President, President 1996 44
Broadband Communications Division
Jack P. Reily Vice President, Business 1994 46
Development
Charles T. Roehrick Vice President, Controller 1995 42
John A. Schofield Vice President, President 1996 48
Systems Integration Division
Robert E. Switz Vice President, Chief Financial 1994 50
Officer
The Company's executive officers were last elected as executive officers by
the Board of Directors on February 27, 1996, except Messrs. Ragavan and
Schofield were elected to their positions on June 4, 1996. Messrs. Cadogan,
Davis and Reily have served in various capacities with the Company for more than
five years. Biographical information regarding the other named officers
follows.
18
<PAGE>
Mr. Gilbert joined the Company in June 1992. Prior to November 1994 he was
Vice President and General Manager, Access Group for six months and Vice
President Engineering for two years. From 1991 to 1992 he was Vice President of
Research and Development at Make Systems, Inc., a manufacturer of a network
design and analysis tool. From 1990 to 1991 Mr. Gilbert was Assistant Vice
President of Software Engineering for Vitalink Communications Corporation, a
manufacturer of data communications equipment.
Mr. Render joined the company in January 1996. Prior to such time he was
employed by Lucent Technologies (formerly AT&T Network Systems), a manufacturer
of public and private networks, communications systems and software, consumer
and business telephone systems and microelectronics components. Such positions
with Lucent included Central Region Vice President and Managing Director,
Italtel Alliance. From 1965 to 1985, Mr. Render was employed by AT&T Bell
Laboratories.
Mr. Martin joined the Company in September 1994. Prior to such time he was
employed by Ascom Timeplex, a manufacturer of data and telecommunications
equipment, most recently as Vice President, Technical Marketing. His previous
positions included Vice President China Business Development and Vice President
U.S. Sales. From 1987 to 1990 he was the Chief Executive Officer of Broadband
Telesystems, until that company was acquired by Ascom Timeplex.
Mr. Ragavan joined the company in January 1996. Prior to such time he was
employed by General Instrument Corp., a manufacturer of analog and digital
settops and broadband transmission equipment, as Vice President of Engineering.
His previous positions included Vice President of Engineering for COMSAT
Technology Products, a manufacturer of satellite based voice and data
communications systems.
Mr. Roehrick joined the Company in January 1995. Prior to such time he was
employed by Cray Research, Inc., a manufacturer of large scale computers, most
recently as Controller. From 1992 to 1993 he was Assistant Controller, and from
1989 to 1991 he was Director of Accounting.
Mr. Schofield originally joined the Company in October 1992. He returned
to the Company in October 1995 after holding the position with DSC
Communications as Vice President, International Sales and Marketing for a brief
period between July and October of 1995. Prior to such time, he was Managing
Director for Asia Pacific/Latin America. He was Senior Vice President, Sales
and Marketing at Telex Communications, Inc., a manufacturer and marketer of
electronic audio communications devices, from 1990 to 1992. He held several
Vice President positions at Memorex Telex Corporation, a manufacturer and
marketer of computer terminal and peripheral equipment, most recently Vice
President and General Manager, Airline and Systems Business Group.
Mr. Switz joined the Company in January 1994. Prior to such time he was
employed by Burr-Brown Corporation, a manufacturer of precision micro-
electronics, from 1988, most recently as Vice President, Chief Financial Officer
and Director, Ventures and Systems Business.
19
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.20 par value, is traded on the Nasdaq
National Market under the symbol "ADCT." The following table sets forth the
high and low sale prices for each quarter during the years ended October 31,
1996 and 1995, as reported on that system. All prices have been restated to
reflect a two-for-one stock split effected in the form of a 100% stock
dividend paid in February 1995 and an additional two-for-one stock split
effected in the form of a 100% stock dividend paid in October 1996.
LOW HIGH
--- ----
FISCAL YEAR ENDED OCTOBER 31, 1996
First Quarter 14 1/4 24 1/8
Second Quarter 16 1/4 22 1/8
Third Quarter 19 1/2 25 3/8
Fourth Quarter 21 5/16 35 1/8
FISCAL YEAR ENDED OCTOBER 31, 1995
First Quarter 9 7/8 12 3/4
Second Quarter 11 5/16 17 1/8
Third Quarter 13 7/8 20 1/8
Fourth Quarter 16 1/2 24 11/16
No cash dividends have been declared or paid during the past five years.
The Company currently anticipates that it will retain any future earnings for
use in its business and does not anticipate paying any cash dividends in the
foreseeable future. As of October 31, 1996, there were approximately 3,272
holders of record of the Common Stock.
On October 2, 1996, ADC issued 37,168 shares (the "Shares") of its Common
Stock, par value $0.20 per share, in a transaction that was not registered
under the Securities Act of 1933, as amended (the "Securities Act"). The
Shares were issued to the former shareholders of Metrica Systems ("Metrica")
pursuant to an agreement dated May 22, 1996 (the "Acquisition Agreement")
among the Company and such former shareholders of Metrica, providing for the
acquisition of all of the issued shares of capital stock of Metrica by ADC.
The transaction between ADC and Metrica closed on May 31, 1996, and the
Shares were issued to the former Metrica shareholders in October 1996
pursuant to a post-closing adjustment provided for in the Acquisition
Agreement. No underwriter or placement agent was involved in the issuance of
the Shares, and ADC did not receive any cash consideration for the Shares
(which were part of the purchase price paid by ADC for Metrica). The Shares
were issued to the former Metrica shareholders in a transaction exempt
pursuant to Section 4(c) of the Securities Act.
20
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of certain consolidated statement of income
and balance sheet information of ADC Telecommunications, Inc. and
subsidiaries for the five years ended October 31, 1996. This summary should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this report. All share and per share amounts
have been restated to reflect two-for-one stock splits effected in the form
of 100% stock dividends paid in June 1993, February 1995 and October 1996.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 1995 1994 1993 1992
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $828,009 $586,222 $448,735 $366,118 $316,496
Cost of product sold 438,847 302,094 221,448 178,572 155,074
--------- -------- -------- -------- ---------
Gross profit 389,162 284,128 227,287 187,546 161,422
--------- -------- -------- -------- ---------
Expenses:
Development and product engineering 90,038 66,460 48,974 40,988 36,063
Selling and administration 160,705 130,297 110,799 93,311 82,966
Goodwill amortization 5,235 3,133 3,135 2,798 2,720
Personnel reduction -- 3,914 -- -- 3,800
--------- -------- -------- -------- ---------
Total expenses 255,978 203,804 162,908 137,097 125,549
--------- -------- -------- -------- ---------
Operating income 133,184 80,324 64,379 50,449 35,873
Other income (expense), net:
Interest 10,504 6,803 1,158 183 (942)
Other (7,025) (898) (1,216) (895) (205)
--------- -------- -------- -------- ---------
Income before income taxes and
extraordinary item 136,663 86,229 64,321 49,737 34,726
Provision for income taxes 49,200 31,043 23,800 18,101 13,700
--------- -------- -------- -------- ---------
Net income before extraordinary item 87,463 55,186 40,521 31,636 21,026
Extraordinary item, net of taxes (1) -- -- (1,450) -- --
--------- -------- -------- -------- ---------
Net income 87,463 $ 55,186 $39,071 $31,636 $21,026
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
Average common shares outstanding 128,314 117,094 111,220 109,996 108,352
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
Earnings per share before extraordinary
item (1) $0.68 $0.47 $0.36 $0.29 $0.19
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
Earnings per share $0.68 $0.47 $0.35 $0.29 $0.19
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents $183,221 $238,491 $49,512 $16,324 $20,484
Working capital 357,422 358,786 132,015 87,630 75,284
Total assets 768,765 601,083 334,684 280,054 240,762
Total debt 9,160 410 810 1,110 14,434
Total stockholders' investment 617,470 510,866 264,758 220,394 182,188
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
___________
</TABLE>
(1) An extraordinary charge of $1,450,000 (or $.01 per share), net of income
taxes, recorded in the year ended October 31, 1994, represents the charge to
clean up and repair the damage from an earthquake at the Company's facility in
California.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company offers a broad range of products to address key areas of the
telecommunications network infrastructure. To meet its customers' needs, the
Company offers equipment, services and integrated solutions within the following
general functional product groups: transmission, enterprise networking and
broadband connectivity. The Company's transmission products are sold primarily
to public network providers in the United States and internationally. The
Company's enterprise networking products are sold primarily to private voice,
data and video network providers around the world. The Company's broadband
connectivity products are sold to both public and private global network
providers.
Historically, the Company's principal product offerings have generally
consisted of copper-based and fiber-based products designed to address the needs
of its customers for transmission, enterprise networking and connectivity on
traditional telephony networks. With the growth of multimedia applications and
the associated development of enhanced voice, data and video services, the
Company's more recent product offerings and research and development efforts
have increasingly focused on emerging technologies and applications relating to
the broadband telecommunications equipment market. The market for broadband
telecommunications equipment is evolving and rapidly changing. There can be no
assurance that the Company's new or enhanced products will meet with market
acceptance or be sold profitably.
The Company's operating results may fluctuate significantly from quarter to
quarter due to several factors. The Company is experiencing growth through
acquisition and expansion and results of operations described in this report may
not be indicative of results to be achieved in future periods. The Company's
expense levels are based in part on expectations of future revenues. If revenue
levels in a particular period do not meet expectations, operating results will
be adversely affected. In addition, the Company's results of operations are
subject to seasonal factors. The Company historically has experienced a
stronger demand for its products in the fourth fiscal quarter, primarily as a
result of customer budget cycles and Company year-end incentives, and has
experienced a weaker demand for its products in the first fiscal quarter,
primarily as a result of the number of holidays during late November, December
and early January and a general industry slowdown during that period. There can
be no assurance that these historical seasonal trends will continue in the
future.
22
<PAGE>
RESULTS OF OPERATIONS
The percentage relationships to net sales of certain income and expense
items for the three years ended October 31, 1996, and the percentage changes in
these income and expense items between years are contained in the following
table:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF NET SALES INCREASE BETWEEN
YEARS ENDED YEARS
----------------------------------------------
1996 VS. 1995 VS.
1996 1995 1994 1995 1994
----- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 41.2% 30.6%
Cost of product sold (53.0) (51.5) (49.3) 45.3 36.4
------ ------- -------
Gross profit 47.0 48.5 50.7 37.0 25.0
Expenses:
Development and product engineering (10.9) (11.3) (11.0) 35.5 35.7
Selling and administration (19.4) (22.2) (24.7) 23.3 17.6
Goodwill amortization (.6) (.6) (.7) - -
Personnel reduction - (.7) - - -
-------- ------- -------
Operating income 16.1 13.7 14.3 65.8 24.8
Other income (expense), net:
Interest 1.3 1.2 .3 54.4 -
Other (.9) (.2) (.3) - -
-------- ------- -------
Income before income taxes and
extraordinary item 16.5 14.7 14.3 58.5 34.1
Provision for income taxes (5.9) (5.3) (5.3) 58.5 30.4
-------- ------- -------
Net income before extraordinary item 10.6 9.4 9.0 58.5 36.2
Extraordinary item, net of taxes - - (.3) - -
-------- ------- -------
Net income 10.6% 9.4% 8.7% 58.5 41.2
-------- ------- -------
-------- ------- -------
</TABLE>
NET SALES: The following table sets forth the dollar amounts and
percentage amounts of the Company's net sales for the three years ended
October 31, 1996, for each of the functional product groups described above
(dollars in thousands):
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
NET SALES FOR THE YEARS ENDED OCTOBER 31, BETWEEN YEARS
-----------------------------------------------------------------------
1996 1995 1994 1996 VS. 1995 VS.
------------------------------------------------------ 1995 1994
PRODUCT GROUP NET % NET % NET % ---- ----
- ------------- SALES --- SALES --- SALES ---
-------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transmission $304,820 36.8% $184,432 31.5% $103,694 23.1% 65.3% 77.9%
Enterprise
Networking 145,651 17.6 127,405 21.7 123,300 27.5 14.3 3.3
Broadband
Connectivity 377,538 45.6 274,385 46.8 221,741 49.4 37.6 23.7
-------- ------ -------- ------ -------- ------
Total $828,009 100.0% $586,222 100.0% $448,735 100.0% 41.2 30.6
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
</TABLE>
23
<PAGE>
Net sales were $828.0 million and $586.2 million for the years ended
October 31, 1996 and 1995, reflecting 41.2% and 30.6% annual increases,
respectively. The increases in net sales in both 1996 and 1995 predominantly
reflect increases in sales of transmission products (65.3% in 1996 and 77.9% in
1995) and broadband connectivity products (37.6% in 1996 and 23.7% in 1995).
Within these two product groups, net sales increased approximately $70.0 million
in 1996 as a result of revenue contributions from companies acquired during
1996.
In addition to the growth from acquisition, the Company's 65.3% growth in
net sales of transmission products during 1996 primarily reflects increased
sales of transmission systems to public telecommunications network providers.
The Company's 77.9% growth in net sales of transmission products during 1995
primarily reflected increased sales of fiber optic transmission systems to
public telecommunications network providers. If the Company's transmission
systems internally developed or acquired within the last three years and
continuing transmission product enhancements meet with reasonable market
acceptance, the Company anticipates that net sales of transmission products will
grow as a percentage of the Company's total net sales.
The Company's 37.6% growth in net sales of broadband connectivity products
in 1996 predominantly reflects the Company's success in selling these products
into new global broadband market applications, in addition to growth from
acquisition. This success is also a primary cause of the 23.7% growth in net
sales of broadband connectivity products in 1995. Within the broadband
connectivity product group, net sales of ADC's digital signal cross-connect
(DSX) modules and bays have declined as a percentage of total net sales to 22.7%
in 1996, from 23.9% in 1995 and 27.2% in 1994. The Company believes that future
sales of DSX and other copper connectivity products will continue to account
for a substantial portion of the Company's revenues, although these products may
continue to decline as a percentage of total net sales primarily due to the
ongoing evolution of technologies in the telecommunications marketplace.
Net sales of enterprise networking products increased 14.3% and 3.3% during
1996 and 1995, respectively. These increases reflect significant growth in net
sales of public network access equipment, partially offset by decreases in net
sales of Local Area Network (LAN) equipment. Recognizing changes in the
competitive environment for LAN equipment, the Company realigned its Kentrox and
Fibermux subsidiaries into the Enterprise Networking Group during 1995 to better
address the industry trend toward integration of LAN and Wide Area Network (WAN)
technologies and products. Further integration of these two subsidiaries is
planned for 1997.
GROSS PROFIT. During 1996, 1995 and 1994, the gross profit percentages
were 47.0%, 48.5% and 50.7% of net sales, respectively. The 1996 and 1995
declines in gross profit percentages primarily resulted from the continuing
change in product sales mix toward sales of newer, lower margin products which
address emerging broadband applications. Future gross profit percentages will
continue to be affected by the mix of products the Company sells, the timing of
new product introductions and manufacturing volume, among other factors.
OPERATING EXPENSES: Total operating expenses for the years ended October
31, 1996, 1995 and 1994 were $256.0 million, $203.8 million and $162.9 million,
representing 30.9%,
24
<PAGE>
34.8% and 36.4% of net sales, respectively. The increases in absolute
dollars of operating expenses during 1996 and 1995 were due primarily to the
expanded operations associated with higher revenue levels and, in the year
ended October 31, 1995, a charge of $3.9 million related primarily to a
personnel reduction at the Fibermux facility resulting from the realignment
of the Company's enterprise networking operations. The decreases in
operating expenses as a percentage of net sales during 1996 and 1995 reflect
the Company's ability to leverage operating expenses against higher revenue
levels.
Development and product engineering expenses were $90.0 million, $66.5
million and $49.0 million for the years ended October 31, 1996, 1995 and 1994,
respectively, reflecting increases of 35.5% during 1996 and 35.7% during 1995.
These increases resulted from substantial product development efforts in each of
the Company's three functional product groups. The Company believes that, given
the rapidly changing technology and competitive environment in the
telecommunications equipment industry, continued commitment to product
development efforts will be required for the Company to remain competitive.
Accordingly, the Company intends to continue to allocate substantial resources
to product development for each of its three functional product groups.
However, the Company recognizes the need to balance the cost of product
development with expense control and remains committed to carefully managing the
rate of increase of such expenses.
Selling and administration expenses were $160.7 million, $130.3 million and
$110.8 million for the years ended October 31, 1996, 1995 and 1994,
respectively, reflecting increases of 23.3% during 1996 and 17.6% during 1995.
These increases resulted from selling activities associated with new product
introductions, additional personnel costs related to expanded operations and, in
1996, costs associated with the three acquisitions which were accounted for as
poolings of interests.
The Company's other 1996 acquisitions were accounted for as purchase
transactions in which the initial purchase prices exceeded the fair value of the
acquired assets by approximately $59.9 million. The amortization of these
amounts over 5 to 15 years on a straight line basis resulted in increased
goodwill amortization expense for the year ended October 31, 1996, to $5.2
million, from $3.1 million in the years ended October 31, 1995 and 1994.
OTHER INCOME (EXPENSE), NET: For the years ended October 31, 1996 and
1995, the net interest income category represented net interest income on cash
balances. (See "Liquidity and Capital Resources" below for a discussion of cash
levels and the $182.0 million of cash proceeds from the Company's June 1995
secondary public offering of 6.3 million shares of common stock.)
Other expense for the year ended October 31, 1996 primarily represented the
Company's share of net operating results of its investments in other companies
accounted for on an equity basis. For the years ended October 31, 1995 and
1994, other expense primarily represented miscellaneous expense.
INCOME TAXES: See Note 8 to the Consolidated Financial Statements included
in Part II, Item 8 of this report for a reconciliation of the federal statutory
tax rate to effective tax rates of
25
<PAGE>
36.0%, 36.0% and 37.0% in 1996, 1995 and 1994, respectively. These rates
reflect the varying amounts of non-deductible goodwill amortization during
1996, 1995 and 1994, respectively, included in operating expenses in each of
the three years, and the beneficial impact of tax credits.
EXTRAORDINARY ITEM: An extraordinary charge of $1.5 million (or $.01 per
share), net of income taxes, was recorded in 1994, representing expenses
relating to the clean up and repair of damage to the Fibermux facility resulting
from an earthquake in January 1994.
NET INCOME: Net income was $87.5 million (or $.68 per share) for the year
ended October 31, 1996, an increase of 58.5% over $55.2 million (or $.47 per
share) for the year ended October 31, 1995. Net income for 1995 represented an
increase of 41.2% over $39.1 million (or $.35 per share) for the year ended
October 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, primarily short-term investments in commercial
paper with maturities of less than 90 days, decreased $55.3 million, and
increased $189.0 million during the years ended October 31, 1996 and 1995,
respectively. The major elements of the 1996 decrease were net income before
depreciation and amortization of $121.3 million offset by the $80.9 million
increase in receivables and inventory levels, property and equipment additions
of $69.1 million and acquisition payments and long-term investments of $56.6
million. The 1996 increases in receivables and inventory levels and property
and equipment additions reflect the Company's growth. See Note 4 to the
Consolidated Financial Statements included in this report for a discussion of
1996 acquisitions. In the year ended October 31, 1995, the major elements of
the increase were the $182 million net proceeds from the Company's June 1995
public offering of 6.3 million shares of common stock and net income before
depreciation and amortization of $81.5 million, offset by the $52.6 million
increase in inventory and receivable levels (reflecting the Company's growth in
1995), property and equipment additions of $32.5 million and acquisition and
investment payments of $12.8 million.
At October 31, 1996, the Company had approximately $9.2 million of debt
outstanding. This entire amount represents debt of companies acquired during
1996.
Management believes that current cash balances and cash generated from
operating activities will be adequate to fund working capital requirements,
capital expenditures (approximately $51 million committed at October 31, 1996)
and possible acquisitions or strategic alliances for 1997. However, the Company
may find it necessary to seek additional sources of financing to support its
capital needs, for additional working capital, potential investments or
acquisitions, or otherwise.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The foregoing discussion of the Company's Business and Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and
26
<PAGE>
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements represent the Company's expectations or beliefs
concerning future events, including the following: any statements regarding
future sales and gross profit percentages, any statements regarding the
continuation of historical trends, any statements regarding the sufficiency
of the Company's cash balances and cash generated from operating and
financing activities for the Company's future liquidity and capital resource
needs, any statements regarding the effect of regulatory changes and any
statements regarding the future of the telecommunications industry. The
Company cautions that any forward-looking statements made by the Company in
this report or in other announcements made by the Company are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements, including, without
limitations, the factors set forth on Exhibit 99 to the Company's report on
Form 10-K for the fiscal year ended October 31, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(A) STATEMENT OF REGISTRANT
No separate financial statements of the Company's subsidiaries are included
herein because the Company is primarily an operating company and its
subsidiaries are wholly-owned or majority owned.
(B) CONSOLIDATED STATEMENTS
Report of Independent Public Accountants......................................28
Consolidated Statements of Income for the years ended
October 31, 1996, 1995 and 1994...........................................29
Consolidated Balance Sheets as of October 31, 1996 and 1995...................30
Consolidated Statements of Stockholders' Investment
for the years ended October 31, 1996, 1995 and 1994.......................31
Consolidated Statements of Cash Flows for the years ended
October 31, 1996, 1995 and 1994...........................................32
Notes to Consolidated Financial Statements....................................33
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted as not
required, not applicable or the information required has been included elsewhere
in the financial statements and related notes.
(C) SUPPLEMENTAL FINANCIAL INFORMATION -- Unaudited...........................41
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ADC Telecommunications, Inc.:
We have audited the accompanying consolidated balance sheets of ADC
TELECOMMUNICATIONS, INC. AND SUBSIDIARIES as of October 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' investment and cash
flows for each of the three years in the period ended October 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ADC Telecommunications, Inc.
and Subsidiaries as of October 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
November 26, 1996
28
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 1995 1994
-------- -------- --------
NET SALES $828,009 $586,222 $448,735
COST OF PRODUCT SOLD 438,847 302,094 221,448
-------- -------- --------
GROSS PROFIT 389,162 284,128 227,287
Gross profit percentage 47.0% 48.5% 50.7%
-------- -------- --------
EXPENSES:
Development and product engineering 90,038 66,460 48,974
Selling and administration 160,705 130,297 110,799
Goodwill amortization 5,235 3,133 3,135
Personnel reduction -- 3,914 --
-------- -------- --------
Total expenses 255,978 203,804 162,908
-------- -------- --------
OPERATING INCOME 133,184 80,324 64,379
OTHER INCOME (EXPENSE), NET 3,479 5,905 (58)
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 136,663 86,229 64,321
PROVISION FOR INCOME TAXES 49,200 31,043 23,800
-------- -------- --------
NET INCOME BEFORE EXTRAORDINARY ITEM 87,463 55,186 40,521
EXTRAORDINARY ITEM, NET OF TAXES -- -- (1,450)
-------- -------- --------
NET INCOME $ 87,463 $ 55,186 $ 39,071
-------- -------- --------
-------- -------- --------
AVERAGE COMMON SHARES OUTSTANDING 128,314 117,094 111,220
-------- -------- --------
-------- -------- --------
EARNINGS PER SHARE BEFORE EXTRAORDINARY
ITEM $0.68 $0.47 $0.36
-------- -------- --------
-------- -------- --------
EARNINGS PER SHARE $0.68 $0.47 $0.35
-------- -------- --------
-------- -------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
29
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - OCTOBER 31
(IN THOUSANDS)
1996 1995
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $183,221 $238,491
Accounts receivable, net of reserves of
$3,921 and $4,258 163,219 107,255
Inventories, net of reserves of
$14,603 and $8,103 130,582 86,559
Prepaid income taxes and other assets 22,479 15,442
-------- --------
Total current assets 499,501 447,747
PROPERTY AND EQUIPMENT, NET 131,080 78,686
OTHER ASSETS, PRINCIPALLY GOODWILL 138,184 74,650
-------- --------
$768,765 $601,083
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,247 $ 410
Accounts payable 49,459 28,820
Accrued liabilities 90,373 59,731
-------- --------
Total current liabilities 142,079 88,961
DEFERRED INCOME TAXES 2,303 1,256
LONG-TERM DEBT, LESS CURRENT MATURITIES 6,913 --
-------- --------
Total liabilities 151,295 90,217
-------- --------
STOCKHOLDERS' INVESTMENT:
Common stock, $0.20 par value; authorized
300,000 shares; issued 65,177 and 62,737
shares 13,035 12,547
Paid-in capital 232,266 219,266
Retained earnings 373,540 280,662
Cumulative translation adjustment 232 (715)
Deferred compensation (1,603) (894)
-------- --------
Total stockholders' investment 617,470 510,866
-------- --------
$768,765 $601,083
-------- --------
-------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
30
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Cumulative
---------------- Paid-in Retained Translation Deferred
Shares Amount Capital Earnings Adjustment Compensation
------ ------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1993 27,697 $ 5,539 $ 29,465 $186,405 -- $(1,015)
Stock issued for employee benefit plans 191 38 5,386 -- -- (1,262)
Reduction of deferred compensation -- -- -- -- -- 1,131
Net income -- -- -- 39,071 -- --
------ ------- -------- -------- ----------- ----------
Balance, October 31, 1994 27,888 5,577 34,851 225,476 -- (1,146)
Stock split effected in the form of a
stock dividend 28,044 5,609 (5,609) -- -- --
Stock issued for secondary public offering 6,325 1,265 180,489 -- -- --
Stock issued for employee benefit plans 480 96 9,535 -- -- (714)
Reduction of deferred compensation -- -- -- -- -- 966
Translation adjustments -- -- -- -- $ (715) --
Net income -- -- -- 55,186 -- --
------ ------- -------- -------- ----------- ----------
Balance, October 31, 1995 62,737 12,547 219,266 280,662 (715) (894)
Stock issued for business acquisitions 1,911 382 198 5,415 -- --
Stock issued for employee benefit plans 529 106 12,802 -- -- (1,490)
Reduction of deferred compensation -- -- -- -- -- 781
Translation adjustments -- -- -- -- 947 --
Net income -- -- -- 87,463 -- --
------ ------- -------- -------- ----------- ----------
Balance, October 31, 1996 65,177 $13,035 $232,266 $373,540 $ 232 $ (1,603)
------ ------- -------- -------- ----------- ----------
------ ------- -------- -------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
31
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 87,463 $ 55,186 $ 39,071
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 33,794 26,341 23,366
Reduction in deferred compensation 781 966 1,131
Decrease in deferred income taxes (3,448) (4,652) (1,786)
Other 28 455 --
Changes in assets and liabilities
Accounts receivable (45,767) (31,130) (8,518)
Inventories (35,100) (21,466) (15,925)
Prepaids and other assets (3,048) (2,455) 1,010
Accounts payable 15,104 6,559 8,438
Accrued liabilities 13,650 14,455 11,414
--------- --------- ---------
Total cash from operating activities 63,457 44,259 58,201
--------- --------- ---------
INVESTMENT ACTIVITIES:
Property and equipment additions, net (69,057) (32,456) (21,788)
Acquisition payments (49,291) (4,676) (7,087)
Long-term investments (7,268) (8,139) --
--------- --------- ---------
Total cash used for investment
activities (125,616) (45,271) (28,875)
--------- --------- ---------
FINANCING ACTIVITIES:
Decrease in long-term debt (4,897) (400) (300)
Common stock issued 11,696 190,671 4,162
--------- --------- ---------
Total cash from financing activities 6,799 190,271 3,862
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 90 (280) --
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (55,270) 188,979 33,188
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 238,491 49,512 16,324
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 183,221 $ 238,491 $ 49,512
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES:
Income taxes paid $ 46,129 $ 27,549 $ 21,802
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
32
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of ADC Telecommunications, Inc. (a Minnesota corporation) and
all significant subsidiaries in which ADC has more than a 50% equity
ownership, (collectively, the "Company"). All significant intercompany
transactions and balances have been eliminated in consolidation.
CASH EQUIVALENTS: Cash equivalents primarily represent short-term
investments in commercial paper with maturities of three months or less.
The carrying amount of these investments approximate their fair value due
to their short maturities.
INVENTORIES: Inventories include material, labor and overhead and are
stated at the lower of first-in, first-out cost or market.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost and
depreciated using the straight-line method over estimated useful lives of
three to thirty years or, in the case of leasehold improvements, over the
term of the lease, if shorter. Both straight-line and accelerated methods
of depreciation are used for income tax purposes.
GOODWILL: The excess of the cost of acquired businesses over the fair
value of the net assets acquired is being amortized on a straight-line
basis ranging from 5 to 25 years. Management periodically assesses the
amortization period and recoverability of the carrying amount of goodwill
based upon an estimate of future cash flows from related operations.
RESEARCH AND DEVELOPMENT COSTS: The Company's policy is to expense all
research and development costs in the period incurred.
INCOME TAXES: The Company utilizes the liability method of accounting for
income taxes. Deferred tax liabilities or assets are recognized for the
expected future tax consequences of temporary differences between the book
and tax bases of assets and liabilities.
EARNINGS PER SHARE: Earnings per share is computed using the weighted
average number of common shares outstanding during the year, after
consideration of the dilutive effect of stock options and restricted stock
awards.
33
<PAGE>
FOREIGN CURRENCY TRANSLATION: The Company accounts for translation of
foreign currency in accordance with the provisions of SFAS No. 52. The
resulting translation adjustments are recorded directly to a separate
component of stockholders' investment.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in
the future, they may ultimately differ from actual results.
NEW ACCOUNTING PRONOUNCEMENTS: SFAS NO. 123 - Accounting for Stock-Based
Compensation, encourages, but does not require, a fair value based method
of accounting for employee stock options or similar equity instruments. As
permitted under the new standard, the Company will continue to account for
employee stock options under APB No. 25. The pro-forma disclosures
required by this standard will be included in the Company's 1997
consolidated financial statements.
(2) CONSOLIDATED INCOME STATEMENT INFORMATION
EXPORT SALES: Export sales were $172,212,000, $106,416,000 and $67,113,000
during 1996, 1995 and 1994, respectively.
OTHER INCOME (EXPENSE), NET:
--------------------------------------------------------------------------
1996 1995 1994
(In Thousands)
--------------------------------------------------------------------------
Interest income $10,906 $7,078 $1,309
Interest expense (402) (275) (151)
Other income (expense), net (7,025) (898) (1,216)
-------- ------- -------
$3,479 $5,905 $(58)
-------- ------- -------
-------- ------- -------
PERSONNEL REDUCTION: During the quarter ended April 30, 1995, the Company
initiated a realignment of its Kentrox and Fibermux subsidiaries into one
business unit. The Company recorded a charge of $3,914,000 in conjunction
with the realignment, related primarily to a personnel reduction. As a
result of the realignment, approximately 100 Fibermux employees, primarily
in sales, administration and engineering, were separated from the Company.
Substantially all separation benefits were paid by January 31, 1996.
EXTRAORDINARY ITEM: The building that serves as headquarters for Fibermux
suffered damage as a result of the earthquake that struck Los Angeles on
January 17, 1994. The facility sustained damages of $2,300,000 ($1,450,000
after the $850,000 tax benefit). All operations resumed by February 8,
1994.
34
<PAGE>
(3) CONSOLIDATED BALANCE SHEET INFORMATION
--------------------------------------------------------------------------
1996 1995
(In Thousands)
--------------------------------------------------------------------------
INVENTORIES:
Purchased materials and manufactured products $119,006 $75,694
Work-in-process 11,576 10,865
-------- -------
$130,582 $86,559
-------- -------
-------- -------
PROPERTY AND EQUIPMENT:
Land and buildings $43,965 $33,362
Machinery and equipment 209,347 139,294
Furniture and fixtures 22,319 18,881
-------- -------
275,631 191,537
Less accumulated depreciation
and amortization (144,551) (112,851)
-------- -------
$131,080 $78,686
-------- -------
-------- -------
GOODWILL:
Goodwill $136,940 $77,028
Less accumulated amortization (20,156) (14,921)
-------- -------
$116,784 $62,107
-------- -------
-------- -------
ACCRUED LIABILITIES:
Accrued compensation and benefits $42,968 $34,632
Accrued income taxes 14,566 10,088
Other accrued liabilities 32,839 15,011
-------- -------
$90,373 $59,731
-------- -------
-------- -------
(4) ACQUISITIONS
During the second quarter of 1996, the Company exchanged a total of
1,176,950 shares of its common stock in two separate business combinations
for all the outstanding shares of Da Tel Fibernet, Inc. ("Da Tel") and
Information Transmission Systems Corp. ("ITS"). Both transactions were
accounted for as poolings of interests. Da Tel provides engineering, design
and installation services for telecommunications companies. ITS designs
and manufactures wireless television transmission products for the cable
and broadcast industries.
During the third quarter of 1996, the Company acquired all of the
outstanding capital stock of Metrica Systems Limited ("Metrica") in a
transaction that was accounted for as a pooling of interests. A total of
734,015 shares of the Company's common stock were exchanged in the
combination. Metrica, based in London, England, designs and manufactures
management software for wireless networks.
35
<PAGE>
Financial data for periods prior to the closing of these pooling
transactions has not been restated because neither the net assets nor
operating results were material, individually or in the aggregate, to the
Company's consolidated financial statements.
During the second quarter of 1996, the Company purchased all of
the outstanding stock of Skyline Technology, Inc. ("Skyline") for an
initial cash payment of $12 million and additional consideration not to
exceed $20 million. The purchase price exceeded the fair value of the
acquired assets by approximately $11 million. Additional consideration, if
any, will be payable over a three year period beginning November 1, 1996,
subject to the achievement of certain financial results. Skyline designs
and manufactures ISDN/Frame Relay access products.
During the third quarter of 1996, the Company purchased 80% of the
outstanding common stock of Solitra Oy ("Solitra"), based in Kempele,
Finland, with a commitment to acquire the remaining 20% over a three year
period. The stock was acquired for an initial cash payment of $41 million
plus additional consideration which is payable subject to the achievement
of certain financial results. The initial purchase price exceeded the fair
value of the acquired assets by approximately $38.5 million. Additional
consideration, if any, will be payable over a three year period beginning
November 1, 1996. Solitra designs and manufactures components for cellular
network base stations as well as high specification filters for mobile
phones.
The acquisitions of Skyline and Solitra were accounted for as purchases.
Accordingly, the results of operations of the acquired entities have been
included in the Company's consolidated financial statements since the
respective dates of acquisition. Goodwill associated with these
acquisitions is being amortized using the straight line method over periods
ranging from 10 to 15 years.
The inclusion of Skyline and Solitra financial data prior to the dates of
acquisition would not have materially affected reported results.
(5) DEBT
The Company has a revolving, unsecured credit agreement with four banks
which permits borrowings up to $40,000,000 through December 31, 1996,
primarily at prevailing market rates of interest. There were no borrowings
under this agreement during 1996, 1995 or 1994.
(6) EMPLOYEE BENEFIT PLANS
PENSION PLAN: The Company maintains a defined benefit plan covering a
majority of its employees. The plan is funded in accordance with the
requirements of Federal laws and regulations. Plan assets consist of fixed
income securities and a managed portfolio of equity securities.
36
<PAGE>
Pension expense included the following components:
--------------------------------------------------------------------------
1996 1995 1994
(In Thousands)
--------------------------------------------------------------------------
Service cost for benefits
earned during the period $2,368 $1,766 $1,804
Interest cost on the projected
benefit obligation 1,944 1,682 1,522
Return on assets (4,614) (3,627) (633)
Net amortization and deferral 2,891 2,240 (700)
------- ------- -------
$2,589 $2,061 $1,993
------- ------- -------
------- ------- -------
Discount rate used to determine
actuarial present value of
benefits at October 31 8.0% 7.5% 7.5%
------- ------- -------
------- ------- -------
The rate of compensation increase used to measure the projected benefit
obligation was 5% for all three years. The expected long-term rate of
return on plan assets was 9%.
The following table sets forth the funded status of the plan as of
October 31:
--------------------------------------------------------------------------
1996 1995
(In Thousands)
--------------------------------------------------------------------------
Accumulated benefit obligation:
Vested $(21,926) $(20,357)
Nonvested (1,376) (1,509)
--------- ---------
Total (23,302) (21,866)
Excess of projected benefit obligation
over accumulated benefit obligation (7,366) (4,055)
--------- ---------
Projected benefit obligation (30,668) (25,921)
Market value of plan assets 29,011 20,939
--------- ---------
Unfunded projected benefit obligation (1,657) (4,982)
Unrecognized net gain (4,769) (3,240)
Unrecognized prior service cost 1,717 1,842
Unrecognized transition liability 780 851
--------- ---------
Total accrued pension liability $(3,929) $(5,529)
--------- ---------
--------- ---------
RETIREMENT SAVINGS PLAN: The Company maintains a Retirement Savings Plan
for employees who have completed one year of service. The Company
contributes 1% of wages and, depending on Company performance, partially
matches employee contributions to the Plan up to 6% of wages. Employees
are fully vested in all contributions. The Company's contributions to the
plan totaled $7,394,000, $6,141,000 and $5,830,000 during 1996, 1995, and
1994, respectively. A portion of the Company's cash contributions is
invested in the Company's stock by the Plan's trustee.
37
<PAGE>
STOCK AWARD PLANS: The Company maintains a Stock Incentive Plan to grant
certain stock awards, including stock options at fair market value and
restricted shares, to key employees of the Company. A maximum of
16,431,708 stock awards can be granted under this plan; 8,392,326 stock
awards were available for grant as of October 31, 1996. The Company also
maintains a Nonemployee Director Stock Option Plan in order to enhance the
ability to attract and retain the services of experienced and knowledgeable
outside directors. This plan provides for granting of a maximum of 440,000
non-qualified stock options at fair market value. As of October 31, 1996,
120,000 shares were available for option grants under this plan.
The following schedule summarizes activity in the plans:
--------------------------------------------------------------------------
Stock Restricted Grant
Options Stock Price
--------------------------------------------------------------------------
Outstanding at October 31, 1994 3,945,612 201,620 $ 1 - $11
Granted 3,246,882 40,500 $10 - $21
Exercised (1,273,476) $ 1 - $13
Restrictions Lapsed -- (1,440) $ 9 - $11
Canceled (599,624) (75,540) $ 6 - $16
----------- ---------
Outstanding at October 31, 1995 5,319,394 165,140 $ 1 - $21
Granted 1,206,116 70,378 $ 1 - $33
Exercised (963,514) -- $ 1 - $21
Restrictions Lapsed -- (104,932) $ 6 - $23
Canceled (353,920) (22,000) $ 5 - $23
----------- ---------
Outstanding at October 31, 1996 5,208,076 108,586 $ 1 - $32
----------- ---------
----------- ---------
Exercisable at October 31, 1996 2,979,140 -- $ 1 - $20
----------- ---------
----------- ---------
During 1994, options for 648,796 shares were exercised at prices ranging
from $1 to $5 per share.
(7) CAPITAL STOCK
AUTHORIZED STOCK: The Company is authorized to issue 300,000,000 shares of
$0.20 par value common stock and 10,000,000 shares of no par value
preferred stock. There are no preferred shares issued.
STOCK SPLIT: On September 24, 1996, the Company declared a two-for-one
stock split effected in the form of a 100% stock dividend paid October 31,
1996, to stockholders of record as of October 15, 1996. All references in
the accompanying financial statements and notes to earnings per share,
average common shares outstanding, Stock Award Plan data and related share
prices have been adjusted to reflect the split.
STOCK OFFERING: On June 14, 1995, the Company completed a secondary public
offering of 6,325,000 shares of its common stock at $30 per share. The net
proceeds from the offering were $181,754,000, which will be used for
general corporate purposes, including
38
<PAGE>
working capital, capital expenditures and possible acquisitions or
strategic alliances.
SHAREHOLDER RIGHTS PLAN: On November 28, 1995, the Board of Directors
amended and restated the Company's Shareholder Rights Plan that was
originally adopted during 1986. Under the original Plan, the Board of
Directors declared a dividend of one right for each outstanding share of
the Company's common stock. The Plan, as amended, provides that if any
person or group acquires 15% or more of the Company's common stock, each
right not owned by such person or group will entitle its holder to
purchase, at the Right's then-current purchase price ($62.50 for each one-
half share of the Company's common stock at October 31, 1996, after giving
effect to the October 31, 1996 stock split), common stock of the Company
having a value of twice the Right's purchase price. The Rights would not
be triggered, however, if the acquisition of 15% or more of the Company's
common stock is pursuant to a tender offer or exchange for all outstanding
shares of the Company's common stock which is determined by the Board of
Directors to be fair and in the best interests of the Company and its
shareholders. At October 31, 1996, after giving effect to the October 31,
1996 stock split, the Rights are redeemable at $0.005 per share any time
prior to the time they become exercisable. The Rights will expire on
November 28, 2005, if not previously redeemed or exercised.
(8) INCOME TAXES
The components of the provision for income taxes are as follows:
--------------------------------------------------------------------------
1996 1995 1994
(In Thousands)
--------------------------------------------------------------------------
Current taxes payable:
Federal $44,483 $30,666 $21,357
Foreign 2,078 573 330
State 6,087 4,456 3,211
------- ------- -------
52,648 35,695 24,898
Deferred (3,448) (4,652) (1,098)
------- ------- -------
Total provision $49,200 $31,043 $23,800
------- ------- -------
------- ------- -------
The provision for foreign income taxes is based upon foreign pretax
earnings of approximately $8,260,000, $1,547,000 and $1,563,000 during
1996, 1995 and 1994, respectively.
The effective income tax rate differs from the Federal statutory rate as
follows:
--------------------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------------------
Federal statutory rate 35% 35% 35%
Research and development
tax credits (1) (2) (2)
Goodwill amortization 1 1 2
State income taxes, net 3 3 3
Other, net (2) (1) (1)
---- ---- ----
Effective income tax rate 36% 36% 37%
---- ---- ----
---- ---- ----
39
<PAGE>
Deferred tax assets (liabilities) of the Company as of October 31 are
comprised of the following:
--------------------------------------------------------------------------
1996 1995
(In Thousands)
--------------------------------------------------------------------------
Current deferred tax assets:
Asset valuation reserves $ 5,225 $ 4,002
Accrued liabilities 10,989 7,067
Other 3 396
-------- --------
Total $16,217 $11,465
-------- --------
-------- --------
Non-current deferred tax assets (liabilities):
Depreciation $(2,698) $(1,929)
Other 395 673
-------- --------
Total $(2,303) $(1,256)
-------- --------
-------- --------
(9) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES: A portion of the Company's operations are conducted
using leased equipment and facilities. These leases are non-cancelable and
renewable with expiration dates ranging through the year 2004. The rental
expense included in the accompanying consolidated statements of income was
$7,281,000, $5,676,000, and $5,411,000 for 1996, 1995, and 1994
respectively.
The following is a schedule of future minimum rental payments required
under all non-cancelable operating leases as of October 31, 1996:
--------------------------------------------------------------------------
(In Thousands)
--------------------------------------------------------------------------
1997 $ 6,493
1998 5,614
1999 5,111
2000 4,664
2001 and thereafter 11,592
-----------
$33,474
-----------
-----------
CONTINGENCIES: There are no legal proceedings pending against or involving
the Company which, in the opinion of management, will have a material
adverse effect on the Company's financial position or results of
operations.
CHANGE OF CONTROL: The Board of Directors has approved the extension of
certain employee benefits, including salary continuation to key employees,
in the event of a change of control of the Company. The Board has retained
the flexibility to cancel such provisions under certain circumstances.
40
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales $162,591 $193,053 $217,313 $255,052 $828,009
------- ------- ------- ------- -------
Gross Profit 77,910 89,417 101,746 120,089 389,162
------- ------- ------- ------- -------
Income Before Income Taxes 25,487 31,094 36,206 43,876 136,663
Provision for Income Taxes 9,174 11,195 13,034 15,797 49,200
------- ------- ------- ------- -------
Net Income $ 16,313 $ 19,899 $ 23,172 $ 28,079 $ 87,463
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Average Common Shares
Outstanding 125,516 128,048 129,704 130,098 128,314
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings Per Share $ 0.13 $ 0.15 $ 0.18 $ 0.22 $ 0.68
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------
1995
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales $121,774 $140,342 $150,454 $173,652 $586,222
------- ------- ------- ------- -------
Gross Profit 59,372 69,039 71,712 84,005 284,128
------- ------- ------- ------- -------
Income Before Income Taxes 16,352 16,235 24,489 29,153 86,229
Provision for Income Taxes 5,886 5,846 8,815 10,496 31,043
------- ------- ------- ------- -------
Net Income $ 10,466 $ 10,389 $ 15,674 $ 18,657 $ 55,186
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Average Common Shares
Outstanding 111,698 112,188 118,642 125,310 117,094
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings Per Share $ 0.10 $ 0.09 $ 0.13 $ 0.15 $ 0.47
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
41
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Part I of this Report for information with respect to executive
officers of the Company. Pursuant to General Instruction G(3), reference is
made to the information contained under the captions "Election of Directors"
and "Section 16(a) Reporting" in the Company's definitive proxy statement for
its 1997 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission on or before February 25, 1997, which information is
incorporated herein.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3), reference is made to the
information contained under the caption "Executive Compensation" (except for
the information set forth under the subcaption "Compensation and Organization
Committee Report on Executive Compensation," which is not incorporated
herein) in the Company's definitive proxy statement for its 1997 Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission on or before February 25, 1997, which information is incorporated
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Pursuant to General Instruction G(3), reference is made to the
information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive proxy statement
for its 1997 Annual Meeting of Shareholders to be filed with the Securities
and Exchange Commission on or before February 25, 1997, which information is
incorporated herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), reference is made to the
information contained in the last paragraph under the caption "Election of
Directors -- Compensation of Directors" in the Company's definitive proxy
statement for its 1997 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission on or before February 25, 1997, which
information is incorporated herein.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included
in Part II, Item 8 of this Annual Report on Form 10-K:
Report of Independent Public Accountants.
Consolidated Statements of Income for the years ended October 31,
1996, 1995 and 1994.
Consolidated Balance Sheets as of October 31, 1996 and 1995.
Consolidated Statements of Stockholders' Investment for
the years ended October 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years
ended October 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Supplemental Financial Information (Unaudited).
2. FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted as
not required or not applicable, or the information required has been included
elsewhere in the financial statements and related notes.
3. LISTING OF EXHIBITS
Exhibit
Number Description
- ------- -----------
3-a Restated Articles of Incorporation of ADC Telecommunications, Inc., as
amended. (Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 dated May 24, 1996.)
3-b Composite Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 3-b to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1989.)
43
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
4-a Form of certificate for shares of Common Stock of ADC Telecommunications,
Inc. (Incorporated by reference to Exhibit 4-a to the Company's Form 10-Q
for the quarter ended January 31, 1996.)
4-b Restated Articles of Incorporation of ADC Telecommunications, Inc., as
amended. (Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 dated May 24, 1996.)
4-c Composite Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 3-b to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1989.)
4-d Second Amended and Restated Rights Agreement, amended and restated as of
November 28, 1995, between ADC Telecommunications, Inc. and Norwest Bank
Minnesota, N.A. (amending and restating the Rights Agreement dated as of
September 23, 1986, as amended and restated as of August 16, 1989), which
includes as Exhibit A thereto the form of Right Certificate. (Incorporated
by reference to Exhibit 4 to the Company's Form 8-K dated December 11,
1995.)
10-a* Stock Option and Restricted Stock Plan, restated as of January 26,
1988. (Incorporated by reference to Exhibit 10-a to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1988.)
10-b* Amendment to Stock Option and Restricted Stock Plan dated as of
September 26, 1989. (Incorporated by reference to Exhibit 10-e to the
Company's Annual Report on Form 10-K for the fiscal year ended October 31,
1989.)
10-c* ADC Telecommunications, Inc. 1991 Stock Incentive Plan, as amended.
10-d* Business Unit Management Incentive Plan Document - Directors and Above
Fiscal Year 1997.
10-e* Corporate Management Incentive Plan Document - Directors and Above
Fiscal Year 1997.
10-f* International Management Incentive Plan Document Fiscal Year 1997.
10-g* Executive Incentive Exchange Plan Fiscal Year 1997.
10-h* Executive Incentive Exchange Plan Fiscal Year 1996.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ------------
<S> <C>
10-i* Broadband Connectivity Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-h to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-j* Corporate Management Incentive Plan Fiscal Year 1996. (Incorporated by
reference to Exhibit 10-i to the Company's Quarterly Report on Form 10-Q
for the Quarter ended January 31, 1996.)
10-k* Enterprise Networking Group Management Incentive Plan Fiscal Year
1996. (Incorporated by reference to Exhibit 10-j to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-l* International Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-k to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-m* Network Services Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-m to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-n* ADC Video Systems Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-o to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-o* Systems Integration Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-r to the Company's Quarterly
Report on Form 10-Q for the Quarter ended January 31, 1996.)
10-p* Broadband Connectivity Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-f to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1995.)
10-q* Corporate Management Incentive Plan Fiscal Year 1995. (Incorporated
by reference to Exhibit 10-g to the Company's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1995.)
10-r* International Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-i to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1995.)
10-s* Kentrox Management Incentive Plan Fiscal Year 1995. (Incorporated by
reference to Exhibit 10-j to the Company's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1995.)
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10-t* Network Services Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-k to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1995.)
10-u* Supplemental Executive Retirement Plan Agreement for William J.
Cadogan, dated as of November 1, 1990, between ADC Telecommunications, Inc.
and William J. Cadogan, as amended.
10-v* ADC Telecommunications, Inc. Change in Control Severance Pay Plan
Statement and Summary Plan Description. (Incorporated by reference to
Exhibit 10-q to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1989.)
10-w* Compensation Plan for Directors of ADC Telecommunications, Inc.,
restated as of December 31, 1988. (Incorporated by reference to Exhibit
10-b to the Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1989.)
10-x* First Amendment of the Compensation Plan for Directors of ADC
Telecommunications, Inc. restated as of December 31, 1988. (Incorporated
by reference to Exhibit 10-s to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1989.)
10-y* ADC Telecommunications, Inc. Directors' Supplemental Retirement Plan
dated as of January 23, 1990. (Incorporated by reference to Exhibit 10-m
to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1990.)
10-z* ADC Telecommunications, Inc. Nonemployee Director Stock Option Plan,
as amended.
10-aa* ADC Telecommunications, Inc. Deferred Compensation Plan, dated as of
November 1, 1978, as amended.
10-bb* ADC Telecommunications, Inc. Pension Excess Plan, dated as of January
1, 1985, as amended.
10-cc* ADC Telecommunications, Inc. 401(k) Excess Plan, dated as of September
1, 1990, as amended.
10-dd Lease Agreement, dated August 21, 1990, between Minnetonka Corporate
Center I Limited Partnership and ADC Telecommunications, Inc.
(Incorporated by reference to Exhibit 10-x to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1990.)
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10-ee Lease Agreement, dated October 26, 1990, between Lutheran Brotherhood
and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit
10-w to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1990.)
10-ff Sublease Agreement, dated October 31, 1990, between Seagate
Technology, Inc. and ADC Telecommunications, Inc. (Incorporated by
reference to Exhibit 10-y to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990.)
10-gg Sublease, dated as of February 21, 1995, between Seagate Technology,
Inc. and ADC Telecommunications, Inc. (Incorporated by reference to
Exhibit 10-a of the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1995.)
10-hh Extension of Lease, dated December 7, 1995, between ADC
Telecommunications, Inc. and Lutheran Brotherhood (for the Company's
facility located at 5900 Clearwater Drive, Minnetonka Corporate Center,
Minnetonka, Minnesota.) (Incorporated by reference to Exhibit 10-w to the
Company's Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-ii Extension of Lease, dated December 7, 1995, between ADC
Telecommunications, Inc. and Lutheran Brotherhood (for the Company's
facility located at 5950 Clearwater Drive, Minnetonka Corporate Center,
Minnetonka, Minnesota). (Incorporated by reference to Exhibit 10-x to the
Company's Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-jj Stock Purchase Agreement, dated July 1, 1996, by and between ADC
Telecommunications, Inc., ADC Mersum Oy and the Shareholders of Solitra Oy.
(Incorporated by reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated July 1, 1996.)
21-a Subsidiaries of the Company.
23-a Consent of Independent Public Accountants to the incorporation of their
report dated November 26, 1996, included in this Form 10-K, into the
Company's previously filed Registration Statements, File Nos. 2-83584,
33-22654, 33-40356, 33-40357, 33-52635, 33-52637, 33-58407, 33-58409,
33-59445, 333-02133, 333-04481, 333-07309 and 333-15283.
24-a Power of Attorney.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- ------------
<S> <C>
27-a Financial Data Schedule.
99-a Cautionary Statement Regarding Forward-Looking Statements.
There have been excluded from the exhibits filed with this report
instruments defining the rights of holders of long-term debt of the Company
where the total amount of the securities authorized under such instruments
does not exceed 10% of the total assets of the Company. The Company hereby
agrees to furnish a copy of any such instruments to the Commission upon
request.
</TABLE>
(b) REPORTS ON FORM 8-K
Form 8-K/A Amendment No. 1 to Current Report on Form 8-K dated July 1,
1996 filed on September 13, 1996 in connection with the acquisition
of Solitra Oy, a Finnish corporation.
Current Report on Form 8-K dated September 24, 1996 filed on October 7,
1996 in connection with the Company's announcement of a two-for-one
common stock split, in the form of a one-hundred percent (100%) stock
dividend.
(c) See Exhibit Index and Exhibits attached to this report.
(d) See Financial Statement Schedules included in Part II, Item 8 of this
report.
__________________
* Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to the Annual Report on Form 10-K.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ADC TELECOMMUNICATIONS, INC.
Dated: January 9, 1997 By: /s/ William J. Cadogan
------------------------
William J. Cadogan
Chairman of the Board, President,
Chief Executive Officer and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ William J. Cadogan Chairman of the Board, President, Dated: January 9, 1997
- ----------------------- Chief Executive Officer and
William J. Cadogan Chief Operating Officer
(principal executive officer)
/s/ Robert E. Switz Vice President, Chief Financial Dated: January 9, 1997
- ----------------------- Officer
Robert E. Switz (principal financial officer)
/s/ Charles T. Roehrick Vice President, Controller Dated: January 9, 1997
- ----------------------- (principal accounting officer)
Charles T. Roehrick
James C. Castle* Director Dated: January 9, 1997
Thomas E. Holloran* Director Dated: January 9, 1997
B. Kristine Johnson* Director Dated: January 9, 1997
Charles W. Oswald* Director Dated: January 9, 1997
Irene M. Qualters* Director Dated: January 9, 1997
Alan E. Ross* Director Dated: January 9, 1997
Jean-Pierre Rosso* Director Dated: January 9, 1997
Donald M. Sullivan* Director Dated: January 9, 1997
Warde F. Wheaton* Director Dated: January 9, 1997
John D. Wunsch* Director Dated: January 9, 1997
*By /s/ David F. Fisher Dated: January 9, 1997
--------------------
David F. Fisher
Attorney-in-Fact
</TABLE>
49
<PAGE>
ADC TELECOMMUNICATIONS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
3-a Restated Articles of Incorporation of ADC Telecommunications, Inc., as
amended. (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 dated May 24, 1996.)
3-b Composite Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 3-b to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1989.)
4-a Form of certificate for shares of Common Stock of ADC
Telecommunications, Inc. (Incorporated by reference to Exhibit
4-a to the Company's Form 10-Q for the quarter ended January 31,
1996.)
4-b Restated Articles of Incorporation of ADC Telecommunications, Inc., as
amended. (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 dated May 24, 1996.)
4-c Composite Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 3-b to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1989.)
4-d Second Amended and Restated Rights Agreement, amended and restated as
of November 28, 1995, between ADC Telecommunications, Inc. and
Norwest Bank Minnesota, N.A. (amending and restating the Rights
Agreement dated as of September 23, 1986, as amended and restated
as of August 16, 1989), which includes as Exhibit A thereto the
form of Right Certificate. (Incorporated by reference to Exhibit
4 to the Company's Form 8-K dated December 11, 1995.)
10-a Stock Option and Restricted Stock Plan, restated as of January 26,
1988. (Incorporated by reference to Exhibit 10-a to the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1988.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ------
<S> <C> <C>
10-b Amendment to Stock Option and Restricted Stock Plan dated as of
September 26, 1989. (Incorporated by reference to Exhibit 10-e
to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1989.)
10-c ADC Telecommunications, Inc. 1991 Stock Incentive Plan, as amended.....
10-d Business Unit Management Incentive Plan Document - Directors and
Above Fiscal Year 1997. ...............................................
10-e Corporate Management Incentive Plan Document - Directors and Above
Fiscal Year 1997. .....................................................
10-f International Management Incentive Plan Document Fiscal Year 1997. ....
10-g Executive Incentive Exchange Plan Fiscal Year 1997. ...................
10-h Executive Incentive Exchange Plan Fiscal Year 1996. ...................
10-i Broadband Connectivity Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-h to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-j Corporate Management Incentive Plan Fiscal Year 1996. (Incorporated by
reference to Exhibit 10-i to the Company's Quarterly Report on
Form 10-Q for the Quarter ended January 31, 1996.)
10-k Enterprise Networking Group Management Incentive Plan Fiscal Year
1996. (Incorporated by reference to Exhibit 10-j to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-l International Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-k to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-m Network Services Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-m to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-n ADC Video Systems Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-o to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10-o Systems Integration Management Incentive Plan Fiscal Year 1996.
(Incorporated by reference to Exhibit 10-r to the Company's
Quarterly Report on Form 10-Q for the Quarter ended January 31,
1996.)
10-p Broadband Connectivity Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-f to the Company's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1995.)
10-q Corporate Management Incentive Plan Fiscal Year 1995. (Incorporated
by reference to Exhibit 10-g to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31, 1995.)
10-r International Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-i to the Company's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1995.)
10-s Kentrox Management Incentive Plan Fiscal Year 1995. (Incorporated by
reference to Exhibit 10-j to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31, 1995.)
10-t Network Services Management Incentive Plan Fiscal Year 1995.
(Incorporated by reference to Exhibit 10-k to the Company's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1995.)
10-u Supplemental Executive Retirement Plan Agreement for William J.
Cadogan, dated as of November 1, 1990, between ADC
Telecommunications, Inc. and William J. Cadogan, as amended. .......
10-v ADC Telecommunications, Inc. Change in Control Severance Pay Plan
Statement and Summary Plan Description. (Incorporated by
reference to Exhibit 10-q to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1989.)
10-w Compensation Plan for Directors of ADC Telecommunications, Inc.,
restated as of December 31, 1988. (Incorporated by reference to
Exhibit 10-b to the Company's Quarterly Report on Form 10-Q for
the quarter ended January 31, 1989.)
10-x First Amendment of the Compensation Plan for Directors of ADC
Telecommunications, Inc. restated as of December 31, 1988.
(Incorporated by reference to Exhibit 10-s to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31,
1989.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10-y ADC Telecommunications, Inc. Directors' Supplemental Retirement Plan
dated as of January 23, 1990. (Incorporated by reference to
Exhibit 10-m to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1990.)
10-z ADC Telecommunications, Inc. Nonemployee Director Stock Option
Plan, as amended. ...................................................
10-aa ADC Telecommunications, Inc. Deferred Compensation Plan, dated as
of November 1, 1978, as amended. ....................................
10-bb ADC Telecommunications, Inc. Pension Excess Plan, dated as of
January 1, 1985, as amended. ........................................
10-cc ADC Telecommunications, Inc. 401(k) Excess Plan, dated as of
September 1, 1990, as amended. ......................................
10-dd Lease Agreement, dated August 21, 1990, between Minnetonka
Corporate Center I Limited Partnership and ADC
Telecommunications, Inc. (Incorporated by reference to Exhibit
10-x to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1990.)
10-ee Lease Agreement, dated October 26, 1990, between Lutheran
Brotherhood and ADC Telecommunications, Inc. (Incorporated by
reference to Exhibit 10-w to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1990.)
10-ff Sublease Agreement, dated October 31, 1990, between Seagate
Technology, Inc. and ADC Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-y to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1990.)
10-gg Sublease, dated as of February 21, 1995, between Seagate
Technology, Inc. and ADC Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-a of the Company's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1995.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10-hh Extension of Lease, dated December 7, 1995, between ADC
Telecommunications, Inc. and Lutheran Brotherhood (for the
Company's facility located at 5900 Clearwater Drive, Minnetonka
Corporate Center, Minnetonka, Minnesota.) (Incorporated by
reference to Exhibit 10-w to the Company's Quarterly Report on
Form 10-Q for the Quarter ended January 31, 1996.)
10-ii Extension of Lease, dated December 7, 1995, between ADC
Telecommunications, Inc. and Lutheran Brotherhood (for the
Company's facility located at 5950 Clearwater Drive, Minnetonka
Corporate Center, Minnetonka, Minnesota). (Incorporated by
reference to Exhibit 10-x to the Company's Quarterly Report on
Form 10-Q for the Quarter ended January 31, 1996.)
10-jj Stock Purchase Agreement, dated July 1, 1996, by and between ADC
Telecommunications, Inc., ADC Mersum Oy and the Shareholders of
Solitra Oy. (Incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated July 1, 1996.)
21-a Subsidiaries of the Company. .............................................
23-a Consent of Independent Public Accountants to the incorporation of
their report dated November 26, 1996, included in this Form 10-K,
into the Company's previously filed Registration Statements, File
Nos. 2-83584, 33-22654, 33-40356, 33-40357, 33-52635, 33-52637, 33-58407,
33-58409, 33-59445, 333-02133, 333-04481, 333-07309 and 333-15283.........
24-a Power of Attorney. .......................................................
27-a Financial Data Schedule. .................................................
99-a Cautionary Statement Regarding Forward-Looking Statements. ...............
</TABLE>
<PAGE>
EXHIBIT 10-C
ADC TELECOMMUNICATIONS, INC.
1991 STOCK INCENTIVE PLAN
(Share amounts adjusted to reflect stock splits through October 31, 1996)
SECTION 1. PURPOSE; EFFECT ON PRIOR PLAN.
(a) PURPOSE. The purpose of the ADC Telecommunications, Inc. 1991 Stock
Incentive Plan (the "Plan") is to aid in maintaining and developing management
personnel capable of assuring the future success of ADC Telecommunications, Inc.
(the "Company"), to offer such personnel incentives to put forth maximum efforts
for the success of the Company's business and to afford such personnel an
opportunity to acquire a proprietary interest in the Company.
(b) EFFECT ON PRIOR PLAN. From and after the effective date of the Plan,
no stock options or restricted stock awards shall be granted under the Company's
Stock Option and Restricted Stock Plan. All outstanding stock options and
restricted stock awards previously granted under the Stock Option and Restricted
Stock Plan shall remain outstanding in accordance with the terms thereof.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii)
any entity in which the Company has a significant equity interest, as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award or Dividend Equivalent
granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors of the
Company designated by such Board to administer the Plan and composed of not
less than three directors, each of whom is a "disinterested person" within
the meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.
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(g) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee. Notwithstanding
the foregoing, for purposes of the Plan, the Fair Market Value of Shares on
a given date shall be (i) the last sale price of the Shares as reported on
the NASDAQ National Market System on such date, if the Shares are then
quoted on the NASDAQ National Market System or (ii) the closing price of
the Shares on such date on a national securities exchange, if the Shares
are then being traded on a national securities exchange.
(h) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto.
(i) "Key Employee" shall mean any employee of the Company or any Affiliate
who the Committee determines to be a key employee.
(j) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(l) "Participant" shall mean a Key Employee designated to be granted an
Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association or trust.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.
(p) "Restricted Stock Unit" shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation thereto.
(r) "Shares" shall mean shares of Common Stock, $.20 par value, of the
Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(s) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
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<PAGE>
SECTION 3. ADMINISTRATION.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The Plan shall be administered
by the Committee. Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to each Participant
under the Plan; (iii) determine the number of Shares to be covered by (or with
respect to which payments are to be calculated in connection with) Awards; (iv)
determine the terms and conditions of any Award or Award Agreement; (v) amend
the terms and conditions of any Award or Award Agreement and accelerate the
exercisability of Options or the lapse of restrictions relating to Restricted
Stock or Restricted Stock Units; (vi) determine whether, to what extent and
under what circumstances Awards may be exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash or
Shares payable with respect to an Award under the Plan shall be deferred either
automatically or at the election of the holder thereof or the Committee;
(viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Participant, any holder or beneficiary of
any Award and any employee of the Company or any Affiliate.
(b) MEETINGS OF THE COMMITTEE. The Committee shall select one of its
members as its chairman and shall hold its meetings at such times and places as
the Committee may determine. A majority of the Committee's members shall
constitute a quorum. All determinations of the Committee shall be made by not
less than a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(c),
the number of Shares available for granting Awards under the Plan shall be
16,431,708. If any Shares covered by an Award or to which an Award relates are
not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares or cash payments to be received thereunder, then the
number of Shares counted against the aggregate number of Shares available under
the Plan with respect to such Award, to the extent of any such forfeiture or
termination, shall again be available for granting Awards under the Plan. In
addition, any Shares that are used by a Participant as full or partial payment
to the Company of the purchase price of Shares acquired upon exercise of an
Option shall again be available for granting Awards.
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<PAGE>
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4,
(i) if an Award entitles the holder thereof to receive or purchase
Shares, the number of Shares covered by such Award or to which such Award
relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan;
and
(ii) if an Award entitles the holder to receive cash payments but the
amount of such payments are denominated in or based on a number of Shares,
such number of Shares shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards under
the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted for,
other Awards may be counted or not counted under procedures adopted by the
Committee in order to avoid double counting.
(c) ADJUSTMENTS. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
securities or other property) which thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or securities or other property)
subject to outstanding Awards and (iii) the exercise price with respect to any
Award; provided, however, that the number of Shares covered by any Award or to
which such Award relates shall always be a whole number.
(d) INCENTIVE STOCK OPTIONS. Notwithstanding the foregoing, the number of
Shares available for granting Incentive Stock Options under the Plan shall not
exceed 16,431,708, subject to adjustment as provided in the Plan and Section 422
or 424 of the Code.
SECTION 5. ELIGIBILITY.
Any Key Employee, including any Key Employee who is an officer or director
of the Company or any Affiliate, shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code.
SECTION 6. AWARDS.
(a) OPTIONS. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
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<PAGE>
(i) EXERCISE PRICE. The purchase price per Share purchasable under
an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than the Fair Market Value of a Share
on the date of grant of such Option.
(ii) OPTION TERM. The term of each Option shall be fixed by the
Committee.
(iii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the exercise date
equal to the relevant exercise price) in which, payment of the exercise
price with respect thereto may be made or deemed to have been made.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under
the Plan shall confer on the holder thereof a right to receive upon exercise
thereof the excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (ii) the grant price
of the Stock Appreciation Right as specified by the Committee, which price shall
not be less than the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) RESTRICTIONS. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate.
(ii) STOCK CERTIFICATES. Any Restricted Stock granted under the Plan
shall be evidenced by issuance of a stock certificate or certificates.
Such certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock. In the
case of Restricted Stock Units, no Shares shall be issued at the time such
Awards are granted.
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<PAGE>
(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise determined
by the Committee, upon termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all Shares of Restricted Stock and all Restricted Stock Units at
such time subject to restriction shall be forfeited and reacquired by the
Company; provided, however, that the Committee may, when it finds that a
waiver would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to Shares of Restricted
Stock or Restricted Stock Units. Shares representing Restricted Stock that
is no longer subject to restrictions shall be delivered to the holder
thereof promptly after the applicable restrictions lapse or are waived.
Upon the lapse or waiver of restrictions and the restricted period relating
to Restricted Stock Units evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holders of the Restricted Stock
Units.
(d) PERFORMANCE AWARDS. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash or Shares (including, without limitation,
Restricted Stock) and (ii) shall confer on the holder thereof the right to
receive payments, in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee shall establish. Subject
to the terms of the Plan and any applicable Award Agreement, the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted and the amount
of any payment to be made pursuant to any Performance Award shall be determined
by the Committee.
(e) DIVIDEND EQUIVALENTS. The Committee is hereby authorized to grant to
Participants Dividend Equivalents under which such Participants shall be
entitled to receive payments (in cash or Shares, as determined in the discretion
of the Committee) equivalent to the amount of cash dividends paid by the Company
to holders of Shares with respect to a number of Shares determined by the
Committee. Subject to the terms of the Plan and any applicable Award Agreement,
such Dividend Equivalents may have such terms and conditions as the Committee
shall determine.
(f) GENERAL.
(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
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<PAGE>
(iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan
and of any applicable Award Agreement, payments to be made by the Company
or an Affiliate upon the grant, exercise or payment of an Award may be made
in Shares, cash or a combination thereof as the Committee shall determine,
and may be made in a single payment, in installments or on a deferred
basis, in each case in accordance with rules and procedures established by
the Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents with respect to installment or deferred payments.
(iv) LIMITS ON TRANSFER OF AWARDS. No Award and no right under any
such Award shall be assignable, alienable, saleable or transferable by a
Participant otherwise than by will or by the laws of descent and
distribution; provided, however, that, if so determined by the Committee, a
Participant may, in the manner established by the Committee, designate a
beneficiary or beneficiaries to exercise the rights of the Participant and
receive any property distributable with respect to any Award upon the death
of the Participant. Each Award or right under any Award shall be
exercisable during the Participant's lifetime only by the Participant or,
if permissible under applicable law, by the Participant's guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee.
(vi) RULE 16B-3 SIX-MONTH LIMITATIONS. To the extent required in
order to comply with Rule 16b-3 only, any equity security offered pursuant
to the Plan may not be sold for at least six months after acquisition,
except in the case of death or disability, and any derivative security
issued pursuant to the Plan shall not be exercisable for at least six
months, except in case of death or disability. Terms used in the preceding
sentence shall, for the purposes of such sentence only, have the meanings,
if any, assigned or attributed to them under Rule 16b-3.
(vii) RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates for
Shares delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission and any applicable federal or state securities laws, and the
Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares are traded on a securities exchange, the Company shall not be
required to deliver any Shares covered by an Award unless and until such
Shares have been admitted for trading on such securities exchange.
(viii) AWARD LIMITATIONS UNDER THE PLAN. No Participant may be granted
any Award or Awards under the Plan, the value of which Award or Awards are
based solely on an increase in the value of Shares after the date of grant
of such Award or Awards, for more
7
<PAGE>
than 1,000,000 Shares, in the aggregate, in any one calendar year period
beginning with the 1994 calendar year. The foregoing annual limitation
specifically includes the grant of any Awards representing "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the shareholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that:
(i) absent such approval, would cause Rule 16b-3 to become unavailable
with respect to the Plan;
(ii) requires the approval of the Company's shareholders under any
rules or regulations of the National Association of Securities Dealers,
Inc. or any securities exchange that are applicable to the Company; or
(iii) requires the approval of the Company's shareholders under the Code
in order to permit Incentive Stock Options to be granted under the Plan.
(b) AMENDMENTS TO AWARDS. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without the
consent of the Participant or holder or beneficiary thereof.
(c) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
SECTION 8. INCOME TAX WITHHOLDING; TAX BONUSES.
(a) WITHHOLDING. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant, are withheld or collected from such Participant. In order to
assist a Participant in paying all federal and state taxes to be withheld or
collected upon exercise or receipt of (or the lapse of restrictions relating to)
an Award, the Committee, in its discretion and subject to such additional terms
and conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes or
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(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.
(b) TAX BONUSES. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve bonuses to designated Participants to be paid upon their
exercise or receipt of (or the lapse of restrictions relating to) Awards in
order to provide funds to pay all or a portion of federal and state taxes due as
a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.
SECTION 9. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. No Key Employee, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Key Employees, Participants or holders
or beneficiaries of Awards under the Plan. The terms and conditions of Awards
need not be the same with respect to different Participants.
(b) DELEGATION. The Committee may delegate to one or more officers of the
Company or any Affiliate or a committee of such officers the authority, subject
to such terms and limitations as the Committee shall determine, to grant Awards
to Key Employees who are not officers or directors of the Company for purposes
of Section 16 of the Securities Exchange Act of 1934, as amended.
(c) GRANTING OF AWARDS. The granting of an Award pursuant to the Plan
shall take place only when an Award Agreement shall have been duly executed on
behalf of the Company.
(d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(e) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. In addition, the Company or an Affiliate may at any time dismiss
a Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(f) GOVERNING LAW. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Minnesota.
(g) SEVERABILITY. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended
9
<PAGE>
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(i) NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
SECTION 10. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by the
shareholders of the Company.
SECTION 11. TERM OF THE PLAN.
Awards shall only be granted under the Plan during a 10-year period
beginning on the effective date of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the end of such 10-year period, and the
authority of the Committee provided for hereunder with respect to the Plan and
any Awards, and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the end of such period.
10
<PAGE>
ADC TELECOMMUNICATIONS, INC.
1991 STOCK INCENTIVE PLAN
Amendment Effective as of December 17, 1996
RESOLVED, that Section 6(f)(iv) of the ADC Telecommunications, Inc. 1991 Stock
Incentive Plan is hereby amended in its entirety to read as follows:
(iv) LIMITS ON TRANSFER OF AWARDS. No Award and no right under any such
Award shall be assignable, alienable, salable or transferable by a Participant
otherwise than by will or by the laws of descent and distribution; PROVIDED,
HOWEVER, that a Participant may, in the manner established by the Committee,
(A) designate a beneficiary or beneficiaries to exercise the rights of
the Participant and receive any property distributable with respect to any
Award upon the death of the Participant, or
(B) transfer a Non-Qualified Stock Option to any member of such
Participant's immediate family (which, for purposes of this clause (B)
shall mean such Participant's children, grandchildren, or current spouse)
or to one or more trusts established for the exclusive benefit of one or
more such immediate family members or partnerships in which the Participant
or such immediate family members are the only partners, PROVIDED that (1)
there is no consideration for such transfer, and (2) the Non-Qualified
Options held by such transferees continue to be subject to the same terms
and conditions (including restrictions on subsequent transfers) as were
applicable to such Non-Qualified Options immediately prior to their
transfer.
Each Award or right under any Award shall be exercisable during the
Participant's lifetime only by the Participant, by a transferee pursuant to a
transfer permitted by clause (B) of this Section 6(f)(iv), or, if permissible
under applicable law, by the Participant's or such transferee's guardian or
legal representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
<PAGE>
EXHIBIT 10-D
ADC TELECOMMUNICATIONS
BUSINESS UNIT
MANAGEMENT INCENTIVE PLAN DOCUMENT - DIRECTORS AND ABOVE
FISCAL YEAR 1997
<PAGE>
ADC TELECOMMUNICATIONS
BUSINESS UNIT
MANAGEMENT INCENTIVE PLAN DOCUMENT - DIRECTORS AND ABOVE
FISCAL YEAR 1997
I. PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company"), Business
Unit Management Incentive Plan - Directors and Above, Fiscal Year ("FY") 1997,
effective November 1, 1996 through October 31, 1997.
II. PURPOSE
The purpose of the Plan is to provide, with full regard to the protection of
shareholder's investments, a direct financial incentive for eligible employees
to perform an effective leadership role and make a significant contribution to
the Company's established goals.
III. ADMINISTRATION
This Plan is administered by a Management Incentive Plan Committee ("Committee")
appointed and authorized by the Company's Board of Directors. Subject to the
complete and full discretion of the Board of Directors, the Committee is
authorized to make all decisions as required in administration of the Plan and
to exercise its discretion to define, interpret, construe, apply and make any
exceptions to the terms of the Plan.
IV. ELIGIBILITY
The Committee establishes rules of eligibility for participation in the Plan and
determines eligibility in accordance with those rules. For Fiscal Year 1997,
eligibility applies to all employees in Grades 17 and above, plus any Grade 16
directors. Participation is effective as of the date approved by the Committee
and is communicated to the participant by an incentive opportunity statement
("Participant Form") specifying the target incentive level for the position. No
employee will become a participant in the Plan after May 1, 1997, unless the
employee is already a participant in the Management Incentive Plan for Managers.
<PAGE>
V. PLAN GOALS
The Plan reinforces the key financial goals which support ADC's long-term
strategic plans. The FY 1997 goal categories and weights for Business Unit
participants are as follows:
GOAL WEIGHT
---- ------
* Business Unit EVA Improvement 60%
Business Unit Revenue 20%
** Key Business Unit Goal 20%
---
TOTAL 100%
* EVA Improvement is the dollar amount of planned year-over-year improvement
in EVA. EVA Improvement goals are set for each of the next 3 years.
** The key Business Unit goal varies by Business Unit. See attached goal
sheet for definition of applicable key Business Unit goal.
VI. INCENTIVE PAYOUT OPPORTUNITIES
A. The payout opportunity for meeting the Business Unit Revenue and key
Business Unit goal are as follows:
PAYOUTS
---------------------------------------------
GOAL THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
Business Unit Revenue 0% of Target 100% 400% of Target
Key Business Unit Goal 0% of Target 100% 200% of Target
Results between threshold-target and target-maximum are interpolated.
A. The payout opportunity for meeting the EVA Improvement goal is as follows:
GOAL THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
Business Unit EVA Improvement N/A 100% N/A
(unlimited (unlimited
downside) upside)
Incentive amounts are interpolated based on leverage (the slope of the
line).
There are no thresholds and maximums for the EVA Improvement goal.
However, the specific incentive payout is a function of a bonus bank
concept which is described in Section VII and Section VIII.
<PAGE>
VII. BONUS BANK DEFINITION
As mentioned earlier, the Plan offers unlimited upside and downside rewards to
participants for creating value. In order to ensure that EVA Improvements are
sustainable over a multi-year period, a bonus bank is created whereby
exceptional performance (above 200% of target) is credited to your account and
poor performance (negative amounts below 0% of the target level) is deducted
from your account.
The specific mechanics of the bonus bank are described below.
VIII. HOW THE BONUS BANK WORKS
A. A bonus bank account is created when the EVA Improvement goal achievement
is above 200% of target or below 0% of the target level.
B. Amounts achieved in excess of 200% of target are put into an EVA
Improvement bonus bank. These amounts vest at a rate of 25% per year,
beginning immediately, and then after 1 year, 2 years, and 3 years,
respectively.
C. If EVA Improvement is less than 0% of the target level for the current Plan
year, a negative amount is calculated and is handled as follows:
1. If there is a positive current year bonus bank amount, the negative
amount offsets it. After the negative has been applied, any positive
vested amount is paid. If the bonus bank is negative at the end of the
year, the negative amount is carried over to the next year.
2. If no positive bank balances have been carried forward from prior
year(s), the entire negative amount goes into the bonus bank and is carried
forward into the next plan year. Then, in that next Plan year, if EVA
Improvement is positive, the negative amount offsets amounts earned in that
year in this manner and order:
a) Up to 100% of target achieved: No reduction or offset. Amount is
paid immediately.
b) Between 100% and 200% of target. Offset applies before any payout
occurs. The remaining amount, if any, is paid immediately.
c) Over 200% of target: Offset applies before any amounts are banked
and subject to vesting. Any remaining amounts are subject to vesting
schedule described above.
D. The bonus bank is a bookkeeping account and as such, amounts allocated to a
participant's bonus bank earn no interest, are unfunded, and do not
actually vest until they are paid out in in accordance with the Plan.
<PAGE>
IX. MAXIMUM EVA IMPROVEMENT GOAL PAYOUT IN ANY PLAN YEAR
Notwithstanding the above, the maximum amount that may be paid in any one year
to a participant due to the EVA Improvement goal, including amounts achieved for
the current year and bonus bank amounts that vest in the current year, may not
exceed 400% of the EVA Improvement target incentive amount.
X. CURRENT PLAN YEAR PAYMENT
Payments which become due and payable under this Plan for the current Plan year
include:
- - The amount achieved for the Revenue goal.
- - The amount achieved for the key Business Unit goal, PROVIDED THE THRESHOLD
REVENUE DOLLAR AMOUNT IS MET OR 0% OF THE TARGET LEVEL FOR THE EVA
IMPROVEMENT GOAL IS MET.
- - Current year EVA Improvement goal achievement up to 200% of target (if
there are no negative offsets).
- - Vested amount of EVA Improvement bonus bank account balance.
Payments which become due and payable under this Plan are made as soon as
administratively feasible following the close of the Company's Fiscal Year.
XI. CALCULATION OF INDIVIDUAL PAYMENTS AND BONUS BANK ACCOUNT BALANCES
A. The obligation to make payments under the Plan is determined by achievement
of goals as determined by the Board of Directors.
B. Calculations under this Plan are a function of:
1. Target incentive opportunity - expressed as a percentage of an
individual's FY 1997 earnings. The target % for each participant
is designated on the "Participant Form."
2. Participant's 1997 Fiscal Year base salary earnings.
3. Performance against the established goals.
C. Individual award calculations are shown by the following examples:
<PAGE>
Assume we have a Plan participant with the following facts:
- ---------------------------------------------------------------------
Current Plan Year 1997
- ---------------------------------------------------------------------
Grade 17
- ---------------------------------------------------------------------
Base Salary Earnings $85,000
- ---------------------------------------------------------------------
Target Incentive Opportunity 20% of base salary earnings or $17,000
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
GOAL WEIGHT TARGET INCENTIVE
- ---- ------ ----------------
DOLLARS
-------
Business Unit EVA Improvement 60% $ 10,200
Business Unit Revenue 20% $ 3,400
Key Business Unit Goal 20% $ 3,400
--------
$ 17,000
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOAL ACHIEVEMENT (AS A % OF TARGET)
- -----------------------------------
Business Unit EVA Improvement 300% x $10,200 = $30,600*
Business Unit Revenue 110% x $3,400 = $ 3,740
Key Business Unit Goal 100% x $3,400 = $ 3,400
- --------------------------------------------------------------------------------
*BUSINESS UNIT EVA IMPROVEMENT INCENTIVE CALCULATIONS:
- - 1st 200% of target EVA incentive = $20,400
Adjustments: None. Pay immediately.
- - Above 200% of target = $10,200
Adjustments: Put into bonus bank. 25% vests immediately; the rest at
25% per year.
- - Final EVA incentive payout:
$20,400 + ($10,200 x 25%) =$22,950
- - EVA bonus bank balance to carry over = 75% of $10,200 or $7,650:
vests in 1998 = $2,550
vests in 1999 = $2,550
vests in 2000 = $2,550
------
$7,650
TOTAL CURRENT YEAR INCENTIVE PAYOUT: $22,950 (FINAL EVA PAYOUT) + $3,740
(REVENUE) + $3,400 (KEY BUSINESS UNIT GOAL) = $30,090.
<PAGE>
Assume the same Participant has the following facts the next year:
-------------------------------------------------------------------------
Current Plan Year 1998
-------------------------------------------------------------------------
Grade 17
-------------------------------------------------------------------------
Base Salary Earnings $90,000
-------------------------------------------------------------------------
Target Incentive Opportunity 20% of base salary earnings or $18,000
-------------------------------------------------------------------------
EVA Bonus Bank $2,550 vests in 1998
-------------------------------------------------------------------------
$2,550 vests in 1999
-------------------------------------------------------------------------
$2,550 vests in 2000
------
-------------------------------------------------------------------------
$7,650 Total Bonus Bank
-------------------------------------------------------------------------
------------------------------------------------------------------------
GOAL WEIGHT TARGET INCENTIVE
---- ------ ----------------
DOLLARS
-------
Business Unit EVA Improvement 60% $ 10,800
Business Unit Revenue 20% $ 3,600
Key Business Unit Goal 20% $ 3,600
--------
$ 18,000
------------------------------------------------------------------------
---------------------------------------------------------------------------
GOAL ACHIEVEMENT (AS A % OF TARGET)
-----------------------------------
Business Unit EVA Improvement -50% x $10,800 = $ -5,400*
Business Unit Revenue 90% x $ 3,600 = $ 3,240
Key Business Unit Goal 110% x $ 3,600 = $ 3,960
---------------------------------------------------------------------------
*BUSINESS UNIT EVA IMPROVEMENT INCENTIVE CALCULATIONS:
-$-5,400 offsets positive bonus bank
-Apply to amount due to vest in 1998 (current plan year)
-5,400
2,550 due to vest in 1998
-----
-2,850 remaining negative accrual is carried forward to 1999
-EVA bonus bank balance to carry over:
2,550 due to vest in 1999
-2,850 negative carry over from 1998
------
-300 beginning of year 1999 bank balance
2,250 due to vest in 2000
TOTAL CURRENT YEAR INCENTIVE PAYOUT: $3,240 (REVENUE) + $3,960 (KEY BUSINESS
UNIT GOAL) = $7,200.
<PAGE>
XII. EFFECT OF CHANGE IN EMPLOYMENT STATUS
A. VOLUNTARY RESIGNATION AND RETIREMENT. A participant who voluntarily resigns
full-time employment or retires prior to the end of the Fiscal Year receives no
payment under the Plan for the current Plan year's performance or any EVA bonus
bank account balances being carried over. The participant does not have any
obligations with respect to any negative EVA bonus bank account balances
remaining at the end of the Plan year.
B. CHANGE BASED UPON UNSATISFACTORY JOB PERFORMANCE. A participant who is
involuntarily terminated or transferred to a position not eligible for this Plan
for reasons of unsatisfactory job performance receives no payment under the Plan
for the current Plan year's performance or any EVA bonus bank account balances
being carried over from prior Plan year(s). The participant does not have any
obligations with respect to any negative EVA bonus bank account balances
remaining at the end of the Plan year.
C. CHANGE BASED UPON JOB ELIMINATION. Subject to the approval of the Committee,
a participant who is involuntarily terminated or transferred to a position not
eligible for this Plan or another Management Incentive Plan because of a job
elimination may retain the right to a pro rata calculation under this Plan for
the current year's performance, plus a pro rata portion of any EVA bonus bank
balance that would otherwise have vested at the end of the current Plan year,
based upon the time served in the eligible position during the Fiscal Year,
provided at least three months was served in the eligible position. Rights to
any unvested EVA bonus bank account balances at the end of the Plan year are
forfeited. The participant does not have any obligations with respect to any
negative EVA bonus bank account balances that remain after the pro rata
calculation.
D. CHANGE BASED UPON PROMOTION, DEMOTION, OR TRANSFER TO ANOTHER ELIGIBLE PLAN
JOB. A current participant who is promoted, demoted, or transferred from an
eligible position under this Plan to another eligible position under this Plan
during the Fiscal Year has a pro rata calculation of the current year's
performance awards based upon the time served in each position during FY 1997,
provided at least three months were served in each position. If a participant
is in an eligible position for less than three months during the Fiscal Year,
the payment calculation is based on the incentive level of the position served
in the longest. Any positive or negative bonus bank accounts transfer with the
individual in their entirety.
E. CHANGE IN JOBS WITHIN THE COMPANY BUT NOT ELIGIBLE FOR THIS PLAN. A
participant who changes jobs within the Company but is not eligible for this
Plan, retains the right to a pro rata payout under this Plan for the current
year's performance, plus a pro rata portion of any EVA bonus balance that would
otherwise have vested at the end of the current Plan year, based upon the time
served in the eligible position during the Fiscal Year, provided at least three
months was served in the eligible position. Rights to any unvested EVA bonus
bank account balances at the end of the Plan year are forfeited. The
participant does not have any obligations with respect to any negative EVA bonus
bank account balances that remain after the pro rata calculation.
<PAGE>
F. DEATH. If a participant dies during the Fiscal Year, the participant's
heirs as determined by will or applicable laws of descent and distribution will
have a pro rata calculation of the current year's performance, plus a pro rata
portion of any EVA bonus bank balance that would otherwise have vested at the
end of the current Plan year, based upon the time served in the eligible
position during the Fiscal Year. Rights to any unvested EVA bonus bank account
balances at the end of the current Plan year are forfeited. The participant's
heirs do not have any obligations with respect to any negative EVA bonus bank
account balances that remain after the pro rata calculation.
XIII. COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986
If a current Plan year payout causes the participant's total cash compensation
to exceed one million dollars in the Fiscal Year, the participant must defer
the portion that exceeds the one million dollars in the ADC Telecommunications
Deferred Compensation Plan.
XIV. AMENDMENT OR TERMINATION OF PLAN
The Board of Directors reserves and retains the right to modify, rescind or
terminate this plan in whole or in part, at its sole discretion, and nothing in
this Plan limits this right in any way or creates any rights in any employee of
future participation in this Plan or any other plan, or constitutes any
guarantee of compensation or employment with ADC. Further, neither the Board of
Directors nor the Company has any obligation under this Plan or otherwise to
adopt this or any other plan in any future fiscal year.
<PAGE>
EXHIBIT 10-E
ADC TELECOMMUNICATIONS
CORPORATE
MANAGEMENT INCENTIVE PLAN DOCUMENT - DIRECTORS AND ABOVE
FISCAL YEAR 1997
<PAGE>
ADC TELECOMMUNICATIONS
CORPORATE
MANAGEMENT INCENTIVE PLAN DOCUMENT - DIRECTORS AND ABOVE
FISCAL YEAR 1997
I. PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company"), Corporate
Management Incentive Plan - Directors and Above, Fiscal Year ("FY") 1997,
effective November 1, 1996 through October 31, 1997.
II. PURPOSE
The purpose of the Plan is to provide, with full regard to the protection of
shareholder's investments, a direct financial incentive for eligible employees
to perform an effective leadership role and make a significant contribution to
the Company's established goals.
III. ADMINISTRATION
This Plan is administered by a Management Incentive Plan Committee ("Committee")
appointed and authorized by the Company's Board of Directors. Subject to the
complete and full discretion of the Board of Directors, the Committee is
authorized to make all decisions as required in administration of the Plan and
to exercise its discretion to define, interpret, construe, apply and make any
exceptions to the terms of the Plan.
IV. ELIGIBILITY
The Committee establishes rules of eligibility for participation in the Plan and
determines eligibility in accordance with those rules. For Fiscal Year 1997,
eligibility applies to all employees in Grades 17 and above, plus any Grade 16
directors. Participation is effective as of the date approved by the Committee
and is communicated to the participant by an incentive opportunity statement
("Participant Form") specifying the target incentive level for the position. No
employee will become a participant in the Plan after May 1, 1997, unless the
employee is already a participant in the Management Incentive Plan for Managers.
<PAGE>
V. PLAN GOALS
The Plan reinforces the key financial goals which support ADC's long-term
strategic plans. The FY 1997 goal categories and weights for Corporate
participants are as follows:
GOAL WEIGHT
---- ------
* Corporate EVA Improvement 60%
Corporate Revenue 20%
** Individual Contribution 20%
----
TOTAL 100%
* EVA Improvement is the dollar amount of planned year-over-year improvement
in EVA. EVA Improvement goals are set for each of the next 3 years.
** The Individual Contribution goal measures your performance against
pre-determined objectives. The objectives are to be documented on the
attached "Individual Objective" form and require your Supervisor's and
Division head's approval.
VI. INCENTIVE PAYOUT OPPORTUNITIES
A. The payout opportunity for meeting the Corporate Revenue and Individual
Contribution goals are as follows:
PAYOUTS
----------------------------------------
GOAL THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
Corporate Revenue 0% of Target 100% 400% of Target
Individual Contribution 0% of Target 100% 200% of Target
Results between threshold-target and target-maximum are interpolated.
B. The payout opportunity for meeting the EVA Improvement goal is as follows:
GOAL THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
EVA Improvement N/A 100% N/A
(unlimited downside) (unlimited upside)
Incentive amounts are interpolated based on leverage (the slope of the
line).
There are no thresholds and maximums for the EVA Improvement goal.
However, the specific incentive payout is a function of a bonus bank
concept which is described in Section VII and Section VIII.
<PAGE>
VII. BONUS BANK DEFINITION
As mentioned earlier, the Plan offers unlimited upside and downside rewards to
participants for creating value. In order to ensure that EVA Improvements are
sustainable over a multi-year period, a bonus bank is created whereby
exceptional performance (above 200% of target) is credited to your account and
poor performance (negative amounts below 0% of the target level) is deducted
from your account.
The specific mechanics of the bonus bank are described below.
VIII. HOW THE BONUS BANK WORKS
A. A bonus bank account is created when the EVA Improvement goal achievement
is above 200% of target or below 0% of the target level.
B. Amounts achieved in excess of 200% of target are put into an EVA
Improvement bonus bank. These amounts vest at a rate of 25% per year,
beginning immediately, and then after 1 year, 2 years, and 3 years,
respectively.
C. If EVA Improvement is less than 0% of the target level for the current Plan
year, a negative amount is calculated and is handled as follows:
1. If there is a positive current year bonus bank amount, the
negative amount offsets it. After the negative has been applied, any
positive vested amount is paid. If the bonus bank is negative at the
end of the year, the negative amount is carried over to the next year.
2. If no positive bank balances have been carried forward from prior
year(s), the entire negative amount goes into the bonus bank and is
carried forward into the next plan year. Then, in that next Plan
year, if EVA Improvement is positive, the negative amount offsets
amounts earned in that year in this manner and order:
a) Up to 100% of target achieved: No reduction or offset.
Amount is paid immediately.
b) Between 100% and 200% of target. Offset applies before any
payout occurs. The remaining amount, if any, is paid
immediately.
c) Over 200% of target: Offset applies before any amounts are
banked and subject to vesting. Any remaining amounts are
subject to vesting schedule described above.
D. The bonus bank is a bookkeeping account and as such, amounts allocated to a
participant's bonus bank earn no interest, are unfunded, and do not actually
vest until they are paid out in in accordance with the Plan.
<PAGE>
IX. MAXIMUM EVA IMPROVEMENT GOAL PAYOUT IN ANY PLAN YEAR
Notwithstanding the above, the maximum amount that may be paid in any one year
to a participant due to the EVA Improvement goal, including amounts achieved for
the current year and bonus bank amounts that vest in the current year, may not
exceed 400% of the EVA Improvement target incentive amount.
X. CURRENT PLAN YEAR PAYMENT
Payments which become due and payable under this Plan for the current Plan year
include:
- - The amount achieved for the Revenue goal.
- - The amount achieved for the Individual Contribution goal, PROVIDED THE
THRESHOLD REVENUE DOLLAR AMOUNT IS MET OR 0% OF THE TARGET LEVEL FOR THE
EVA IMPROVEMENT GOAL IS MET.
- - Current year EVA Improvement goal achievement up to 200% of target (if
there are no negative offsets).
- - Vested amount of EVA Improvement bonus bank account balance.
Payments which become due and payable under this Plan are made as soon as
administratively feasible following the close of the Company's Fiscal Year.
XI. CALCULATION OF INDIVIDUAL PAYMENTS AND BONUS BANK ACCOUNT BALANCES
A. The obligation to make payments under the Plan is determined by achievement
of goals as determined by the Board of Directors.
B. Calculations under this Plan are a function of:
1. Target incentive opportunity - expressed as a percentage of an
individual's FY 1997 earnings. The target % for each participant
is designated on the "Participant Form."
2. Participant's 1997 Fiscal Year base salary earnings.
3. Corporate and individual performance against the established
goals.
C. Individual award calculations are shown by the following examples:
<PAGE>
Assume we have a Plan participant with the following facts:
- -------------------------------------------------------------------------
Current Plan Year 1997
- -------------------------------------------------------------------------
Grade 17
- -------------------------------------------------------------------------
Base Salary Earnings $85,000
- -------------------------------------------------------------------------
Target Incentive Opportunity 20% of base salary earnings or $17,000
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
GOAL WEIGHT TARGET INCENTIVE DOLLARS
- ---- ------ ------------------------
Corporate EVA Improvement 60% $10,200
Corporate Revenue 20% $ 3,400
Individual Contribution 20% $ 3,400
-------
$17,000
- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOAL ACHIEVEMENT (AS A % OF TARGET)
- -----------------------------------
Corporate EVA Improvement 300% x $10,200 = $ 30,600*
Corporate Revenue 110% x $3,400 = $ 3,740
Individual Contribution 100% x $3,400 = $ 3,400
- --------------------------------------------------------------------------------
*CORPORATE EVA IMPROVEMENT INCENTIVE CALCULATIONS:
- - 1st 200% of target EVA incentive = $20,400
Adjustments: None. Pay immediately.
- - Above 200% of target = $10,200
Adjustments: Put into bonus bank. 25% vests immediately; the rest at
25% per year.
- - Final EVA incentive payout:
$20,400 + ($10,200 x 25%) =$22,950
- - EVA bonus bank balance to carry over = 75% of $10,200 or $7,650:
vests in 1998 = $2,550
vests in 1999 = $2,550
vests in 2000 = $2,550
------
$7,650
TOTAL CURRENT YEAR INCENTIVE PAYOUT: $22,950 (FINAL EVA PAYOUT) + $3,740
(REVENUE) + $3,400 (INDIVIDUAL CONTRIBUTION) = $30,090.
<PAGE>
Assume the same Participant has the following facts the next year:
- -------------------------------------------------------------------------
Current Plan Year 1998
- -------------------------------------------------------------------------
Grade 17
- -------------------------------------------------------------------------
Base Salary Earnings $90,000
- -------------------------------------------------------------------------
Target Incentive Opportunity 20% of base salary earnings or $18,000
- -------------------------------------------------------------------------
EVA Bonus Bank $2,550 vests in 1998
- -------------------------------------------------------------------------
$2,550 vests in 1999
- -------------------------------------------------------------------------
$2,550 vests in 2000
------
- -------------------------------------------------------------------------
$7,650 Total Bonus Bank
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
GOAL WEIGHT TARGET INCENTIVE DOLLARS
- ---- ------ ------------------------
Corporate EVA Improvement 60% $10,800
Corporate Revenue 20% $ 3,600
Individual Contribution 20% $ 3,600
-------
$18,000
- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOAL ACHIEVEMENT (AS A % OF TARGET)
- -----------------------------------
Corporate EVA Improvement -50% x $10,800 = $ -5,400*
Corporate Revenue 90% x $3,600 = $ 3,240
Individual Contribution 110% x $3,600 = $ 3,960
- --------------------------------------------------------------------------------
*CORPORATE EVA IMPROVEMENT INCENTIVE CALCULATIONS:
- -$-5,400 offsets positive bonus bank
- -Apply to amount due to vest in 1998 (current plan year)
-5,400
2,550 due to vest in 1998
-----
-2,850 remaining negative accrual is carried forward to 1999
- -EVA bonus bank balance to carry over:
2,550 due to vest in 1999
-2,850 negative carry over from 1998
-----
-300 beginning of year 1999 bank balance
2,250 due to vest in 2000
TOTAL CURRENT YEAR INCENTIVE PAYOUT: $3,240 (REVENUE) + $3,960 (INDIVIDUAL
CONTRIBUTION) = $7,200.
<PAGE>
XII. EFFECT OF CHANGE IN EMPLOYMENT STATUS
A. VOLUNTARY RESIGNATION AND RETIREMENT. A participant who voluntarily resigns
full-time employment or retires prior to the end of the Fiscal Year receives no
payment under the Plan for the current Plan year's performance or any EVA bonus
bank account balances being carried over. The participant does not have any
obligations with respect to any negative EVA bonus bank account balances
remaining at the end of the Plan year.
B. CHANGE BASED UPON UNSATISFACTORY JOB PERFORMANCE. A participant who is
involuntarily terminated or transferred to a position not eligible for this Plan
for reasons of unsatisfactory job performance receives no payment under the Plan
for the current Plan year's performance or any EVA bonus bank account balances
being carried over from prior Plan year(s). The participant does not have any
obligations with respect to any negative EVA bonus bank account balances
remaining at the end of the Plan year.
C. CHANGE BASED UPON JOB ELIMINATION. Subject to the approval of the Committee,
a participant who is involuntarily terminated or transferred to a position not
eligible for this Plan or another Management Incentive Plan because of a job
elimination may retain the right to a pro rata calculation under this Plan for
the current year's performance, plus a pro rata portion of any EVA bonus bank
balance that would otherwise have vested at the end of the current Plan year,
based upon the time served in the eligible position during the Fiscal Year,
provided at least three months was served in the eligible position. Rights to
any unvested EVA bonus bank account balances at the end of the Plan year are
forfeited. The participant does not have any obligations with respect to any
negative EVA bonus bank account balances that remain after the pro rata
calculation.
D. CHANGE BASED UPON PROMOTION, DEMOTION, OR TRANSFER TO ANOTHER ELIGIBLE PLAN
JOB. A current participant who is promoted, demoted, or transferred from an
eligible position under this Plan to another eligible position under this Plan
during the Fiscal Year has a pro rata calculation of the current year's
performance awards based upon the time served in each position during FY 1997,
provided at least three months were served in each position. If a participant
is in an eligible position for less than three months during the Fiscal Year,
the payment calculation is based on the incentive level of the position served
in the longest. Any positive or negative bonus bank accounts transfer with the
individual in their entirety.
E. CHANGE IN JOBS WITHIN THE COMPANY BUT NOT ELIGIBLE FOR THIS PLAN. A
participant who changes jobs within the Company but is not eligible for this
Plan, retains the right to a pro rata payout under this Plan for the current
year's performance, plus a pro rata portion of any EVA bonus balance that would
otherwise have vested at the end of the current Plan year, based upon the time
served in the eligible position during the Fiscal Year, provided at least three
months was served in the eligible position. Rights to any unvested EVA bonus
bank account balances at the end of the Plan year are forfeited. The
participant does not have any obligations with respect to any negative EVA bonus
bank account balances that remain after the pro rata calculation.
<PAGE>
F. DEATH. If a participant dies during the Fiscal Year, the participant's
heirs as determined by will or applicable laws of descent and distribution will
have a pro rata calculation of the current year's performance, plus a pro rata
portion of any EVA bonus bank balance that would otherwise have vested at the
end of the current Plan year, based upon the time served in the eligible
position during the Fiscal Year. Rights to any unvested EVA bonus bank account
balances at the end of the current Plan year are forfeited. The participant's
heirs do not have any obligations with respect to any negative EVA bonus bank
account balances that remain after the pro rata calculation.
XIII. COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986
If a current Plan year payout causes the participant's total cash compensation
to exceed one million dollars in the Fiscal Year, the participant must defer
the portion that exceeds the one million dollars in the ADC Telecommunications
Deferred Compensation Plan.
XIV. AMENDMENT OR TERMINATION OF PLAN
The Board of Directors reserves and retains the right to modify, rescind or
terminate this plan in whole or in part, at its sole discretion, and nothing in
this Plan limits this right in any way or creates any rights in any employee of
future participation in this Plan or any other plan, or constitutes any
guarantee of compensation or employment with ADC. Further, neither the Board of
Directors nor the Company has any obligation under this Plan or otherwise to
adopt this or any other plan in any future fiscal year.
<PAGE>
EXHIBIT 10-F
ADC TELECOMMUNICATIONS
INTERNATIONAL
MANAGEMENT INCENTIVE PLAN DOCUMENT
FISCAL YEAR 1997
<PAGE>
ADC TELECOMMUNICATIONS
INTERNATIONAL
MANAGEMENT INCENTIVE PLAN DOCUMENT
FISCAL YEAR 1997
I. PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company"),
International Management Incentive Plan - Fiscal Year ("FY") 1997, effective
November 1, 1996 through October 31, 1997.
II. PURPOSE
The purpose of the Plan is to provide, with full regard to the protection of
shareholder's investments, a direct financial incentive for eligible management
employees to perform an effective leadership role and make a significant
contribution to the Company's established goals.
III. ADMINISTRATION
This Plan is administered by a Management Incentive Plan Committee ("Committee")
appointed and authorized by the Company's Board of Directors. Subject to the
complete and full discretion of the Board of Directors, the Committee is
authorized to make all decisions as required in administration of the Plan and
to exercise its discretion to define, interpret, construe, apply and make any
exceptions to the terms of the Plan.
IV. ELIGIBILITY
The Committee establishes rules of eligibility for participation in the Plan and
determines eligibility in accordance with those rules. Participation is
effective as of the date approved by the Committee and is communicated to the
participant by an incentive opportunity statement ("Participant Form")
specifying the target incentive level for the position held by the participant.
No employee will become a participant in the Plan after May 1, 1997.
V. TIME OF PAYMENT
Payments which become due under this Plan are made as soon as administratively
feasible following the close of the Company's fiscal year.
<PAGE>
VI. PLAN GOALS
The Plan reinforces the key financial goals which support ADC's long-term
strategic plans. The FY 1997 goal categories and weights for International
participants are as follows:
Goal Weight
---- ------
International Revenue 60%
* Corporate EVA Improvement 20%
** Individual Contribution 20%
---
TOTAL 100%
* EVA Improvement is the dollar amount of planned year-over-year
improvement in EVA.
EVA Improvement goals are set for each of the next three years.
** The Individual Contribution goal measures your performance against
pre-determined objectives. The objectives are to be documented on the
attached "Individual Objective" form and require your direct manager's
and Business Unit head's approval.
VII. MINIMUM PERFORMANCE PAYOUT REQUIREMENTS
A. To ensure protection of shareholder interest before an incentive payout
can be generated, the threshold for International Revenue or Corporate
EVA Improvement must be met.
VIII. CALCULATION OF PAYMENTS
A. DETERMINATION OF ACHIEVEMENT AGAINST GOALS AND OBLIGATION TO MAKE
PAYMENTS.
1. The obligation to make payments under the Plan is determined by
achievement of goals determined by the Board of Directors.
2. The payout opportunity for meeting the goals are as follows:
Goal Threshold Target Maximum
---- --------- ------ --------
International Revenue 0% of Target 100% 400% of Target
Corporate EVA Improvement 0% of Target 100% 400% of Target
Individual Contribution 0% of Target 100% 200% of Target
Results between threshold-target and target-maximum are interpolated.
<PAGE>
B. CALCULATION OF INDIVIDUAL PAYMENTS UNDER THIS PLAN IS A FUNCTION OF:
1. Target incentive opportunity - expressed as a percentage of an
individual's FY 1997 earnings. The target % for each participant is
designated on the "Participant Form."
2. Participant's 1997 fiscal year base salary earnings.
3. Performance against the established goals.
C. INDIVIDUAL AWARD CALCULATIONS ARE SHOWN BY THE FOLLOWING EXAMPLE:
Assume we have a Plan participant with the following facts:
Grade: 15
Target Payout: 11% of base salary earnings
Base Salary Earnings: 65,000
Minimum performance payout requirement is met.
GOAL WEIGHT ACHIEVEMENT
---- ------ -----------
(As a % of Target)
International Revenue 60% 100%
Corporate EVA Improvement 20% 110%
Individual Contribution 20% 100%
----
OVERALL RESULT AS % OF TARGET 102%
Calculation of Payment:
$65,000 (FY Earnings) x 11% (Target Opportunity) x 102% (Overall Result
as a % of Target)=$7,293.
<PAGE>
IX. EFFECT OF CHANGE IN EMPLOYMENT STATUS
A. VOLUNTARY RESIGNATION. A participant who voluntarily resigns full-time
employment prior to the end of the Fiscal Year receives no payment under
the Plan.
B. CHANGE BASED UPON UNSATISFACTORY JOB PERFORMANCE. A participant who is
involuntarily terminated or transferred to a non-eligible position for
reasons of unsatisfactory job performance receives no payment under this
plan.
C. CHANGE BASED UPON JOB ELIMINATION. Subject to the approval of the
Committee, a participant who is involuntarily terminated or transferred
to a non-eligible position because of a job elimination may retain the
right to a pro-rata payment based upon the time served in the eligible
position during the fiscal year, provided at least three months was
served in the eligible position.
D. CHANGE BASED UPON PROMOTION / DEMOTION. A current participant who is
promoted or demoted from an incentive eligible position to another
incentive eligible position during the fiscal year has a pro rata
calculation of payment based upon the time served in each position
during FY 1997, provided at least three months was served in each
position. If a participant is in an eligible position for less than
three months during the fiscal year, the payment calculation is based on
the incentive level of the position served in the longest.
E. CHANGE BASED UPON TRANSFER TO ANOTHER POSITION. A current participant
who transfers to another position within the Company that is eligible
for participation in an ADC Management Incentive Plan with different
goals during FY 1997 has a pro rata calculation of payment based on the
goals and length of time served in the respective positions, provided at
least three months was served in each position. If a participant is in
a job for less than three months during the fiscal year, the payment
calculation is based on the goals of the position served in the longest.
F. DEATH. If a participant dies during the fiscal year, the participant's
heirs as determined by will or applicable laws of descent and
distribution has a pro-rata calculation of payment based upon the time
the participant served in the eligible position during the fiscal year.
X. AMENDMENT OR TERMINATION OF PLAN
The Board of Directors reserves and retains the right to modify, rescind or
terminate this plan in whole or in part, at its sole discretion, and nothing in
this Plan limits this right in any way or creates any rights in any employee of
future participation in this Plan or any other plan, or constitutes any
guarantee of compensation or employment with ADC. Further, neither the Board of
Directors nor the Company has any obligation under this Plan or otherwise to
adopt this or any other plan in any future fiscal year.
<PAGE>
EXHIBIT 10-G
ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 1997
<PAGE>
ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 1997
I. PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company") Executive
Incentive Exchange Plan - Fiscal Year 1997 ("FY 1997"), effective November 1,
1996 through October 31, 1997.
II. PURPOSE
The purpose of the Plan is to provide exceptional rewards for exceptional
performance of eligible executives, align executive rewards with shareholder
interests, and provide an incentive for retention.
III. ADMINISTRATION
This Plan will be administered by the same Committee ("Committee") appointed and
authorized by the Company's Board of Directors to administer the Company's 1991
Stock Incentive Plan. The Committee is authorized to make all decisions as
required in administration of the Plan and to exercise its discretion to define,
interpret, construe, apply, and make any exceptions to the terms of the Plan.
IV. STOCK OPTION ISSUANCE
All stock options issued under this Plan will be granted under the Company's
1991 Stock Incentive Plan and/or its successor plans.
V. ELIGIBILITY
The Committee will establish rules of eligibility for participation in the Plan
in accordance with the 1991 Stock Incentive Plan and determine eligibility in
accordance with those rules. Eligibility is limited to Corporate and Divisional
Vice Presidents and above in salary grade 19 or above. Selected additional
executives may be included also. All Plan participants must also be
participants under the Company's Management Incentive Plan ("MIP").
VI. PLAN GOALS AND ACHIEVEMENT
All goals and objectives under this Plan shall be identical to the goals and
objectives stated in each participant's MIP. Total payouts are calculated in
the same fashion as payouts made under the applicable MIP.
<PAGE>
VII. EXCHANGE ELECTION
Prior to the beginning of FY 1997, participants may irrevocably elect to
exchange up to 50% of their FY 1997 MIP award for options to purchase common
stock of the Company. Such elections may be made in 10% increments up to a
maximum of 50% of the cash MIP award. Participants hired or promoted into a
position eligible for this Plan during FY 1997 may make this election up to 30
days following the date of hire or promotion. No election may be made after May
1, 1997 by new hires or newly promoted eligible participants. No exchange will
be made if the portion elected for exchange is less than One Hundred Dollars
($100.00).
VIII. EXCHANGE DATE
Exchanges made under this Plan will be made as soon as administratively feasible
following the close of FY 1997 and as soon as MIP awards are approved. The
exchange date will be the same day as the MIP awards are approved. For purposes
of this document, the terms exchange date and grant date are synonymous.
IX. EXCHANGE CALCULATION
The MIP award that will be used to calculate the exchange to options will be the
incentive amount eligible to be paid for the fiscal year excluding any amounts
allocated to bonus bank accounts as defined in the Management Incentive Plan.
The dollar amount of the MIP award elected to be exchanged will first be
multiplied by an exchange factor ("Factor") of ten (10). This amount is then
divided by the Black-Scholes value of an option to purchase one share of ADC
common stock on the last day of FY 1996 to determine the number of option shares
to be received by the participant.
This Black-Scholes value will reflect the vesting characteristics of the options
to be granted under this Plan and other characteristics as appropriate, and as
such may differ from the Black-Scholes value applied for other options granted
under other Company plans. The final number of shares will be rounded down if
necessary to the nearest whole share.
This exchange causes payment of the MIP cash incentive amount exchanged to be
forfeited, except as described under Section XIII.
X. NATURE OF OPTIONS TO BE GRANTED
All options granted under this Plan will be nonqualified stock options, that are
not "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
<PAGE>
XI. TERM AND VESTING OF OPTIONS
All options granted under this Plan will have a term and method of exercise as
determined by the Committee. The term will be 10 years from the date of
exchange or grant. Options will vest in three (3) equal annual installments,
beginning two (2) years after the grant.
XII. EXERCISE PRICE OF OPTIONS
The Committee is authorized to determine the exercise price of the options
granted under this Plan. The exercise price of the stock options granted under
this plan will be the Fair Market Value of the Company's common stock on the
grant date determined in accordance with the 1991 Stock Incentive Plan.
XIII. EFFECT OF CHANGE IN EMPLOYMENT STATUS ON CURRENT YEAR ELECTIONS
(CHANGES DURING THE PLAN YEAR)
A. VOLUNTARY RESIGNATION OR INVOLUNTARY TERMINATION. A participant who
voluntarily resigns employment or who is terminated involuntarily, except
as defined under paragraph B below, prior to the end of FY 1997 will
relinquish all rights to the grant of any stock option under this plan.
B. TERMINATION OF EMPLOYMENT BASED UPON JOB ELIMINATION. Subject to the
approval of the Committee, a participant who is involuntarily terminated
because of a job elimination may receive a cash equivalent calculated in
the same fashion as the applicable pro-rata cash MIP payment would be made
(not subject to the Factor), provided at least three months was served in
the eligible position.
C. CHANGE IN JOB STATUS BASED UPON A PROMOTION/DEMOTION. A participant who is
demoted from an eligible position under this Plan to an ineligible position
will exchange the pro-rata portion of cash MIP award that is calculated
according to the time served in the eligible position during FY 1997,
provided at least three months was served in the eligible position. A
participant who is promoted into an eligible position under this Plan will
be provided the opportunity to exchange the pro-rata MIP award that is
calculated according to the time served in the eligible position under this
Plan during FY 1997, as provided in Section VII of this document, based
upon the exchange percentage elected by the participant.
D. DEATH. If a participant dies during FY 1997, the participant's heirs as
determined by will or applicable laws of descent and distribution will have
no right to receive any stock options under this plan. Heirs will receive
instead the cash equivalent of the pro-rata MIP award that is calculated
according to the MIP Plan, but not subject to the Factor.
<PAGE>
XIV. EFFECT OF CHANGE IN EMPLOYMENT STATUS OCCURRING AFTER FY 1997 ON EXCHANGES
MADE IN FY 1997
All stock options already awarded under this Plan will vest fully upon a
participant's death, disability, or voluntary retirement. For purposes of this
Plan, retirement from the Company shall be defined as having attained age 55
with 10 years of service with the Company ("early retirement"), or age 65 with 5
years of service with the Company ("normal retirement").
If a participant terminates for any other reason, termination provisions will be
applied. For each grant or exchange already made, if the participant terminates
prior to the vesting of the first one third of the options, all options and the
MIP cash equivalent amount will be immediately forfeited. If the participant
terminates after the first one third of the options have vested, all vested
options will remain exercisable for a period of two (2) years. All unvested
options will be forfeited, and no cash equivalent will be provided.
XV. EFFECT OF CHANGE IN CONTROL ON EXCHANGES ALREADY MADE
In the event of a change in control of the Company as referenced in stock
option agreements issued pursuant to this Plan, all unvested options will
immediately vest in full.
<PAGE>
EXHIBIT 10-H
ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 1996
<PAGE>
ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 1996
I. PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company") Executive
Incentive Exchange Plan - Fiscal Year 1996 ("FY 1996"), effective November 1,
1995 through October 31, 1996.
II. PURPOSE
The purpose of the Plan is to provide exceptional rewards for exceptional
performance of eligible executives, align executive rewards with shareholder
interests, and provide an incentive for retention.
III. ADMINISTRATION
This Plan will be administered by the same Committee ("Committee") appointed and
authorized by the Company's Board of Directors to administer the Company's 1991
Stock Incentive Plan. The Committee is authorized to make all decisions as
required in administration of the Plan and to exercise its discretion to define,
interpret, construe, apply, and make any exceptions to the terms of the Plan.
IV. STOCK OPTION ISSUANCE
All stock options issued under this Plan will be granted under the Company's
1991 Stock Incentive Plan and/or its successor plans.
V. ELIGIBILITY
The Committee will establish rules of eligibility for participation in the Plan
in accordance with the 1991 Stock Incentive Plan and determine eligibility in
accordance with those rules. Eligibility is limited to Corporate and Divisional
Vice Presidents and above in salary grade 19 or above. Selected additional
executives may be included also. All Plan participants must also be
participants under the Company's Management Incentive Plan ("MIP").
VI. PLAN GOALS AND ACHIEVEMENT
All goals and objectives under this Plan shall be identical to the goals and
objectives stated in each participant's MIP. Total payouts are calculated in
the same fashion as payouts made under the applicable MIP.
VII. EXCHANGE ELECTION
Prior to the beginning of FY 1996, participants may irrevocably elect to
exchange up to 50% of their FY 1996 MIP award for options to purchase common
stock of the Company. Such elections may be made in 10% increments up to a
maximum of 50% of the cash MIP award. Participants hired or promoted into a
position eligible for this Plan during FY 1996 may make this election up to 30
days following the date of hire or promotion. No election may be made after May
1, 1996 by new hires or newly promoted eligible participants. No exchange will
be made if the portion elected for exchange is less than One Hundred Dollars
($100.00).
VIII. EXCHANGE DATE
Exchanges made under this Plan will be made as soon as administratively feasible
following the close of FY 1996 and as soon as MIP awards are approved. The
exchange date will be the same day as the MIP awards are approved. For purposes
of this document, the terms exchange date and grant date are synonymous.
<PAGE>
IX. EXCHANGE CALCULATION
The dollar amount of the MIP award elected to be exchanged will first be
multiplied by an exchange factor ("Factor") of ten (10). This amount is then
divided by the Black-Scholes value of an option to purchase one share of ADC
common stock on the last day of FY 1995 to determine the number of option shares
to be received by the participant.
This Black-Scholes value will reflect the vesting characteristics of the options
to be granted under this Plan and other characteristics as appropriate, and as
such may differ from the Black-Scholes value applied for other options granted
under other Company plans. The final number of shares will be rounded down if
necessary to the nearest whole share.
This exchange causes payment of the MIP cash bonus amount exchanged to be
forfeited, except as described under Section XIII or Section XIV as appropriate.
X. NATURE OF OPTIONS TO BE GRANTED
All options granted under this Plan will be nonqualified stock options, that are
not "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
XI. TERM AND VESTING OF OPTIONS
All options granted under this Plan will have a term and method of exercise as
determined by the Committee. The term will be 10 years from the date of
exchange or grant. Options will vest in three (3) equal annual installments,
beginning two (2) years after the grant.
XII. EXERCISE PRICE OF OPTIONS
The Committee is authorized to determine the exercise price of the options
granted under this Plan. The exercise price of the stock options granted under
this plan will be the Fair Market Value of the Company's common stock on the
grant date determined in accordance with the 1991 Stock Incentive Plan.
XIII. EFFECT OF CHANGE IN EMPLOYMENT STATUS ON CURRENT YEAR ELECTIONS
(CHANGES DURING THE PLAN YEAR)
A. VOLUNTARY RESIGNATION OR INVOLUNTARY TERMINATION. A participant who
voluntarily resigns employment or who is terminated involuntarily,
except as defined under paragraph B below, prior to the end of FY 1996
will relinquish all rights to the grant of any stock option under this
plan.
B. TERMINATION OF EMPLOYMENT BASED UPON JOB ELIMINATION. Subject to the
approval of the Committee, a participant who is involuntarily terminated
because of a job elimination may receive a cash equivalent calculated in
the same fashion as the applicable pro-rata cash MIP payment would be
made (not subject to the Factor).
C. CHANGE IN JOB STATUS BASED UPON A PROMOTION/DEMOTION. A current
participant who is promoted or demoted from one eligible position to
another under this Plan during FY 1996 will exchange the pro-rata MIP
award that is calculated according to the time served in each eligible
MIP position during FY 1996. A participant who is demoted from an
eligible position under this Plan to an ineligible position will
exchange the pro-rata portion of cash MIP award that is calculated
according to the time served in the eligible position during FY 1996. A
participant who is promoted into an eligible position under this Plan
will be provided the opportunity to exchange the pro-rata MIP award that
is calculated according to the time served in the eligible position
under this Plan during FY 1996, as provided in Section VII of this
document, based upon the exchange percentage elected by the participant.
<PAGE>
D. DEATH. If a participant dies during FY 1996, the participant's heirs as
determined by will or applicable laws of descent and distribution will
have no right to receive any stock options under this plan. Heirs will
receive instead the cash equivalent of the pro-rata MIP award that is
calculated according to the MIP Plan, but not subject to the Factor.
XIV. EFFECT OF CHANGE IN EMPLOYMENT STATUS OCCURRING AFTER FY 1996 ON
EXCHANGES MADE IN FY 1996
All stock options already awarded under this Plan will vest fully upon a
participant's death, disability, or voluntary retirement. For purposes of this
Plan, retirement from the Company shall be defined as having attained age 55
with 10 years of service with the Company ("early retirement"), or age 65 with 5
years of service with the Company ("normal retirement").
If a participant terminates for any other reason, termination provisions will be
applied. For each grant or exchange already made, if the participant terminates
prior to the vesting of the first one third of the options, all options will be
immediately forfeited. However, the participant will receive an amount
equivalent to the original MIP award exchanged, i.e., before multiplication by
the Factor, with due consideration for any applicable laws and regulations
concerning transactions in securities. No interest will be applied. If the
participant terminates after the first one third of the options have vested, all
vested options will remain exercisable for a period of two (2) years. All
unvested options will be forfeited, and no cash equivalent will be provided.
XV. EFFECT OF CHANGE IN CONTROL ON EXCHANGES ALREADY MADE
In the event of a change in control of the Company as referenced in stock
option agreements issued pursuant to this Plan, all unvested options will
immediately vest in full.
<PAGE>
Exhibit 10-u
- ------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
FOR
WILLIAM J. CADOGAN
First Effective November 1, 1990
AND
As Amended By
The FIRST AMENDMENT Adopted March 12, 1996
But Effective November 1, 1995
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
FOR
WILLIAM J. CADOGAN
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION.................................................. 1
1.1. Basis of Agreement
1.2. Definitions
1.2.1. Accrued Benefit
1.2.2. Actuarial Equivalent
1.2.3. Average Monthly Compensation
1.2.4. Board of Directors
1.2.5. Change in Control
1.2.6. Compensation
1.2.7. Disability, Disabled
1.2.8. Effective Date
1.2.9. Employer
1.2.10. Qualified Plans Benefit
1.2.11. Single Life Annuity
1.2.12. Social Security Benefit
1.2.13. Supplemental Retirement Benefit
1.2.14. Termination of Employment
1.3. Rules of Interpretation
SECTION 2. SUPPLEMENTAL RETIREMENT INCOME BENEFIT........................ 6
2.1. Supplemental Retirement Benefit
2.1.1. When Available
2.1.2. Amount
2.1.3. Form of Pension
2.1.4. Installment Amounts
2.1.5. Default
2.1.6. Time
2.2. Designation of Beneficiaries for Installment
Payments
2.2.1. Right To Designate
2.2.2. Failure of Designation
2.2.3. Disclaimers by Beneficiaries
2.2.4. Definitions
2.2.5. Special Rules
2.2.6. Spousal Rights
2.3. No Other Benefits
2.4. Facility of Payment
2.5. Forfeiture of Benefits
SECTION 3. DEATH BENEFITS................................................ 12
3.1. Death Before Benefit Commencement
3.1.1. When Available
3.1.2. Amount
3.1.3. Form of Benefit
-i-
<PAGE>
SECTION 4. FUNDING OF PLAN............................................... 13
4.1. Unfunded Agreement
4.2. Spendthrift Provisions
SECTION 5. AMENDMENT AND TERMINATION..................................... 14
SECTION 6. DETERMINATIONS -- RULES AND REGULATIONS....................... 15
6.1. Determinations
6.2. Rules and Regulations
6.3. Method of Executing Instruments
6.4. Claims Procedure
6.4.1. Original Claim
6.4.2. Claims Review Procedure
6.4.3. General Rules
SECTION 7. PLAN ADMINISTRATION........................................... 17
7.1. Employer
7.1.1. Officers
7.1.2. Delegation By Board
7.1.3. Non-Delegable Functions
7.2. Administrator
7.3. Service of Process
SECTION 8. MISCELLANEOUS RULES........................................... 18
SIGNATURES................................................................ 18
APPENDIX A -- DETERMINATION OF ACTUARIAL EQUIVALENT
TO SINGLE LIFE ANNUITY................................ A-1
-ii-
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
FOR
WILLIAM J. CADOGAN
This Agreement made and entered into as of November 1, 1990 by and
between WILLIAM J. CADOGAN and ADC TELECOMMUNICATIONS, INC., a Minnesota
corporation, (hereinafter the "Employer").
SECTION 1
INTRODUCTION
1.1. Basis of Agreement. In consideration of the services performed by
WILLIAM J. CADOGAN for the Employer in the past and to be performed in the
future, the Employer hereby agrees to pay, in addition to other consideration to
be provided by the Employer, deferred compensation to him under the terms and
conditions hereinafter set forth. This Agreement creates an unfunded,
nonqualified plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees as
contemplated by the Employee Retirement Income Security Act of 1974 ("ERISA")
and shall be construed and administered accordingly.
1.2. Definitions. When used herein with initial capital letters, the
following words have the following meanings:
1.2.1. Accrued Benefit -- the dollar amount determined for WILLIAM J.
CADOGAN as of the date of his Termination of Employment (and payable monthly to
him in the Single Life Annuity form, beginning on the first day of the calendar
month following his Termination of Employment or age sixty (60) years, if later)
equal to the product of (a) multiplied by (b):
(a) Full Supplement. A dollar amount equal to:
(i) Fifty percent (50%) of his Average Monthly Compensation
determined as of the date of his Termination of
Employment, minus
(ii) The sum of: (A) his Qualified Plans Benefit determined
as of one day before the date of his Termination of
Employment, and (B) fifty percent (50%) of the monthly
amount of his Social Security Benefit determined as of
one day before the date of his Termination of
Employment.
(b) Service Ratio. A fraction, not greater than one (1):
(i) The numerator of which is the total years and fractions
of years of his service with the Employer from the
Effective Date through and including the date of his
Termination of Employment, and
(ii) The denominator of which is eight (8).
1.2.2. Actuarial Equivalent -- a benefit of equivalent value computed
on the basis of actuarial tables, factors and assumptions set forth in this
Agreement (including the Appendix - A to this Agreement).
<PAGE>
1.2.3. Average Monthly Compensation -- one-sixtieth (1/60th) of the
total dollar amount of Compensation attributable to the sixty (60) consecutive
calendar months ending immediately before WILLIAM J. CADOGAN'S Termination of
Employment subject, however, to the following:
(a) Less Than 5 Years. If he shall have received Compensation
attributable to less than all of the sixty (60) consecutive
calendar months ending immediately before the Termination of
Employment, his Average Monthly Compensation shall be equal to
the total of all the Compensation attributable to all calendar
months to which any of his Compensation is attributable divided
by the greatest number of consecutive calendar months to which
any of his Compensation is attributable.
(b) Five-Year Limit. In determining his Average Monthly
Compensation, there shall be disregarded all Compensation
attributable any calendar months other than the sixty (60)
consecutive calendar months ending immediately before the
Termination of Employment.
(c) No Compensation. The absence of Compensation in any calendar
month shall not affect the requirement that only sixty (60)
consecutive calendar months ending immediately before the
Termination of Employment be considered in determining Average
Monthly Compensation.
1.2.4. Board of Directors -- the Board of Directors of the Employer or
a duly authorized committee of less than all the Directors.
1.2.5. Change in Control -- an event defined as a Change in Control in
section 7.6.2 of the ADC TELECOMMUNICATIONS, INC. PENSION PLAN (1885
Restatement), as that document and that definition may exist from time to time.
1.2.6. Compensation -- amounts paid to WILLIAM J. CADOGAN by the
Employer and all affiliates for services rendered, reported as income subject to
federal income taxes on Treasury Form W-2 for the applicable year; subject,
however, to the following:
(a) Excluded Items. In determining his Compensation, there shall
be excluded (i)all discretionary bonuses not paid pursuant to a
formal plan, and (ii) all foreign service allowances, foreign
tax equalization payments, expense reimbursements, moving
expense payments or other similar extra compensation, and (iii)
all noncash remuneration and (iv) all deferred compensation
(except as provided in (b) below), excess life insurance
premiums, the value of stock options (whether or not
exercised), and (iv) the value of restricted stock or similar
awards and any cash payments made in connection with any such
restricted stock award.
(b) Added Items. Remuneration which would have been paid by the
Employer or an affiliate but which was not paid because he
entered into an agreement to reduce earnings as a condition of
participation in a plan established under section 125 or
section 401(k) of the Internal Revenue Code, shall be
considered to have been paid at the time when it would have
been paid but for such agreement to reduce earnings.
Remuneration which would have been paid by the Employer or an
Affiliate but which was not paid because he entered into an
agreement to defer compensation under a nonqualified plan of
deferred compensation or under any other similar arrangement
(including but not limited to the "Executive Incentive Exchange
Plan") shall
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be considered to have been paid at the time it would have been
paid but for such agreement to defer earnings.
(c) Attribution to Periods. His Compensation shall be considered
attributable to the calendar month in which it is actually paid
(and not when earned or accrued) except that annual incentive
payments shall be considered attributable to the last day of
the last calendar month in the fiscal period with respect to
which they are paid.
(d) Excluded Periods. Amounts attributable to calendar months
commencing after the earliest of the date he became Disabled or
had a Termination of Employment shall not be taken into account
in determining his Compensation.
(e) Final Payments. Final payments on account of Termination of
Employment (i.e., severance payments) and settlement for
accrued but unused vacation and sick leave shall not be taken
into account in determining his Compensation.
1.2.7. Disability, Disabled -- a medically determinable physical or
mental impairment which constitutes disability under the Employer's separate
long term disability plan.
1.2.8. Effective Date -- November 1, 1990.
1.2.9. Employer -- ADC TELECOMMUNICATIONS, INC., a Minnesota
corporation, and any successor thereof that adopts this Agreement.
1.2.10. Qualified Plans Benefit -- a dollar amount determined for
WILLIAM J. CADOGAN as of the last day of the calendar month in which his
Termination of Employment occurs or, if later, the last day of the calendar
month in which he would attain age sixty (60) years (and expressed in terms of a
monthly annuity payable to him in the Single Life Annuity form beginning on the
first day of the calendar month following his Termination of Employment or, if
later, the first day of the calendar month following the date he would attain
age sixty years) which is the sum of the:
(a) accrued benefit developed for him as of the date of his
Termination of Employment under all qualified defined benefit
pension plans maintained by the Employer when expressed in the
form of a Single Life Annuity first payable on the first day of
the first calendar month following his Termination of
Employment or, if later, the first day of the calendar month
following the date he would attain age sixty (60) years; and
(b) the Actuarial Equivalent monthly amount of annuity payable to
him when expressed in the form of a Single Life Annuity
beginning on the first day of the first calendar month
following his Termination of Employment or, if later, the first
day of the calendar month following the date he would attain
age sixty (60) years to the extent such benefits are
attributable to contributions of the Employer (and exclusive of
any benefits attributable to contributions directly or
indirectly made by him) under all qualified defined
contribution pension, profit sharing or stock bonus plans
maintained by the Employer; and
(c) the Actuarial Equivalent monthly amount of annuity payable to
him when expressed in the form of a Single Life Annuity
beginning on the first day of the first calendar month
following his Termination of Employment or, if later, the first
day of the calendar month following the date he would attain
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age sixty (60) years to the extent such benefits are Employer-
provided benefits payable from a nonqualified plan maintained
by the Employer for the purpose of providing benefits which
cannot be provided from qualified pension, profit sharing or
stock bonus plans maintained by the Employer because of
limitations on such plans under section 401(a)(17), section
401(k), section 401(m), section 402(g), section 415 and other
similar provisions of the Internal Revenue Code.
1.2.11. Single Life Annuity -- a form of annuity that is payable
monthly to and for the lifetime of WILLIAM J. CADOGAN, the first such payment to
be due on the date specified in Section 2 hereof and the last such payment due
on the first day of the calendar month in which his death occurs.
1.2.12. Social Security Benefit -- the monthly amount available for the
benefit of WILLIAM J. CADOGAN at:
(a) at age sixty-two (62) years if his Termination of Employment is
before age sixty-two (62) years (calculated on the assumption
that he will have no additional earnings from his Termination
of Employment until age sixty-two (62) years); or
(b) the date of his Termination of Employment if his Termination of
Employment is after age sixty-two (62) years but before age
sixty-five (65) years; or
(c) age sixty-five (65) years, if his Termination of Employment is
at or after age sixty-five (65) years;
(excluding amounts available for spouse and dependents) as an old age benefit
under the provisions of Title II of the federal Social Security Act in effect on
the date of the Termination of Employment (or age sixty-five, if earlier),
whether or not payment of such amount is delayed, suspended or forfeited because
of failure to apply, acceptance of other work, or any other similar reason
within his control. For this purpose, unless he shall have furnished verified
proof of wages before his Termination of Employment, he shall be deemed to have
had taxable wages at or above the taxable wage base in all years prior to the
year of his Termination of Employment.
1.2.13. Supplemental Retirement Benefit -- the benefit payable under
this Plan upon the Termination of Employment of WILLIAM J. CADOGAN, subject to
the conditions and limitations set forth in this Plan Statement.
1.2.14. Termination of Employment -- a complete severance of WILLIAM J.
CADOGAN'S employment relationship with the Employer and its subsidiaries or
affiliates, if any, for any reason other than his death. A transfer from
employment with the Employer to employment with an affiliate of the Employer
shall not constitute a Termination of Employment.
1.3. Rules of Interpretation. An individual shall be considered to have
attained a given age on his birthday for that age (and not on the day before).
The birthday of any individual born on a February 29 shall be deemed to be
February 28 in any year that is not a leap year. Notwithstanding any other
provision of this Agreement or any election or designation made under this
Agreement, any individual who feloniously and intentionally kills WILLIAM J.
CADOGAN or any surviving spouse shall be deemed for all purposes of this
Agreement and all elections and designations made under this Agreement to have
died before him or his surviving spouse. A final judgment of conviction of
felonious and intentional killing is conclusive for the purposes of this
Section. In the absence of a conviction of felonious and intentional killing,
the Board of Directors shall determine whether the killing was felonious and
intentional for the purposes of this Section. Whenever appropriate, words used
herein in the singular may be read in the plural, or words used herein in the
plural may be read in the singular; the
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masculine may include the feminine; and the words "hereof," "herein" or
"hereunder" or other similar compounds of the word "here" shall mean and refer
to the entire Agreement and not to any particular paragraph or section of this
Agreement unless the context clearly indicates to the contrary. The titles
given to the various sections of this Agreement are inserted for convenience of
reference only and are not part of this Agreement, and they shall not be
considered in determining the purpose, meaning or intent of any provision
hereof. Any reference in this Agreement to a statute or regulation shall be
considered also to mean and refer to any subsequent amendment or replacement of
that statute or regulation. This instrument has been executed and delivered in
the State of Minnesota and has been drawn in conformity to the laws of that
State and shall, except to the extent that federal law is controlling, be
construed and enforced in accordance with the laws of the State of Minnesota.
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SECTION 2
SUPPLEMENTAL RETIREMENT INCOME BENEFIT
2.1. Supplemental Retirement Benefit.
2.1.1. When Available. Upon the Termination of Employment of WILLIAM
J. CADOGAN:
(a) at or after his attainment of age fifty (50) years; or
(b) at the written request of the Board of Directors; or
(c) within six (6) months after a Change in Control; or
(d) after, and on account of, his Disability.
and upon the filing of a written application with the Board of Directors, he
shall receive a Supplemental Retirement Benefit.
2.1.2. Amount. The amount of WILLIAM J. CADOGAN'S Supplemental
Retirement Benefit shall be the Actuarial Equivalent single lump sum of his
Accrued Benefit determined as of his Termination of Employment reduced, however,
five-twelfths of one percent (5/12%) for each month by which the payment of the
Supplemental Retirement Benefit precedes the last day of the calendar month in
which he attains age sixty (60) years.
2.1.3. Form of Pension. For the purpose of defining the amount of the
Supplemental Retirement Benefit in Section 2.1.1, the benefit is derived from a
Single Life Annuity, the first payment of which is due on the first day of the
calendar month which follows his Termination of Employment, or, if later, the
first day of the calendar month which follows the date he would attain age sixty
(60) years. Notwithstanding the foregoing, this annuity shall be, in all
cases, converted to an Actuarial Equivalent single lump sum on the first day of
the calendar month following his Termination of Employment (the "Lump Sum
Amount"). The payments (minus all withholding and payroll taxes which must be
deducted therefrom) shall be distributed from this Plan in the same manner as if
it had been paid or commenced from the general assets of the Employer to the
Participant. Such payment shall be in full and complete discharge of all
benefits payable to, or with respect to the Participant under this Plan
including, but not limited to, all survivor benefits and all optional forms of
benefit to which the Participant or spouse might otherwise have been entitled.
The consent of a spouse or other Beneficiary shall not be required before making
the single lump sum payment or the annual installment payments herein described.
Distribution of benefits accrued on or after April 1, 1996, shall be made in
whichever of the following forms the Participant shall have designated in
writing at the time required by the Employer (to the extent that such election
is consistent with the rules of this Plan Statement). The Employer shall
unilaterally designate the form of distribution of all benefits accrued prior to
April 1, 1996.
(a) Term Certain Installments to Participant. If the Participant
has elected distribution in a series of annual installments payable over ten
(10) years and the actuarially equivalent single lump sum value of the benefit
at the Termination of Employment is at least One Hundred Thousand Dollars
($100,000), distribution shall be made in a series of annual installments
payable over ten (10) years.
(b) Term Certain Installments to Beneficiary. If the Distributee
is the Beneficiary of the Participant who has elected
distribution in a series of
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annual installments payable over ten (10) years and died after
Termination of Employment but before distribution commenced and
the actuarially equivalent single lump sum value of the benefit
at death is at least One Hundred Thousand Dollars ($100,000),
distribution shall be made in a series of annual installments
payable over ten (10) years.
(c) Continued Term Certain Installments to Beneficiary. If the
Distributee is the Beneficiary of the deceased Participant and
distribution had commenced to the deceased Participant before
his death over a ten (10) year period as specified in paragraph
(a) above, in a series of annual installments payable over the
remainder of the ten (10) year period.
(d) Lump Sum. To the extent that the Distributee is either the
Participant or the Beneficiary of the deceased Participant and
none of the foregoing rules are applicable, in a single lump
sum payment.
2.1.4. Installment Amounts. If the Distributee's benefit will be
distributed in the form of a series of annual installments payable over ten (10)
years, a bookkeeping account ("Account") will be created for the purpose of
paying the benefit to the Distributee. The initial value of the Account shall
equal the Distributee's Lump Sum Account. The amount of the annual installments
shall be determined by dividing the amount of the Distributee's Account as of
the December 31 as of which the installment is being paid by the number of
remaining installment payments to be made (including the payment being
determined).
(a) Valuation and Adjustment of Accounts. Each Distributee's
Account shall be valued as of the last day of each calendar
month (the "Valuation Date"). As of each Valuation Date, the
value of each Account determined as of the immediately
preceding Valuation Date (the "Initial Account Value") shall be
increased (or decreased) by the following adjustment made in
the following sequence:
(i) The Initial Account Value shall be increased by an
amount equal to the balance of the Account as of the
preceding Valuation Date multiplied by the Interest
Rate and multiplied by a fraction, the numerator of
which is one (1) and the denominator of which is twelve
(12); and
(ii) The Initial Account Value (as adjusted above) shall be
reduced by the total amount distributed in fact to (or
with respect to) the Participant from such Account as
of the current Valuation Date.
(b) Interest Rate. For purposes of this Section 2.1, the "Interest
Rate" shall mean the rate of interest charged on the Valuation
Date for which interest is being credited by Norwest Bank
Minnesota, N.A., and in effect on that Valuation Date to its
most credit-worthy corporate customers on loans of not more
than ninety (90) days duration which are unsecured (that is,
the so called prime rate of interest).
2.1.5. Default. If for any reason a Participant shall have failed to
make a timely written designation of form for distribution (including reasons
entirely beyond the control of the Participant), the distribution shall be made
in a single lump sum. No spouse, former spouse or other person shall have any
right to participate in the Participant's selection of a form of benefit.
2.1.6. Time. Any lump sum payment shall be made as of the first day
of the calendar month following the Participant's Termination of Employment and
actual payment shall be made as soon as administratively feasible thereafter.
Any annual installment payments shall be commenced as of the December 31
coincident with or next following the Participant's Termination of Employment
and actual payment shall be commenced as soon as
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administratively feasible thereafter. If the Employer determines that delaying
the time the initial payments are made or commenced would increase the
probability that such payments would be fully deductible for federal or state
income tax purposes, for example because such payments would result in over one
million dollars ($1,000,000) of compensation for the taxable year with respect
to the Participant under section 162(m) of the Code, the Employer may
unilaterally delay the time of the making payment or transfer for up to twenty-
four (24) months after the date such payment or transfer would otherwise be
payable.
2.2. Designation of Beneficiaries for Installment Payments. This section 2.2
applies only to Participants who are entitled to receive a distribution in the
form of annual installments and who have elected to receive distribution of the
Participant's benefit in the form of annual installments.
2.2.1. Right To Designate. Each Participant may designate, upon forms
to be furnished by and filed with the Employer, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified part of
such Participant's account in the event of such Participant's death. The
Participant may change or revoke any such designation from time to time without
notice to or consent from any Beneficiary, except as provided in Section2.2.6.
No such designation, change or revocation shall be effective unless executed by
the Participant and received by the Employer during the Participant's lifetime.
2.2.2. Failure of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such
designation without naming another Beneficiary, or
(c) designates one or more Beneficiaries and all such Beneficiaries
so designated fail to survive the Participant,
such Participant's account, or the part thereof as to which such Participant's
designation fails, as the case may be, shall be payable to the first class of
the following classes of automatic Beneficiaries with a member surviving the
Participant and (except in the case of surviving issue) in equal shares if there
is more than one member in such class surviving the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
2.2.3. Disclaimers by Beneficiaries. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant's account may
disclaim an interest therein subject to the following requirements. To be
eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of the account at the time such
disclaimer is executed and delivered, and must have attained at least age
twenty-one (21) years as of the date of the Participant's death. Any disclaimer
must be in writing and must be executed personally by the Beneficiary before a
notary public. A disclaimer shall state that the Beneficiary's entire interest
in the undistributed account is disclaimed or shall specify what portion thereof
is disclaimed. To be effective, duplicate original executed copies of the
disclaimer must be both executed and actually delivered to the Employer after
the date of the Participant's death but not later than one hundred eighty (180)
days after the date of the Participant's death. A disclaimer shall be
irrevocable when delivered to the Employer. A disclaimer shall be considered to
be delivered to the Employer only when actually received by the Employer. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary
shall
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be considered not to have survived the Participant as to the interest
disclaimed. A disclaimer by a Beneficiary shall not be considered to be a
transfer of an interest in violation of the provisions of Section 8 and shall
not be considered to be an assignment or alienation of benefits in violation of
federal law prohibiting the assignment or alienation of benefits under this
Plan. No other form of attempted disclaimer shall be recognized by the
Employer.
2.2.4. Definitions. When used herein and, unless the Participant has
otherwise specified in the Participant's Beneficiary designation, when used in a
Beneficiary designation, "issue" means all persons who are lineal descendants of
the person whose issue are referred to, including legally adopted descendants
and their descendants but not including illegitimate descendants and their
descendants; "child" means an issue of the first generation; "per stirpes" means
in equal shares among living children of the person whose issue are referred to
and the issue (taken collectively) of each deceased child of such person, with
such issue taking by right of representation of such deceased child; and
"survive" and "surviving" mean living after the death of the Participant.
2.2.5. Special Rules. Unless the Participant has otherwise specified
in the Participant's Beneficiary designation, the following rules shall apply:
(a) If there is not sufficient evidence that a Beneficiary was
living at the time of the death of the Participant, it shall be
deemed that the Beneficiary was not living at the time of the
death of the Participant.
(b) The automatic Beneficiaries specified in Section 3.4.2 and the
Beneficiaries designated by the Participant shall become fixed
at the time of the Participant's death so that, if a
Beneficiary survives the Participant but dies before the
receipt of payments due such Beneficiary hereunder, such
payments shall be payable to the representative of such
Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person who
is the Participant's spouse on the date of the designation,
either by name or by relationship, or both, the dissolution,
annulment or other legal termination of the marriage between
the Participant and such person shall automatically revoke such
designation. (The foregoing shall not prevent the Participant
from designating a former spouse as a Beneficiary on a form
executed by the Participant and received by the Employer after
the date of the legal termination of the marriage between the
Participant and such former spouse, and during the
Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is
accompanied by a description of relationship to the Participant
shall be given effect without regard to whether the
relationship to the Participant exists either then or at the
Participant's death.
(e) Any designation of a Beneficiary only by statement of
relationship to the Participant shall be effective only to
designate the person or persons standing in such relationship
to the Participant at the Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported Beneficiary designation.
2.2.6. Spousal Rights. No person designated to be a Beneficiary,
other than a spouse or surviving spouse, shall have any rights or interest in
the benefits accumulated under
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this Plan including, but not limited to, the right to be the sole Beneficiary or
to consent to the designation of Beneficiaries (or the changing of designated
Beneficiaries) by the Participant.
Notwithstanding the foregoing, a designation will not be valid for the
purpose of paying benefits from the Plan to anyone other than a surviving spouse
of the Participant (if there is a surviving spouse) unless that surviving spouse
consents in writing to the designation of another person as Beneficiary. To be
valid, the consent of such spouse must be in writing, must acknowledge the
effect of the designation of the Beneficiary and must be witnessed by a notary
public. The consent of the spouse to a Beneficiary is not a waiver of any
rights to pre-retirement death benefits under the Plan because a Beneficiary
designation under this Section2.2 is only effective for annual installment
payments due after the Participant's termination of employment. The consent of
the surviving spouse need not be given at the time the designation is made. The
consent of the surviving spouse need not be given before the death of the
Participant. The consent of the surviving spouse will be required, however,
before benefits can be paid to any person other than the surviving spouse. The
consent of a spouse shall be irrevocable and shall be effective only with
respect to that spouse.
2.3. No Other Benefits. No benefits are available under this Plan upon the
Termination of Employment of WILLIAM J. CADOGAN before he is entitled to the
Supplemental Retirement Benefit specifically enumerated herein.
2.4. Facility of Payment. In case of the legal disability, including
minority, of WILLIAM J. CADOGAN, joint annuitant or beneficiary entitled to
receive any distribution under the Agreement, payment shall be made, if the
Board of Directors shall be advised of the existence of such condition:
(a) to his or her duly appointed guardian, conservator or other
legal representative, or
(b) to a person or institution entrusted with the care or
maintenance of the incompetent or disabled person, provided
such person or institution has satisfied the Board of Directors
that the payment will be used for the best interest and assist
in the care of such person, and provided further, that no prior
claim for said payment has been made by a duly appointed
guardian, conservator or other legal representative of such
person.
Any payment made in accordance with the foregoing provisions of this section
shall constitute a complete discharge of any liability or obligation of the
Employer and the Board of Directors.
2.5. Forfeiture of Benefits. All unpaid benefits under this Plan payable to
or with respect to WILLIAM J. CADOGAN, including without limiting the generality
of the foregoing, undistributed commuted values, shall be immediately and
permanently forfeited upon the determination by the Board of Directors that he,
either before or after Termination of Employment:
(i) engaged in a felonious or fraudulent conduct resulting
in material harm to the Employer or an affiliate; or
(ii) made an unauthorized disclosure to a competitor of any
material confidential information, trade information,
or trade secrets of the Employer or an affiliate; or
(iii) provided the Employer or an affiliate with materially
false reports concerning his business interests or
employment; or
(iv) made materially false representations which are relied
upon by the Employer or an affiliate in furnishing
information to shareholders,
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accountants, a stock exchange, the Securities and
Exchange Commission or public or private regulatory
body; or
(v) maintained an undisclosed, unauthorized and material
conflict of interest in the discharge of the duties
owed by him to the Employer or an affiliate; or
(vi) engaged in conduct causing a serious violation of state
or federal law by the Employer or an affiliate; or
(vii) engaged in the theft of assets or funds of the Employer
or an affiliate; or
(viii) has been convicted of any crime which directly or
indirectly arose out of his employment relationship
with the Employer or an affiliate or materially
affected his ability to discharge the duties of his
employment with the Employer or an affiliate; or
(ix) engaged during his employment in any employment or
self-employment with a competitor of the Employer or an
affiliate; or
(x) engaged during a period of two (2) years after his
voluntary termination of employment with the Employer
in any employment or self-employment with a competitor
of the Employer or an affiliate within the geographical
area which is then served by the Employer or the
affiliate.
He shall be notified within thirty (30) days of any such decision by the Board
of Directors. He may contest such action by filing a claim as prescribed in
Section6.4.
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SECTION 3
DEATH BENEFITS
3.1. Death Before Benefit Commencement.
3.1.1. When Available. If upon the death of WILLIAM J. CADOGAN:
(a) his Supplemental Retirement Benefit under the Agreement had not
been paid as provided in Section 2.1, and
(b) he was married and had been married for the one (1) year
preceding his death, and
(c) he was entitled to some Accrued Benefit immediately before his
death;
a lump sum survivor benefit shall be payable to the surviving spouse to whom he
was married for at least one (1) year ending on the date of death.
3.1.2. Amount. The amount of the lump sum survivor benefit shall be:
(a) If he had not Terminated Employment at the date of his death,
the amount shall be the 85% of Actuarially Equivalent single
lump sum which he would have received if he had Terminated
Employment on the date of his death at the written request of
the Board of Directors (and not by reason of his death).
(b) If he had Terminated Employment at the date of his death, the
amount shall be the amount, if any, which he would have
received, if any, under Section 2.1 if he had lived to the date
of such payment.
3.1.3. Form of Benefit. The lump sum survivor benefit shall be due
on the first day of the calendar month after the death of WILLIAM J. CADOGAN.
Notwithstanding the foregoing, if that lump sum is equal to or greater than One
Hundred Thousand Dollars ($100,000) and the Participant has elected to receive
his benefit in annual installment payments, it shall be held in the Account
which is established under the Plan for the purpose of making payments in a
series of annual installments payable over ten (10) years and distributed from
the Plan to the surviving spouse in accordance with the rules under Section 2.1.
The benefit payment or payments (minus the withholding and payroll taxes which
must be deducted therefrom) shall be paid to the surviving spouse from the
general assets of the Employer. No other death benefit shall be payable with
respect to him if he dies under these circumstances. No death benefit shall be
payable with respect to him if he dies under any other circumstances.
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SECTION 4
FUNDING OF PLAN
4.1. Unfunded Agreement. All benefits payable under this Agreement shall be
paid exclusively from the general assets of the Employer. No fund or trust
shall be established apart from the general assets of the Employer for the
purposes of this Agreement. No assets or property shall be segregated or set
apart from the general assets of the Employer for the purpose of funding this
Agreement. The rights of WILLIAM J. CADOGAN under this Agreement (or of any
surviving spouse with respect to him) shall be solely those of an unsecured
general creditor of the Employer. If, for its own internal purposes, the
Employer elects to purchase life insurance policies on his life or any other
assets in connection with this Agreement, he will not be the beneficial owner or
beneficiary of such policies or assets (all such rights being retained by the
Employer) and shall not have any preferred claim or interest in any such
policies, assets or the proceeds thereof. The Employer makes no representation
that it will actually use any life insurance policies, other assets or proceeds
of the same which it may acquire for the purpose of paying any benefits under
this Agreement.
4.2. Spendthrift Provisions. Neither WILLIAM J. CADOGAN nor his surviving
spouse shall have any transferrable interest in any benefit nor shall he or his
surviving spouse have any power to anticipate, alienate, dispose of, pledge or
encumber the same nor shall the Employer or the Board of Directors recognize any
assignment thereof, either in whole or in part, nor shall it be subject to
attachment, garnishment, execution following judgment or other legal process.
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SECTION 5
AMENDMENT AND TERMINATION
This Agreement may be amended and terminated only by the written agreement of
the Employer and WILLIAM J. CADOGAN. The rights and obligations of the Employer
and him shall be binding upon them and their heirs, successors and assigns.
-14-
<PAGE>
SECTION 6
DETERMINATIONS -- RULES AND REGULATIONS
6.1. Determinations. The Board of Directors shall make such determinations as
may be required from time to time in the administration of the Agreement. Each
interested party may act and rely upon all information reported to them
hereunder and need not inquire into the accuracy thereof nor be charged with any
notice to the contrary.
6.2. Rules and Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Board of Directors.
6.3. Method of Executing Instruments. Information to be supplied or written
notices to be made or consents to be given by the Employer or the Board of
Directors pursuant to any provision of this Agreement may be signed in the name
of the Employer by any officer thereof who has been authorized to make such
certification or to give such notices or consents or by any Board of Directors
member.
6.4. Claims Procedure. Until modified by the Board of Directors, the claims
procedure set forth in this Section 6.4 shall be the claims procedure for the
resolution of disputes and disposition of claims arising under the Agreement.
An application for benefits under Section3 or Section 5 shall be considered as a
claim for the purposes of this Section 6.4.
6.4.1. Original Claim. WILLIAM J. CADOGAN or his surviving spouse
may, if he or she so desires, file with the Board of Directors a written claim
for benefits under the Agreement. Within ninety (90) days after the filing of
such a claim, the Board of Directors shall notify the claimant in writing
whether his claim is upheld or denied in whole or in part or shall furnish the
claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than one hundred eighty days
from the date the claim was filed) to reach a decision on the claim. If the
claim is denied in whole or in part, the Board of Directors shall state in
writing:
(a) the specific reasons for the denial;
(b) the specific references to the pertinent provisions of this
Agreement on which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(d) an explanation of the claims review procedure set forth in this
section.
6.4.2. Claims Review Procedure. Within sixty (60) days after receipt
of notice that his claim has been denied in whole or in part, the claimant may
file with the Board of Directors a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the Board of Directors shall
notify the claimant in writing whether, upon review, the claim was upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred twenty days from the date the
request for review was filed) to reach a decision on the request for review.
6.4.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims
-15-
<PAGE>
procedure. The Board of Directors may require that any claim
for benefits and any request for a review of a denied claim be
filed on forms to be furnished by the Board of Directors upon
request.
(b) All decision on claims and on requests for a review of denied
claims shall be made by the Board of Directors.
(c) The Board of Directors may, in its discretion, hold one or more
hearings on a claim or a request for a review of a denied
claim.
(d) A claimant may be represented by a lawyer or other
representative (at their own expense), but the Board of
Directors reserves the right to require the claimant to furnish
written authorization. A claimant's representative shall be
entitled to receive copies of notices sent to the claimant.
(e) The decision of the Board of Directors on a claim and on a
request for a review of a denied claim shall be served on the
claimant in writing. If a decision or notice is not received
by a claimant within the time specified, the claim or request
for a review of a denied claim shall be deemed to have been
denied.
(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or his representative shall have a
reasonable opportunity to review a copy of this Agreement and
all other pertinent documents in the possession of the
Employer, and the Board of Directors.
-16-
<PAGE>
SECTION 7
PLAN ADMINISTRATION
7.1. Employer.
7.1.1. Officers. Functions generally assigned to the Employer shall
be discharged by the officers of ADC TELECOMMUNICATIONS, INC. (other than
WILLIAM J. CADOGAN) or delegated and allocated as provided herein.
7.1.2. Delegation By Board. Except as hereinafter provided, the Board
of Directors of ADC TELECOMMUNICATIONS, INC. may delegate or redelegate and
allocate and reallocate to one or more persons or to a committee of persons
jointly or severally, and whether or not such persons are directors, officers or
employees, such functions assigned to the Employer hereunder as it may from time
to time deem advisable.
7.1.3. Non-Delegable Functions. The Board of Directors of ADC
TELECOMMUNICATIONS, INC. shall have the exclusive authority, which authority may
not be delegated, to act for the Employer to amend this Agreement and to
terminate the Agreement.
7.2. Administrator. ADC TELECOMMUNICATIONS, INC. shall be the administrator
for purposes of section 3(16)(A) of the Employee Retirement Income Security Act
of 1974.
7.3. Service of Process. In the absence of any designation to the contrary by
ADC TELECOMMUNICATIONS, INC., the Secretary of ADC TELECOMMUNICATIONS, INC. is
designated as the appropriate and exclusive agent for the receipt of service of
process directed to the Agreement in any legal proceeding, including
arbitration, involving the Agreement.
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<PAGE>
SECTION 8
MISCELLANEOUS RULES
The continuance of this Agreement shall not be a term of the employment of
WILLIAM J. CADOGAN. The Employer shall not be obliged to continue the
Agreement. The terms of this Agreement shall not give him the right to be
retained in the employment of the Employer. Neither the officers nor the
members of the Board of Directors of ADC TELECOMMUNICATIONS, INC. in any way
guarantee the payment of any benefit or amount which may become due and payable
hereunder to him, or surviving spouse. He and surviving spouse shall look
solely to the assets of ADC TELECOMMUNICATIONS, INC. for such payments.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be
executed as of the day and year first above written:
ADC TELECOMMUNICATIONS, INC. WILLIAM J. CADOGAN
By ___________________________ By ___________________________
Its________________________ Its________________________
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<PAGE>
APPENDIX A
DETERMINATION OF ACTUARIAL EQUIVALENT
TO SINGLE LIFE ANNUITY
Section 1. Lump Sum Settlements. When converting benefits to a single
lump sum for payment to WILLIAM J. CADOGAN, the benefit to be converted is the
Single Life Annuity form payable at the latest date such benefit may commence.
When converting benefits to a single lump sum for payment to any other person,
the benefit to be converted shall be the benefit payable to such other person at
the latest date such benefit may commence. The factors to be used to convert
the Single Life Annuity form to a lump sum benefit shall be:
Interest Assumption: During each stability period, the annual rate of
interest on 30-year Treasury securities for the
lookback month. The stability period shall be the Plan
Year. The lookback month shall be the second calendar
month preceding the commencement of the stability
period.
Mortality Assumption: The mortality rate determined from the table prescribed
by the Secretary of the Treasury under section
417(e)(3)(A)(ii)(I) of the Code based on the prevailing
commissioners' standard table used to determine
reserves for group annuity contracts.
Section 2. Defined Contribution Plan Accrual. To determine the Actuarial
Equivalent annuity value of WILLIAM J. CADOGAN'S account balances attributable
to contributions of the Employer in defined contribution plans as of a specified
date (expressed in the Single Life Annuity form beginning on the first day of
the calendar month following his Normal Retirement Age) the following steps
shall be followed:
(a) Determine the value of all such defined contribution plan accounts
as of the valuation date under each defined contribution plan which
is coincident with or immediately preceding such specified date;
(b) Increase such account balances from such valuation dates to the last
day of the calendar month in which his Termination of Employment
occurs or, if later, the last day of the calendar month in which he
would attain age sixty (60) years at an assumed rate of earnings
equal to eight percent (8%), compounded annually;
(c) Convert the resulting total to an Actuarial Equivalent amount of
monthly annuity in the Single Life Annuity form commencing on the
last day of the calendar month in which his Termination of
Employment occurs or, if later, the last day of the calendar month
in which he would attain age sixty (60) years by applying the
interest and mortality factors set forth in Section 1 above.
Section 3. General Factors. Except to the extent otherwise specified
in the Agreement, the following interest and mortality factors shall be used in
determining the Actuarial Equivalent amount of any benefit:
Interest Assumption: During each stability period, the annual rate of
interest on 30-year Treasury securities for the
lookback month. The
A-1
<PAGE>
stability period shall be the Plan Year. The lookback
month shall be the second calendar month preceding the
commencement of the stability period.
Mortality Assumption: The mortality rate determined from the table prescribed
by the Secretary of the Treasury under section
417(e)(3)(A)(ii)(I) of the Code based on the prevailing
commissioners' standard table used to determine
reserves for group annuity contracts.
A-2
<PAGE>
EXHIBIT 10-Z
ADC TELECOMMUNICATIONS, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(Share amounts adjusted to reflect stock splits through October 31, 1996)
SECTION 1. PURPOSE.
This plan shall be known as the "ADC Telecommunications, Inc. Nonemployee
Director Stock Option Plan" and is hereinafter referred to as the "Plan." The
purpose of the Plan is to promote the interests of ADC Telecommunications, Inc.,
a Minnesota corporation (the "Company"), by enhancing its ability to attract and
retain the services of experienced and knowledgeable outside directors and by
providing additional incentive for such directors to increase their interest in
the Company's long-term success and progress.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee") of three or
more persons appointed by the Board of Directors of the Company. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic as described in Section 6. However, all questions of
interpretation of the Plan or of any options issued under it shall be determined
by the Committee and such determination shall be final and binding upon all
persons having an interest in the Plan.
SECTION 3. PARTICIPATION IN THE PLAN.
Each director of the Company shall be eligible to participate in the Plan
unless such director is an employee of the Company or any subsidiary of the
Company.
SECTION 4. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 11 hereof, the stock to be subject to
options under the Plan shall be authorized but unissued shares of the Company's
common stock, par value $.20 per share (the "Common Stock"). Subject to
adjustment as provided in Section 11 hereof, the maximum number of shares with
respect to which options may be exercised under this Plan shall be 440,000
shares. If an option under the Plan expires, or for any reason is terminated,
any shares that have not been purchased upon exercise of the option prior to the
expiration or termination date shall again be available for options thereafter
granted during the term of the Plan.
1
<PAGE>
SECTION 5. NONQUALIFIED STOCK OPTIONS.
All options granted under the Plan shall be nonqualified stock options
which do not qualify as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(a) INITIAL OPTION GRANTS. An option to purchase 16,000 shares
of Common Stock shall be granted automatically on the first business day
immediately following each meeting of the Company's shareholders or Board
of Directors during the term of the Plan to each eligible director, if any,
who is elected to the Board of Directors for the first time at such
meeting.
(b) ANNUAL OPTION GRANTS. Subject to Section 6(c) hereof, an
option to purchase 8,000 shares of Common Stock shall be granted
automatically on the first business day immediately following each annual
meeting of the Company's shareholders held during the term of the Plan
beginning with the 1995 annual meeting of shareholders (the "Annual Option
Grant Date") to each eligible director in office on such Annual Option
Grant Date who prior to such Annual Option Grant Date has received an
option pursuant to Section 6(a) hereof.
(c) RETURN ON EQUITY REQUIREMENT. No options shall be granted
pursuant to Section 6(b) hereof on any Annual Option Grant Date if the
Company's "return on equity" (as hereinafter defined) for the fiscal year
ended immediately preceding such Annual Option Grant Date was less than
10%. "Return on equity" shall mean the percentage determined by dividing
(i) the net income of the Company for such fiscal year by (ii) the total
stockholders' investment in the Company as of the end of the next preceding
fiscal year. Net income and total stockholders' investment shall be
determined by reference to the Company's audited financial statements. If
the Company does not have net income for any fiscal year, the return on
equity for such fiscal year shall be deemed to be less than 10%.
(d) OPTIONS NON-TRANSFERABLE. No option granted under the Plan
shall be transferable by the optionee otherwise than by will or by the laws
of descent and distribution as provided in Section 6(g) hereof. During
the lifetime of the optionee, the options shall be exercisable only by such
optionee. No option or interest therein may be transferred, assigned,
pledged or hypothecated by the optionee during such optionee's lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
2
<PAGE>
(e) PERIOD OF OPTIONS. Options shall terminate upon the
expiration of 10 years from the date on which they were granted.
(f) EXERCISE OF OPTIONS.
(i) Options granted under the Plan shall not be
exercisable for a period of one year after the date on which they
were granted, but thereafter will be exercisable in full at any time
or from time to time during the term of the option.
(ii) The exercise of any option granted hereunder shall
only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant
to such exercise will not violate any federal or state securities or
other laws. An optionee desiring to exercise an option may be
required by the Company, as a condition of the effectiveness of any
exercise of an option granted hereunder, to agree in writing that
all Common Stock to be acquired pursuant to such exercise shall be
held for his or her own account without a view to any distribution
thereof, that the certificates for such shares shall bear an
appropriate legend to that effect and that such shares will not be
transferred or disposed of except in compliance with applicable
federal and state securities laws.
(iii) An optionee electing to exercise an option shall give
written notice to the Company of such election and of the number of
shares subject to such exercise. The full purchase price of such
shares shall be tendered with such notice of exercise. Payment shall
be made to the Company in cash (including check, bank draft or money
order).
(g) EFFECT OF DEATH. If the optionee shall die prior to the time
the option is fully exercised, such option may be exercised at any time
within one year after his or her death by the personal representatives or
administrators of the optionee or by any person or persons to whom the
option is transferred by will or the applicable laws of descent and
distribution, to the extent of the full number of shares the optionee was
entitled to purchase under the option on the date of death and subject to
the condition that no option shall be exercisable after the expiration of
the term of the option.
SECTION 7. OPTION EXERCISE PRICE.
The option exercise price per share for the shares covered by each option
shall be equal to the "fair market value" of a share of Common Stock as of the
date on which the option is granted, as determined pursuant to Section 9 hereof.
3
<PAGE>
SECTION 8. TIME FOR GRANTING OPTIONS.
Unless the Plan shall have been discontinued as provided in Section 13
hereof, the Plan shall terminate upon the expiration of 10 years from the date
upon which it takes effect as provided in Section 12 hereof. No option may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee, alter or impair any rights or obligations under any
option theretofore granted.
SECTION 9. FAIR MARKET VALUE OF COMMON STOCK.
For purposes of the Plan, the fair market value of the Common Stock on a
given date shall be (i) the last sale price of the Common Stock as reported on
the NASDAQ National Market System on such date, if the Common Stock is then
quoted on the NASDAQ National Market System, or (ii) the closing price of the
Common Stock on such date on a national securities exchange, if the Common Stock
is then being traded on a national securities exchange. If on the date as of
which the fair market value is being determined the Common Stock is not publicly
traded, the Committee shall make a good faith attempt to determine such fair
market value and, in connection therewith, shall take such actions and consider
such factors as it deems necessary or advisable.
SECTION 10. LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan, shall
constitute, or be evidence of, any agreement or understanding, express or
implied, that the Company will retain a director for any period of time, or at
any particular rate of compensation.
(b) NO SHAREHOLDER RIGHTS FOR OPTIONS. An optionee shall have no rights
as a shareholder with respect to the shares covered by options until the date of
the issuance to such optionee of a stock certificate therefor, and no adjustment
will be made for cash dividends or other rights for which the record date is
prior to the date such certificate is issued.
SECTION 11. ADJUSTMENTS TO COMMON STOCK.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend (of whatever
amount), stock split or other change in the corporate structure, appropriate
adjustments in the Plan and outstanding options shall be made. In the event of
any such changes, adjustments shall include, where appropriate, changes in the
aggregate number of shares subject to the Plan, the number of shares subject to
outstanding options and the option exercise prices thereof in order to prevent
dilution or enlargement of option rights.
4
<PAGE>
SECTION 12. EFFECTIVE DATE OF THE PLAN.
The Plan shall take effect immediately upon its approval by the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and voted at a duly held meeting of shareholders of the Company.
SECTION 13. AMENDMENT OF THE PLAN.
The Board may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that without approval of the shareholders
of the Company no revision or amendment shall be made that (a) absent such
shareholder approval, would cause Rule 16b-3, as promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation thereto, to become unavailable with respect
to the Plan or (b) requires the approval of the Company's shareholders under any
rules or regulations of the National Association of Securities Dealers, Inc. or
any securities exchange that are applicable to the Company. The Board shall not
alter or impair any option theretofore granted under the Plan without the
consent of the holder of the option.
SECTION 14. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of Minnesota and construed
accordingly.
5
<PAGE>
ADC TELECOMMUNICATIONS, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Amendment Effective as of December 17, 1996
RESOLVED FURTHER, that Section 6(d) of the ADC Telecommunications, Inc.,
Nonemployee Director Stock Option Plan is hereby amended in its entirety to read
as follows:
(d) OPTIONS NON-TRANSFERABLE. No option granted under the Plan shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution as provided in Section 6(g) hereof; PROVIDED, HOWEVER, that an
optionee may, in the manner established by the Committee, transfer an option to
any member of such optionee's immediate family (which, for purposes of this
clause (d) shall mean such optionee's children, grandchildren, or current
spouse) or to one or more trusts established for the exclusive benefit of one or
more such immediate family members or one or more partnerships in which the
Participant or such immediate family members are the only partners, and PROVIDED
FURTHER that (1) there is no consideration for such transfer, and (2) the
options held by such transferees continue to be subject to the same terms and
conditions (including restrictions on subsequent transfers) as were applicable
to such options immediately prior to their transfer. During the lifetime of the
optionee, the options shall be exercisable only by such optionee. No option or
interest therein may be transferred, assigned, pledged or hypothecated by the
optionee during such optionee's lifetime, except as set forth at this section
(d), whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
<PAGE>
Exhibit 10-AA
- -------------
ADC TELECOMMUNICATIONS, INC.
DEFERRED COMPENSATION PLAN
(1989 Restatement)
First Effective November 1, 1978
As Amended and Restated Effective November 1, 1989
AND
As Amended By
The FIRST AMENDMENT Adopted March 12, 1996
But Effective November 1, 1995
<PAGE>
ADC TELECOMMUNICATIONS, INC.
DEFERRED COMPENSATION PLAN
(1989 Restatement)
TABLE OF CONTENTS
Page
PREAMBLES ............................................................. 1
SECTION 1. INTRODUCTION .............................................. 2
1.1. Definitions
1.1.1. Account
1.1.2. Affiliate
1.1.3. Annual Valuation Date
1.1.4. Beneficiary
1.1.5. Deferrable Compensation
1.1.6. Disability
1.1.7. Effective Date
1.1.8. Eligible Employee
1.1.9. Employer
1.1.10. Event of Maturity
1.1.11. Interest Rate
1.1.12. Normal Retirement Age
1.1.13. Participant
1.1.14. Plan
1.1.15. Plan Statement
1.1.16. Plan Year
1.1.17. Prior Plan Statement
1.1.18. Valuation Date
1.1.19. Vested
1.2. Rules of Interpretation
SECTION 2. PARTICIPATION ............................................. 5
2.1. Enrollment for Participation
2.2. Annual Election
2.3. Minimum Deferral
2.4. Specific Exclusion
SECTION 3. ADDITIONS TO ACCOUNTS....................................... 7
3.1. Amount
3.2. Crediting the Account
SECTION 4. ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS .................. 8
4.1. Valuation and Adjustment of Accounts
4.1.1. Contribution Adjustment
4.1.2. Investment Adjustment
4.1.3. Distributions Adjustment
4.2. Not Funded
SECTION 5. VESTING OF ACCOUNT ........................................ 9
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<PAGE>
SECTION 6. MATURITY .................................................. 10
6.1. Events of Maturity
6.2. Determination of Account
6.3. Effect of Maturity upon Further Participation in Plan
SECTION 7. DISTRIBUTION .............................................. 11
7.1. Time of Distribution
7.2. Form of Distribution
7.2.1. Form of Distribution
7.2.2. Installment Amounts
7.2.3. Default
7.3. 280G Limitation
7.4. Designation of Beneficiaries
7.4.1. Right To Designate
7.4.2. Failure of Designation
7.4.3. Disclaimers by Beneficiaries
7.4.4. Definitions
7.4.5. Special Rules
7.4.6. Spousal Rights
7.5. Death Prior to Distribution
7.6. Facility of Payment
SECTION 8. SPENDTHRIFT PROVISIONS .................................... 15
SECTION 9. AMENDMENT AND TERMINATION ................................. 16
9.1. Amendment and Termination
9.2. Change in Control
9.2.1. In General
9.2.2. Special Definitions
9.2.3. Amendment
9.2.4. Termination of Employment
9.2.5. Pending Distributions
9.2.6. Not Amendable
SECTION 10. DETERMINATIONS -- RULES AND REGULATIONS .................. 17
10.1. Determinations
10.2. Rules and Regulations
10.3. Method of Executing Instruments
10.4. Claims Procedure
10.4.1. Original Claim
10.4.2. Claims Review Procedure
10.4.3. General Rules
10.5. Information Furnished by Participants
SECTION 11. PLAN ADMINISTRATION ...................................... 19
11.1. Employer
11.1.1. Officers
11.1.2. Chief Executive Officer
11.1.3. Board of Directors
11.1.4. Amendment
11.2. Conflict of Interest
11.3. Administrator
11.4. Service of Process
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<PAGE>
SECTION 12. DISCLAIMERS .............................................. 20
12.1. Term of Employment
12.2. Employment
12.3. Source of Payment
12.4. Guaranty
12.5. Delegation
SIGNATURES ............................................................ 20
-iii-
<PAGE>
ADC TELECOMMUNICATIONS, INC.
DEFERRED COMPENSATION PLAN
(1989 Restatement)
WHEREAS, ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (hereinafter
sometimes referred to as the "Employer"), by resolution of its Board of
Directors, has heretofore established and maintained a nonqualified, unfunded,
deferred compensation plan (the "Plan") for the benefit of a select group of
management or highly compensated eligible employees, said plan to be contained
and set forth in a Plan Statement made by the Employer; and
WHEREAS, The Plan is set forth in a document dated November 1, 1978, and
entitled "MAGNETIC CONTROLS COMPANY DEFERRED COMPENSATION PLAN;" and
WHEREAS, The Employer has reserved the right by action of its Board of
Directors to amend the Plan document; and
WHEREAS, It is desired to amend and restate the Plan document in the manner
hereinafter set forth;
NOW, THEREFORE, The Plan document is hereby amended and restated, effective
as of November 1, 1989, to read in full as follows:
<PAGE>
SECTION 1
INTRODUCTION
1.1. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
1.1.1. Account -- the separate unfunded and unsecured general obligation
of the Employer established with respect to each person who is a Participant in
this Plan in accordance with Section 2 and to which is credited the dollar
amounts specified in Section 3 and Section 4 and from which are subtracted
forfeitures and payments made pursuant to Section 5 and Section 7. To the
extent necessary to accommodate and effect the distribution elections made by
Participants pursuant to Section 2, separate bookkeeping sub-accounts shall be
established with respect to each of the several annual deferral elections made
by Participants.
1.1.2. Affiliate -- a business entity which is under "common control"
with the Employer or which is a member of an "affiliated service group" that
includes the Employer, as those terms are defined in section 414(b), (c) and (m)
of the Internal Revenue Code. A business entity which is a predecessor to the
Employer shall be treated as an Affiliate if the Employer maintains a plan of
such predecessor business entity or if, and to the extent that, such treatment
is otherwise required by regulations prescribed by the Secretary of the Treasury
under section 414(a) of the Internal Revenue Code. A business entity shall also
be treated as an Affiliate if, and to the extent that, such treatment is
required by regulations under section 414(o) of the Internal Revenue Code. In
addition, the Employer may designate as an Affiliate any business entity which
is not such a "common control," "affiliated service group" or "predecessor"
business entity but which is otherwise affiliated with the Employer, subject to
such limitations as it may impose.
1.1.3. Annual Valuation Date -- each October 31.
1.1.4. Beneficiary -- a person designated by a Participant (or
automatically by operation of this Plan Statement) to receive all or a part of
the Participant's Vested Accounts in the event of the Participant's death prior
to full distribution thereof. A person so designated shall not be considered a
Beneficiary until the death of the Participant.
1.1.5. Deferrable Compensation -- any compensation payable to an
employee of the Employer or any Affiliate from the Employer's Management
Incentive Plan.
1.1.6. Disability -- a medically determinable physical or mental
impairment which: (i)renders the individual incapable of performing any
substantial gainful employment, (ii) can be expected to be of long-continued and
indefinite duration or result in death, and (iii) is evidenced by a
certification to this effect by a doctor of medicine approved by the Employer.
In lieu of such a certification, the Employer may accept, as proof of
Disability, the official written determination that the individual will be
eligible for disability benefits under the federal Social Security Act as now
enacted or hereinafter amended (when any waiting period expires). The Employer
shall determine the date on which the Disability shall have occurred if such
determination is necessary.
1.1.7. Effective Date -- November 1, 1989.
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<PAGE>
1.1.8. Eligible Employee -- each employee of the Employer or any
Affiliate that:
(a) is eligible to receive a payment of Deferrable Compensation, or would
be eligible to receive such a payment if one were made, and
(b) is at least a corporate or divisional Vice President of the Employer,
or has otherwise been specifically designated by the Board of
Directors as eligible for participation in this Plan.
1.1.9. Employer -- ADC TELECOMMUNICATIONS, INC., a Minnesota
corporation.
1.1.10. Event of Maturity -- any of the occurrences described in Section
6 by reason of which a Participant or Beneficiary may become entitled to a
distribution from the Plan.
1.1.11. Interest Rate -- the rate of interest charged on the Valuation
Date by Norwest Bank Minnesota, N.A. and in effect on that Valuation Date to its
most credit-worthy corporate customers on loans of not more than ninety (90)
days duration which are unsecured (that is, the so called prime rate of
interest).
1.1.12. Normal Retirement Age -- the date a Participant attains age
sixty-five (65) years.
1.1.13. Participant -- an employee of the Employer who becomes a
Participant in the Plan in accordance with the provisions of Section 2 of this
Plan Statement or any comparable provision of the Prior Plan Statement. An
employee who has become a Participant shall be considered to continue as a
Participant in the Plan until the date of death or, if earlier, the date when
such Participant no longer has any Account under the Plan.
1.1.14. Plan -- the program of supplemental retirement income benefit of
the Employer established for the benefit of employees eligible to participate
therein, as first set forth in the Prior Plan Statement and as amended and
restated in this Plan Statement. (As used herein, "Plan" refers to the legal
entity established by the Employer and not to the documents pursuant to which
the Plan is maintained. Those documents are referred to herein as the "Prior
Plan Statement" and the "Plan Statement"). The Plan shall be referred to as the
"ADC TELECOMMUNICATIONS, INC. DEFERRED COMPENSATION PLAN."
1.1.15. Plan Statement -- this document entitled "ADC TELECOMMUNICATIONS,
INC. DEFERRED COMPENSATION PLAN (1989 Restatement)" as adopted by the Employer
effective as of November 1, 1989, as the same may be amended from time to time
thereafter.
1.1.16. Plan Year -- the twelve (12) consecutive month period ending on
any Annual Valuation Date.
1.1.17. Prior Plan Statement -- the document pursuant to which the Plan
was established effective as of November1, 1978, and operated thereafter until
the Effective Date.
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1.1.18. Valuation Date -- the Annual Valuation Date, the last day of each
calendar month and such other dates as the Employer, in its discretion, shall
determine.
1.1.19. Vested -- nonforfeitable, i.e., a claim obtained by a Participant
or a Participant's Beneficiary to that part of an immediate or deferred benefit
hereunder which arises from the Participant's service, which is unconditional
and which is legally enforceable against the Plan.
1.2. Rules of Interpretation. An individual shall be considered to have
attained a given age on such individual's birthday for that age (and not on the
day before). Notwithstanding any other provision of this Plan Statement or any
election or designation made under the Plan, any individual who feloniously and
intentionally kills a Participant or Beneficiary shall be deemed for all
purposes of this Plan and all elections and designations made under this Plan to
have died before such Participant or Beneficiary. A final judgment of
conviction of felonious and intentional killing is conclusive for the purposes
of this section. In the absence of a conviction of felonious and intentional
killing, the Employer shall determine whether the killing was felonious and
intentional for the purposes of this section. The birthday of any individual
born on a February 29 shall be deemed to be February 28 in any year that is not
a leap year. Whenever appropriate, words used herein in the singular may be
read in the plural, or words used herein in the plural may be read in the
singular; the masculine may include the feminine; and the words "hereof,"
"herein" or "hereunder" or other similar compounds of the word "here" shall mean
and refer to this entire Plan Statement and not to any particular paragraph or
section of this Plan Statement unless the context clearly indicates to the
contrary. The titles given to the various sections of this Plan Statement are
inserted for convenience of reference only and are not part of this Plan
Statement, and they shall not be considered in determining the purpose, meaning
or intent of any provision hereof. Any reference in this Plan Statement to a
statute or regulation shall be considered also to mean and refer to any
subsequent amendment or replacement of that statute or regulation. This
document has been executed and delivered in the State of Minnesota and has been
drawn in conformity to the laws of that State and shall, except to the extent
that federal law is controlling, be construed and enforced in accordance with
the laws of the State of Minnesota.
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SECTION 2
PARTICIPATION
2.1. Enrollment for Participation. Each Eligible Employee may enroll as a
Participant in this Plan by filing with the Employer a signed, written,
irrevocable election to defer some or all of such Eligible Employee's Deferrable
Compensation under this Plan. Once enrolled as a Participant an Eligible
Employee shall continue to be a Participant until such Participant's entire
Account has been distributed or, if earlier, until the date of such
Participant's death.
2.2. Annual Election. Each Participant must make a new election to defer
Deferrable Compensation for each Plan Year. In the case of an Eligible Employee
who has not previously enrolled as a Participant, only Deferrable Compensation
which is earned after such Eligible Employee is enrolled as a Participant can be
deferred under this Plan. Each such enrollment:
(a) Shall be irrevocable for the remainder of the Plan Year with respect
to which it is made once it has been accepted by the Employer.
(b) Shall designate the amount or portion of the Participant's Deferrable
Compensation which is earned during that Plan Year (without regard to
whether it would be paid during that or a subsequent Plan Year) which
shall not be paid to the Participant but instead shall be accumulated
and paid under the rules of this Plan. The amount or portion may be
designated as a dollar amount or a percentage.
(c) Shall specify the form in which distribution of the portion of the
Account attributable to that enrollment shall be made under Section 7
upon the occurrence of an Event of Maturity (and if such designation
is not clearly made to the contrary shall be deemed to have been an
election of a single lump sum distribution).
(d) Shall be made upon forms furnished by the Employer, shall be made at
such time as the Employer shall determine, shall be made before the
beginning of the Plan Year with respect to which it is made (provided,
however, that in the year in which an employee is first hired or
promoted into a position eligible for participation in this Plan, the
enrollment shall be (i) deemed to have been made before the beginning
of the Plan Year and (ii) shall be effective on the date of initial
eligibility, if it is made not later than thirty days after such
initial eligibility) and shall conform to such other procedural and
substantive rules as the Employer shall prescribe.
Notwithstanding anything herein to the contrary, the Employer shall unilaterally
designate the form of distribution of all benefits accrued prior to April 1,
1996.
2.3. Minimum Deferral. A Participant's election to defer payment of Deferrable
Compensation must result in a deferral of at least One Hundred Dollars ($100.00)
for each Plan Year. Any election which would result in a deferral of less than
One Hundred Dollars ($100.00) shall be disregarded by the Employer and shall be
of no effect.
2.4. Specific Exclusion. Notwithstanding anything apparently to the contrary
in this Plan or in any written communication, summary, resolution or document or
oral communication, no individual shall be a Participant in this Plan, develop
benefits under this Plan or be entitled to receive benefits under this Plan
(either for such individual or such individual's survivors) unless such
individual is a member of a select group of management or highly compensated
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employees (as that expression is used in ERISA). If a court of competent
jurisdiction, any representative of the U.S. Department of Labor or any other
governmental, regulatory or similar body makes any direct or indirect, formal or
informal, determination that an individual is not a member of a select group of
management or highly compensated employees (as that expression is used in
ERISA), such individual shall not be (and shall not have ever been) a
Participant in this Plan at any time. If any person not so defined has been
erroneously treated as a Participant in this Plan, upon discovery of such error
such person's erroneous participation shall immediately terminate ab initio and
upon demand such person shall be obligated to reimburse ADC Telecommunications,
Inc. for all amounts erroneously paid to such person.
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SECTION 3
ADDITIONS TO ACCOUNTS
3.1. Amount. The Employer shall credit each Participant's Account with the
amount of deferred compensation agreed to by each Participant pursuant to a
deferral election filed with the Employer pursuant to Section 2.
3.2. Crediting the Account. The amount of compensation deferred with respect
to each Participant shall be credited in dollar amounts to the Participant's
Account as of the Valuation Date coincident with or next following the last day
of the calendar month in which the compensation was deferred.
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SECTION 4
ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS
4.1. Valuation and Adjustment of Accounts. There shall be established for the
Account of each Participant a bookkeeping account which shall be valued each
Valuation Date.
As of each Valuation Date (the "current Valuation Date"), the value of each
Account determined as of the immediately preceding Valuation Date (the "initial
Account value") shall be increased (or decreased) by the following adjustments
made in the following sequence:
4.1.1. Contribution Adjustment. The initial Account value shall be
increased by the total amount, if any, credited to such Account under Section 3
as of the current Valuation Date.
4.1.2. Investment Adjustment. The initial Account value (as adjusted
above) shall be increased by an amount equal to the average daily balance of the
Account during the time from the immediately preceding Valuation Date to the
current Valuation Date multiplied by the Interest Rate and multiplied by a
fraction, the numerator of which is the number of months from the immediately
preceding Valuation Date to the current Valuation Date and the denominator of
which is twelve (12).
4.1.3. Distributions Adjustment. The initial Account value (as adjusted
above) shall be reduced by the total amount distributed in fact to (or with
respect to) the Participant from such Account as of the current Valuation Date.
4.2. Not Funded. The obligations of the Employer to make payments under this
Plan constitute only the unsecured (but legally enforceable) promise of the
Employer to make such payments, and the Participant shall have no lien, prior
claim or other security interest in any property of the Employer. No fund,
trust or account (other than a bookkeeping account or reserve) will be
established or maintained by the Employer for the purpose of funding or paying
the benefits promised under this Plan. If such a fund is established, the
property therein shall remain the sole and exclusive property of the Employer.
The Employer will pay the cost of this Plan out of its general assets. All
references to accounts, accruals, gains, losses, income, expenses, payments,
custodial funds and the like are included merely for the purpose of measuring
the Employer's obligation to Participants in this Plan and shall not be
construed to impose on the Employer the obligation to create any separate fund
for purposes of this Plan.
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SECTION 5
VESTING OF ACCOUNT
The Account of each Participant shall be fully Vested at all times.
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SECTION 6
MATURITY
6.1. Events of Maturity. A Participant's Account shall mature and become
distributable in accordance with Section 7 upon the earliest occurrence of any
of the following events while in the employment of the Employer or an Affiliate:
(a) the Participant's death, or
(b) the Participant's termination of employment, whether voluntary or
involuntary, or
(c) the Participant's Disability, or
(d) termination of the Plan;
provided, however, that a loss of active Participant status by action pursuant
to Section 2 or a transfer of employment to an Affiliate shall not constitute an
Event of Maturity.
6.2. Determination of Account. Upon the occurrence of an Event of Maturity
effective as to a Participant, the value of such Participant's Account as of the
Valuation Date coincident with or next following the Event of Maturity shall be
determined.
6.3. Effect of Maturity upon Further Participation in Plan. On the
occurrence of an Event of Maturity, a Participant shall cease to have any
interest in the Plan other than the right to receive payment of the
Participant's Account as provided in Section 7 hereof, adjusted from time to
time as provided in Section 4. If a Participant who has had an Event of
Maturity should ever again become a Participant in this Plan entitled to
additional accruals under Section 3 before such Participant's Account has been
distributed, the accruals made with respect to participation after the Event of
Maturity shall be added to the Account attributable to accruals before the Event
of Maturity, and shall not be maintained as a separate Account.
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SECTION 7
DISTRIBUTION
7.1. Time of Distribution. Upon the occurrence of an Event of Maturity
effective as to a Participant, the Employer shall make or commence payment of
such Participant's Account (reduced by the amount of any applicable payroll,
withholding and other taxes) as soon as administratively feasible following the
December 31 Valuation Date coincident with or next following the Event of
Maturity. If the Employer determines that delaying the time the initial
payments are made or commenced would increase the probability that such payments
would be fully deductible for federal or state income tax purposes, for example
because such payments would result in over one million dollars ($1,000,000) of
compensation for the taxable year with respect to the Participant under section
162(m) of the Code, the Employer may unilaterally delay the time of the making
or commencement of payments for up to twenty-four (24) months after the date
such payments would otherwise be payable.
7.2. Form of Distribution. Distribution of the Participant's Account shall
be made to the Participant or the Beneficiary entitled to receive the
distribution in accordance with the following rules.
7.2.1. Form of Distribution. Distribution shall be made in
whichever of the following forms as the Participant shall have designated in
writing at the time of his or her enrollment (to the extent that such election
is consistent with the rules of this Plan Statement):
(a) Term Certain Installments to Participant. If the
Distributee is a Participant who has elected distribution in
a series of annual installments payable over ten (10) years
and the Account at the Termination of Employment is at least
One Hundred Thousand Dollars ($100,000), distribution shall
be made in a series of annual installments payable over ten
(10) years. (For the purpose of applying this dollar
limitation, all portions of the Account distributable in ten
annual installments shall be considered together
notwithstanding that such amounts may have been attributable
to enrollments relating to more than one Plan Year.)
(b) Term Certain Installments to Beneficiary. If the
Distributee is the Beneficiary of a Participant who has
elected distribution in a series of annual installments
payable over ten (10) years but died before distribution
commenced and the Account at death is at least One Hundred
Thousand Dollars ($100,000), distribution shall be made in a
series of annual installments payable over ten (10) years.
(For the purpose of applying this dollar limitation, all
portions of the Account distributable in ten annual
installments shall be considered together notwithstanding
that such amounts may have been attributable to enrollments
relating to more than one Plan Year.)
(c) Continued Term Certain Installments to Beneficiary. If the
Distributee is a Beneficiary of a deceased Participant and
distribution had commenced to the deceased Participant
before his or her death over a ten (10) year period as
specified in paragraph (a) above, in a series of annual
installments payable over the remainder of the ten (10) year
period.
(d) Lump Sum. To the extent that the Distributee is either a
Participant or a Beneficiary of a deceased Participant and
none of the foregoing rules are applicable, in a single lump
sum payment.
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7.2.2. Installment Amounts. The amount of the annual
installments shall be determined by dividing the amount of the Account as of
the December 31 Valuation Date as of which the installment is being paid by
the number of remaining installment payments to be made (including the
payment being determined).
7.2.3. Default. If for any reason a Participant shall have
failed to make a timely written designation of form for distribution
(including reasons entirely beyond the control of the Participant), the
distribution shall be made in a single lump sum. No spouse, former spouse,
Beneficiary or other person shall have any right to participate in the
Participant's selection of a form of benefit.
7.3. 280G Limitation. The amount of any cash distribution to be received by
the Participant under the Plan shall be reduced (but not below zero) by the
amount, if any, necessary to prevent any part of any payment or benefit received
or to be received by the Participant in connection with a Change in Control of
the Employer (as defined in Section 9.2) or the termination of the Participant's
employment (whether payable under the terms of the Plan or any other plan,
contract, agreement or arrangement with the Employer, with any person whose
actions result in a Change in Control of the Employer or with any person
constituting a member of an "affiliated group" (as defined in section 280G(d)(5)
of the Code)), with the Employer or with any person whose actions result in a
Change in Control of the Employer (such foregoing payments or benefits referred
to collectively as the "Total Payments") from being treated as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code, but
only if and to the extent such reduction will also result in, after taking into
account all applicable state or federal taxes (computed at the highest marginal
rate) including any taxes payable pursuant to section 4999 of the Code, a
greater after-tax benefit to the Participant than the after-tax benefit to the
Participant of the Total Payments computed without regard to any such reduction.
For purposes of the foregoing, (a) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the Employer
and acceptable to the Participant does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code; (b) any reduction in
payments under the Plan shall be computed by taking into account that portion of
Total Payments which constitute reasonable compensation within the meaning of
section 280G(b)(4)(B) of the Code in the opinion of such tax counsel; (c) the
value of any non-cash benefit or of any deferred cash payment included in the
Total Payments shall be determined by the Employer in accordance with the
principles of section 280G(d)(3)(iv) of the Code; and (d) in the event of any
uncertainty as to whether a reduction in Total Payments to the Participant is
required under the Plan, the Employer shall initially make the payment to the
Participant and the Participant shall agree to refund to the Employer any
amounts ultimately determined not to have been payable under the terms of this
Section.
7.4. Designation of Beneficiaries.
7.4.1. Right To Designate. Each Participant may designate, upon
forms to be furnished by and filed with the Employer, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified part of
such Participant's Account in the event of such Participant's death. The
Participant may change or revoke any such designation from time to time without
notice to or consent from any Beneficiary. No such designation, change or
revocation shall be effective unless executed by the Participant and received by
the Employer during the Participant's lifetime.
7.4.2. Failure of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such
designation without naming another Beneficiary, or
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(c) designates one or more Beneficiaries and all such
Beneficiaries so designated fail to survive the Participant,
such Participant's Account, or the part thereof as to which such Participant's
designation fails, as the case may be, shall be payable to the first class of
the following classes of automatic Beneficiaries with a member surviving the
Participant and (except in the case of surviving issue) in equal shares if there
is more than one member in such class surviving the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
7.4.3. Disclaimers by Beneficiaries. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant's Account may
disclaim an interest therein subject to the following requirements. To be
eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of the Account at the time such
disclaimer is executed and delivered, and must have attained at least age
twenty-one (21) years as of the date of the Participant's death. Any disclaimer
must be in writing and must be executed personally by the Beneficiary before a
notary public. A disclaimer shall state that the Beneficiary's entire interest
in the undistributed Account is disclaimed or shall specify what portion thereof
is disclaimed. To be effective, duplicate original executed copies of the
disclaimer must be both executed and actually delivered to the Employer after
the date of the Participant's death but not later than one hundred eighty (180)
days after the date of the Participant's death. A disclaimer shall be
irrevocable when delivered to the Employer. A disclaimer shall be considered to
be delivered to the Employer only when actually received by the Employer. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary
shall be considered not to have survived the Participant as to the interest
disclaimed. A disclaimer by a Beneficiary shall not be considered to be a
transfer of an interest in violation of the provisions of Section 8 and shall
not be considered to be an assignment or alienation of benefits in violation of
federal law prohibiting the assignment or alienation of benefits under this
Plan. No other form of attempted disclaimer shall be recognized by the
Employer.
7.4.4. Definitions. When used herein and, unless the Participant
has otherwise specified in the Participant's Beneficiary designation, when used
in a Beneficiary designation, "issue" means all persons who are lineal
descendants of the person whose issue are referred to, including legally adopted
descendants and their descendants but not including illegitimate descendants and
their descendants; "child" means an issue of the first generation; "per stirpes"
means in equal shares among living children of the person whose issue are
referred to and the issue (taken collectively) of each deceased child of such
person, with such issue taking by right of representation of such deceased
child; and "survive" and "surviving" mean living after the death of the
Participant.
7.4.5. Special Rules. Unless the Participant has otherwise
specified in the Participant's Beneficiary designation, the following rules
shall apply:
(a) If there is not sufficient evidence that a Beneficiary was
living at the time of the death of the Participant, it shall
be deemed that the Beneficiary was not living at the time of
the death of the Participant.
(b) The automatic Beneficiaries specified in Section 7.4.2 and
the Beneficiaries designated by the Participant shall become
fixed at the time of the Participant's death so that, if a
Beneficiary survives the Participant but dies
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before the receipt of payments due such Beneficiary
hereunder, such payments shall be payable to the
representative of such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person
who is the Participant's spouse on the date of the
designation, either by name or by relationship, or both, the
dissolution, annulment or other legal termination of the
marriage between the Participant and such person shall
automatically revoke such designation. (The foregoing shall
not prevent the Participant from designating a former spouse
as a Beneficiary on a form executed by the Participant and
received by the Employer after the date of the legal
termination of the marriage between the Participant and such
former spouse, and during the Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is
accompanied by a description of relationship to the
Participant shall be given effect without regard to whether
the relationship to the Participant exists either then or at
the Participant's death.
(e) Any designation of a Beneficiary only by statement of
relationship to the Participant shall be effective only to
designate the person or persons standing in such
relationship to the Participant at the Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported Beneficiary designation.
7.4.6. Spousal Rights. No spouse or surviving spouse of a
Participant and no person designated to be a Beneficiary shall have any rights
or interest in the benefits accumulated under this Plan including, but not
limited to, the right to be the sole Beneficiary or to consent to the
designation of Beneficiaries (or the changing of designated Beneficiaries) by
the Participant.
7.5. Death Prior to Distribution. If a Participant dies after an Event of
Maturity but before distribution of such Participant's Account has been made,
the undistributed Account shall be distributed in the same manner as
hereinbefore provided in the Event of Maturity by reason of death (and shall not
be paid to the Participant's estate).
7.6. Facility of Payment. In case of the legal disability, including
minority, of a Participant or Beneficiary entitled to receive any distribution
under the Plan, payment shall be made, if the Employer shall be advised of the
existence of such condition:
(a) to the duly appointed guardian, conservator or other legal
representative of such Participant or Beneficiary, or
(b) to a person or institution entrusted with the care or
maintenance of the incompetent or disabled Participant or
Beneficiary, provided such person or institution has
satisfied the Employer that the payment will be used for the
best interest and assist in the care of such Participant or
Beneficiary, and provided further, that no prior claim for
said payment has been made by a duly appointed guardian,
conservator or other legal representative of such
Participant or Beneficiary.
Any payment made in accordance with the foregoing provisions of this section
shall constitute a complete discharge of any liability or obligation of the
Employer therefor.
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SECTION 8
SPENDTHRIFT PROVISIONS
No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same while in the possession or
control of the Employer, nor shall the Employer recognize any assignment
thereof, either in whole or in part, nor shall any Account be subject to
attachment, garnishment, execution following judgment or other legal process
while in the possession or control of the Employer.
The power to designate Beneficiaries to receive the Account of a Participant in
the event of such Participant's death shall not permit or be construed to permit
such power or right to be exercised by the Participant so as thereby to
anticipate, pledge, mortgage or encumber such Participant's Account or any part
thereof, and any attempt of a Participant so to exercise said power in violation
of this provision shall be of no force and effect and shall be disregarded by
the Employer.
This section shall not prevent the Employer from exercising, in its discretion,
any of the applicable powers and options granted to it upon the occurrence of an
Event of Maturity, as such powers may be conferred upon it by any applicable
provision hereof.
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SECTION 9
AMENDMENT AND TERMINATION
9.1. Amendment and Termination. The Employer hereby reserves the power to
unilaterally amend the Plan Statement and to partially terminate or totally
terminate the Plan, either prospectively or retroactively or both; provided that
no amendment or termination shall be effective to reduce or divest the Account
of any Participant without such Participant's consent.
9.2. Change in Control.
9.2.1. In General. Notwithstanding any other provision of the Plan
Statement, Section 9.2.3, Section 9.2.4 and Section 9.2.5 shall take effect if
and only if a Maturity Date occurs effective as to this Plan following a Change
in Control. A Maturity Date cannot occur if there is no Change in Control. A
Maturity Date effective as to this Plan does not occur merely because there is a
Change in Control or merely because a Maturity Date occurs effective as to the
ADC TELECOMMUNICATIONS, INC. PENSION PLAN. A Maturity Date following a Change
in Control must be effective as to this Plan.
9.2.2. Special Definitions. For purposes of this Section 9.2, the
special definitions in Section 7.6.2 of the ADC TELECOMMUNICATIONS, INC. PENSION
PLAN (1985 Restatement), as amended, shall apply.
9.2.3. Amendment. Notwithstanding any other provision of the Plan
Statement, during the two (2) years following the date of a Change in Control,
the provisions of the Plan Statement may not be amended if any amendment would
adversely affect the rights, expectancies or benefits provided by the Plan (as
in effect immediately prior to the Change in Control), of any Participant,
Beneficiary or other person entitled to payments under the Plan. The Plan may
not be terminated or merged with any other plan during the same two (2) year
period.
9.2.4. Termination of Employment. Notwithstanding any other
provision of the Plan Statement, the Account of any Participant actively
employed on the date of a Change in Control who terminates employment for any
reason including Good Reason, death, disability (as defined in section 22(e)(3)
of the Code) or Cause during the two (2) years following the date of the Change
in Control shall be distributed in a single lump sum cash payment as soon as
administratively feasible after such termination.
9.2.5. Pending Distributions. Notwithstanding any other provision
of the Plan Statement, any distribution which is pending but which has not
actually been made on the date of a Change in Control shall be distributed in a
single lump sum cash payment as soon as administratively feasible after the date
of the Change of Control.
9.2.6. Not Amendable. Notwithstanding any other provision of the
Plan Statement, this Section 9.2 may not be amended to decrease any of the
benefits which it provides during the two (2) years following the date of a
Change in Control without the affirmative written consent of a majority in both
number and interest of the Participants actively employed on the date of the
Change in Control.
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SECTION 10
DETERMINATIONS -- RULES AND REGULATIONS
10.1. Determinations. The Employer shall make such determinations as may be
required from time to time in the administration of the Plan. The Employer
shall have the authority and responsibility to interpret and construe the Plan
Statement and to determine all factual and legal questions under the Plan,
including but not limited to the entitlement of employees, Participants, and
Beneficiaries, and the amounts of their respective interests. Each interested
party may act and rely upon all information reported to them hereunder and need
not inquire into the accuracy thereof, nor be charged with any notice to the
contrary.
10.2. Rules and Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Employer.
10.3. Method of Executing Instruments. Information to be supplied or written
notices to be made or consents to be given by the Employer pursuant to any
provision of this Plan Statement may be signed in the name of the Employer by
any officer or director thereof who has been authorized to make such
certification or to give such notices or consents.
10.4. Claims Procedure. The claims procedure set forth in this Section 10.4
shall be the claims procedure for the disposition of claims for benefits arising
under the Plan.
10.4.1. Original Claim. Any employee, former employee or
Beneficiary of such employee or former employee may, if he or she so desires,
file with the Employer a written claim for benefits under the Plan. Within
ninety (90) days after the filing of such a claim, the Employer shall notify the
claimant in writing whether the claim is upheld or denied in whole or in part or
shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred eighty (180) days from the date the claim was filed) to reach a
decision on the claim. If the claim is denied in whole or in part, the Employer
shall state in writing:
(a) the specific reasons for the denial;
(b) the specific references to the pertinent provisions of this
Plan Statement on which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(d) an explanation of the claims review procedure set forth in
this section.
10.4.2. Claims Review Procedure. Within sixty (60) days after
receipt of notice that the claim has been denied in whole or in part, the
claimant may file with the Employer a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the Employer shall notify
the claimant in writing whether, upon review, the claim was upheld or denied in
whole or in part or shall furnish the claimant a written notice describing
specific special circumstances requiring a specified amount of additional time
(but not more than one hundred twenty days from the date the request for review
was filed) to reach a decision on the request for review.
10.4.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims
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<PAGE>
procedure. The Employer may require that any claim for
benefits and any request for a review of a denied claim be
filed on forms to be furnished by the Employer upon request.
(b) All decisions on claims and on requests for a review of
denied claims shall be made by the Employer.
(c) The Employer may, in its discretion, hold one or more
hearings on a claim or a request for a review of a denied
claim.
(d) A claimant may be represented by a lawyer or other
representative (at the claimant's own expense), but the
Employer reserves the right to require the claimant to
furnish written authorization. A claimant's representative
shall be entitled to copies of all notices given to the
claimant.
(e) The decision of the Employer on a claim and on a request for
a review of a denied claim shall be served on the claimant in
writing. If a decision or notice is not received by a
claimant within the time specified, the claim or request for
a review of a denied claim shall be deemed to have been
denied.
(f) Prior to filing a claim or a request for a review of a
denied claim, the claimant or the claimant's representative
shall have a reasonable opportunity to review a copy of this
Plan Statement and all other pertinent documents in the
possession of the Employer.
10.5. Information Furnished by Participants. The Employer shall not be liable
or responsible for any error in the computation of the Account of a Participant
resulting from any misstatement of fact made by the Participant, directly or
indirectly, to the Employer, and used by it in determining the Participant's
Account. The Employer shall not be obligated or required to increase the
Account of such Participant which, on discovery of the misstatement, is found to
be understated as a result of such misstatement of the Participant. However,
the Account of any Participant which is overstated by reason of any such
misstatement shall be reduced to the amount appropriate in view of the truth.
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<PAGE>
SECTION 11
PLAN ADMINISTRATION
11.1. Employer.
11.1.1. Officers. Except as hereinafter provided, functions
generally assigned to the Employer shall be discharged by its officers or
delegated and allocated as provided herein.
11.1.2. Chief Executive Officer. Except as hereinafter provided,
the Chief Executive Officer of the Employer may delegate or redelegate and
allocate and reallocate to one or more persons or to a committee of persons
jointly or severally, and whether or not such persons are directors, officers or
employees, such functions assigned to the Employer generally hereunder as the
Chief Executive Officer may from time to time deem advisable.
11.1.3. Board of Directors. Notwithstanding the foregoing, the
Board of Directors of the Employer shall have the exclusive authority, which may
not be delegated, to act for the Employer to amend this Plan Statement and to
terminate this Plan.
11.2. Conflict of Interest. If any officer or employee of the Employer, or
any member of the Board of Directors of the Employer to whom authority has been
delegated or redelegated hereunder shall also be a Participant in the Plan, such
Participant shall have no authority as such officer, employee or member with
respect to any matter specially affecting such Participant's individual interest
hereunder (as distinguished from the interests of all Participants and
Beneficiaries or a broad class of Participants and Beneficiaries), all such
authority being reserved exclusively to the other officers, employees or members
as the case may be, to the exclusion of such Participant, and such Participant
shall act only in such Participant's individual capacity in connection with any
such matter.
11.3. Administrator. ADC TELECOMMUNICATIONS, INC. shall be the administrator
for purposes of section 3(16)(A) of the Employee Retirement Income Security Act
of 1974.
11.4. Service of Process. In the absence of any designation to the contrary
by the Employer, the Secretary of ADC TELECOMMUNICATIONS, INC. is designated as
the appropriate and exclusive agent for the receipt of service of process
directed to the Plan in any legal proceeding, including arbitration, involving
the Plan.
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<PAGE>
SECTION 12
DISCLAIMERS
12.1. Term of Employment. Neither the terms of this Plan Statement nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee. The Employer shall not be obliged to continue the Plan.
12.2. Employment. The terms of this Plan Statement shall not give any
employee the right to be retained in the employment of the Employer.
12.3. Source of Payment. Neither the Employer nor any of its officers nor any
member of its Board of Directors in any way secure or guarantee the payment of
any benefit or amount which may become due and payable hereunder to any
Participant or to any Beneficiary or to any creditor of a Participant or a
Beneficiary. Each Participant, Beneficiary or other person entitled at any time
to payments hereunder shall look solely to the assets of the Employer for such
payments or to the Account distributed to any Participant or Beneficiary, as the
case may be, for such payments. In each case where Account shall have been
distributed to a former Participant or a Beneficiary or to the person or any one
of a group of persons entitled jointly to the receipt thereof and which purports
to cover in full the benefit hereunder, such former Participant or Beneficiary,
or such person or persons, as the case may be, shall have no further right or
interest in the other assets of the Employer.
12.4. Guaranty. Neither the Employer nor any of its officers nor any member
of its Board of Directors shall be under any liability or responsibility for
failure to effect any of the objectives or purposes of the Plan by reason of the
insolvency of the Employer.
12.5. Delegation. The Employer and its officers and the members of its Board
of Directors shall not be liable for an act or omission of another person with
regard to a responsibility that has been allocated to or delegated to such other
person pursuant to the terms of this Plan Statement or pursuant to procedures
set forth in this Plan Statement.
IN WITNESS WHEREOF, ADC TELECOMMUNICATIONS, INC. has caused this Plan
document to be executed by its duly authorized officers.
, 1991 ADC TELECOMMUNICATIONS, INC.
- --------------
By
-------------------------
Its
-------------------------
And
-------------------------
Its
-------------------------
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<PAGE>
Exhibit 10-bb
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ADC TELECOMMUNICATIONS, INC.
PENSION EXCESS PLAN
(1989 Restatement)
First Effective January 1, 1985
As Amended and Restated Effective January1, 1989
AND
As Amended By
The FIRST AMENDMENT Adopted March 12, 1996
But Effective November 1, 1995
<PAGE>
ADC TELECOMMUNICATIONS, INC.
PENSION EXCESS PLAN
(1989 Restatement)
WHEREAS, ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (hereinafter
sometimes referred to as the "Employer") and certain subsidiaries of the
Employer have heretofore adopted and currently maintain a defined benefit
pension plan known as the ADC Telecommunications, Inc. Pension Plan (hereinafter
the "Pension Plan") for the purpose of developing retirement benefits for
employees; and
WHEREAS, The Pension Plan is subject to the Employee Retirement Income
Security Act of 1974, as amended (hereinafter "ERISA") and is intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as amended
(hereinafter the "Code"); and
WHEREAS, By operation of section 401(a) of the Code, benefits which may be
paid under the Pension Plan are restricted so that they do not exceed certain
maximum limitations established under section 415 of the Code; and
WHEREAS, For benefits accruing under the Pension Plan during plan years
beginning after December 31, 1988, the maximum amount of annual compensation
which may be taken into account for any employee may not exceed a fixed dollar
amount which is established under section 401(a)(17) of the Code; and
WHEREAS, ERISA authorizes the establishment of an unfunded, nonqualified
plan of deferred compensation maintained by an employer solely for the purpose
of providing benefits for employees which are in excess of the limitations on
benefits and allocations imposed on qualified plans by section 415 of the Code;
and
WHEREAS, ERISA also authorizes the establishment of an unfunded,
nonqualified plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees;
and
WHEREAS, Effective November 1, 1978, the Employer did establish a
nonqualified plan known as the Magnetic Controls Company Deferred Compensation
Plan (the "Deferred Compensation Plan") and is in the process of amending and
restating the same effective January1, 1989, in a document known as the ADC
Telecommunications, Inc. Deferred Compensation Plan (1989 Restatement); and
WHEREAS, Effective September 1, 1990, the Employer did establish a
nonqualified plan known as the ADC Telecommunications, Inc. 401(k) Excess Plan
(the "401(k) Excess Plan"); and
WHEREAS, The deferral of income under the Deferred Compensation Plan and
the 401(k) Excess Plan reduces the benefits payable under the Pension Plan; and
WHEREAS, The Employer may establish additional plans to defer compensation
(including but not limited to the "Executive Incentive Exchange Plan") which
also would reduce the benefits payable under the Pension Plan (any such plan or
plans, together with the Deferred Compensation Plan and the 401(k) Excess Plan,
shall collectively be referred to as the "Other Plans"); and
WHEREAS, It is in the interest of the Employer to provide the full benefits
promised to certain employees under the Pension Plan without regard to the
limitations on benefits and
<PAGE>
allocations imposed by section 415 of the Code, the compensation limitation
imposed by section 401(a)(17) of the Code, and the deferral of income under the
Other Plans, and that an unfunded nonqualified deferred compensation plan be
maintained for this and other purposes; and
WHEREAS, Effective January 1, 1985, the Employer did establish a
nonqualified, unfunded plan known as the Magnetic Controls Company Excess
Benefits Plan to provide benefits in excess of the limitations imposed by
section 415 of the Code; and
WHEREAS, The Employer has reserved to itself the power to amend such plan;
NOW THEREFORE, The Employer does hereby amend the previously established
Magnetic Controls Company Excess Benefits Plan and restate it to incorporate
features of an unfunded, nonqualified deferred compensation plan, the terms and
conditions of which are as follows:
1. Plan Name. This plan shall be referred to as the ADC TELECOMMUNICATIONS,
INC. PENSION EXCESS PLAN (1989 Restatement) (hereinafter the "Plan").
2. Participants.
2.1. General Rules. The individuals eligible to participate in and receive
benefits under the Plan (the "Participants") are those employees of the Employer
and its subsidiaries who, on or after January1, 1985:
(a) are participating employees in the Pension Plan; and
(b) are actively employed by the Employer or one of its subsidiaries;
and
(c) are approved for participation in this Plan by the Board of
Directors of the Employer (the "Board of Directors").
2.2. Specific Exclusions. Notwithstanding anything apparently to the
contrary in this Plan or in any written communication, summary, resolution or
document or oral communication, no person shall be a Participant in this Plan,
develop benefits under this Plan or be entitled to receive benefits under this
Plan (either for such person or such person's survivors) unless such person is a
member of a select group of management or highly compensated employees (as that
expression is used in ERISA). If a court of competent jurisdiction, any
representative of the U.S. Department of Labor or any other governmental,
regulatory or similar body makes any direct or indirect, formal or informal,
determination that a person is not a member of a select group of management or
highly compensated employees (as that expression is used in ERISA), such person
shall not be (and shall not have ever been) a Participant in this Plan at any
time. If any person not so defined has been erroneously treated as a Participant
in this Plan, upon discovery of such error such person's erroneous participation
shall immediately terminate ab initio and upon demand such person shall be
obligated to reimburse ADC Telecommunications, Inc. for all amounts erroneously
paid to such person.
3. Benefit for Participants.
3.1. Amount. This Plan shall pay to each Participant the excess, if any,
of:
(a) the amount that would have been payable under the Pension Plan to the
Participant if such benefit had been determined without regard to the
benefit limitations under section 415 of the Code, the compensation
limitation of section 401(a)(17) of the Code, and the deferral of
income under the Other Plans, over
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<PAGE>
(b) the amount actually paid from the Pension Plan.
For the purpose of this Section3.1, the benefit is expressed as a single life
annuity as that term is defined under the Pension Plan as if benefits had
commenced under the Pension Plan as of the first day of the calendar month
following the Participant's termination of employment.
3.2. Form of Distribution. This benefit shall be, in all cases, converted
to an actuarially equivalent single lump sum on the first day of the calendar
month following the Participant's Termination of Employment (the "Lump Sum
Amount"). The payments (minus all withholding and payroll taxes which must be
deducted therefrom) shall be paid or commenced from the general assets of the
Employer to the Participant. Such payment shall be in full and complete
discharge of all benefits payable to, or with respect to the Participant under
this Plan including, but not limited to, all survivor benefits and all optional
forms of benefit to which the Participant or spouse might otherwise have been
entitled. The consent of a spouse, joint annuitant or beneficiary shall not be
required before making the annual installment or single lump sum payment herein
described. Actuarially equivalent value shall be calculated by reference to the
interest and mortality factors in effect under the Pension Plan at the time the
benefit is payable. Distribution of the Participant's benefit shall be made to
the Participant or the Beneficiary entitled to receive the distribution in
accordance with the following rules.
3.2.1. Form of Distribution. Distribution of benefits accrued on or
after April1, 1996, shall be made in whichever of the following forms the
Participant shall have designated in writing at the time required by the
Employer (to the extent that such election is consistent with the rules of
this Plan Statement). The Employer shall unilaterally designate the form
of distribution of all benefits accrued prior to April 1, 1996.
(a) Term Certain Installments to Participant. If the Distributee is a
Participant who has elected distribution in a series of annual
installments payable over ten (10) years and the actuarially
equivalent single lump sum value of the benefit at the Termination of
Employment is at least One Hundred Thousand Dollars ($100,000),
distribution shall be made in a series of annual installments payable
over ten (10) years.
(b) Term Certain Installments to Beneficiary. If the Distributee is the
Beneficiary of a Participant who has elected distribution in a series
of annual installments payable over ten (10) years and died after
termination of employment but before distribution commenced and the
actuarially equivalent single lump sum value of the benefit at death
is at least One Hundred Thousand Dollars ($100,000), distribution
shall be made in a series of annual installments payable over ten (10)
years.
(c) Continued Term Certain Installments to Beneficiary. If the
Distributee is a Beneficiary of a deceased Participant and
distribution had commenced to the deceased Participant before his or
her death over a ten (10) year period
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<PAGE>
as specified in paragraph (a) above, in a series of annual
installments payable over the remainder of the ten (10) year period.
(d) Lump Sum. To the extent that the Distributee is either a Participant
or a Beneficiary of a deceased Participant and none of the foregoing
rules are applicable, in a single lump sum payment.
3.2.2. Installment Amounts. If the Distributee's benefit will be
distributed in the form of a series of annual installments payable over ten
(10) years, a bookkeeping account ("Account") will be created for the
purpose of paying the benefit to the Distributee. The initial value of the
Account shall equal the Distributee's Lump Sum Amount. The amount of the
annual installments shall be determined by dividing the amount of the
Distributee's Account as of the December31 as of which the installment is
being paid by the number of remaining installment payments to be made
(including the payment being determined).
(a) Valuation and Adjustment of Accounts. Each Distributee's Account
shall be valued as of the last day of each calendar month (the
"Valuation Date"). As of each Valuation Date, the value of each
Account determined as of the immediately preceding Valuation Date (the
"Initial Account Value") shall be increased (or decreased) by the
following adjustment made in the following sequence:
(i) The Initial Account Value shall be increased by an amount equal
to the balance of the Account as of the preceding Valuation Date
multiplied by the Interest Rate and multiplied by a fraction, the
numerator of which is one (1) and the denominator of which is
twelve (12); and
(ii) The Initial Account Value (as adjusted above) shall be reduced by
the total amount distributed in fact to (or with respect to) the
Participant from such Account as of the current Valuation Date.
(b) Interest Rate. For purposes of this Section 3.2, the "Interest Rate"
shall mean the rate of interest charged on the Valuation Date for
which interest is being credited by Norwest Bank Minnesota, N.A., and
in effect on that Valuation Date to its most credit-worthy corporate
customers on loans of not more than ninety (90) days duration which
are unsecured (that is, the so called prime rate of interest).
3.2.3. Default. If for any reason a Participant shall have failed to
make a timely written designation of form for distribution (including
reasons entirely beyond the control of the Participant), the distribution
shall be made in a single lump sum. No spouse, former spouse, Beneficiary
or other person shall have any right to participate in the Participant's
selection of a form of benefit.
3.3. Time. Any lump sum payment shall be made as of the first day of the
calendar month following the Participant's termination of employment and actual
payment shall be made as soon as administratively feasible thereafter. Any
annual installment payments shall be commenced as of the December 31 coincident
with or next following the Participant's termination of employment and actual
payment shall be commenced as soon as administratively feasible thereafter. In
the event of the Participant's death before actual payment of a lump sum
distribution is made, payment shall be made to the Participant's estate. In the
event of the Participant's death before actual payment of an annual installment
distribution is commenced, payment shall be made to the Participant's designated
beneficiary. If the Employer determines that delaying the time the initial
payments are made or commenced would increase the probability that such payments
would be fully deductible for federal or state income tax purposes, for example
because such payments would result in over one million dollars ($1,000,000) of
compensation for the taxable year with respect to the
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<PAGE>
Participant under section 162(m) of the Code, the Employer may unilaterally
delay the time of the making or commencement of payment for up to twenty-four
(24) months after the date such initial payment would otherwise be payable.
3.4. Designation of Beneficiaries for Installment Payments. This section
3.4 applies only to Participants who are entitled to receive a distribution in
the form of annual installments and who has elected to receive distribution of
the Participant's benefit in the form of annual installments.
3.4.1. Right To Designate. Each Participant may designate, upon
forms to be furnished by and filed with the Employer, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified
part of such Participant's account in the event of such Participant's
death. The Participant may change or revoke any such designation from time
to time without notice to or consent from any Beneficiary, except as
provided in Section3.4.6. No such designation, change or revocation shall
be effective unless executed by the Participant and received by the
Employer during the Participant's lifetime.
3.4.2. Failure of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such designation
without naming another Beneficiary, or
(c) designates one or more Beneficiaries and all such Beneficiaries so
designated fail to survive the Participant,
such Participant's account, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to
the first class of the following classes of automatic Beneficiaries with a
member surviving the Participant and (except in the case of surviving
issue) in equal shares if there is more than one member in such class
surviving the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
3.4.3. Disclaimers by Beneficiaries. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant's account may
disclaim an interest therein subject to the following requirements. To be
eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of the account at the time
such disclaimer is executed and delivered, and must have attained at least
age twenty-one (21) years as of the date of the Participant's death. Any
disclaimer must be in writing and must be executed personally by the
Beneficiary before a notary public. A disclaimer shall state that the
Beneficiary's entire interest in the undistributed account is disclaimed or
shall specify what portion thereof is disclaimed. To be effective,
duplicate original executed copies of the disclaimer must be both executed
and actually delivered to the Employer after the date of the Participant's
death but not later than one hundred eighty (180) days after the date of
the Participant's death. A disclaimer shall be irrevocable when delivered
to the Employer. A disclaimer shall be considered to be delivered to the
Employer only when actually received by the Employer. The Employer shall
be the sole judge of the content, interpretation and validity of a
purported disclaimer. Upon the filing of a valid disclaimer, the
Beneficiary shall be considered not to have survived the Participant as to
the interest disclaimed. A disclaimer by a Beneficiary shall not be
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<PAGE>
considered to be a transfer of an interest in violation of the provisions
of Section 8 and shall not be considered to be an assignment or alienation
of benefits in violation of federal law prohibiting the assignment or
alienation of benefits under this Plan. No other form of attempted
disclaimer shall be recognized by the Employer.
3.4.4. Definitions. When used herein and, unless the Participant has
otherwise specified in the Participant's Beneficiary designation, when used
in a Beneficiary designation, "issue" means all persons who are lineal
descendants of the person whose issue are referred to, including legally
adopted descendants and their descendants but not including illegitimate
descendants and their descendants; "child" means an issue of the first
generation; "per stirpes" means in equal shares among living children of
the person whose issue are referred to and the issue (taken collectively)
of each deceased child of such person, with such issue taking by right of
representation of such deceased child; and "survive" and "surviving" mean
living after the death of the Participant.
3.4.5. Special Rules. Unless the Participant has otherwise specified
in the Participant's Beneficiary designation, the following rules shall
apply:
(a) If there is not sufficient evidence that a Beneficiary was living at
the time of the death of the Participant, it shall be deemed that the
Beneficiary was not living at the time of the death of the
Participant.
(b) The automatic Beneficiaries specified in Section 3.4.2 and the
Beneficiaries designated by the Participant shall become fixed at the
time of the Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of payments due such
Beneficiary hereunder, such payments shall be payable to the
representative of such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person who is the
Participant's spouse on the date of the designation, either by name or
by relationship, or both, the dissolution, annulment or other legal
termination of the marriage between the Participant and such person
shall automatically revoke such designation. (The foregoing shall not
prevent the Participant from designating a former spouse as a
Beneficiary on a form executed by the Participant and received by the
Employer after the date of the legal termination of the marriage
between the Participant and such former spouse, and during the
Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is accompanied
by a description of relationship to the Participant shall be given
effect without regard to whether the relationship to the Participant
exists either then or at the Participant's death.
(e) Any designation of a Beneficiary only by statement of relationship to
the Participant shall be effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death.
A Beneficiary designation is permanently void if it either is executed or
is filed by a Participant who, at the time of such execution or filing, is
then a minor under the law of the state of the Participant's legal
residence. The Employer shall be the sole judge of the content,
interpretation and validity of a purported Beneficiary designation.
3.4.6. Spousal Rights. No person designated to be a Beneficiary,
other than a spouse or surviving spouse, shall have any rights or interest
in the benefits accumulated under this Plan including, but not limited to,
the right to be the sole
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<PAGE>
Beneficiary or to consent to the designation of Beneficiaries (or the
changing of designated Beneficiaries) by the Participant.
Notwithstanding the foregoing, a designation will not be valid for the
purpose of paying benefits from the Plan to anyone other than a surviving
spouse of the Participant (if there is a surviving spouse) unless that
surviving spouse consents in writing to the designation of another person
as Beneficiary. To be valid, the consent of such spouse must be in
writing, must acknowledge the effect of the designation of the Beneficiary
and must be witnessed by a notary public. The consent of the spouse to a
Beneficiary is not a waiver of any rights to pre-retirement death benefits
under the Plan because a Beneficiary designation under this Section3.4 is
only effective for annual installment payments due after the Participant's
termination of employment. The consent of the surviving spouse need not be
given at the time the designation is made. The consent of the surviving
spouse need not be given before the death of the Participant. The consent
of the surviving spouse will be required, however, before benefits can be
paid to any person other than the surviving spouse. The consent of a
spouse shall be irrevocable and shall be effective only with respect to
that spouse.
4. Death Benefit for Surviving Spouse.
4.1. Amount. In the event of the Participant's death, this Plan shall pay
to the surviving spouse or other joint or contingent annuitant or beneficiary of
a Participant the excess, if any, of:
(a) the amount that would have been payable under the Pension Plan to the
surviving spouse if such benefit had been determined without regard to
the benefit limitations under section 415 of the Code, the
compensation limitation of section 401(a)(17) of the Code, and the
deferral of income under the Other Plans, over
(b) the amount actually paid to the surviving spouse from the Pension
Plan.
4.2. Form. This benefit (minus the withholding and payroll taxes which
must be deducted therefrom) shall be paid to the surviving spouse directly from
the general assets of the Employer in a single lump sum that is the actuarially
equivalent value of the amount determined under Section4.1. Actuarially
equivalent value shall be calculated by reference to the interest and mortality
factors in effect under the Pension Plan at the time the benefit is payable.
4.3. Time. The payment shall be made as of the first day of the calendar
month following the Participant's death and actual payment shall be made as soon
as administratively feasible thereafter. In the event of the surviving spouse's
death before actual payment is made, payment shall be made to the surviving
spouse's estate.
5. 280G Limitation. The amount of any distribution to be received by a
Participant under the Plan shall be reduced (but not below zero) by the amount,
if any, necessary to prevent any part of any payment or benefit received or to
be received by the Participant in connection with a Change in Control of the
Employer (as defined in Section 9.2) or the termination of the Participant's
employment (whether payable under the terms of the Plan or any other plan,
contract, agreement or arrangement with the Employer, with any person whose
actions result in a Change in Control of the Employer or with any person
constituting a member of an "affiliated group" (as defined in section 280G(d)(5)
of the Code)), with the Employer or with any person whose actions result in a
Change in Control of the Employer (such foregoing payments or benefits referred
to collectively as the "Total Payments") from being treated as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code, but
only if and to the extent such reduction will also result in, after taking into
account all applicable state or federal taxes (computed at the highest marginal
rate) including any taxes
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<PAGE>
payable pursuant to section 4999 of the Code, a greater after-tax benefit to the
Participant than the after-tax benefit to the Participant of the Total Payments
computed without regard to any such reduction. For purposes of the foregoing,
(a) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Employer and acceptable to the
Participant does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code; (b) any reduction in payments under the Plan
shall be computed by taking into account that portion of Total Payments which
constitute reasonable compensation within the meaning of section 280G(b)(4)(B)
of the Code in the opinion of such tax counsel; (c) the value of any non-cash
benefit or of any deferred cash payment included in the Total Payments shall be
determined by the Employer in accordance with the principles of section
280G(d)(3)(iv) of the Code; and (d) in the event of any uncertainty as to
whether a reduction in Total Payments to the Participant is required under the
Plan, the Employer shall initially make the payment to the Participant and the
Participant shall agree to refund to the Employer any amounts ultimately
determined not to have been payable under the terms of this Section.
6. Forfeiture of Benefits. All unpaid benefits under this Plan shall be
forfeited upon the determination by the Board of Directors that the Participant,
either before or after termination of employment:
(a) has engaged in a criminal or fraudulent activity resulting in harm to
the Employer or an affiliate, or
(b) has divulged to a competitor any significant confidential information
or trade secrets of the Employer or an affiliate, or
(c) has provided the Employer or affiliate with materially false reports
concerning such Participant's business interests or employment, or
(d) has made materially false representations which are relied upon by the
Employer or an affiliate in furnishing information to a shareholder,
auditors or any regulatory or governmental agency, or
(e) has maintained an undisclosed, unauthorized and material conflict of
interest in the discharge of the duties owed by such Participant to
the Employer or an affiliate, or
(f) has engaged in conduct causing a serious violation of state or federal
law by the Employer or an affiliate, or
(g) has engaged in reckless or grossly negligent activity toward the
Employer or an affiliate which is admitted or judicially proven and
which results in significant harm to the Employer or an affiliate, or
(h) has engaged in the theft of assets or funds of the Employer or an
affiliate, or
(i) has engaged in fraud or dishonesty toward the Employer or an affiliate
which is admitted or judicially proven, or
(j) has been convicted of any crime which directly or indirectly arose out
of such Participant's employment relationship with the Employer or an
affiliate or materially affected such Participant's ability to
discharge the duties of employment with the Employer or an affiliate,
or
(k) shall fail at or after the time of such Participant's termination of
employment to execute a form of release and waiver prepared by and
acceptable to the Employer releasing the Employer (and its officers,
directors, employees and agents) from all direct or indirect claims
for
-8-
<PAGE>
workers' compensation benefits, unemployment compensation benefits,
claims arising as a result of employment discrimination, employment
related claims arising under tort, breach of contract (express or
implied) or any other law or theory and all other similar types of
claims (whether known or unknown) as the Employer may specify or,
after executing such a release or waiver, shall fail to abide by its
terms.
7. Spendthrift Provisions. No Participant or beneficiary shall have any
transmissible interest in this Plan nor shall any Participant or beneficiary
have any power to anticipate, alienate, dispose of, pledge or encumber the same
while in the possession or control of the Employer, nor shall the Employer
recognize any assignment thereof, either in whole or in part, nor shall any
interest in this Plan be subject to attachment, garnishment, execution following
judgment or other legal process while in the possession or control of the
Employer.
This Section shall not prevent the Employer from exercising, in its discretion,
any of the applicable powers and options granted to it, as such powers may be
conferred upon them by any applicable provision hereof.
8. Claims Procedure. The claims procedure set forth in this Section 8.4 shall
be the claims procedure for the disposition of claims for benefits arising under
the Plan.
8.1. Original Claim. Any employee, former employee or beneficiary of such
employee or former employee may, if he or she so desires, file with the Employer
a written claim for benefits under the Plan. Within ninety (90) days after the
filing of such a claim, the Employer shall notify the claimant in writing
whether the claim is upheld or denied in whole or in part or shall furnish the
claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than one hundred eighty (180)
days from the date the claim was filed) to reach a decision on the claim. If
the claim is denied in whole or in part, the Employer shall state in writing:
(a) the specific reasons for the denial;
(b) the specific references to the pertinent provisions of this Plan
Statement on which the denial is based;
(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) an explanation of the claims review procedure set forth in this
section.
8.2. Claims Review Procedure. Within sixty (60) days after receipt of
notice that the claim has been denied in whole or in part, the claimant may file
with the Employer a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Employer shall notify the claimant in
writing whether, upon review, the claim was upheld or denied in whole or in part
or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days from the date the request for review was filed) to reach
a decision on the request for review.
8.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a request for
a review of a denied claim unless made in accordance with the claims
procedure. The Employer may require that any claim for benefits and
any request for a review of a denied claim be filed on forms to be
furnished by the Employer upon request.
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<PAGE>
(b) All decisions on claims and on requests for a review of denied claims
shall be made by the Employer.
(c) The Employer may, in its discretion, hold one or more hearings on a
claim or a request for a review of a denied claim.
(d) A claimant may be represented by a lawyer or other representative (at
the claimant's own expense), but the Employer reserves the right to
require the claimant to furnish written authorization. A claimant's
representative shall be entitled to copies of all notices given to the
claimant.
(e) The decision of the Employer on a claim and on a request for a review
of a denied claim shall be served on the claimant in writing. If a
decision or notice is not received by a claimant within the time
specified, the claim or request for a review of a denied claim shall
be deemed to have been denied.
(f) Prior to filing a claim or a request for a review of a denied claim,
the claimant or the claimant's representative shall have a reasonable
opportunity to review a copy of this Plan Statement and all other
pertinent documents in the possession of the Employer.
9. Change In Control Provisions.
9.1. In General. Notwithstanding any other provision of the Plan,
Section9.3 and Section9.4 shall take effect if and only if a Maturity Date
occurs effective as to this Plan following a Change in Control. A Maturity Date
cannot occur if there is no Change in Control. A Maturity Date effective as to
this Plan does not occur merely because there is a Change in Control or merely
because a Maturity Date occurs effective as to the Pension Plan. A Maturity
Date following a Change in Control must be effective as to this Plan.
9.2. Special Definitions. For purposes of this Section 9.2, the special
definitions in Section 7.6.2 of the Pension Plan, as amended, shall apply.
9.3. Amendment. Notwithstanding any other provision of the Plan, during
the two (2) years following the date of a Change in Control, the provisions of
the Plan may not be amended if any amendment would adversely affect the rights,
expectancies or benefits provided by the Plan (as in effect immediately prior to
the Change in Control), of any Participant, beneficiary or other person entitled
to payments under the Plan. The Plan may not be terminated or merged with any
other plan during the same two (2) year period.
9.4. Not Amendable. Notwithstanding any other provision of the Plan, this
Section 9 may not be amended to decrease any of the benefits which it provides
during the two (2) years following the date of a Change in Control without the
affirmative written consent of a majority in both number and interest of the
Participants actively employed on the date of the Change in Control.
10. Funding. All benefits payable under this Plan shall be paid exclusively
from the general assets of the Employer and no fund or trust shall be
established apart from the general assets of such corporation for this purpose
nor shall any assets or property be segregated or set apart from such
corporation's general assets for the purposes of funding this Plan.
11. Amendment and Termination. Except as otherwise provided in Section 9, the
Board of Directors may amend this Plan prospectively, retroactively, or both, at
any time and for any reason deemed sufficient by it without notice to any person
affected by this Plan and may likewise terminate or curtail the benefits of this
Plan both with regard to persons expecting to receive benefits hereunder in the
future and persons already receiving benefits at the time of such action.
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<PAGE>
12. Construction. This Plan is adopted with the understanding that it is in
part an unfunded excess benefit plan within the meaning of Section 3(36) of
ERISA and is in part an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees as provided in sections 201(2), 301(3) and 401(a)(1) of
ERISA. Each provision hereof shall be interpreted and administered accordingly.
Unless a contrary intention is clearly expressed herein, terms defined
in the Pension Plan and used in this Plan shall have the meanings assigned in
the Pension Plan insofar as this Plan is developing benefits by reference to the
Pension Plan.
It is specifically contemplated that the Pension Plan will, from time
to time, be amended and possibly terminated. All such amendments and
terminations shall be given effect under this Plan (it being expressly intended
that this Plan shall not freeze or lock-in the benefit structures of the Pension
Plan as they exist at the adoption of this Plan or upon the commencement of
participation by any Participant).
This Plan is adopted in the State of Minnesota and shall be construed
and enforced according to the laws of that State to the extent such laws are not
preempted by federal law.
This Plan will not provide any excess benefits with respect to any
stock bonus plan, employee stock ownership plan or PAYSOP. This Plan shall be
construed to prevent the duplication of benefits provided under any other plan
or arrangement, whether qualified or nonqualified, funded or unfunded, to the
extent that such other benefits are provided directly or indirectly by the
Employer.
13. Determinations - Rules and Regulations.
13.1. Determinations. The Employer shall make such determinations as
may be required from time to time in the administration of the Plan. The
Employer shall have the sole authority and responsibility to interpret and
construe the Plan Statement and to determine all factual and legal questions
under the Plan, including but not limited to the entitlement of employees,
Participants and beneficiaries and the amounts of their respective interests.
Each interested party may act and rely upon all information reported to that
party hereunder and need not inquire into the accuracy thereof, nor be charged
with any notice to the contrary.
13.2. Rules and Regulations. Any rule not in conflict or at variance
with the provisions hereof may be adopted by the Employer.
13.3. Method of Executing Instruments. Information to be supplied or
written notices to be made or consents to be given by the Employer pursuant to
any provision of this Plan Statement may be signed in the name of the Employer
by any officer thereof who has been authorized to make such certification or to
give such notices or consents.
13.4. Information Furnished by Participants. The Employer shall not be
liable or responsible for any error in the computation of the benefit of a
Participant resulting from any misstatement of fact made by the Participant,
directly or indirectly, to the Employer and used by it in determining the
Participant's benefit. The Employer shall not be obligated or required to
increase the benefit of such Participant which, on discovery of the
misstatement, is found to be understated as a result of such misstatement of the
Participant. However, the benefit of any Participant which is overstated by
reason of any such misstatement shall be reduced to the amount appropriate for
the Participant in view of the truth.
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<PAGE>
14. Plan Administration.
14.1. Officers. Except as hereinafter provided, functions generally
assigned to the Employer shall be discharged by its officers or delegated and
allocated as provided herein.
14.2. Chief Executive Officer. Except as hereinafter provided, the
Chief Executive Officer of the Employer may delegate or redelegate and allocate
and reallocate to one or more persons jointly or severally, and whether or not
such persons are directors, officers or employees, such functions assigned to
the Employer hereunder as the Chief Executive Officer may from time to time deem
advisable.
14.3. Board of Directors. Notwithstanding the foregoing, the Board of
Directors of the Employer shall have the exclusive authority, which may not be
delegated, to act for the Employer to amend the Plan and to terminate the Plan.
14.4. Conflict of Interest. If any officer or employee of the Employer
or any member of the board of directors of the Employer to whom authority has
been delegated or redelegated hereunder shall also be a Participant in the Plan,
the Participant shall have no authority as such officer, employee or member with
respect to any matter specially affecting the Participant's individual interest
hereunder (as distinguished from the interests of all Participants and
beneficiaries or a broad class of Participants and beneficiaries), all such
authority being reserved exclusively to the other officers, employees or members
as the case may be, to the exclusion of the Participant and the Participant
shall act only in the Participant's individual capacity in connection with any
such matter.
14.5. Administrator. The Employer shall be the administrator for
purposes of section 3(16)(A) of ERISA.
14.6. Service of Process. In the absence of any designation to the
contrary by the Employer, the Secretary of the Employer is designated as the
appropriate and exclusive agent for the receipt of service of process directed
to the Plan in any legal proceeding, including arbitration, involving the Plan.
15. Disclaimers.
15.1. Term of Employment. Neither the terms of the Plan nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee. The Employer shall not be obligated to continue the Plan.
15.2. Employment. The terms of the Plan shall not give any employee
the right to be retained in the employment of the Employer. This Plan shall not
alter, enlarge or diminish any person's employment rights or obligations or any
person's rights or obligations under the Pension Plan or any other employee
benefit plan maintained by the Employer.
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<PAGE>
15.3. Source of Payment. Neither the Employer nor any of its officers
nor any member of its board of directors in any way secure or guarantee the
payment of any benefit or amount which may become due and payable hereunder to
any Participant or to any beneficiary or to any creditor of a Participant or a
beneficiary. Each Participant, beneficiary or other person entitled at any time
to payments hereunder shall look solely to the assets of the Employer for such
payments or to the benefits distributed to any Participant or beneficiary, as
the case may be, for such payments. In each case where benefits shall have been
distributed to a former Participant or a beneficiary or to the person or any one
of a group of persons entitled jointly to the receipt thereof and which purports
to cover in full the benefit hereunder, such former Participant or beneficiary,
or such person or persons, as the case may be, shall have no further right or
interest in the other assets of the Employer.
15.4. Guaranty. Neither the Employer nor any of its officers nor any
member of its board of directors shall be under any liability or responsibility
for failure to effect any of the objectives or purposes of the Plan by reason of
the insolvency of the Employer.
15.5. Delegation. The Employer and its officers and the members of the
Board of Directors shall not be liable for an act or omission of another person
with regard to a responsibility that has been allocated to or delegated to such
other person pursuant to the terms of the Plan or pursuant to procedures set
forth in the Plan.
IN WITNESS WHEREOF, ADC TELECOMMUNICATIONS, INC. has caused this Plan
document to be executed by its duly authorized officers.
- ---------------, 1992 ADC TELECOMMUNICATIONS, INC.
By
-------------------------
Its
-------------------------
And
-------------------------
Its
-------------------------
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<PAGE>
Exhibit 10-cc
- -------------
ADC TELECOMMUNICATIONS, INC. 401(k) EXCESS PLAN
(1990 Statement)
First Effective September 1, 1990
AND
As Amended By
The FIRST AMENDMENT Adopted September 15, 1994
But Effective January 1, 1992 and January 1, 1994
The SECOND AMENDMENT Adopted March 12, 1996
But Effective January 1, 1996
<PAGE>
ADC TELECOMMUNICATIONS, INC. 401(k) EXCESS PLAN
(1990 Statement)
TABLE OF CONTENTS
Page
PREAMBLES ................................................................ 1
SECTION 1. INTRODUCTION.................................................. 2
1.1. Definitions
1.1.1. Accounts
(a) Total Account
(b) Excess Savings Account
(c) Match Account
(d) Phantom Stock Account
1.1.2. Affiliate
1.1.3. Annual Valuation Date
1.1.4. Beneficiary
1.1.5. Code
1.1.6. Compensation
1.1.7. Disability
1.1.8. Effective Date
1.1.9. Excess Savings Agreement
1.1.10. Employer
1.1.11. ERISA
1.1.12. Event of Maturity
1.1.13. Participant
1.1.14. Plan
1.1.15. Plan Statement
1.1.16. Plan Year
1.1.17. Principal Sponsor
1.1.18. Recognized Employment
1.1.19. Retirement Savings Plan
1.1.20. Unit Share
1.1.21. Valuation Date
1.1.22. Vested
1.2. Rules of Interpretation
1.3. Transitional Rules
SECTION 2. ELIGIBILITY AND PARTICIPATION................................ 6
2.1. Eligibility
2.2. Enrollment
2.3. Excess Savings Agreement
2.4. Modifications of Excess Savings Agreement
2.4.1. Increase or Decrease
2.4.2. Voluntary Cancellation
2.4.3. Automatic Cancellation
2.4.4. Form of Agreement
2.5. Specific Exclusion
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SECTION 3. ADDITIONS TO ACCOUNTS......................................... 8
3.1. Excess Savings Additions
3.1.1. Amount
3.1.2. Crediting the Account
3.2. Fixed Match Additions
3.2.1. Amount
3.2.2. Crediting the Account
3.3. One Percent Additions
3.3.1. Amount
3.3.2. Crediting the Account
3.4. Conditional Match Additions
3.4.1. Amount
3.4.2. Crediting the Account
3.5. Performance Match Additions
3.5.1. Amount
3.5.2. Crediting the Account
3.6. Section 415 Additions
3.6.1. Amount
3.6.2. Crediting the Account
3.7. Eligible Participant
3.8. Nonduplication of Benefits
SECTION 4. ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS...................... 11
4.1. Valuation and Adjustment of Accounts
4.1.1. Addition Adjustment
4.1.2. Investment Adjustment for Excess Savings Account
4.1.3. Investment Adjustment for Match Account
4.1.4. Dividend Adjustment for Phantom Stock Account
4.1.5. Antidilution Adjustment for Phantom Stock Account
4.1.6. Distributions Adjustment
4.2. Not Funded
SECTION 5. VESTING OF ACCOUNTS........................................... 13
5.1. Full Vesting
5.2. Forfeiture for Misconduct
SECTION 6. MATURITY...................................................... 14
6.1. Events of Maturity
6.2. Effect of Maturity upon Further Participation in
Plan
SECTION 7. DISTRIBUTION.................................................. 15
7.1. Time of Distribution
7.2. Forms of Distribution
7.3. Distribution in Cash
7.4. 280G Limitation
7.5. Designation of Beneficiaries
7.5.1. Right To Designate
7.5.2. Failure of Designation
7.5.3. Disclaimers by Beneficiaries
7.5.4. Definitions
7.5.5. Special Rules
7.5.6. Spousal Rights
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<PAGE>
7.6. Death Prior to Full Distribution
7.7. Facility of Payment
SECTION 8. SPENDTHRIFT PROVISIONS........................................ 19
SECTION 9. AMENDMENT AND TERMINATION..................................... 20
9.1. Amendment and Termination
9.2. Change in Control
9.2.1. In General
9.2.2. Special Definitions
9.2.3. Amendment
9.2.4. Termination of Employment
9.2.5. Pending Distributions
9.2.6. Commutation of Installments
9.2.7. Not Amendable
SECTION 10. DETERMINATIONS -- RULES AND REGULATIONS........................ 21
10.1. Determinations
10.2. Rules and Regulations
10.3. Method of Executing Instruments
10.4. Claims Procedure
10.4.1. Original Claim
10.4.2. Claims Review Procedure
10.4.3. General Rules
10.5. Information Furnished by Participants
SECTION 11. PLAN ADMINISTRATION........................................... 23
11.1. Principal Sponsor
11.1.1. Officers
11.1.2. Chief Executive Officer
11.1.3. Board of Directors
11.1.4. Amendment
11.2. Conflict of Interest
11.3. Administrator
11.4. Service of Process
SECTION 12. DISCLAIMERS................................................... 24
12.1. Term of Employment
12.2. Employment
12.3. Source of Payment
12.4. Guaranty
12.5. Delegation
SIGNATURES................................................................ 24
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<PAGE>
ADC TELECOMMUNICATIONS, INC. 401(k) EXCESS PLAN
(1990 Statement)
WITNESSETH: That
WHEREAS, ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (the
"Principal Sponsor"), by resolution of its Board of Directors, has authorized
the creation of a nonqualified, unfunded, deferred compensation and
supplemental retirement plan for the benefit of a select group of management or
highly compensated eligible employees, said plan to be contained and set forth
in a plan document; and
WHEREAS, This is the plan document so contemplated;
NOW, THEREFORE, The Principal Sponsor does hereby create and establish such
deferred compensation and supplemental retirement plan, effective September 1,
1990, to read in full as follows:
<PAGE>
SECTION 1
INTRODUCTION
1.1. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
1.1.1. Accounts -- the following Accounts will be maintained under the
Plan for Participants:
(a) Total Account -- for convenience of reference, the separate
unfunded and unsecured general obligation of the Employer
established with respect to each person who is a Participant in
the Plan in accordance with Section 2, including the
Participant's Excess Savings Account, Match Account and
Phantom Stock Account.
(b) Excess Savings Account -- the bookkeeping account maintained
for each Participant to which is credited the amounts specified
in Section 3 and Section 4 and from which is subtracted
payments made pursuant to Section 7.
(c) Match Account -- the bookkeeping account maintained for each
Participant to which is credited the amounts specified in
Section 3 and Section 4 and from which is subtracted
forfeitures and payments made pursuant to Section 5 and Section
7.
(d) Phantom Stock Account -- the bookkeeping account maintained for
each Participant to which is credited the amounts specified in
Section 3 and Section 4 and from which is subtracted
forfeitures and payments made pursuant to Section 5 and Section
7.
1.1.2. Affiliate -- a business entity which is under "common control"
with the Employer or which is a member of an "affiliated service group" that
includes the Employer, as those terms are defined in section 414(b), (c) and (m)
of the Code. A business entity which is a predecessor to the Employer shall be
treated as an Affiliate if the Employer maintains a plan of such predecessor
business entity or if, and to the extent that, such treatment is otherwise
required by regulations under section 414(a) of the Code. A business entity
shall also be treated as an Affiliate if, and to the extent that, such treatment
is required by regulations under section 414(o) of the Code. In addition to
said required treatment, the Principal Sponsor may, in its discretion, designate
as an Affiliate any business entity which is not such a "common control,"
"affiliated service group" or "predecessor" business entity but which is
otherwise affiliated with the Employer, subject to such limitations as the
Principal Sponsor may impose.
1.1.3. Annual Valuation Date -- each December 31.
1.1.4. Beneficiary -- a person designated by a Participant (or
automatically by operation of this Plan Statement) to receive all or a part of
the Participant's Total Account in the event of the Participant's death prior to
full distribution thereof. A person so designated becomes a Beneficiary after
the death of the Participant with respect to whom the person is a Beneficiary.
1.1.5. Code -- the Internal Revenue Code of 1986, including applicable
regulations for the specified section of the Code. Any reference in this Plan
Statement to a section of the Code, including the applicable regulation, shall
be considered also to mean and refer to any subsequent amendment or replacement
of that section or regulation.
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<PAGE>
1.1.6. Compensation -- wages within the meaning of section 3401(a) of
the Internal Revenue Code for purposes of federal income tax withholding at the
source but determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor in section
3401(a)(2) of the Code) and paid to the Participant by the Employer for the
applicable period; subject, however, to the following:
(a) Included Items. In determining a Participant's Compensation
there shall be included elective contributions made by the
Employer on behalf of the Participant that are not includible
in gross income under sections 125, 402(e)(3), 402(h), 403(b),
414(h)(2) and 457 of the Internal Revenue Code including
elective contributions authorized by the Participant under a
cafeteria plan or any qualified cash or deferred arrangement
under section 401(k) of the Code.
(b) Excluded Items for HCEs. There shall be excluded in
determining the Compensation of a Participant who is a highly
compensated employee (as defined in section 414 of the Code and
determined as of the first day of the Plan Year) all of
following: (i) income related to a restricted stock award, and
(ii) tax offset bonuses paid or payable with respect to a
restricted stock award, and (iii) the value of all stock
options and stock appreciation rights (whether or not
exercised) and other similar amounts, and (iv) all similar
emoluments consistent with the foregoing.
(c) Pre-Participation Employment. Remuneration paid by the
Employer attributable to periods prior to the date the
Participant became a Participant in the Plan shall not be taken
into account in determining the Participant's Compensation.
(d) Non-Recognized Employment. Remuneration paid by the Employer
for employment that is not Recognized Employment shall not be
taken into account in determining a Participant's Compensation.
(e) Attribution to Periods. A Participant's Compensation shall be
considered attributable to the period in which it is actually
paid and not when earned or accrued.
(f) Excluded Periods. Amounts received after the Participant's
termination of employment shall not be taken into account in
determining a Participant's Compensation.
(g) Multiple Employers. If a Participant is employed by more than
one Employer in a Plan Year, a separate amount of Compensation
shall be determined for each Employer.
(h) Annual Maximum. A Participant's Compensation for a Plan Year
shall not exceed the annual compensation limit under section
401(a)(17) of the Internal Revenue Code. In determining a
Participant's Compensation, the rules of section 414(q)(6) of
the Code apply, except that in applying such rules, the term
"family" shall include only the spouse of the Participant and
lineal descendants of the Participant who have not attained age
nineteen (19) years before the close of the Plan Year;
provided, however, that the rule in this sentence shall not
apply to the Seven Thousand Dollar ($7,000) limit specified in
Section 2.4. If Participants are aggregated as such family
members (and do not otherwise agree in writing), the
Compensation of each
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<PAGE>
family member shall equal the annual compensation limit under
section 401(a)(17) of the Internal Revenue Code multiplied by a
fraction, the numerator of which is such family member's
Compensation (before application of such annual compensation
limit) and the denominator of which is the total Compensation
(before application of such annual compensation limit) of all
such family members. For purposes of the foregoing, the annual
compensation limit imposed under section 401(a)(17) of the
Internal Revenue Code shall be One Hundred and Fifty Thousand
Dollars ($150,000) as adjusted under the Internal Revenue Code
for cost of living increases) for all Plan Years beginning
after December 31, 1993.
1.1.7. Disability -- a physical or mental condition resulting from
injury or illness which is of such a nature that it constitutes total disability
as defined for purposes of the group long-term disability insurance program
maintained by the Employer, whether or not the individual is actually covered by
such group long-term disability insurance program.
1.1.8. Effective Date -- September 1, 1990.
1.1.9. Excess Savings Agreement -- the agreement which may be entered
into by a Participant as provided in Section 2.2.
1.1.10. Employer -- the Principal Sponsor, any business entity
affiliated with the Principal Sponsor that adopts the Plan, and any successor
thereof that adopts the Plan.
1.1.11. ERISA -- the Employee Retirement Income Security Act of 1974,
including applicable regulations for the specified section of ERISA. Any
reference in this Plan Statement to a section of ERISA, including the applicable
regulation, shall be considered also to mean and refer to any subsequent
amendment or replacement of that section or regulation.
1.1.12. Event of Maturity -- any of the occurrences described in
Section 6 by reason of which a Participant or Beneficiary may become entitled to
a distribution from the Plan.
1.1.13. Participant -- an employee of the Employer who becomes a
Participant in the Plan in accordance with the provisions of Section 2. An
employee who has become a Participant shall be considered to continue as a
Participant in the Plan until the Participant's date of death or, if earlier,
the date when the Participant is no longer employed in Recognized Employment and
upon which the Participant no longer has any Account under the Plan (that is,
the Participant has both received a distribution of all of the Participant's
Total Account, if any).
1.1.14. Plan -- the program of deferred compensation and supplemental
retirement income benefit of the Employer established for the benefit of
employees eligible to participate therein, as first set forth in this Plan
Statement. (As used herein, "Plan" refers to the legal entity established by
the Employer and not to the document pursuant to which the Plan is maintained.
That document is referred to herein as the "Plan Statement.") The Plan shall be
referred to as the "ADC TELECOMMUNICATIONS, INC. 401(k) EXCESS PLAN."
1.1.15. Plan Statement -- this document entitled "ADC
TELECOMMUNICATIONS, INC. 401(k) EXCESS PLAN (1990 Statement)" as adopted by the
Principal Sponsor effective as of September 1, 1990, as the same may be amended
from time to time thereafter.
1.1.16. Plan Year -- the twelve (12) consecutive month period ending on
any Annual Valuation Date.
1.1.17. Principal Sponsor -- ADC TELECOMMUNICATIONS, INC., a Minnesota
corporation.
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1.1.18. Recognized Employment -- employment in an officer or director
level position with the Principal Sponsor or a comparable position with any
other Employer.
1.1.19. Retirement Savings Plan -- the tax-qualified stock bonus plan
of the Employer established for the benefit of employees eligible to participate
therein, as set forth in the document entitled "ADC RETIREMENT SAVINGS AND STOCK
OWNERSHIP PLAN TRUST AGREEMENT (1990 Restatement)" as adopted by the Principal
Sponsor effective as of January 1, 1990, as the same may be amended from time to
time thereafter.
1.1.20. Unit Share -- a bookkeeping unit which is the equivalent of one
(1) share of common stock of the Employer.
1.1.21. Valuation Date -- the Annual Valuation Date and the last day of
each other calendar month.
1.1.22. Vested -- nonforfeitable, i.e., a claim obtained by a
Participant or the Participant's Beneficiary to that part of an immediate or
deferred benefit hereunder which arises from the Participant's service, which is
unconditional and which is legally enforceable against the Plan.
1.2. Rules of Interpretation. An individual shall be considered to have
attained a given age on the individual's birthday for that age (and not on the
day before). The birthday of any individual born on a February 29 shall be
deemed to be February 28 in any year that is not a leap year. Notwithstanding
any other provision of this Plan Statement or any election or designation made
under the Plan, any individual who feloniously and intentionally kills a
Participant or Beneficiary shall be deemed for all purposes of this Plan and all
elections and designations made under this Plan to have died before such
Participant or Beneficiary. A final judgment of conviction of felonious and
intentional killing is conclusive for the purposes of this Section. In the
absence of a conviction of felonious and intentional killing, the Employer shall
determine whether the killing was felonious and intentional for the purposes of
this Section. Whenever appropriate, words used herein in the singular may be
read in the plural, or words used herein in the plural may be read in the
singular; and the words "hereof," "herein" or "hereunder" or other similar
compounds of the word "here" shall mean and refer to this entire Plan Statement
and not to any particular paragraph or Section of this Plan Statement unless the
context clearly indicates to the contrary. The titles given to the various
Sections of this Plan Statement are inserted for convenience of reference only
and are not part of this Plan Statement, and they shall not be considered in
determining the purpose, meaning or intent of any provision hereof. Any
reference in this Plan Statement to a statute or regulation shall be considered
also to mean and refer to any subsequent amendment or replacement of that
statute or regulation. This document has been executed and delivered in the
State of Minnesota and has been drawn in conformity to the laws of that State
and shall, except to the extent that federal law is controlling, be construed
and enforced in accordance with the laws of the State of Minnesota.
1.3. Transitional Rules. The Employer may adopt such transition rules as
necessary to implement the Plan effective September 1, 1990, including, but not
limited to, permitting the execution of Excess Savings Agreements prior to that
date.
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SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. Eligibility. Each employee in Recognized Employment shall become a
Participant on the first January 1 as of which the employee is both:
(a) a participant in the Retirement Savings Plan, and
(b) enrolled for the maximum deferral percentage of retirement
savings under the Retirement Savings Plan.
2.2. Enrollment. Each employee who will become a Participant as provided in
Section 2.1 may elect to defer compensation by completing an Excess Savings
Agreement and delivering it to the Employer at least fifteen (15) days prior to
the January 1 as of which the employee will become a Participant. If an
employee does not elect to defer compensation when the employee is first
eligible to do so, the employee may elect to defer compensation as of any
subsequent January 1 by completing an Excess Savings Agreement and delivering it
to the Employer at least fifteen (15) days prior to that January 1, if on that
January 1, the employee is in Recognized Employment and enrolled for the maximum
deferral percentage of retirement savings under the Retirement Savings Plan.
2.3. Excess Savings Agreement. The Excess Savings Agreement which each
Participant may execute shall provide for a deferral of a percentage of the
Participant's Compensation in excess of ten (10) times the Seven Thousand
Dollar ($7,000) limit, as adjusted, under the Retirement Savings Plan. The
deferral percentage which a Participant may elect under the Excess Savings
Agreement shall be equal to not less than two percent (2%) nor more than fifteen
percent (15%) of the amount of the Participant's Compensation which otherwise
would be paid to the Participant by the Employer each payday. The deferral of
compensation agreed to by the Participant shall be made by the Employer from the
Participant's Compensation each payday on and after the payday as of which the
Participant's Compensation for the Plan Year exceeds ten (10) times the Seven
Thousand Dollar ($7,000) limit, as adjusted, under the Retirement Savings Plan
for so long as the Excess Savings Agreement remains in effect.
2.4. Modifications of Excess Savings Agreement. The Excess Savings Agreement
of a Participant may be modified as follows.
2.4.1. Increase or Decrease. A Participant who has an Excess Savings
Agreement in effect may modify the Excess Savings Agreement to increase or
decrease the deferral percentage as of any subsequent January 1, if on that
January 1, the Participant is in Recognized Employment and enrolled for the
maximum deferral percentage of retirement savings under the Retirement Savings
Plan. The modified Excess Savings Agreement must be delivered to the Employer
at least fifteen (15) days prior to the January 1 as of which the Participant
desires the modification to be effective.
2.4.2. Voluntary Cancellation. A Participant who has an Excess
Savings Agreement in effect may cancel completely the Excess Savings Agreement
as of any subsequent January 1. Written notice of the cancellation must be
delivered to the Employer at least fifteen (15) days prior to the January 1 as
of which the Participant desires the cancellation to be effective. If, as of
any subsequent January 1, the Participant is both in Recognized Employment and
enrolled for the maximum deferral percentage of retirement savings under the
Retirement Savings Plan, the Participant may execute a new Excess Savings
Agreement effective as of that January 1. The new Excess Savings Agreement must
be delivered to the Employer at least
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fifteen (15) days prior to the January 1 as of which the Participant desires the
new agreement to be effective.
2.4.3. Automatic Cancellation. The Excess Savings Agreement of
Participant who ceases to be, as of any subsequent January 1, either in
Recognized Employment or enrolled for the maximum deferral percentage of
retirement savings under the Retirement Savings Plan shall be cancelled
automatically as of that January 1. If, as of any subsequent January 1, the
Participant is both in Recognized Employment and enrolled for the maximum
deferral percentage of retirement savings under the Retirement Savings Plan, the
Participant may execute a new Excess Savings Agreement effective as of that
January 1. The new Excess Savings Agreement must be delivered to the Employer
at least fifteen (15) days prior to the January 1 as of which the Participant
desires the new agreement to be effective.
2.4.4. Form of Agreement. The Employer shall specify the form of the
Excess Savings Agreement, the form of any notices modifying the Excess Savings
Agreement and all procedures for the delivery and acceptance of forms and
notices.
2.5. Specific Exclusion. Notwithstanding anything apparently to the contrary
in the Plan or in any written communication, summary, resolution or document or
oral communication, no individual shall be a Participant in the Plan, develop
benefits under the Plan or be entitled to receive benefits under the Plan
(either for the individual or the individual's survivors) unless such individual
is a member of a select group of management or highly compensated employees (as
that expression is used in ERISA). If a court of competent jurisdiction, any
representative of the U.S. Department of Labor or any other governmental,
regulatory or similar body makes any direct or indirect, formal or informal,
determination that an individual is not a member of a select group of management
or highly compensated employees (as that expression is used in ERISA), such
individual shall not be (and shall not have ever been) a Participant in the Plan
at any time. If any individual not so defined has been erroneously treated as a
Participant in the Plan, upon discovery of such error such individual's
erroneous participation shall immediately terminate ab initio and upon demand
such individual shall be obligated to reimburse the Principal Sponsor for all
amounts erroneously paid to that individual.
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SECTION 3
ADDITIONS TO ACCOUNTS
3.1. Excess Savings Additions.
3.1.1. Amount. Each calendar month, the Employer shall credit each
Participant's Excess Savings Account with the amount of deferred compensation
agreed to by each Participant pursuant to an Excess Savings Agreement.
3.1.2. Crediting the Account. The amount of compensation deferred
with respect to each Participant shall be credited in dollar amounts to the
Participant's Excess Savings Account as of the Valuation Date coincident with or
next following the last day of the calendar month in which the compensation was
deferred.
3.2. Fixed Match Additions.
3.2.1. Amount. Each calendar month, the Employer shall credit each
Participant's Match Account with an amount which is equal to twenty-five percent
(25%) of the first six percent (6%) of the Participant's Compensation for the
Plan Year in excess of the Seven Thousand Dollar ($7,000) limit, as adjusted,
under the Retirement Savings Plan, but only if the Participant is an eligible
Participant for the Plan Year (as defined in Section 3.7).
3.2.2. Crediting the Account. The fixed match addition which is made
with respect to a Participant shall be credited in dollar amounts to the
Participant's Match Account as of the Valuation Date coincident with or next
following the last day of the calendar month for which the addition is made.
3.3. One Percent Additions.
3.3.1. Amount. Each calendar quarter, the Employer shall credit each
Participant's Phantom Stock Account with an amount which is equal to one percent
(1%) of the Participant's Compensation for the Plan Year in excess of the Two
Hundred Thousand Dollar ($200,000) limit, as adjusted, under the Retirement
Savings Plan, but only if the Participant is an eligible Participant for the
Plan Year (as defined in Section 3.7).
3.3.2. Crediting the Account. The one percent addition which is made
with respect to a Participant shall be credited in Unit Shares to the
Participant's Phantom Stock Account as of the quarterly Valuation Date
coincident with or next following the last day of the calendar quarter for which
the addition is made. The number of Unit Shares shall be determined by dividing
the dollar amount of the addition by the average stock price used by First Trust
National Association for the Retirement Savings Plan for the same calendar
quarter.
3.4. Conditional Match Additions.
3.4.1. Amount. Each calendar quarter, the Employer shall credit each
Participant's Phantom Stock Account with an amount which is equal to fifteen
percent (15%) of the amount of the first six percent (6%) of the Participant's
Compensation for the Plan Year in excess of the Seven Thousand Dollar ($7,000)
limit, as adjusted, under the Retirement Savings Plan, but only if the
Participant is an eligible Participant for the Plan Year (as defined in Section-
3.7); provided, however, such conditional match addition shall be made for a
Plan Year only if conditional match contributions are made under the Retirement
Savings Plan for that Plan Year.
3.4.2. Crediting the Account. The conditional match addition which is
made with respect to a Participant shall be credited in Unit Shares to the
Participant's Phantom Stock
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Account as of the quarterly Valuation Date coincident with or next following the
last day of the calendar quarter for which the addition is made. The number of
Unit Shares shall be determined by dividing the dollar amount of the addition by
the average stock price used by First Trust National Association for the
Retirement Savings Plan for the same calendar quarter.
3.5. Performance Match Additions.
3.5.1. Amount. Each Plan Year, the Employer may (but shall not be
required to) credit to each Participant's Phantom Stock Account a percentage of
the Participant's Compensation which is determined each Plan Year. The
percentage shall be the performance match percentage, if any, determined for
making performance match contributions for the Plan Year under the Retirement
Savings Plan. The amount, if any, credited to each Participant's Phantom Stock
Account shall be equal to the sum of:
(a) the performance match percentage multiplied by the first six
percent (6%) of the Participant's Compensation for the Plan
Year in excess of the Seven Thousand Dollar ($7,000) limit, as
adjusted, under the Retirement Savings Plan, and
(b) the performance match percentage multiplied by the first one
percent (1%) of the Participant's Compensation for the Plan
Year in excess of the Two Hundred Thousand Dollar ($200,000)
limit, as adjusted, under the Retirement Savings Plan;
but only if the Participant is: (i)an eligible Participant for the Plan Year
(as defined in Section 3.7), (ii)employed in Recognized Employment on the last
day of the Plan Year and (iii)eligible to receive a performance match
contribution under the Retirement Savings Plan for the Plan Year. For purposes
of this Section 3.5, Compensation paid by Kentrox Industries, Inc. shall be
ignored.
3.5.2. Crediting the Account. The performance match addition which is
made with respect to a Participant shall be credited in Unit Shares to the
Participant's Phantom Stock Account as of the Annual Valuation Date in the Plan
Year for which the addition is made. The number of Unit Shares shall be
determined by dividing the dollar amount of the addition by the average stock
price used by First Trust National Association for the Retirement Savings Plan
for the last calendar quarter in the same Plan Year.
3.6. Section 415 Additions.
3.6.1. Amount. Each Plan Year, the Employer shall credit each
Participant's Match Account with an amount which is equal to the excess, if any,
over the maximum permissible addition that would have been contributed on behalf
of the Participant under the Retirement Savings Plan but for the limitation on
annual additions imposed under section 415 of the Code; provided, however, such
section 415 addition shall be made with respect to a Participant only if the
Participant is an eligible Participant for the Plan Year (as defined in Section
3.7).
3.6.2. Crediting the Account. The section 415 addition which is made
with respect to a Participant shall be credited in dollar amounts to that
Participant's Match Account as of the Annual Valuation Date in the Plan Year for
which the addition is made.
3.7. Eligible Participant. For purposes of this Section 3, a Participant
shall be an eligible Participant for a Plan Year only if, on the January 1 of
that Plan Year, the Participant is both in Recognized Employment and enrolled
for the maximum deferral percentage of retirement savings under the Retirement
Savings Plan.
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3.8. Nonduplication of Benefits. The Plan shall be construed to prevent the
duplication of benefits provided under any other plan or arrangement, whether
qualified or nonqualified, funded or unfunded, to the extent that such other
benefits are provided directly or indirectly by the Employer.
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SECTION 4
ESTABLISHMENT AND ADJUSTMENT OF ACCOUNTS
4.1. Valuation and Adjustment of Accounts. There shall be established for
each Account of each Participant a bookkeeping account which shall be valued
each Valuation Date.
As of each Valuation Date (the "current Valuation Date"), the value of each
Account determined as of the immediately preceding Valuation Date (the "initial
Account value") shall be increased (or decreased) by the following adjustments
made in the following sequence:
4.1.1. Addition Adjustment. The initial Account value shall be
increased by the total amount, if any, credited to such Account under Section 3
as of the current Valuation Date.
4.1.2. Investment Adjustment for Excess Savings Account. The initial
Account value of each Participant's Excess Savings Account (as adjusted above)
shall be increased by the rate of interest charged on the Valuation Date by
Norwest Bank Minnesota, N.A. and in effect on that Valuation Date to its most
credit-worthy corporate customers on loans of not more than ninety (90) days
duration which are unsecured (that is, the so called prime rate of interest).
4.1.3. Investment Adjustment for Match Account. The initial Account
value of each Participant's Match Account (as adjusted above) shall be increased
by the rate of interest charged on the Valuation Date by Norwest Bank Minnesota,
N.A. and in effect on that Valuation Date to its most credit-worthy corporate
customers on loans of not more than ninety (90) days duration which are
unsecured (that is, the so called prime rate of interest).
4.1.4. Dividend Adjustment for Phantom Stock Account. At such time
that dividends are paid on common stock of the Employer, the Unit Shares
credited to the Participant's Phantom Stock Account shall be increased by
crediting in Unit Shares the amount of the dividend which would have been paid
if the number of Unit Shares had been shares of common stock of the Employer.
The number of Unit Shares shall be determined by dividing the dollar amount of
the dividend by the average stock price used by First Trust National Association
for the Retirement Savings Plan for the calendar quarter in which the dividend
is paid.
4.1.5. Antidilution Adjustment for Phantom Stock Account. In the
event that the outstanding shares of stock of the Employer, of whatever class or
series, are increased, decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Employer or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, stock
dividends or otherwise, then the number of Unit Shares credited to the
Participant's Phantom Stock Account shall be adjusted so that the resulting
number of Unit Shares shall be in the same ratio to the original number of Unit
Shares as the number of shares of stock of the Employer, of whatever class or
series, outstanding immediately after the transaction described above giving
rise to an adjustment hereunder bears to the number of shares of stock of the
Employer, of whatever class or series, outstanding immediately prior to the
transaction. Adjustments shall be made as are necessary to prevent dilution or
enlargement of the benefits credited under the Plan.
4.1.6. Distributions Adjustment. The initial Account value (as
adjusted above) shall be reduced by the total amount distributed in fact to (or
with respect to) the Participant from such Account as of the current Valuation
Date.
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4.2. Not Funded. The obligations of the Employer to make payments under this
Plan constitutes only the unsecured (but legally enforceable) promise of the
Employer to make such payments, and the Participant shall have no lien, prior
claim or other security interest in any property of the Employer. No fund,
trust or account (other than a bookkeeping account or reserve) will be
established or maintained by the Employer for the purpose of funding or paying
the benefits promised under this Plan. If such a fund is established, the
property therein shall remain the sole and exclusive property of the Employer.
The Employer will pay the cost of the Plan out of its general assets. All
references to accounts, accruals, gains, losses, income, expenses, payments,
custodial funds and the like are included merely for the purpose of measuring
the Employer's obligation to Participants in the Plan and shall not be construed
to impose on the Employer the obligation to create any separate fund for
purposes of the Plan.
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SECTION 5
VESTING OF ACCOUNTS
5.1. Full Vesting. Except as hereinafter provided, the Accounts of each
Participant shall be fully (100%) Vested at all times.
5.2. Forfeiture for Misconduct. Notwithstanding the foregoing provision, a
Participant shall not be Vested at all in the Match Account and Phantom Stock
Account (and shall completely forfeit all claims to such Accounts for such
Participant and all Beneficiaries) upon the determination by the Employer that
the Participant, either before or after termination of employment:
(a) has engaged in a criminal or fraudulent activity resulting in
harm to the Employer or an Affiliate, or
(b) has divulged to a competitor any significant confidential
information or trade secrets of the Employer or an Affiliate,
or
(c) has provided the Employer or Affiliate with materially false
reports concerning such Participant's business interests or
employment, or
(d) has made materially false representations which are relied upon
by the Employer or an Affiliate in furnishing information to a
shareholder, auditors or any regulatory or governmental agency,
or
(e) has maintained an undisclosed, unauthorized and material
conflict of interest in the discharge of the duties owed by
such Participant to the Employer or an Affiliate, or
(f) has engaged in conduct causing a serious violation of state or
federal law by the Employer or an Affiliate, or
(g) has engaged in reckless or grossly negligent activity toward
the Employer or an Affiliate which is admitted or judicially
proven and which results in significant harm to the Employer or
an Affiliate, or
(h) has engaged in the theft of assets or funds of the Employer or
an Affiliate, or
(i) has engaged in fraud or dishonesty toward the Employer or an
Affiliate which is admitted or judicially proven, or
(j) has been convicted of any crime which directly or indirectly
arose out of such Participant's employment relationship with
the Employer or an Affiliate or materially affected such
Participant's ability to discharge the duties of employment
with the Employer or an Affiliate, or
(k) shall fail at or after the time of such Participant's
termination of employment to execute a form of release and
waiver prepared by and acceptable to the Employer releasing the
Employer (and is officers, directors, employees and agents)
from all direct or indirect claims for workers' compensation
benefits, unemployment compensation benefits, claims arising as
a result of employment discrimination, employment related
claims arising under tort, breach of contract (express or
implied) or any other law or theory and all other similar types
of claims (whether known or unknown) as the Employer may
specify or, after executing such a release or waiver, shall
fail to abide by its terms.
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SECTION 6
MATURITY
6.1. Events of Maturity. A Participant's Total Account shall mature and shall
become distributable in accordance with Section 7 upon the earliest occurrence
of any of the following events while in the employment of the Employer or an
Affiliate:
(a) the Participant's death,
(b) the Participant's termination of employment, whether voluntary
or involuntary,
(c) the Participant's Disability, or
(d) termination of the Plan;
provided, however, that a transfer from Recognized Employment to employment with
the Employer that is other than Recognized Employment or a transfer from the
employment of one Employer participating in the Plan to another such Employer or
to any Affiliate shall not constitute an Event of Maturity.
6.2. Effect of Maturity upon Further Participation in Plan. On the occurrence
of an Event of Maturity, a Participant shall cease to have any interest in the
Plan other than the right to receive payment of all Accounts as provided in
Section 7, adjusted from time to time as provided in Section 4.
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SECTION 7
DISTRIBUTION
7.1. Time of Distribution. Upon the occurrence of an Event of Maturity
effective as to a Participant, the Employer shall make or commence distribution
of the Participant's Total Account (reduced by the amount of any applicable
payroll, withholding and other taxes) as of one of the following times as the
Participant shall designate in writing prior to the first Plan Year in which the
Participant first receives additions to the Participant's Accounts.
(a) Annual Valuation Date. Distribution may be made or commenced
as of the Annual Valuation Date coincident with or next
following the Event of Maturity. Actual distribution shall be
made or commenced in the calendar month immediately following
the Annual Valuation Date or as soon thereafter as
administratively feasible.
(b) Quarterly Valuation Date. Distribution may be made or
commenced as of the quarterly Valuation Date coincident with or
next following the Event of Maturity. Actual distribution
shall be made or commenced in the calendar month immediately
following the quarterly Valuation Date or as soon thereafter as
administratively feasible.
7.2. Forms of Distribution. Distribution of the Participant's Total Account
shall be made to the Participant or the Beneficiary entitled to receive
distribution (the "Distributee") in one of the following ways as the Participant
shall designate in writing prior to the first Plan Year in which the Participant
first receives additions to the Participant's Accounts.
(a) Lump Sum. If the Distributee is either a Participant or a
Beneficiary, in a single lump sum.
(b) Five Annual Installments. If the Distributee is a Participant,
in a series of substantially equal installments payable
annually over a term of five (5) years. If the Distributee is a
Beneficiary of a Participant and distribution had commenced to
the Participant over a five (5) year period, in a series of
substantially equal installments payable annually over the
remainder of the five (5) year period. If the Distributee is a
Beneficiary of a Participant and distribution had not commenced
prior to the Participant's death, in a series of substantially
equal installments payable annually over a term of five (5)
years.
The amount of the installment distribution to be made in substantially equal
annual installments shall be determined by dividing the Account value as of the
Valuation Date of the installment distribution by the number of remaining
installments (including the installment being computed).
7.3. Distribution in Cash. The Employer shall make or commence distribution
of the Participant's Total Account in cash. The portion of the Participant's
Phantom Stock Account to be distributed as of a Valuation Date shall be
converted to a dollar amount based on the greater of (a) or (b) below.
(a) Closing Price. The closing price of common stock of the
Employer for the calendar quarter in which the Valuation Date
occurs.
(b) Quarter Average Price. The quarter average price of common
stock of the Employer used by First Trust National Association
for the Retirement Savings Plan for the calendar quarter in
which the Valuation Date occurs.
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7.4. 280G Limitation. The amount of any cash distribution to be received by
the Participant under the Plan shall be reduced (but not below zero) by the
amount, if any, necessary to prevent any part of any payment or benefit received
or to be received by the Participant in connection with a Change in Control of
the Employer (as defined in Section 9.2) or the termination of the Participant's
employment (whether payable under the terms of the Plan or any other plan,
contract, agreement or arrangement with the Employer, with any person whose
actions result in a Change in Control of the Employer or with any person
constituting a member of an "affiliated group" (as defined in section 280G(d)(5)
of the Code)), with the Employer or with any person whose actions result in a
Change in Control of the Employer (such foregoing payments or benefits referred
to collectively as the "Total Payments") from being treated as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code, but
only if and to the extent such reduction will also result in, after taking into
account all applicable state or federal taxes (computed at the highest marginal
rate) including any taxes payable pursuant to section 4999 of the Code, a
greater after-tax benefit to the Participant than the after-tax benefit to the
Participant of the Total Payments computed without regard to any such reduction.
For purposes of the foregoing, (a) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the Employer
and acceptable to the Participant does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code; (b) any reduction in
payments under the Plan shall be computed by taking into account that portion of
Total Payments which constitute reasonable compensation within the meaning of
section 280G(b)(4)(B) of the Code in the opinion of such tax counsel; (c) the
value of any non-cash benefit or of any deferred cash payment included in the
Total Payments shall be determined by the Employer in accordance with the
principles of section 280G(d)(3)(iv) of the Code; and (d) in the event of any
uncertainty as to whether a reduction in Total Payments to the Participant is
required under the Plan, the Employer shall initially make the payment to the
Participant and the Participant shall agree to refund to the Employer any
amounts ultimately determined not to have been payable under the terms of this
Section.
7.5. Designation of Beneficiaries.
7.5.1. Right To Designate. Each Participant may designate, upon forms
to be furnished by and filed with the Employer, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified part of
the Participant's Total Account in the event of Participant's death. The
Participant may change or revoke any such designation from time to time without
notice to or consent from any Beneficiary or spouse. No such designation,
change or revocation shall be effective unless executed by the Participant and
received by the Employer during the Participant's lifetime.
7.5.2. Failure of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter such designation is
revoked without another Beneficiary being named, or
(c) designates one or more Beneficiaries and all such Beneficiaries
so designated fail to survive the Participant,
such Participant's Total Account, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant and (except in the case of the Participant's surviving
issue) in equal shares if there is more than one member in such class surviving
the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
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<PAGE>
Participant's surviving brothers and sisters
Representative of Participant's estate.
7.5.3. Disclaimers by Beneficiaries. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant's Total Account may
disclaim his or her interest therein subject to the following requirements. To
be eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of a Total Account at the time
such disclaimer is executed and delivered, and must have attained at least age
twenty-one (21) years as of the date of the Participant's death. Any disclaimer
must be in writing and must be executed personally by the Beneficiary before a
notary public. A disclaimer shall state that the Beneficiary's entire interest
in the undistributed Total Account is disclaimed or shall specify what portion
thereof is disclaimed. To be effective, duplicate original executed copies of
the disclaimer must be both executed and actually delivered to the Employer
after the date of the Participant's death but not later than one hundred eighty
(180) days after the date of the Participant's death. A disclaimer shall be
irrevocable when delivered to the Employer. A disclaimer shall be considered to
be delivered to the Employer only when actually received by the Employer. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary
shall be considered not to have survived the Participant as to the interest
disclaimed. A disclaimer by a Beneficiary shall not be considered to be a
transfer of an interest in violation of the provisions of Section 8 and shall
not be considered to be an assignment or alienation of benefits in violation of
federal law prohibiting the assignment or alienation of benefits under this
Plan. No other form of attempted disclaimer shall be recognized by either the
Employer.
7.5.4. Definitions. When used herein and, unless the Participant has
otherwise specified in his or her Beneficiary designation, when used in a
Beneficiary designation, "issue" means all persons who are lineal descendants of
the person whose issue are referred to, including legally adopted descendants
and their descendants but not including illegitimate descendants and their
descendants; "child" means an issue of the first generation; "per stirpes" means
in equal shares among living children of the person whose issue are referred to
and the issue (taken collectively) of each deceased child of such person, with
such issue taking by right of representation of such deceased child; and
"survive" and "surviving" mean living after the death of the Participant.
7.5.5. Special Rules. Unless the Participant has otherwise specified
in his or her Beneficiary designation, the following rules shall apply:
(a) If there is not sufficient evidence that a Beneficiary was
living at the time of the death of the Participant, it shall be
deemed that the Beneficiary was not living at the time of the
death of the Participant.
(b) The automatic Beneficiaries specified in Section 7.5.2 and the
Beneficiaries designated by the Participant shall become fixed
at the time of the Participant's death so that, if a
Beneficiary survives the Participant but dies before the
receipt of all payments due such Beneficiary hereunder, such
remaining payments shall be payable to the representative of
such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person who
is the Participant's spouse on the date of the designation,
either by name or by relationship, or both, the dissolution,
annulment or other legal termination of the marriage between
the Participant and such person shall automatically revoke such
designation. (The foregoing shall not prevent the Participant
from designating a former spouse as a Beneficiary on a form
executed by the Participant and received by the Employer after
the date of the legal termination of the marriage between the
Participant and such former spouse, and during the
Participant's lifetime.)
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<PAGE>
(d) Any designation of a nonspouse Beneficiary by name that is
accompanied by a description of relationship to the Participant
shall be given effect without regard to whether the
relationship to the Participant exists either then or at the
Participant's death.
(e) Any designation of a Beneficiary only by statement of
relationship to the Participant shall be effective only to
designate the person or persons standing in such relationship
to the Participant at the Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Employer shall be the sole judge of the content, interpretation and validity of
a purported Beneficiary designation.
7.5.6. Spousal Rights. No spouse or surviving spouse of a Participant
and no person designated to be a Beneficiary shall have any rights or interest
in the benefits accumulated under the Plan including, but not limited to, the
right to be the sole Beneficiary or to consent to the designation of
Beneficiaries (or the changing of designated Beneficiaries) by the Participant.
7.6. Death Prior to Full Distribution. If a Participant dies after an Event
of Maturity but before distribution of the Participant's Total Account has been
completed, the remainder of the undistributed Total Account shall be distributed
in the same manner as hereinbefore provided in the Event of Maturity by reason
of death. If, at the death of the Participant, any payment to the Participant
was due or otherwise pending but not actually paid, the amount of such payment
shall be included in the Total Account which is payable to the Beneficiary (and
shall not be paid to the Participant's estate).
7.7. Facility of Payment. In case of the legal disability, including
minority, of a Participant or Beneficiary entitled to receive any distribution
under the Plan, payment shall be made, if the Employer shall be advised of the
existence of such condition:
(a) to the duly appointed guardian, conservator or other legal
representative of such Participant or Beneficiary, or
(b) to a person or institution entrusted with the care or
maintenance of the incompetent or disabled Participant or
Beneficiary, provided such person or institution has satisfied
the Employer that the payment will be used for the best
interest and assist in the care of such Participant or
Beneficiary, and provided further, that no prior claim for said
payment has been made by a duly appointed guardian, conservator
or other legal representative of such Participant or
Beneficiary.
Any payment made in accordance with the foregoing provisions of this Section
shall constitute a complete discharge of any liability or obligation of the
Employer.
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SECTION 8
SPENDTHRIFT PROVISIONS
No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same while in the possession or
control of the Employer, nor shall the Employer recognize any assignment
thereof, either in whole or in part, nor shall any Account be subject to
attachment, garnishment, execution following judgment or other legal process
while in the possession or control of the Employer.
The power to designate Beneficiaries to receive the Total Account of a
Participant in the event of the Participant's death shall not permit or be
construed to permit such power or right to be exercised by the Participant so as
thereby to anticipate, pledge, mortgage or encumber the Participant's Account or
any part thereof, and any attempt of a Participant so to exercise said power in
violation of this provision shall be of no force and effect and shall be
disregarded by the Employer.
This Section shall not prevent the Employer from exercising, in its discretion,
any of the applicable powers and options granted to them upon the occurrence of
an Event of Maturity, as such powers may be conferred upon them by any
applicable provision hereof.
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<PAGE>
SECTION 9
AMENDMENT AND TERMINATION
9.1. Amendment and Termination. The Employer hereby reserves the power to
unilaterally amend the Plan Statement and to partially terminate or totally
terminate the Plan and to reduce, suspend or discontinue its additions to the
Plan, either prospectively or retroactively or both; provided that no amendment
or termination shall be effective to reduce or divest the Accounts of any
Participant without such Participant's consent.
9.2. Change in Control.
9.2.1. In General. Notwithstanding any other provision of the Plan
Statement, Section 9.2.3, Section 9.2.4, Section 9.2.5 and Section 9.2.6 shall
take effect if and only if a Maturity Date occurs effective as to this Plan
following a Change in Control. A Maturity Date can not occur if there is no
Change in Control. A Maturity Date effective as to this Plan does not occur
merely because there is a Change in Control or merely because a Maturity Date
occurs effective as to the ADC TELECOMMUNICATIONS, INC. PENSION PLAN. A
Maturity Date following a Change in Control must be effective as to this Plan.
9.2.2. Special Definitions. For purposes of this Section 9.2, the
special definitions in Section 7.6.2 of the ADC TELECOMMUNICATIONS, INC. PENSION
PLAN (1985 Restatement), as amended, shall apply.
9.2.3. Amendment. Notwithstanding any other provision of the Plan
Statement, during the two (2) years following the date of a Change in Control,
the provisions of the Plan Statement may not be amended if any amendment would
adversely affect the rights, expectancies or benefits provided by the Plan (as
in effect immediately prior to the Change in Control), of any Participant,
Beneficiary or other person entitled to payments under the Plan. The Plan may
not be terminated or merged with any other plan during the same two (2) year
period.
9.2.4. Termination of Employment. Notwithstanding any other provision
of the Plan Statement, the Total Account of any Participant actively employed on
the date of a Change in Control who terminates employment for any reason
including Good Reason, death, disability (as defined in section 22(e)(3) of the
Code) or Cause during the two (2) years following the date of the Change in
Control shall be distributed in a single lump sum cash payment as soon as
administratively feasible after such termination.
9.2.5. Pending Distributions. Notwithstanding any other provision of
the Plan Statement, any distribution (whether lump sum or installment) which is
pending but which has not actually been made or commenced on the date of a
Change in Control shall be distributed in a single lump sum cash payment as soon
as administratively feasible after the date of the Change of Control.
9.2.6. Commutation of Installments. Notwithstanding any other
provision of the Plan Statement, any remaining installments due to any
Participant who terminated employment before the date of a Change of Control
shall be distributed in a single lump sum cash payment as soon as
administratively feasible after the date of the Change of Control.
9.2.7. Not Amendable. Notwithstanding any other provision of the Plan
Statement, this Section 9.2 may not be amended to decrease any of the benefits
which it provides during the two (2) years following the date of a Change in
Control without the affirmative written consent of a majority in both number and
interest of the Participants actively employed on the date of the Change in
Control.
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<PAGE>
SECTION 10
DETERMINATIONS -- RULES AND REGULATIONS
10.1. Determinations. The Employer shall make such determinations as may be
required from time to time in the administration of the Plan. The Employer
shall have the sole authority and responsibility to interpret and construe the
Plan Statement and to determine all factual and legal questions under the Plan,
including but not limited to the entitlement of employees, Participants and
Beneficiaries and the amounts of their respective interests. Each interested
party may act and rely upon all information reported to that party hereunder and
need not inquire into the accuracy thereof, nor be charged with any notice to
the contrary.
10.2. Rules and Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Employer.
10.3. Method of Executing Instruments. Information to be supplied or written
notices to be made or consents to be given by the Principal Sponsor or the
Employer pursuant to any provision of this Plan Statement may be signed in the
name of the Principal Sponsor or Employer by any officer thereof who has been
authorized to make such certification or to give such notices or consents.
10.4. Claims Procedure. Until modified by the Employer, the claims procedure
set forth in this Section 10.4 shall be the claims procedure for the resolution
of disputes and disposition of claims arising under the Plan. An application
for a distribution under Section 7 shall be considered as a claim for the
purposes of this Section.
10.4.1. Original Claim. Any employee, former employee, or Beneficiary
of such employee or former employee may, if he or she so desires, file with the
Employer a written claim for benefits under the Plan. Within ninety (90) days
after the filing of such a claim, the Employer shall notify the claimant in
writing whether the claim is upheld or denied in whole or in part or shall
furnish the claimant a written notice describing specific special circumstances
requiring a specified amount of additional time (but not more than one hundred
eighty days from the date the claim was filed) to reach a decision on the claim.
If the claim is denied in whole or in part, the Employer shall state in writing:
(a) the specific reasons for the denial,
(b) the specific references to the pertinent provisions of this
Plan Statement on which the denial is based,
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary,
and
(d) an explanation of the claims review procedure set forth in this
Section.
10.4.2. Claims Review Procedure. Within sixty (60) days after receipt
of notice that the claim has been denied in whole or in part, the claimant may
file with the Employer a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Employer shall notify the claimant in
writing whether, upon review, the claim was upheld or denied in whole or in part
or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days from the date the request for review was filed) to reach
a decision on the request for review.
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<PAGE>
10.4.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims procedure. The Employer may require
that any claim for benefits and any request for a review of a
denied claim be filed on forms to be furnished by the Employer
upon request.
(b) All decisions on claims and on requests for a review of denied
claims shall be made by the Employer.
(c) The Employer may, in its discretion, hold one or more hearings
on a claim or a request for a review of a denied claim.
(d) Claimants may be represented by a lawyer or other
representative (at their own expense), but the Employer
reserves the right to require the claimant to furnish written
authorization. A claimant's representative shall be entitled
to copies of all notices given to the claimant.
(e) The decision of the Employer on a claim and on a request for a
review of a denied claim shall be served on the claimant in
writing. If a decision or notice is not received by a claimant
within the time specified, the claim or request for a review of
a denied claim shall be deemed to have been denied.
(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or claimant's representative shall have a
reasonable opportunity to review a copy of this Plan Statement
and all other pertinent documents in the possession of the
Employer.
10.5. Information Furnished by Participants. The Employer shall not be liable
or responsible for any error in the computation of the Account of a Participant
resulting from any misstatement of fact made by the Participant, directly or
indirectly, to the Employer and used by it in determining the Participant's
Account. The Employer shall not be obligated or required to increase the
Account of such Participant which, on discovery of the misstatement, is found to
be understated as a result of such misstatement of the Participant. However,
the Account of any Participant which is overstated by reason of any such
misstatement shall be reduced to the amount appropriate for the Participant in
view of the truth.
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<PAGE>
SECTION 11
PLAN ADMINISTRATION
11.1. Principal Sponsor.
11.1.1. Officers. Except as hereinafter provided, functions generally
assigned to the Principal Sponsor shall be discharged by its officers or
delegated and allocated as provided herein.
11.1.2. Chief Executive Officer. Except as hereinafter provided, the
Chief Executive Officer of the Principal Sponsor may delegate or redelegate and
allocate and reallocate to one or more persons or to a Employer of persons
jointly or severally, and whether or not such persons are directors, officers or
employees, such functions assigned to the Principal Sponsor hereunder as the
Chief Executive Officer may from time to time deem advisable.
11.1.3. Board of Directors. Notwithstanding the foregoing, the Board
of Directors of the Employer shall have the exclusive authority, which may not
be delegated, to act for the Employer to amend the Plan Statement and to
terminate the Plan.
11.2. Conflict of Interest. If any officer or employee of the Employer or any
member of the board of directors of the Employer to whom authority has been
delegated or redelegated hereunder shall also be a Participant in the Plan, the
Participant shall have no authority as such officer, employee or member with
respect to any matter specially affecting the Participant's individual interest
hereunder (as distinguished from the interests of all Participants and
Beneficiaries or a broad class of Participants and Beneficiaries), all such
authority being reserved exclusively to the other officers, employees or members
as the case may be, to the exclusion of the Participant and the Participant
shall act only in the Participant's individual capacity in connection with any
such matter.
11.3. Administrator. The Principal Sponsor shall be the administrator for
purposes of section 3(16)(A) of ERISA.
11.4. Service of Process. In the absence of any designation to the contrary by
the Principal Sponsor, the Secretary of the Principal Sponsor is designated as
the appropriate and exclusive agent for the receipt of service of process
directed to the Plan in any legal proceeding, including arbitration, involving
the Plan.
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<PAGE>
SECTION 12
DISCLAIMERS
12.1. Term of Employment. Neither the terms of the Plan Statement nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee. The Employer shall not be obliged to continue the Plan.
12.2. Employment. The terms of the Plan Statement shall not give any employee
the right to be retained in the employment of the Employer.
12.3. Source of Payment. Neither the Employer nor any of its officers nor any
member of its board of directors in any way secure or guarantee the payment of
any benefit or amount which may become due and payable hereunder to any
Participant or to any Beneficiary or to any creditor of a Participant or a
Beneficiary. Each Participant, Beneficiary or other person entitled at any time
to payments hereunder shall look solely to the assets of the Employer for such
payments or to the Accounts distributed to any Participant or Beneficiary, as
the case may be, for such payments. In each case where Accounts shall have been
distributed to a former Participant or a Beneficiary or to the person or any one
of a group of persons entitled jointly to the receipt thereof and which purports
to cover in full the benefit hereunder, such former Participant or Beneficiary,
or such person or persons, as the case may be, shall have no further right or
interest in the other assets of the Employer.
12.4. Guaranty. Neither the Employer nor any of its officers nor any member of
its board of directors shall be under any liability or responsibility for
failure to effect any of the objectives or purposes of the Plan by reason of the
insolvency of the Employer.
12.5. Delegation. The Employer and its officers and the members of its board
of directors shall not be liable for an act or omission of another person with
regard to a responsibility that has been allocated to or delegated to such other
person pursuant to the terms of the Plan Statement or pursuant to procedures set
forth in the Plan Statement.
IN WITNESS WHEREOF, ADC TELECOMMUNICATIONS, INC. has caused this Plan
document to be executed by its duly authorized officers.
, 1990 ADC TELECOMMUNICATIONS, INC.
- ---------------
By
-------------------------------
Its
-------------------------------
And
------------------------------
Its
------------------------------
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<PAGE>
EXHIBIT 21-a
SUBSIDIARIES OF THE COMPANY
The following list of subsidiaries of the Company identifies the name of the
subsidiary, the state or other jurisdiction of incorporation or organization and
the name under which such subsidiaries do business:
ADC VIDEO SYSTEMS, INC.
A Delaware corporation
AVS, ADC Video Systems
FIBERMUX CORPORATION
A California corporation
Fibermux, ADC Fibermux
KENTROX INDUSTRIES, INC.
A Delaware corporation
Kentrox, ADC Kentrox
DA TEL FIBERNET, INC.
A Georgia corporation
ADC Da Tel
ADC MERSUM OY
Finland
ADC Solitra Oy (80% owned)
Finland
ADC Solitra
ADC MOBILE SYSTEMS, INC.
A Minnesota corporation
METRICA SYSTEMS
United Kingdom
INFORMATION TRANSMISSION SYSTEMS CORP.
A Pennsylvania corporation
ADC ITS
SKYLINE TECHNOLOGY, INC.
A California corporation
<PAGE>
TELESPHERE SOLUTIONS, INC.
A Minnesota corporation
ADC EUROPE NV
Belgium
ADC, ADC Europe
ADC INTERNATIONAL LIMITED
Jamaica
ADC de MEXICO, S.A. de C.V.
Mexico
ADC TELECOM CANADA INC.
Canada
ADC TELECOMMUNICATIONS AUSTRALIA (HOLDINGS) PTY. LIMITED
Australia
ADC Telecommunications Australia Pty. Limited
Australia
AOFR Pty. Limited
Australia
ADC TELECOMMUNICATIONS SINGAPORE PTE. LIMITED
Singapore
ADC TELECOMMUNICATIONS UK LTD
United Kingdom
ADC, ADC Telecommunications
ADC TELECOMUNICACIONES VENEZUELA, S.A.
Venezuela
SHANGHAI ADC TELECOMMUNICATIONS EQUIPMENT CO. LTD. (50% owned)
People's Republic of China
NANJING ADC BROADBAND COMMUNICATIONS CO. LTD. (60% owned)
People's Republic of China
<PAGE>
EXHIBIT 23-a
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ADC Telecommunications, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
report dated November 26, 1996, included in this Form 10-K, and incorporated by
reference into the Company's previously filed Registration Statements, File Nos.
2-83584, 33-22654, 33-40356, 33-40357, 33-52635, 33-52637, 33-58407, 33-58409,
33-59445, 333-02133, 333-04481, 333-07309 and 333-15283.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
January 6, 1997
<PAGE>
EXHIBIT 24-a
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints each of William J. Cadogan and David F. Fisher, with
full power to each to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K of ADC Telecommunications, Inc. (the "Company") for
the Company's fiscal year ended October 31, 1996, and any or all amendments to
said Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and to file the same with such other authorities as necessary, granting unto
each such attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that each such attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on this 17th day
of December, 1996, by the following persons.
/s/ William J. Cadogan /s/ James C. Castle, Ph.D.
- ------------------------- -----------------------------
William J. Cadogan James C. Castle, Ph.D.
/s/ Thomas E. Holloran /s/ B. Kristine Johnson
- ------------------------- -----------------------------
Thomas E. Holloran B. Kristine Johnson
/s/ Charles W. Oswald /s/ Irene M. Qualters
- ------------------------- -----------------------------
Charles W. Oswald Irene M. Qualters
/s/ Alan E. Ross /s/ Jean-Pierre Rosso
- ------------------------- -----------------------------
Alan E. Ross Jean-Pierre Rosso
/s/ Donald M. Sullivan /s/ John D. Wunsch
- ------------------------- -----------------------------
Donald M. Sullivan John D. Wunsch
/s/ Warde F. Wheaton
- -------------------------
Warde F. Wheaton
<PAGE>
EXHIBIT 99-a
Cautionary Statement Regarding Forward-Looking Statements
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 and is filing this
cautionary statement in connection with such safe harbor legislation. This Form
10-K, the Company's Annual Report to Shareholders, any Form 10-Q or Form 8-K of
the Company or any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. The
words "believe," "expect," "anticipate," "intends," "estimate," "forecast,"
"project" and similar expressions identify forward-looking statements.
The Company wishes to caution investors that any forward-looking statements
made by or on behalf of the Company are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors include, but are not limited
to the Risk Factors listed below (many of which have been discussed in prior SEC
filings by the Company). Though the Company has attempted to list
comprehensively these important factors, the Company wishes to caution investors
that other factors may in the future prove to be important in affecting the
Company's results of operations. New factors emerge from time to time and it is
not possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
Investors are further cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
RISK FACTORS
RAPID TECHNOLOGICAL CHANGE AND IMPORTANCE OF NEW PRODUCTS. The
telecommunications equipment industry is characterized by rapid technological
change, evolving industry standards, changing market conditions and frequent new
product introductions and enhancements. The introduction of products embodying
new technologies or the emergence of new industry standards can render existing
products or products under development obsolete or unmarketable. ADC's ability
to anticipate changes in technology and industry standards and successfully to
develop and introduce new products on a timely basis will be a significant
factor in ADC's ability to grow and remain competitive. New product development
often requires long-term forecasting of
1
<PAGE>
market trends, development and implementation of new technologies and processes
and a substantial capital commitment. In particular, ADC has invested
substantial resources toward the development of new products such as its
Homeworx-TM- product utilizing hybrid fiber coax technology. ADC is engaging in
extensive field testing and evaluation of its Homeworx-TM- system for video and
telephony applications, and has shipped the Homeworx-TM- system for video
applications to customers for initial deployment. In addition, ADC is currently
deploying the Homeworx-TM- system for telephony applications to a limited number
of customers for field trial. Development and customer acceptance of new
products is inherently uncertain, and there can be no assurance that ADC will
successfully complete the commercialization of the Homeworx-TM- system for
telephony applications or other new products on a timely basis or that such
products will be commercially successful. Any failure by ADC to anticipate or
respond on a cost-effective and timely basis to technological developments,
changes in industry standards or customer requirements, or any significant
delays in product development or introduction, could have a material adverse
effect on ADC's business, operating results and financial condition.
UNCERTAIN MARKET FOR BROADBAND NETWORK PRODUCTS. Over the past several
years, ADC's principal product offerings have generally consisted of copper-
based and fiber-based products designed to address the needs of its customers
for connectivity, transmission and networking applications on traditional
telephony networks. However, with the growth of multimedia and the associated
development of enhanced voice, video and data transmission technologies, ADC's
recent product offerings and research and development efforts have been
increasingly focused on addressing the broadband telecommunications equipment
market through the use of new or different technologies. The market for
broadband telecommunications products is emerging and rapidly changing. ADC's
future growth is dependent in part on its ability to successfully develop and
commercially introduce new products in each of its product groups addressing
this market, as well as the growth in this market. The growth in the market for
such broadband telecommunications products is dependent on a number of factors,
including the amount of capital expenditures by public network providers,
regulatory and legal developments and end-user demand for integrated voice,
video, data and other network services. There can be no assurance that the
market for broadband telecommunications products will develop rapidly, or that
there can be reliable predictions made of technological trends or products in
this field. In addition, to the extent this market develops, there can be no
assurance that ADC's products will meet with market acceptance or be profitable.
COMPETITION. Competition in the telecommunications equipment industry is
intense, and ADC believes that competition may increase substantially with the
deployment of broadband networks and the recent regulatory changes. See
"Changing Regulatory Environment." Many of ADC's foreign and domestic
competitors have more extensive engineering, manufacturing, marketing, financial
and personnel resources than ADC. ADC believes its success in competing with
other manufacturers of telecommunications products depends primarily on its
engineering, manufacturing and
2
<PAGE>
marketing skills, the price, quality and reliability of its products, and its
delivery and service capabilities. ADC anticipates increasing pricing pressures
from current and future competitors in certain of the markets for its products.
In addition, ADC believes that technological change, the increasing addition of
data, video and other services to networks, continuing regulatory change and
industry consolidation or new entrants will continue to cause rapid evolution in
the competitive environment of the telecommunications equipment market, the full
scope and nature of which is difficult to predict at this time. Increased
competition could result in price reductions, reduced margins and loss of market
share by ADC. There can be no assurance that ADC will be able to compete
successfully with its existing or new competitors or that competitive pressures
faced by ADC will not materially and adversely affect its business, operating
results and financial condition.
FLUCTUATIONS IN OPERATING RESULTS. ADC's operating results may fluctuate
significantly from quarter to quarter due to several factors, including, without
limitation, the volume and timing of orders from, and shipments to, major
customers, the timing of and the ability to obtain new customer contracts, the
timing of new product announcements and the availability of product by ADC or
its competitors, overall level of capital expenditures by public network
providers, market acceptance of new and enhanced versions of ADC's products,
variations in the mix of products ADC sells or its sales channels, and the
availability and cost of key components. In addition, the Company is
experiencing growth through acquisition and expansion and its recent results of
operations may not be indicative of results to be achieved in future periods.
ADC's expense levels are based in part on expectations of future revenues. If
revenue levels in a particular period do not meet expectations, operating
results will be adversely affected. In addition, ADC's results of operations are
subject to seasonal factors. ADC historically has experienced a stronger demand
for its products in the fourth fiscal quarter, primarily as a result of ADC
year-end incentives and customer budget cycles, and has experienced a weaker
demand for its products in the first fiscal quarter, primarily as a result of
the number of holidays in late November, December and early January and a
general industry slowdown during that period. There can be no assurance that
these historical seasonal trends will continue in the future.
CHANGING REGULATORY ENVIRONMENT. The telecommunications industry is
subject to regulation in the United States and other countries. ADC's business
is dependent upon the continued growth of the telecommunications industry in the
United States and internationally. Federal and state regulatory agencies
regulate most of ADC's domestic customers. On January 3, 1996, the U.S.
Congress passed the Telecommunications Act of 1996 (the "Telecommunications
Act"). The President of the United States signed the Telecommunications Act
into law on February 8, 1996. The Telecommunications Act will lift certain
restrictions on the ability of companies, including Regional Bell Operating
Companies ("RBOCs") and other customers of ADC, to compete with one another and
change the regulation of the telecommunications industry. While ADC believes
that the changes in regulation of the telecommunications industry could increase
ADC's opportunities to provide solutions for its customers' voice, data and
video needs,
3
<PAGE>
this is dependent on the reaction of ADC's existing and prospective customers to
such regulatory trends. The effect on the market for ADC's products is
difficult to predict at this time, and there can be no assurance that
competition in ADC's product market will not intensify as a result of such
changes in regulation. Changes in current or future laws or regulations, in the
United States or elsewhere, could materially and adversely affect ADC's
business.
INTERNATIONAL OPERATIONS. Export sales accounted for 15%, 18% and 21% of
ADC's net sales in fiscal 1994, 1995, and 1996, respectively, and ADC expects
that export sales may increase as a percentage of net sales in the future. In
addition, ADC owns or subcontracts manufacturing operations located in Mexico,
Australia, China, Finland, and the United Kingdom. Due to its export sales and
its international manufacturing operations, ADC is subject to the risks of
conducting business internationally, including unexpected changes in, or
impositions of, legislative or regulatory requirements, fluctuations in the U.S.
dollar, which could materially and adversely affect U.S. dollar revenues or
operating expenses, tariffs and other barriers and restrictions, potentially
longer payment cycles, greater difficulty in accounts receivable collection,
potentially adverse taxes, and the burdens of complying with a variety of
foreign laws and telecommunications standards. ADC also is subject to general
geopolitical risks, such as political and economic instability and changes in
diplomatic and trade relationships, in connection with its international
operations. There can be no assurance that such factors will not materially and
adversely affect ADC's operations in the future or require ADC to modify
significantly its current business practices. In addition, the laws of certain
foreign countries may not protect ADC's proprietary technology to the same
extent as do the laws of the United States.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. ADC's future success depends in part
upon its proprietary technology. Although ADC attempts to protect its
proprietary technology through patents, copyrights and trade secrets, it also
believes that its future success will depend upon product development,
technological expertise and distribution channels. There can be no assurance
that ADC will be able to protect its technology, or that competitors will not be
able to develop similar technology independently. ADC has received and may in
the future receive from third parties, including some of its competitors,
notices claiming that it is infringing third-party patents or other proprietary
rights. There can be no assurance that ADC would prevail in any litigation over
third-party claims, or that it would be able to license any valid and infringed
patents on commercially reasonable terms. Furthermore, litigation, regardless
of its outcome, could result in substantial cost to and diversion of effort by
ADC. Any litigation or successful infringement claims by third parties could
materially and adversely affect ADC's business, operating results and financial
condition.
VOLATILITY OF STOCK PRICE. Based on the trading history of its stock, ADC
believes factors such as announcements of new products by ADC or its
competitors, quarterly fluctuations in ADC's financial results, customer
contract awards, developments in telecommunications regulation and general
conditions in the telecommunications
4
<PAGE>
equipment industry have caused and are likely to continue to cause the market
price of ADC's Common Stock to fluctuate substantially. In addition,
telecommunications equipment company stocks have experienced significant price
and volume fluctuations that often have been unrelated to the operating
performance of such companies. This market volatility may adversely affect the
market price of ADC's Common Stock.
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for ADC Telecommunications, Inc. and Subsidiaries, for the
fiscal year ended October 31, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 183,221
<SECURITIES> 0
<RECEIVABLES> 163,219<F1>
<ALLOWANCES> 3,921
<INVENTORY> 130,582<F2>
<CURRENT-ASSETS> 499,501
<PP&E> 275,631
<DEPRECIATION> (144,551)
<TOTAL-ASSETS> 768,765
<CURRENT-LIABILITIES> 142,079
<BONDS> 0
0
0
<COMMON> 13,035
<OTHER-SE> 604,435
<TOTAL-LIABILITY-AND-EQUITY> 768,765
<SALES> 828,009
<TOTAL-REVENUES> 828,009
<CGS> 438,847
<TOTAL-COSTS> 438,847
<OTHER-EXPENSES> 255,978
<LOSS-PROVISION> 654
<INTEREST-EXPENSE> 402
<INCOME-PRETAX> 136,663
<INCOME-TAX> 49,200
<INCOME-CONTINUING> 87,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,463
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
<FN>
<F1>Amount is net of allowance for bad debts and returns and allowances.
<F2>Amount is net of obsolescence reserves.
</FN>
</TABLE>
