<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
ADVANCED FIBRE COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
ADVANCED FIBRE COMMUNICATIONS, INC.
1 WILLOW BROOK COURT
PETALUMA, CALIFORNIA 94954
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
To our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of ADVANCED FIBRE COMMUNICATIONS, INC. (the "Company"), which will be held at
the offices of the Company, 9 Willow Brook Court, Petaluma, California 94954 at
1:00 p.m. on May 14, 1997 (the "Annual Meeting") for the following purposes:
1. To elect two directors to the Board of Directors to serve a three-year
term, such directors to constitute Class I of the Company's Board of
Directors;
2. To consider and vote upon a proposal to ratify the selection of KPMG
Peat Marwick LLP as independent public accountants for the Company for
the fiscal year ending December 31, 1997; and
3. To act upon such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
The Board of Directors has fixed the close of business on March 21, 1997 as
the record date for determining those stockholders who will be entitled to vote
at the Annual Meeting or any adjournment or postponement thereof. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection ten days prior to the Annual Meeting at the principal offices of the
Company, 1 Willow Brook Court, Petaluma, California, 94954. The stock transfer
books will not be closed between the record date and the date of the Annual
Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. Your
proxy may be revoked at any time prior to the time it is voted.
Please read the proxy material carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
Sincerely yours,
/s/ DONALD GREEN
-----------------------------
Donald Green
CHAIRMAN OF THE BOARD
April 4, 1997
Petaluma, California
<PAGE>
STOCKHOLDERS SHOULD READ THE ENTIRE PROXY STATEMENT CAREFULLY PRIOR TO RETURNING
THEIR PROXIES
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
ADVANCED FIBRE COMMUNICATIONS, INC.
TO BE HELD ON MAY 14, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of ADVANCED FIBRE COMMUNICATIONS, INC. ("AFC" or the
"Company") of proxies to be voted at the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") which will be held at the offices of the Company, 9
Willow Brook Court, Petaluma, California 94954 on May 14, 1997 at 1:00 p.m., or
at any adjournments or postponements thereof, for the purposes set forth in the
accompanying Notice of 1997 Annual Meeting of Stockholders. This Proxy Statement
and the proxy card were first mailed to stockholders on or about April 4, 1997.
The Company's 1996 Annual Report is being mailed to stockholders concurrently
with this Proxy Statement. The 1996 Annual Report is not to be regarded as proxy
soliciting material or as a communication by means of which any solicitation of
proxies is to be made.
VOTING RIGHTS AND SOLICITATION
The close of business on March 21, 1997 was the record date for stockholders
entitled to notice of and to vote at the Annual Meeting. As of that date, AFC
had 33,518,073 shares of Common Stock, $.01 par value, issued and outstanding.
All of the shares of the Company's Common Stock outstanding on the record date
are entitled to vote at the Annual Meeting, and stockholders of record entitled
to vote at the Annual Meeting will have one vote for each share of Common Stock
so held with regard to each matter to be voted upon. Representation of at least
a majority of all outstanding shares of Common Stock of Advanced Fibre
Communications, Inc. is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the Annual Meeting.
Shares of the Company's Common Stock represented by proxies in the
accompanying form which are properly executed and returned to AFC will be voted
at the Annual Meeting in accordance with the stockholders' instructions
contained therein. In the absence of contrary instructions, shares represented
by such proxies will be voted FOR the election of each of the directors as
described herein under "Proposal 1--Election of Directors" and FOR ratification
of the selection of accountants as described herein under "Proposal
2--Ratification of Selection of Independent Public Accountants." Management does
not know of any matters to be presented at the Annual Meeting other than those
set forth in this Proxy Statement and in the Notice accompanying this Proxy
Statement. If other matters should properly come before the Annual Meeting, the
proxy holders will vote on such matters in accordance with their best judgment.
Any stockholder has the right to revoke his or her proxy at any time before it
is voted at the Annual Meeting. Election of directors by stockholders shall be
determined by a majority of the votes cast by the stockholders entitled to vote
at the election present in person or represented by proxy. Abstentions and
broker non-votes are each included in the determination of the number of shares
present for quorum purposes. Abstentions are counted in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
The entire cost of soliciting proxies will be borne by AFC. Proxies will be
solicited principally through the use of the mails, but, if deemed desirable,
may be solicited personally or by telephone, telegraph or special letter by
officers and regular AFC employees for no additional compensation. Arrangements
may
1
<PAGE>
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to the beneficial owners of the Company's Common
Stock, and such persons may be reimbursed for their expenses.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a classified Board
of Directors composed of seven directors. Accordingly, the terms of the office
of the Board of Directors are divided into three classes. Class I will expire at
the Annual Meeting; Class II will expire at the annual meeting of stockholders
to be held in 1998; and Class III will expire at the annual meeting of
stockholders to be held in 1999. At each annual meeting of stockholders,
beginning with the 1997 annual meeting, the successors to directors whose terms
will then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election and until their
successors have been duly elected and qualified, or until their earlier
resignation or removal, if any. The Company is continuing to seek to add one
additional director to the Board of Directors. To the extent there is an
increase in the number of directors, additional directorships resulting
therefrom will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors. There are no
family relationships among any of the Company's directors, executive officers,
and key employees.
The proxy holders named on the proxy card intend to vote all proxies
received by them in the accompanying form for the election of the two Class I
nominees listed below, unless instructions to the contrary are marked on the
proxy. These nominees have been selected by the Board of Directors and are both
currently members of the Board. If you do not wish your shares to be voted for
particular nominees, please identify the exceptions on the proxy card.
In the event that a nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them for the nominees
listed below. As of the date of this Proxy Statement, the Board of Directors is
not aware of any nominee who is unable or will decline to serve as a director.
CLASS I--NOMINEES FOR ELECTION:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR SINCE AGE
- ------------------------ ------------------------------------------------------------------ --------------- -----------
<S> <C> <C> <C>
Carl J. Grivner President and Chief Operating Officer, Advanced Fibre 1996 43
Communications, Inc.
Clifford H. Higgerson General Partner, Vanguard Venture Partners 1993 57
</TABLE>
CLASS II--DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING OF
STOCKHOLDERS:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR SINCE AGE
- ------------------------ ------------------------------------------------------------------ --------------- -----------
<S> <C> <C> <C>
B.J. Cassin Private Venture Capitalist 1993 63
Brian Jackman Executive Vice President, Tellabs, Inc. 1993 55
</TABLE>
2
<PAGE>
CLASS III--DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR SINCE AGE
- ------------------------ ------------------------------------------------------------------ --------------- -----------
<S> <C> <C> <C>
Donald Green Chairman of the Board and Chief Executive Officer, Advanced Fibre 1992 65
Communications, Inc.
Dan Rasdal Chairman of the Board, SymmetriComm, Inc. 1993 63
</TABLE>
DONALD GREEN was a co-founder of the Company and has been the Company's
Chairman of the Board and Chief Executive Officer since May 1992. He founded
Optilink Corporation ("Optilink") in 1987 to develop a fiber NGDLC system called
the Litespan 2000. Mr. Green was the President and Chief Executive Officer of
Optilink from 1987 until its acquisition by DSC Communications Corporation
("DSC") in 1990. From 1990 until the founding of the Company, Mr. Green was Vice
President and General Manager of the Access Products division of DSC. Prior to
founding Optilink, Mr. Green served for 17 years as Chief Executive Officer of
Digital Telephone Systems, a company he founded in 1969 to develop, manufacture
and market the D960 Digital Loop Carrier System. Prior to founding Digital
Telephone Systems, Mr. Green served as Project Engineer and, subsequently, Vice
President of Engineering for Lynch Communication Inc., a telecommunications
company, as well as Design Engineer for RCA Standard Telephone Cables (UK), a
telecommunications company. Mr. Green began his career with British Telecom, a
telecommunications company, and is a graduate of the British Institute of
Electrical Engineers.
CARL J. GRIVNER has been the Company's President and Chief Operating Officer
since December 1995 and a director since May 1996. From July 1995 to December
1995, he was the Company's Chief Operating Officer. From September 1994 to July
1995, he was President of Enhanced Business Services of Ameritech, a Regional
Bell Operating Company. From 1986 to September 1994, Mr. Grivner held various
general management positions at Ameritech, including President of Ameritech's
Advertising Services (Yellow Pages) Unit. From 1977 to 1986, he held a variety
of technical and marketing positions at International Business Machines, Inc.
Mr. Grivner holds a Bachelor of Arts degree in Biology from Lycoming College and
an advanced degree from the University of Pennsylvania, Wharton School of
Business.
B.J. CASSIN has been a director of the Company since January 1993. Since
1979, he has been a private venture capitalist. Mr. Cassin is also a director of
Cerus Corporation and six private companies.
CLIFFORD H. HIGGERSON has been a director of the Company since January 1993.
Mr. Higgerson has been a general partner of Vanguard Venture Partners, a venture
capital firm and a stockholder of the Company, since July 1991 and managing
partner of Communications Ventures, a venture capital firm, since 1987. Mr.
Higgerson is also a director of Digital Microwave Corporation and eight private
companies.
BRIAN JACKMAN has been a director of the Company since September 1993. Mr.
Jackman has been the Executive Vice President of Tellabs, Inc., a
telecommunications equipment company and a stockholder of the Company, and the
President of Tellabs Operations, Inc., a subsidiary of Tellabs, Inc., since
1991. From 1990 to 1993, Mr. Jackman was the Executive Vice President of
Business Operations of Tellabs, Inc. From 1989 to 1990, he was the Senior Vice
President/General Manager of the data communications division of Tellabs, Inc.
Mr. Jackman is also a director of Tellabs, Inc. and Universal Electronics, Inc.
DAN RASDAL has been a director of the Company since February 1993. Mr.
Rasdal has been Chairman of the Board of SymmetriComm, Inc., a
telecommunications company, since July 1989, and the President and Chief
Executive Officer of SymmetriComm since 1985. Mr. Rasdal is also a director of
Celeritek, Inc., a semiconductor manufacturer.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 13 meetings during the
fiscal year ended December 31, 1996 (the "1996 fiscal year"). Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board and (ii) the total number of meetings held by all committees of the
Board on which he served.
The Company has two standing committees: an Audit Committee and a
Compensation Committee. There is no nominating committee or committee performing
the function of such committee.
The Audit Committee, currently consisting of Messrs. Cassin, Higgerson and
Rasdal, meets with the Company's financial management and its independent public
accountants at various times during each year and reviews internal control
conditions, audit plans and results, and financial reporting procedures. This
Committee held three meetings during the 1996 fiscal year.
The Compensation Committee, currently consisting of Messrs. Higgerson and
Jackman, reviews and approves the Company's compensation arrangements for key
employees and administers the Company's 1996 Stock Incentive Plan and the
Company's Employee Stock Purchase Plan. This Committee held one meeting during
the 1996 fiscal year.
DIRECTOR COMPENSATION
Non-employee Board members do not receive any cash fees for their service on
the Board or any Board committee, but they are entitled to reimbursement of all
reasonable out-of-pocket expenses incurred in connection with their attendance
at Board and Board committee meetings. In addition, non-employee Board members
receive stock options pursuant to the Automatic Option Grant Program in effect
under the Company's 1996 Stock Incentive Plan.
Under the Automatic Option Grant Program, each individual who first joins
the Board after June 30, 1996 as a non-employee Board member will receive a
non-qualified stock option grant for 20,000 shares of Common Stock at the time
of his or her commencement of board service, provided such individual has not
otherwise been in the prior employ of the Company. In addition, at each annual
meeting of stockholders, beginning with the Annual Meeting, each individual who
is to continue to serve as a non-employee Board member will receive a
non-qualified stock option grant to purchase 6,000 shares of Common Stock,
whether or not such individual has been in the prior employ of the Company and
whether or not such individual first joined the Board after June 30, 1996,
provided that such individual has served as a non-employee Board member for at
least six months.
Each automatic grant will have an exercise price equal to the fair market
value per share of Common Stock on the grant date and will have a maximum term
of 10 years, subject to earlier termination following the optionee's cessation
of Board service. Each automatic option will be immediately exercisable;
however, any shares purchased upon exercise of the option will be subject to
repurchase, at the option exercise price paid per share, should the optionee's
service as a non-employee Board member cease prior to vesting in the shares.
Each automatic option grant will vest in a series of installments over the
optionee's period of Board service as follows: one-third of the option shares
upon completion of one year of Board service, and the balance in twenty-four
(24) successive equal monthly installments upon the optionee's completion of
each additional month of Board service thereafter. However, each outstanding
option will immediately vest upon (i) certain changes in the ownership or
control of the Company or (ii) the death or disability of the optionee while
serving as a Board member.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP served as independent public accountants
for the Company for the fiscal year ended December 31, 1996. The Board of
Directors desires the firm to continue in this
4
<PAGE>
capacity for the current fiscal year. Accordingly, a resolution will be
presented to the Annual Meeting to ratify the selection of KPMG Peat Marwick LLP
by the Board of Directors as independent public accountants to audit the
accounts and records of the Company for the fiscal year ending December 31,
1997, and to perform other appropriate services. In the event that stockholders
fail to ratify the selection of KPMG Peat Marwick LLP, the Board of Directors
would reconsider such selection.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting to respond to appropriate questions and to make a statement if such
representative desires to do so.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1997 by: (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than five percent of the outstanding shares of the Common
Stock of the Company; (ii) each director of the Company; (iii) each executive
officer of the Company; and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
FEBRUARY 28, 1997(1)
---------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
- ---------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Tellabs, Inc.(2) ....................................................................... 3,381,027 10.0%
4951 Indiana Avenue
Lisle, IL 60532
Coral Partners II(3) ................................................................... 3,308,665 9.9%
60 South Sixth Street, Suite 3510
Minneapolis, MN 55402
St. Paul Venture Capital, Inc.(4) ...................................................... 2,826,556 8.3%
8500 Normandale Lake Blvd., Suite 1940
Bloomington, MN 55437
Vanguard IV, L.P. ...................................................................... 2,696,397 8.1%
525 University Avenue
Palo Alto, CA 94301
B.J. Cassin(5).......................................................................... 1,292,915 3.9%
Donald Green(6)......................................................................... 1,851,701 5.5%
Carl Grivner(7)......................................................................... 267,393 *
Clifford H. Higgerson(8)................................................................ 2,696,397 8.1%
Brian Jackman(9)........................................................................ 3,401,993 10.1%
Dan Rasdal(10).......................................................................... 63,000 *
Karen Godfrey(11)....................................................................... 106,113 *
Glenn Lillich(12)....................................................................... 279,262 *
Dan E. Steimle(13)...................................................................... 266,242 *
All executive officers and directors as a group (9 persons)(14)......................... 10,225,016 29.2%
</TABLE>
- ------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options and warrants currently exercisable within 60 days are deemed to
be outstanding for computing the percentage of the person holding such
options or warrants but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by
5
<PAGE>
footnote, and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(2) Includes 300,000 shares which may be acquired upon exercise of a warrant.
(3) Includes 4,150 shares held by Yuval Almog and 5,263 shares held in an IRA
by Dain Bosworth, Inc. as a custodian for the benefit of Yuval Almog. Also
includes 4,150 shares held by Peter McNerney. Messrs. Almog and McNerney are
two of the general partners of Coral Management Partners II, which is the
general partner of Coral Partners II, and may be deemed to be the beneficial
owners of such shares. Mr. Almog and Mr. McNerney disclaim beneficial
ownership of such shares.
(4) St. Paul Venture Capital, Inc. is an affiliate of St. Paul Fire and Marine
Insurance Company, which is the record owner of the shares. Includes 831,880
shares which may be acquired upon exercise of warrants.
(5) Includes 212,053 shares held in trust by the Robert S. Cassin Charitable
Trust. Also includes 43,380 shares which may be acquired upon exercise of a
warrant held by Mr. Cassin as conservator for Robert Cassin, 75,000 shares
held in trust by The Cassin Foundation and 75,000 shares held in trust by
the Cassin 1997 Charitable Trust UTA dated 1/28/97. The remaining shares are
held in trust by B.J. Cassin and Isabel B. Cassin, Trustees of the Cassin
Family Trust U/D/T, dated January 31, 1996.
(6) Includes 321,502 shares issuable upon exercise of options held by Mr.
Green, 146,576 of which shares will be vested as of 60 days from February
28, 1997. Also includes 294,044 shares which may be acquired by Mr. Green
upon exercise of warrants. Excludes shares held by Mr. Green's adult
children.
(7) Includes 216,489 shares issuable upon exercise of options held by Mr.
Grivner, 26,678 of which shares will be vested as of 60 days from February
28, 1997.
(8) Includes 2,696,397 shares held by Vanguard IV, L.P. Mr. Higgerson is a
general partner of Vanguard Venture Partners, L.P., which is the general
partner of Vanguard IV, L.P. and may be deemed to be the beneficial owner of
such shares owned by Vanguard IV, L.P. Mr. Higgerson disclaims beneficial
ownership of such shares.
(9) Includes 3,381,027 shares held by Tellabs, Inc., 300,000 of which shares
may be acquired upon exercise of a warrant. Mr. Jackman is the Executive
Vice President of Tellabs, Inc. and the President of Tellabs Operations,
Inc. and may be deemed to be the beneficial owner of such shares owned by
Tellabs, Inc. Mr. Jackman disclaims beneficial ownership of such shares.
Also includes 10,000 shares which may be acquired by Mr. Jackman upon
exercise of a warrant.
(10) Includes 63,000 shares issuable upon exercise of options held by Mr.
Rasdal, 40,000 of which shares will be vested as of 60 days from February
28, 1997.
(11) Includes 79,515 shares issuable upon exercise of options held by Ms.
Godfrey, 42,826 of which shares will be vested as of 60 days from February
28, 1997.
(12) Includes 259,225 shares issuable upon exercise of options held by Mr.
Lillich, 177,147 of which shares will be vested as of 60 days from February
28, 1997. Also includes 20,000 shares which may be acquired upon exercise of
a warrant.
(13) Includes 72,400 shares subject to a right of repurchase by the Company.
Includes 23,450 shares issuable upon exercise of options held by Mr.
Steimle, 81 of which shares will be vested as of 60 days from February 28,
1997; 4,800 shares held in an IRA by Alex. Brown & Sons as a custodian for
the benefit of Mr. Steimle; and 4,000 shares held in an IRA by Alex. Brown &
Sons as a custodian for the benefit of Jessica Steimle.
(14) Includes 72,400 shares subject to a right of repurchase by the Company.
Includes 963,181 shares issuable upon exercise of options, 433,308 of which
shares will be vested as of 60 days from February 28, 1997, and 667,424
shares which may be acquired upon exercise of warrants.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the other four executive officers of the Company
(the "Named Executive Officers"), each of whose aggregate compensation for the
year ended December 31, 1996 was in excess of $100,000 for services rendered in
all capacities to the Company for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------------------------------- ----------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Don Green(1) ...................................... 1996 $ 275,000 $ 138,903 184,902 $ --
Chairman of the Board and 1995 185,000 115,625 25,000 --
Chief Executive Officer
Carl J. Grivner(2) ................................ 1996 235,000 106,349 -- 74,080(3)
President and 1995 102,115 48,894 212,000 14,690(4)
Chief Operating Officer
Karen Godfrey ..................................... 1996 105,000 25,077 -- --
Corporate Controller and 1995 101,016 28,935 10,200 --
Assistant Secretary
Glenn Lillich ..................................... 1996 170,000 51,868 -- --
Vice President, Domestic 1995 160,000 54,400 12,000 --
Sales and Marketing
Dan E. Steimle .................................... 1996 170,000 51,868 -- --
Vice President, Chief 1995 160,000 54,400 12,000 --
Financial Officer, Treasurer
and Secretary
</TABLE>
- ------------------------
(1) Mr. Green holds 167,200 shares of the Company's Common Stock purchased
pursuant to a restricted stock issuance agreement with an aggregate value on
December 31, 1996 of $8,851,150 (net of consideration for the shares paid by
Mr. Green). The Company has the right to repurchase the shares at the
original purchase price per share upon Mr. Green's cessation of service
prior to vesting in the shares. The repurchase right lapses as to 20% of the
shares upon the completion of one year of service from the date of issuance,
and as to the balance of the shares in a series of 48 equal successive
monthly installments. As of December 31, 1996, the repurchase right has
lapsed as to 66,880 shares.
(2) Mr. Grivner joined the Company in July 1995.
(3) Represents $34,377 in relocation expenses paid by the Company and
forgiveness of $39,703 of principal and interest on a note payable to the
Company. See "Certain Relationships and Related Transactions."
(4) Represents relocation expenses paid by the Company.
7
<PAGE>
STOCK OPTION GRANTS TO NAMED EXECUTIVE OFFICERS
The following table sets forth certain information regarding stock option
grants made to each of the Named Executive Officers in 1996. No stock
appreciation rights were granted to the Named Executive Officers during such
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE OR STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR SHARE(3) DATE 5% 10%
- ----------------------------------- ----------- --------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donald Green....................... 184,902 17.1% $ 12.50 06/25/06 $ 1,453,548 $ 3,683,577
Carl J. Grivner.................... -- -- -- -- -- --
Karen Godfrey...................... -- -- -- -- -- --
Glenn Lillich...................... -- -- -- -- -- --
Dan E. Steimle..................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The option shown in the table is immediately exercisable for all the option
shares. However, any shares purchased under the option will be subject to
repurchase by the Company, at the exercise price paid per share, in the
event the optionee terminates employment prior to vesting in those shares.
The shares vest in successive equal monthly installments over 24 months of
service, measured from the date of grant. All the option shares will
immediately vest in the event the Company is acquired by merger or asset
sale, unless the options are assumed by the acquiring entity.
(2) Realizable values are reported net of the option exercise price. The dollar
amounts under these columns are the result of calculations based upon stock
price appreciation at the assumed 5% and 10% compounded annual rates (as
applied to the estimated fair market value of the option shares on the date
of grant, not the current fair market value of those shares) and are not
intended to forecast any actual or potential future appreciation, if any, in
the value of the Company's stock price. Actual gains, if any, on stock
option exercises will be dependent upon the future performance of the Common
Stock as well as the option holder's continued employment through the
vesting period. The potential realizable value calculation assumes that the
option holder waits until the end of the option term to exercise the option.
(3) The exercise price for the shares of Common Stock subject to option grants
made under the Plan may be paid in cash or in shares of Common Stock valued
at fair market value on the exercise date. The option may also be exercised
through a same-day sale program without any cash outlay by the optionee. In
addition, the Plan Administrator may provide financial assistance to one or
more optionees in the exercise of their outstanding options by allowing such
individuals to deliver a full-recourse, interest-bearing promissory note in
payment of the exercise price and any associated withholding taxes incurred
in connection with such exercise.
8
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to the Named
Executive Officers concerning their option exercises during 1996 and their
option holdings as of December 27, 1996. None of the Named Executive Officers
held any stock appreciation rights at the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISABLE VALUE OF UNEXERCISABLE
SHARES OPTIONS AS OF DECEMBER 27, IN-THE-MONTH OPTIONS AS OF
ACQUIRED 1996(2) DECEMBER 27, 1996(3)
ON VALUE ----------------------------- -----------------------------
EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- ------------ ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald Green............. -- $ -- 108,558 181,344 $5,193,968 $ 7,892,539
Carl J. Grivner.......... 46,666 2,292,467 12,401 152,933 650,503 8,039,699
Karen Godfrey............ 20,000 170,000 36,440 38,760 1,928,445 2,043,593
Glenn Lillich............ -- -- 160,534 87,466 8,533,982 4,630,868
Dan E. Steimle........... 160,000 236,000 18,400 33,600 971,200 1,767,300
</TABLE>
- ------------------------
(1) Based upon the difference between the exercise price and the fair market
value of the Company's Common Stock on the date of exercise.
(2) Although each option is immediately exercisable for all the option shares,
any shares purchased under the option are subject to repurchase by the
Company, at the exercise price paid per share, in the event the optionee
terminates employment prior to vesting in those shares. Twenty percent of
the option shares will vest upon optionee's completion of one year of
service measured from the vesting date, and the balance will vest in
successive equal monthly installments over the next 48 months of service
thereafter (other than 184,902 of Mr. Green's options, which vest in
successive equal monthly installments over 24 months of service measured
from the date of grant). All the option shares will immediately vest in the
event the Company is acquired by merger or asset sale, unless the options
are assumed by the acquiring entity. Accordingly, the table reflects such
option shares as to which the repurchase right has lapsed under the
"exercisable" column and such option shares subject to the repurchase right
under the "unexercisable" column.
(3) Based on the last reported sale price of the Company's Common Stock on
December 27, 1996 ($53.25 per share) less the exercise price payable for
such shares.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Compensation Committee as Plan Administrator of the 1996 Stock Incentive
Plan has the authority to provide for the accelerated vesting of the shares of
Common Stock subject to outstanding options held by the Chief Executive Officer
and the Company's other executive officers or any unvested shares actually held
by those individuals under the 1996 Stock Incentive Plan, in the event the
Company is acquired by merger or asset sale or there is a hostile change in
control effected by a successful tender or exchange offer for more than 50% of
the Company's outstanding voting securities or a change in the majority of the
Board as a result of one or more contested elections for board membership.
Alternatively, the Compensation Committee may condition such accelerated vesting
upon the individual's termination of service within a designated period
following the acquisition or hostile change in control.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, the Company has issued and sold, in private placement
transactions, shares of Preferred Stock and warrants to purchase Common Stock to
the Company's executive officers, directors and/or greater than 5% stockholders
as follows:
<TABLE>
<CAPTION>
COMMON COMMON COMMON COMMON
EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT
SHARES OF SHARES OF SHARES OF SHARES OF
SERIES A SERIES B SERIES C SERIES D
PREFERRED PREFERRED PREFERRED PREFERRED COMMON STOCK
INVESTOR(1) STOCK(2) STOCK(3) STOCK(4) STOCK(5) WARRANTS
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
B.J. Cassin.................................. 1,285,458 175,029 109,656 -- 339,908(6)
Coral Partners II............................ 43,862 6,838 1,353,462 208,487 1,234,280(7)
Donald Green................................. 681,552 -- -- -- 294,044(8)
Dan E. Steimle............................... -- -- 5,483 -- 5,000(9)
St. Paul Venture Capital, Inc................ 1,485,720 231,602 439,655 263,174 831,880(10)
Tellabs, Inc.(11)............................ -- 1,141,322 13,176 1,403,597 1,352,836(12)
Vanguard IV, L.P.(13)........................ 1,485,720 231,602 351,956 87,725 779,464(14)
</TABLE>
- ------------------------
(1) Shares held by all affiliated persons and entities have been aggregated.
See "Security Ownership of Certain Beneficial Owners and Management" for
more detail on shares held by these purchasers.
(2) Shares of Series A Preferred Stock were issued in January and April 1993 at
an effective common equivalent per share price of $0.45597.
(3) Shares of Series B Preferred Stock were issued in October 1993 at an
effective common equivalent per share price of $2.27985.
(4) Shares of Series C Preferred Stock were issued in March and May 1994 at an
effective common equivalent per share price of $2.27985.
(5) Shares of Series D Preferred Stock were issued in October 1994 at an
effective common equivalent per share price of $2.84982.
(6) 80,292 of these Common Stock Warrants were exercised in February 1995, at
the following exercise prices: 6,472 at $0.025 per share and 73,820 at
$0.125 per share. The remaining 259,616 warrants have an exercise price of
$1.165 per share.
(7) An aggregate of 1,207,327 shares of Common Stock were issued upon exercise
of these Common Stock Warrants in October 1996 at an exercise price of
$1.165 per share.
(8) These Common Stock Warrants have the following exercise prices: 255,316 at
$0.025 per share and 38,728 at $0.125 per share.
(9) These Common Stock Warrants were exercised in July 1995 at an exercise
price of $1.165 per share.
(10) These Common Stock Warrants have the following exercise prices: 6,472 at
$0.025 per share, 63,260 at $0.125 per share, 150,000 at $0.25 per share and
612,148 at $1.165 per share.
(11) Brian Jackman, an affiliate of Tellabs, Inc., is a director of the Company.
(12) 1,042,836 of these Common Stock Warrants were exercised in May 1995 at an
exercise price of $1.165 per share. The remaining 310,000 warrants have the
following exercise prices: 300,000 at $0.25 per share and 10,000 at $1.165
per share.
(13) Clifford H. Higgerson, an affiliate of Vanguard IV, L.P., is a director of
the Company.
(14) An aggregate of 767,463 shares of Common Stock were issued upon exercise of
these Common Stock Warrants in October 1996 at the following exercise
prices: 6,469 at $0.025 per share, 70,666 at $0.125 per share, 149,347 at
$0.25 per share and 540,981 at $1.165 per share.
10
<PAGE>
The foregoing table has been adjusted to reflect the conversion of each
outstanding share of Series A, Series B, Series C and Series D Preferred Stock
of the Company into 1.09656 shares of Common Stock in October 1996. Each holder
of such shares of Common Stock issued upon conversion of Preferred Stock is
entitled to certain registration rights.
In connection with the issuance and sale of Preferred Stock, the Company
entered into an indemnity agreement with its Preferred Stock investors (other
than investors of Series F Preferred Stock) pursuant to which the Company agreed
to indemnify such investors from the financial dilution they may experience as a
result of the costs and potential liabilities of the Company arising in
connection with certain litigation with DSC. In connection with the settlement
of the litigation with DSC, the Company entered into an Amended and Restated
Indemnity Agreement (the "Amended Indemnity Agreement") with such investors.
Pursuant to the Amended Indemnity Agreement, the indemnification was limited to
the costs and expenses of the litigation and was effected by amending the
Company's Certificate of Incorporation in August 1996 to adjust the rate at
which each series of Preferred Stock (other than Series F) converts into Common
Stock. The rate at which each share of Series A, Series B, Series C and Series D
Preferred Stock converts into Common Stock was adjusted so that each of such
shares converted into 1.09656 shares of Common Stock and the rate at which each
share of Series E Preferred Stock converts into Common Stock was adjusted so
that each share of Series E Preferred Stock converted into 1.02529 shares of
Common Stock. Such conversion into Common Stock automatically occurred in
October 1996. Upon amendment of the Certificate of Incorporation in August 1996,
the Amended Indemnity Agreement was terminated and no further indemnification
obligation remains.
In October 1995, the Company loaned to Carl Grivner, the President and Chief
Operating Officer of the Company, the sum of $100,000 to assist him in
relocating to Northern California. Such loan bears interest at the rate of 6.37%
per annum, with accrued interest due and payable annually on July 19 of each
year, and the principal of such loan is due and payable in three equal
installments on July 19 of 1996, 1997 and 1998. In August 1996, the Company
forgave one-third of the principal balance and interest accrued through July 19,
1996. As of December 31, 1996, two-thirds of the principal balance of this loan
remained outstanding.
In May 1995, the Company issued an aggregate of 563,600 shares of Common
Stock at $0.3125 per share to certain key employees pursuant to compensation
agreements approved by the Company's Board of Directors. In connection with such
issuance, each such employee paid for the restricted stock by issuing a secured
note payable to the Company. The Company has the right to repurchase such stock
at the original purchase price per share upon the purchaser's cessation of
service prior to vesting in such shares. The repurchase right lapses with
respect to the shares, and each purchaser vests in his shares, as follows: 20%
of the shares upon completion of one year of service measured from the date of
issuance, and the balance of the shares in a series of equal successive monthly
installments upon the purchaser's completion of each of the next 48 months of
service thereafter. Such stock is also subject to the Company's right of first
refusal, which is exercisable in the event the purchaser decides to sell or
otherwise transfer any of the shares purchased prior to the initial public
offering of Common Stock. Donald Green, the Company's Chief Executive Officer,
purchased 167,200 shares of Common Stock and issued a note payable to the
Company in the amount of $52,250. The note is secured by shares of Preferred
Stock owned by Mr. Green. Such note bears interest at the rate of 6.5% per annum
with the entire principal balance of the note, together with all accrued or
unpaid interest, due and payable on December 13, 2000.
AFC and Tellabs Operations, Inc. ("Tellabs Operations"), a subsidiary of
Tellabs, Inc., a stockholder of the Company, entered into a general partnership
in 1994 to design, develop, manufacture and distribute a new product line
derived from the UMC system. AFC contributed a non-exclusive license to use the
UMC technology, Tellabs Operations contributed cash to the joint venture, and
each received defined marketing rights for the developed technology. On December
23, 1996, the Company and Tellabs Operations entered into an agreement to
terminate the partnership. In connection with the dissolution, Tellabs
Operations reimbursed the Company $1,683,000 for all loans and advances made by
the Company
11
<PAGE>
to date. In addition, the Company and Tellabs Operations entered into a License
and Marketing Agreement and an OEM Agreement. Under the License and Marketing
Agreement, the Company granted to Tellabs Operations a license to use the UMC
technology in the development, manufacture, and distribution of coaxial systems
for specified markets. In return, the Company will receive royalties from the
sale of these systems. Under the OEM Agreement the Company agreed to manufacture
the UMC products for Tellabs Operations.
The Company has granted options to certain of its directors and executive
officers. See "Executive Compensation" and "Security Ownership of Certain
Beneficial Owners and Management."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company intends that all future transactions,
including loans, between the Company and its officers, directors, principal
stockholders and their affiliates be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested outside
directors on the Board of Directors, and be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee in May 1994.
During the last fiscal year, Messrs. Higgerson and Jackman served as members of
the Compensation Committee. Neither of these individuals has served at any time
as an officer or employee of the Company. Prior to the establishment of the
Compensation Committee, all decisions relating to executive compensation were
made by the Company's Board of Directors. For a description of the transactions
between the Company and members of the Compensation Committee and entities
affiliated with such members, see "Certain Relationships and Related
Transactions." No executive officer of the Company serves as a member of the
board of directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"), is
composed of two outside directors within the meaning of Section 162(m) of the
Internal Revenue Code, and develops and oversees the Company's executive
compensation strategy. The Company's executive compensation strategy is designed
to facilitate recruiting and retaining highly qualified executives, supporting
achievement of the Company's business objectives and enhancing stockholder
value. The Committee reviews on an ongoing basis all aspects of executive
compensation and has retained an independent compensation consulting firm to
assist in assessing executive compensation policies and programs. The Committee
reviewed the consultant's 1995 study, which confirmed the stated compensation
strategy. In addition, the Committee recommends for consideration and approval
by all of the outside directors the compensation for the Chairman of the Board.
The Committee's executive compensation philosophy is designed to address the
needs of the Company, its executives and its stockholders. The executive
compensation program is structured to:
- Reinforce the importance of management's focus on enhancing stockholder
value.
- Ensure alignment of management's compensation with the annual and
long-term performance of the Company.
- Reward exceptional performance by means of competitive compensation
opportunities.
- Enable the Company to attract and retain a highly qualified management
team.
The three key elements of the Company's compensation program are base
salary, a management incentive bonus plan and long term incentives, which
consist primarily of stock options.
12
<PAGE>
BASE SALARY
The Committee annually reviews each executive's base salary. The expected
level of pay for each position is established at between the 50th and 75th
percentile of comparable positions of similar companies as determined by
external industry surveys of compensation of executives in similar positions. In
making comparisons with the compensation of executives of similar companies, the
Committee considers national salary survey data for companies comparable to the
Company with respect to size and gross revenues. The Committee believes that the
Company competes with these organizations for executive talent.
In determining salary adjustments, the Committee considers the Company's
growth in earnings and revenues and the executive's performance level, as well
as other factors relating to the executive's specific responsibilities.
Additional factors considered include the executive's length of time in the
position, experience, skills, potential for advancement, responsibility and
current salary in relation to the expected level of pay for the position. The
Committee does not apply a specific formula or weight to the factors considered.
For 1996 the Committee exercised its discretionary judgment based upon the
criteria listed above and the recommendations of the Chief Executive Officer to
determine the appropriate salary adjustments.
ANNUAL INCENTIVE COMPENSATION
All executives at the Director level and above participate in the AFC
Management Incentive Plan. At the beginning of each year, the Committee
establishes performance goals for the Company for that year. These goals are
tied to the Company's annual operating plan and include revenues, gross margins,
and operating profit. The plan provides for payment of a designated amount based
upon achievement of specific financial objectives. Performance is measured as a
percent of attainment against these objectives.
Additionally, at the beginning of each year the Committee establishes
incentive award guidelines for the four levels of participants in the plan. The
percentage of total annual pay attributable to incentive compensation increases
proportionately with the executive's level of management responsibility.
Plan bonuses are paid quarterly up to 125% of targeted goals. In the event
performance exceeds 125% of targeted goals for the year, the additional bonus
amount in excess of the 125% is paid out annually.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentives are linked to the growth in the value of the Company's
Common Stock and consist primarily of stock options. All stock options have been
granted with an exercise price equal to the fair market value of the stock at
the time of grant, and, therefore provide no compensation to the executive
unless the value of the stock increases. The Committee encourages executives to
maintain a long-term ownership position in the Company's Common Stock. The
Committee believes that through the use of incentive stock options the interests
of the Company's executives are directly related to enhancing stockholder value.
Each year, the Committee establishes guidelines and incentive option amounts
based on position level, base salary and current competitive practice as
indicated by industry compensation surveys of comparable companies. Individual
departments then make their recommendations to the Chief Executive Officer and
Chief Operating Officer based on each individual's past and expected
contributions to the achievement of the Company's long-term performance goals.
The Chief Executive Officer and Chief Operating Officer adjust and/or approve
the recommendations that are forwarded to the Committee. The Committee approves
incentive option awards to executives based on its discretionary judgment taking
into consideration the above mentioned criteria and recommendations. To ensure
that these option grants are linked to performance, the Committee does not
consider prior stock option grants when making these awards.
13
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Donald Green is the Chief Executive Officer and Chairman of the Board of
Directors of the Company. Mr. Green is also one of the original founders of the
Company. In determining Mr. Green's base salary, incentive compensation and
long-term incentive compensation for 1996 and prior years, the Committee
considered both the Company's performance and Mr. Green's individual performance
by the same measures described above for determining executive compensation.
In connection with Mr. Green's (i) efforts to facilitate the settlement of
all outstanding litigation between DSC and the Company, (ii) dedication to the
Company and its stockholders as exemplified by the Company's exceptional
performance, and (iii) leadership, experience, abilities and recognition as an
industry leader, the Committee awarded Mr. Green 184,902 non-qualified stock
options in 1996, which vest in successive monthly installments over 24 months of
service, measured from the date of grant.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits federal income tax
deductions for compensation paid to the Chief Executive Officer and the four
other most highly compensated officers of a public company to $1 million per
officer in any year, but contains an exception for performance-based
compensation that satisfies certain conditions.
The Company's 1996 Stock Incentive Plan is structured so that any
compensation deemed paid to an executive officer when he or she exercises an
outstanding option under the 1996 Stock Incentive Plan will qualify as
performance-based compensation which will not be subject to the $1 million
limitation.
While it is unlikely that other compensation payable to any executive
officer would exceed the deduction limit in the near future, the Committee has
not yet considered whether it will seek to qualify compensation other than
options for the performance-based exception or will prohibit the payment of
compensation that would exceed the deduction limit. However, in approving the
amount and form of compensation for executive officers, the Committee will
continue to consider all elements of cost to the Company of providing that
compensation.
April 4, 1997
COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS
Clifford H. Higgerson
Brian Jackman
14
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return on the
Company's Common Stock with a comparable return of the S&P 500 Index (the "S&P
500") and the S&P High Technology Composite Index (the "Peer Group").
The graph assumes that $100 was invested at the time of the Company's
initial public offering on October 1, 1996 in each of the Company's Common
Stock, the S&P 500 and the Peer Group, and that dividends in the S&P 500 and
Peer Group were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF AFC, THE S&P 500 AND THE COMPANY'S PEER GROUP
<S> <C> <C> <C>
AFC S&P 500 Peer Group
10/1/96 $100.00 $100.00 $100.00
10/31/96 $229.00 $102.00 $100.00
11/29/96 $196.00 $110.00 $114.00
12/27/96 $213.00 $110.00 $114.00
</TABLE>
<TABLE>
<CAPTION>
10/1/96 10/31/96 11/29/96 12/27/96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
AFC................................................... $ 100 $ 229 $ 196 $ 213
S&P 500............................................... $ 100 $ 102 $ 110 $ 110
Peer Group............................................ $ 100 $ 100 $ 114 $ 114
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Executive officers, directors and greater than ten percent
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the fiscal year ended December
31, 1996 with all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent stockholders.
15
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 1998 Annual Meeting
of Stockholders must be received by the Company no later than December 8, 1997.
The proposal must be mailed to the Company's principal executive offices, 1
Willow Brook Court, Petaluma, CA 94954, Attention Dan E. Steimle. Such proposals
may be included in next year's proxy statement if they comply with certain rules
and regulations promulgated by the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matters to be presented at the Annual
Meeting other than those set forth herein and in the Notice accompanying this
Proxy Statement.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares which you hold. YOU ARE, THEREFORE, URGED TO
EXECUTE PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS
BEEN ENCLOSED FOR YOUR CONVENIENCE. Stockholders who are present at the Annual
Meeting may revoke their proxies and vote in person or, if they prefer, may
abstain from voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
/s/ DONALD GREEN
-----------------------------
Donald Green
CHAIRMAN OF THE BOARD
April 4, 1997
Petaluma, California
16
<PAGE>
P R O X Y
[LOGO] AFC-REGISTERED TRADEMARK-
ADVANCED FIBRE COMMUNICATIONS
DETACH HERE AFCF
REVOCABLE PROXY ADVANCED FIBRE COMMUNICATIONS, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Advanced Fibre Communications, Inc. (the
"Corporation") hereby appoints Carl Grivner and Dan E. Steimle, and each or
either of them, with full power of substitution in each of them, as proxies
of the undersigned, and hereby authorizes them to represent and to cast all
votes as designated below, which the undersigned stockholder is entitled to
cast at the Annual Meeting of Stockholders to be held at 1:00 p.m. on May 14,
1997, at the offices of the Corporation, 9 Willow Brook Court, Petaluma,
California 94954, and at any adjournments thereof, upon the following
matters. The undersigned stockholder hereby revokes any proxy or proxies
heretofore given.
This proxy will be voted as directed by the undersigned stockholder. The
Board recommends a vote FOR Proposals 1 and 2. UNLESS CONTRARY DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2 TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK
LLP AS INDEPENDENT AUDITORS OF THE CORPORATION FOR THE YEAR ENDING DECEMBER
31, 1997 AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD
OF DIRECTORS AS TO OTHER MATTERS. The undersigned stockholder may revoke this
proxy at any time before it is voted by delivering to the Secretary of the
Corporation either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the annual meeting and voting in
person. The undersigned stockholder hereby acknowledges receipt of the notice
of annual meeting and proxy statement.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE SIDE
<PAGE>
Dear Stockholder:
The officers and directors of Advanced Fibre Communications, Inc. ("AFC")
cordially invite you to attend the Annual Meeting of Stockholders, Wednesday,
May 14, 1997 at 1:00 p.m., at the offices of AFC, 9 Willow Brook Court,
Petaluma, California.
Please review the important information enclosed with this Proxy. Your vote
counts, and you are strongly encouraged to exercise your right to vote your
shares.
Please mark the boxes on the proxy card to indicate how your shares will
be voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
/s/ DONALD GREEN
Donald Green
Chairman of the Board
and Chief Executive Officer
DETACH HERE AFCF
PLEASE MARK
/X/VOTES AS IN
THIS EXAMPLE.
1. Election of Directors
NOMINEES: Carl Grivner and Clifford H. Higgerson
FOR WITHHELD
/ / / /
/ / _______________________________________
For both nominees except as noted above
2. Ratify the appointment of KPMG FOR AGAINST ABSTAIN
Peat Marwick LLP as independent / / / / / /
auditors of the Corporation.
3. In their discretion, the Proxies are authorized to vote upon any
other business that may properly come before the meeting.
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND THE
NOTE AT LEFT ANNUAL MEETING
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer. If signing for a partnership,
please sign in Partnership name by an authorized person.
Signature: _______________ Date: ______ Signature: _______________ Date: ______
