<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- - --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Summa Four, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which 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:
- - --------------------------------------------------------------------------------
<PAGE> 2
SUMMA FOUR, INC.
25 SUNDIAL AVENUE
MANCHESTER, NEW HAMPSHIRE 03103-7251
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JULY 19, 1996
The Annual Meeting of Stockholders of Summa Four, Inc. (the "Company") will
be held at the Center of New Hampshire -- Holiday Inn, 700 Elm Street, in
Manchester, New Hampshire 03101 at 11:00 a.m., local time, to consider and act
upon the following matters:
1. To elect seven directors to serve for the ensuing year.
2. To ratify the selection of Coopers & Lybrand, L.L.P. by the Board of
Directors as the Company's independent accountants for the current
fiscal year.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on June 7, 1996 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock transfer books of the Company will remain open.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
PAUL C. SEMPLE
Secretary
Manchester, New Hampshire
June 17, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE> 3
SUMMA FOUR, INC.
25 SUNDIAL AVENUE
MANCHESTER, NEW HAMPSHIRE 03103-7251
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 19, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Summa Four, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on July 19, 1996 and at any
adjournments of that meeting (the "Annual Meeting"). All proxies will be voted
in accordance with the stockholders' instructions, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any
time before its exercise by delivery of written revocation or a subsequently
dated proxy to the Secretary of the Company or by voting in person at the Annual
Meeting.
The Company's Annual Report to Stockholders for 1996 is being mailed to
stockholders concurrently with this Proxy Statement.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on June 7, 1996, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 6,089,471 shares of common
stock, $.01 par value per share, of the Company (the "Common Stock").
Stockholders are entitled to one vote per share.
The presence or representation of holders of a majority of the number of
shares of Common Stock issued, outstanding and entitled to vote at the Annual
Meeting constitutes a quorum for the transaction of business at the Annual
Meeting. Shares of Common Stock present in person or represented by proxy
(including shares which abstain or do not vote with respect to one or more of
the matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of directors. Additionally, the affirmative vote of the holders of a majority of
the shares of Common Stock present or represented and voting is required to
ratify the selection of Coopers & Lybrand, L.L.P. as the Company's independent
accountants for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter and will also not
be counted as votes cast or shares voting on such matter.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information as of JUNE 13, 1996,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director and each person nominated
to become a director of the Company, (iii) each executive officer of the Company
named in the Summary Compensation Table set forth under the caption "Executive
Compensation" below and (iv) all directors and executive officers of the Company
as a group:
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
---------------- ------- -------------
<S> <C> <C>
Kopp Investment Advisors Inc............................. 1,214,070 19.94%
--------- -----
JANUS CAPITAL CORP....................................... 647,500 *
--------- -----
Edgar L. Brown, Jr.(3)................................... 1,400 10.15%
-----
Edward C. Callahan, Jr.(4)............................... 38,000 *
Robert A. Degan(5)....................................... 5,300 *
Kendrick A. Estey(6)..................................... 4,000 *
Barry R. Gorsun(7)....................................... 175,235 *
---------
Michael G. Hluchyj(8).................................... 14,000 *
Gordon T. Ray(9)......................................... 9,375 *
Thomas A. St. Germain(10)................................ 63,000 *
William M. Scranton(11).................................. 35,475 *
John A. Shane(12)........................................ 48,157 *
Theresa Pratt Wang(13)................................... 5,319 *
Mel R. Ethem(14)......................................... -- *
All directors and executive officers as a group(15)...... 399,261 6.56%
--------- -----
- - ---------------
<FN>
* Less than 1%
(1) The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission of beneficial ownership of such
shares. Any reference in the footnotes below to stock options held by the
person in question relates to stock options which are currently exercisable
or exercisable within 60 days after JUNE 13, 1996.
(2) The number of shares deemed outstanding with respect to a named person
includes shares outstanding as of June 13, 1996 plus any shares subject to
options held by the person in question that are currently exercisable or
excisable within 60 days after June 13, 1996.
(3) Mr. Brown is a director of the Company. REPRESENTS 1,400 shares issuable
pursuant to options exercisable within 60 days after JUNe 13, 1996.
(4) Mr. Callahan is President, Chief Operating Officer and a director of the
Company. Represents 38,000 shares issuable pursuant to options exercisable
within 60 days after June 13, 1996.
(5) Mr. Degan is a director of the Company. REPRESENTS 5,300 shares issuable
pursuant to options exercisable within 60 days after JUNE 13, 1996.
(6) Mr. Estey is Senior Vice President, Customer Satisfaction and Operations.
REPRESENTS 4,000 shares issuable pursuant to options exercisable within 60
days after JUNE 13, 1996.
(7) Mr. Gorsun is Chief Executive Officer and Chairman of the Board of
Directors of the Company. Includes 140,235 shares issuable pursuant to
options exercisable within 60 days after JUNE 13, 1996.
(8) Mr. Hluchyj is Vice President, Chief Technology Officer. REPRESENTS 14,000
shares issuable pursuant to options exercisable within 60 days after JUNE
13, 1996.
(9) Mr. Ray is a director of the Company. Includes 8,975 shares issuable
pursuant to options exercisable within 60 days after JUNE 13, 1996.
</TABLE>
2
<PAGE> 5
(10) Mr. St. Germain is Senior Vice President and Chief Financial Officer of the
Company. Includes 60,500 shares issuable pursuant to stock options
exercisable within 60 days after JUNE 13, 1996.
(11) Mr. Scranton is a director of the Company. Includes 22,975 shares issuable
pursuant to options exercisable within 60 days after JUNE 13, 1996.
(12) Mr. Shane is a director of the Company. Includes 6,175 shares issuable
pursuant to options exercisable within 60 days after JUNE 13, 1996.
(13) Ms. Wang is Vice President, Engineering. Includes 5,000 shares issuable
pursuant to options exercisable within 60 days after JUNE 13, 1996.
(14) Mr. Ethem resigned as Senior Vice President, Sales and Marketing of the
Company on December 30, 1995.
(15) Includes an aggregate of 302,560 shares issuable pursuant to options
exercisable within 60 days after JUNE 13, 1996.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
seven nominees named below, unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. Each of the
nominees currently serves as a director of the Company. All of the nominees have
indicated their willingness to serve, if elected, but if any of the nominees
should be unable or unwilling to serve, proxies may be voted for substitute
nominee(s) designated by the Board of Directors.
NOMINEES
Set forth below are the name, age, positions with the Company, principal
occupation and business experience during the past five years and the names of
other publicly-held corporations of which each director of the Company serves as
a director and the date when each such person first became a director of the
Company:
Mr. Barry R. Gorsun, 53, has been Chairman of the Board of Directors since
July 1993 and has been Chief Executive Officer and a director of the Company
since July 1988. From July 1988 to July 1993, Mr. Gorsun was also President of
the Company.
Mr. Edgar L. Brown, Jr., 64, has been a director of the Company since
October 1995. Mr. Brown was President and Chief Executive Officer of Bell
Atlantic International from May 1992 to May 1995. From July 1988 to May 1992,
Mr. Brown was President of Europe Bell Atlantic International.
Mr. Edward C. Callahan, Jr., 50, has been a director, President and Chief
Operating Officer of the Company since May 1995. From July 1993 to May 1995, Mr.
Callahan was Vice President, Global Telecommunications and Cable for Sun
Microsystems Computer Corporation ("Sun"). From October 1992 to June 1993, Mr.
Callahan was Vice President, North American Strategic Accounts for Sun and from
June 1990 to September 1992 he was Vice President, Northeast Area for Sun.
Mr. Robert A. Degan, 57, has served as a director of the Company since July
1984. Mr. Degan has been a director, President and Chief Executive Officer of
TyLink, Corp., a data communications company, since April 1991. From July 1989
to March 1991, Mr. Degan served as President and Chief Executive Officer of
Avanti Inc., a data communications company. From November 1985 to June 1989, Mr.
Degan served as a director and President and Chief Executive Officer of AMNET,
Inc., a data communications company.
Mr. Gordon T. Ray, 66, has served as a director of the Company since May
1994. From October 1985 to September 1993, Mr. Ray was an Executive Vice
President of NEC America, Inc. Mr. Ray is also a member of the Board of
Directors of the Telephone Industry Association, member of the Electronics
Industries Association Board of Governors and a Fellow of the Royal Society of
Arts, Manufacturing and Commerce.
3
<PAGE> 6
Mr. William M. Scranton, 75, has served as a director of the Company since
June 1976. Mr. Scranton has been a Senior Vice President of First Financial
Management Corp., a partnership syndication firm, and a self-employed business
consultant since January 1983.
Mr. John A. Shane, 63, has served as a director of the Company since June
1976. Mr. Shane has been President of Palmer Service Corporation since its
organization in July 1972. Mr. Shane is a general partner of The Palmer
Organization and a general partner of Palmer Partners L.P., venture capital
partnerships. Mr. Shane is also a director of Arch Communications Group, Inc.,
Eastern Bank Corp. and United Asset Management Corporation and is a trustee of
the New England Funds Group.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the Company's internal accounting control policies and procedures,
considers and recommends the selection of the Company's independent accountants,
reviews and approves any major accounting policy changes affecting the Company's
operating results and provides the opportunity for direct contact between the
Company's independent accountants and the Board. The Company's consolidated
financial statements are currently audited by Coopers & Lybrand, L.L.P. The
Audit Committee met eight times during fiscal 1996. The members of the Audit
Committee are Messrs. Ray, Shane and Scranton.
The Company has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board regarding compensation
programs of the Company and has authority to grant stock options under the
Company's stock option and incentive plans to all officers of the Company who
are persons required to file reports ("Reporting Persons") pursuant to Section
16(a) of the Exchange Act. The Compensation Committee also administers the
Company's 1993 Employee Stock Purchase Plan. The Compensation Committee met 13
times during fiscal 1996. The members of the Compensation Committee are Messrs.
Brown, Degan and Scranton.
The Company has a standing Directors Affairs Committee of the Board of
Directors, which establishes membership criteria, identifies, recruits and
nominates qualified candidates to serve on the Board of Directors and assesses
the Board's performance. The Directors Affairs Committee met three times in
fiscal 1996. The members of the Directors Affairs Committee are Messrs. Ray and
Gorsun.
The Board of Directors held ten meetings during fiscal 1996. Each director
attended at least 75% of the aggregate number of Board meetings and meetings
held by all committees on which he then served.
DIRECTOR COMPENSATION
The Company pays to all non-employee directors an annual fee of $10,000 and
a fee of $1,000 for each meeting attended. The Company also reimburses all of
its directors for their out-of-pocket expenses incurred in the performance of
their duties as directors of the Company.
DIRECTOR STOCK OPTIONS
Under the terms of the Company's 1993 Director Stock Option Plan directors
of the Company who are not officers or employees of the Company or of any
subsidiary of the Company are entitled to receive nonstatutory options to
purchase shares of Common Stock.
4
<PAGE> 7
MANAGEMENT
<TABLE>
Executive Officers. The executive officers of the Company are as follows:
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barry R. Gorsun...................................... 53 Chief Executive Officer and
Chairman of the Board of Directors
Edward C. Callahan, Jr............................... 50 President, Chief Operating Officer
and Director
Thomas A. St. Germain................................ 58 Senior Vice President, Chief
Financial Officer and Treasurer
Kendrick A. Estey.................................... 56 Senior Vice President, Customer
Satisfaction and Operations
Michael G. Hluchyj................................... 41 Vice President, Chief Technology
Officer
Theresa M. Pratt Wang................................ 43 Vice President, Engineering
</TABLE>
Messrs. Gorsun and Callahan have been nominated for election to the Board
of Directors at the Annual Meeting. See "Election of Directors -- Nominees."
Mr. St. Germain has been Senior Vice President, Chief Financial Officer and
Treasurer of the Company since May 1993. From August 1984 to April 1993, Mr. St.
Germain was Senior Vice President, Chief Financial Officer, Treasurer and
Secretary of Vicor Corp., a power systems manufacturing company.
Mr. Estey has been Senior Vice President, Customer Satisfaction of the
Company since December 1994. From December 1993 to December 1994, Mr. Estey was
President of Realty InfoLine of Florida, a marketing telecommunications service
to realtors. From November 1992 to December 1993, Mr. Estey was general
manager/operations of Century Computer Marketing Corporation, a multi-vendor
servicer and logistics provider company. From January 1989 to November 1992, Mr.
Estey was a principal of Estey Associates, a consulting and management firm.
Mr. Hluchyj has been Vice President, Chief Technology Officer of the
Company since July 1994. From June 1987 to July 1994, Mr. Hluchyj was Director,
Networking Research for Motorola, Inc.
Theresa M. Pratt Wang has been Vice President, Engineering of the Company
since May 1995. From July 1993 to April, 1995 Ms. Pratt was Vice President,
General Manager of Network Access Systems Products Group for Codex Corp., a
division of Motorola, Inc. From October 1991 to July 1993, Ms. Pratt was Vice
President, Engineering of Artel Communications Corporation, a manufacturer of
ethernet switching hubs and video equipment. From January 1990 to October 1991,
Ms. PRATT was Senior Director, General Manager of Network Access Systems
Products Group for Codex Corp.
Executive officers serve at the discretion of the Board of Directors. There
are no family relationships among any of the Company's directors or executive
officers.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth certain information
concerning the compensation for each of the last three fiscal years of the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers during the fiscal year ended March 31, 1996 (the
"Named Executive Officers"):
5
<PAGE> 8
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -----------
COMPENSATION SECURITIES ALL
------------------ UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS OPTIONS COMPENSATION
POSITION YEAR ($) ($)(1) (SHARES) ($)(2)
-------- ---- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C>
Barry R. Gorsun....................... 1996 237,000 -- -- 3,249
Chief Executive 1995 216,737 90,000 50,000 2,221
Officer and Chairman 1994 180,135 33,100 -- 1,551
Edward C. Callahan, Jr.(3)............ 1996 169,615 42,000 110,000 20,850
President, Chief 1995 -- -- -- --
Operating Officer 1994 -- -- -- --
and Director
Michael G. Hluchyj(4)................. 1996 145,000 -- 7,500 2,761
Vice President, 1995 101,859 36,750 20,000 1,218
Chief Technology 1994 -- -- -- --
Officer
Thomas A. St. Germain(5).............. 1996 136,500 -- 5,000 3,976
Senior Vice President 1995 132,308 45,500 10,000 1,617
and Chief Financial 1994 108,462 35,500 87,500 485
Officer
Kendrick A. Estey(6).................. 1996 121,000 -- -- 1,458
Senior Vice 1995 35,311 11,500 12,500 569
President, Customer 1994 -- -- -- --
Satisfaction and Operations
Mel R. Ethem(7)....................... 1996 172,645 -- 5,000 20,174
Senior Vice 1995 152,404 52,500 15,000 1,639
President, Sales 1994 84,134 48,420 26,250 288
and Marketing
- - ---------------
<FN>
(1) The amounts shown in the "Bonus" column represent bonuses earned during the
period shown. Bonuses are paid in the fiscal year after the fiscal year in
which they are earned.
(2) Unless otherwise indicated, the amounts shown in the "All Other
Compensation" column represent amounts paid by the Company into its 401(k)
Plan on behalf of each of the Named Executive Officers.
(3) Mr. Callahan joined the Company in May 1995. The amount shown in the "All
Other Compensation" column for fiscal year 1996 includes $19,731 of
reimbursements for relocation expenses.
(4) Mr. Hulchyj joined the Company in July 1994.
(5) The amount shown in the "All Other Compensation" column for fiscal year 1996
includes $1,387 of reimbursements for company-related transportation
expenses.
(6) Mr. Estey joined the Company in December 1994. The amount shown in the "All
Other Compensation" column for fiscal year 1996 includes $127 of
reimbursements for COMPANY-RELATED TRANSPORTATION expenses.
(7) Mr. Ethem resigned as Senior Vice President, Sales and Marketing in December
1995. The amount shown in the "All Other Compensation" column for fiscal
year 1996 includes $18,855 of reimbursements for relocation expenses.
</TABLE>
6
<PAGE> 9
<TABLE>
Option Grants. The following table sets forth certain information
concerning option grants during the fiscal year ended March 31, 1996 to the
Named Executive Officers and the number and value of the unexercised options
held by such persons on March 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENT OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL
UNDERLYING GRANTED TO RATES OF STOCK
OPTIONS EMPLOYEES IN EXERCISE MARKET PRICE APPRECIATION
GRANTED PRICE PRICE PRICE EXPIRATION FOR OPTION TERM (1)
NAME (#) FISCAL YEAR ($/SH) ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ---------- ------------ -------- ------ ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry R. Gorsun............... -- -- -- -- -- -- -- --
Edward C. Callahan, Jr........ 90,000 28.70% $24.85 $24.85 5/30/05 -- 1,406,523 3,564,405
20,000 6.38% $19.85 $24.85 6/26/06 100,000 412,561 892,090
-- -- -- -- -- -- -- --
Michael G. Hluchyl............ 5,000 1.59% $23.00 $23.00 5/1/05 -- 72,323 183,280
2,500 0.80% $10.68 $10.68 2/9/06 -- 16,791 42,553
-- -- -- -- -- -- -- --
Thomas A. St. Germain......... 5,000 1.59% $23.00 $23.00 5/1/05 -- 72,323 183,280
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
Kendrick A. Estey............. 5,000 1.59% $23.00 $23.00 5/1/05 -- 72,323 183,280
7,500 2.40% $10.68 $10.68 2/9/06 -- 50,374 127,659
-- -- -- -- -- -- -- --
Mel R. Ethem(2)............... 5,000 1.59% $23.00 $23.00 5/1/05 -- 72,323 183,280
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- - ---------------
<FN>
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. This table does not take into account any appreciation or
depreciation in the price of the Common Stock to date. Actual gain, if any,
on stock option exercises will depend on future performance of the Common
Stock and the date on which the options are exercised.
(2) Mr. Ethem resigned as Senior Vice President, Sales and Marketing of the
Company on December 30, 1995, and AS A RESULT OF, the options owned by Mr.
Ethem are no longer exercisable as of March 30, 1996, 90 days following such
resignation.
</TABLE>
7
<PAGE> 10
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED YEAR-END (#) YEAR-END ($)(1)
ON --------------------- ------------------
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- --------- ----------- --------------------- ------------------
<S> <C> <C> <C> <C>
Barry R. Gorsun.................. -- -- 136,235/30,000 1,252,830/ 17,160
Edward C. Callahan, Jr........... -- -- 20,000/90,000 --/--
Michael G. Hluchyl............... -- -- 9,000/18,500 --/ 6,425
Thomas A. St. Germain............ 15,000 298,950 40,000/45,000 303,800/303,800
Kendrick A. Estey................ -- -- 3,000/19,500 --/ 19,275
Mel R. Ethem..................... 21,000 79,560 --/-- --/--
- - ---------------
<FN>
(1) The per share value of unexercised in-the-money options is calculated by
subtracting the per share option exercise price from the last per share sale
price of the Company's Common Stock on the Nasdaq National Market on March
31, 1996.
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two nonemployee directors. The Committee is responsible for
establishing and administering the policies which govern both annual
compensation and equity ownership.
This report is submitted by the Committee and addresses the Company's
policies for fiscal 1996 as they apply to the Named Executive Officers.
Executive Compensation Philosophy. The Company's executive compensation
program is designed to provide compensation that attracts, motivates and retains
high caliber people to serve the Company's customers and achieve its strategic
objectives. The Company's executive compensation program is comprised of four
elements: (i) base salary; (ii) annual bonus; (iii) long term incentive
compensation in the form of stock options, and (iv) other benefits generally
available to all the Company's employees.
Base Salary and Annual Bonus. Cash compensation levels for the Company's
executive officers are based primarily on the Committee's subjective evaluation
of competitive salary levels of executive officers with similar backgrounds and
experience as the Company's executive officers. Each executive officer's cash
compensation is comprised of base salary and annual cash bonus. In determining
salary adjustments and cash bonus amounts, the Committee considers individual
performance and contributions to the Company. Salary and bonus levels are
reviewed by the Committee on an annual basis.
Long Term Incentive Compensation. The Company's long term incentive
compensation program is implemented through the grant of stock options. This
program is intended to both (i) align executive interests with the long-term
interests of stockholders by integrating long-term stock performance into each
executive officer's overall compensation package and (ii) through multi-year
vesting, provide an incentive for the Company's executive officers to remain
with the Company. Generally, stock options are granted at prevailing market
rates and only have value if the Company's stock price increases, thereby
providing an incentive for the Company's executive officers to improve long-term
stock market performance. Generally, stock options vest in five equal annual
installments and executive officers must be employed by the Company at the time
of vesting in order to exercise the options. The Committee determines the number
of shares subject to option grants to executive officers based on individual
accomplishments measured against certain non-budgeted objectives and
8
<PAGE> 11
contributions to the Company. The Committee also considers the number, value and
vesting schedule of options already held by each executive officer.
Benefits. The Company's executive officers are entitled to receive medical
benefits and life insurance benefits and to participate in the Company's 401(k)
Savings Plan on the same basis as other full-time employees of the Company. The
Company's Employee Stock Purchase Plan, which is available to virtually all
employees, including executive officers, allows participants to purchase shares
at a discount of approximately 15% from the fair market value at the beginning
or end of the applicable purchase period.
Summary of Compensation of Chief Executive. In fiscal 1996, the Company's
Chief Executive Officer, Barry R. Gorsun, received salary compensation of
$237,000. The increase from Mr. Gorsun's salary of $216,737 for the previous
year was based on a subjective assessment of competitive salary levels.
Compliance with Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Section 162(m) of the Code, enacted in 1993, generally
disallows tax deductions to publicly-traded corporations for compensation over
$1,000,000 paid to the corporation's Chief Executive Officer or any of its other
four most highly compensated executive officers. Qualifying performance-based
compensation will not be subject to this disallowance if certain requirements
are met. The Company currently intends to structure the compensation
arrangements of its executive officers in a manner that will avoid disallowances
under Section 162(m).
Compensation Committee
Robert A. Degan
Edgar L. Brown, Jr.
William M. Scranton
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1996 were Messrs.
Brown, Degan and Scranton, each of whom has received options to purchase Common
Stock under the Company's Director Plan. No executive officer is a member of the
Compensation Committee.
REPORTS UNDER SECTION 16(a) OF THE EXCHANGE ACT
Based solely on its review of copies of reports filed by persons
("Reporting Persons") required to file such reports pursuant to Section 16(a) of
the Exchange Act, the Company believes that all filings required to be made by
Reporting Persons of the Company were timely made in accordance with the
requirements of the Exchange Act except that William M. Scranton, a director of
the Company, filed a Form 4 on October 24, 1995 relating to sales of Common
Stock which occurred in September of 1995.
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
<TABLE>
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company during the period from September 23, 1993 (the date
on which the Company's Common Stock began trading on the Nasdaq National Market)
to March 31, 1996 with the cumulative total return over the same period of (i)
the Standard & Poor's 500 Stock Index and (ii) a Peer Group Index* selected by
the Company. This comparison assumes the investment of $100 on September 23,
1993 in the Company's Common Stock, the Standard & Poor's 500 Stock Index and
the Peer Group Index and assumes dividends, if any, are reinvested.
<CAPTION>
Measurement Period
(Fiscal Year Covered) Summa Four S&P 500 Peer Group
<S> <C> <C> <C>
September 23, 1993 100.00 100.00 100.00
March 31, 1995 142.65 112.89 105.07
March 31, 1996 77.94 149.13 142.63
</TABLE>
* The Peer Group Index reflects stock performance of the following
companies: ADC Telecommunications Corp., DSC Communications Corp., Newbridge
Networks Corporation, Stratacom, Inc. and Tellabs, Inc.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Coopers & Lybrand, L.L.P. as the Company's independent
accountants for the current fiscal year. Coopers & Lybrand, L.L.P. has served as
the Company's independent accountants since 1978. Although stockholder
ratification of the Board of Directors' selection of Coopers & Lybrand, L.L.P.
is not required by law, the Board of Directors believes that it is advisable to
give stockholders the opportunity to ratify this selection. If this proposal is
not approved at the Annual Meeting, the Board of Directors will reconsider its
selection of Coopers & Lybrand, L.L.P.
Representatives of Coopers & Lybrand, L.L.P. are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
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<PAGE> 13
OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of shares held in their names and the Company will reimburse them for out-
of-pocket expenses incurred on behalf of the Company.
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Manchester, New Hampshire not later than February 18, 1997 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
PAUL C. SEMPLE
Secretary
June 17, 1996
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT STOCKHOLDERS PLAN TO ATTEND, STOCKHOLDERS ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
11
<PAGE> 14
SUMMA FOUR, INC.
Annual Meeting of Stockholders
To Be Held July 19, 1996
This Proxy is Solicited by and on Behalf of the Board of Directors
The undersigned hereby appoints each of Barry R. Gorsun and Thomas A. St.
Germain with full power of substitution, to represent the undersigned at the
annual meeting of stockholders of Summa Four, Inc., to be held on July 19,
1996, and at any adjournment or postponements thereof, and to vote at such
meeting the shares of Common Stock that the undersigned would be entitled to
vote if present at such meeting, in accordance with the following instructions.
IF NO INSTRUCTIONS ARE INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR EACH OF ITEMS 1 AND 2 SET FORTH ON THE REVERSE SIDE OF THIS CARD.
The undersigned acknowledges receipt of the Notice of Annual Meeting and the
Proxy Statement together with this Proxy.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears on your stock certificate.
Joint owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be that
of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- - -------------------------------- --------------------------------
- - -------------------------------- --------------------------------
- - -------------------------------- --------------------------------
<PAGE> 15
<TABLE>
<S> <C>
/ X / PLEASE MARK VOTES
AS IN THIS EXAMPLE
With- For All
For hold Exempt For Against Abstain
1. To elect the following persons as / / / / / / 2. To ratify the selection of Coopers & / / / / / /
Directors. Lybrand, LLP. by the Board of
Directors as the Company's independent
Barry R. Gorsun, Edward C. Callahan, Jr., accountants for the current fiscal year.
Edgar L. Brown, Jr., Robert A. Degan, Gordon T. Ray,
William M. Scranton and John A. Shane
3. To vote upon any other matters that may properly be presented at
INSTRUCTION: To withhold authority for any individual the meeting according to their best judgement and in their
nominee, mark the "For All Except" box and strike a line discretion.
through the nominee's name.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
- - ------------------------------------------------------------ Mark box at right if comments or address change have / /
been noted on the reverse side of this card.
- - --- Stockholder sign here -------- Co-owner sign here ------
DETACH CARD DETACH CARD
SUMMA FOUR INC.
Dear Stockholder:
Please take note of the information enclosed with this Proxy Ballot.
Your vote counts, and you are encouraged to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be voted. Then sign the card, detach it and
return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be held July 19, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Summa Four, Inc.
</TABLE>
