<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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[_] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ADTRAN, 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)(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:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ADTRAN APPEARS HERE]
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
[LETTERHEAD OF ADTRAN, INC. APPEARS HERE]
March 26, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of ADTRAN, Inc. to be held at the Company's headquarters at 901
Explorer Boulevard, Huntsville, Alabama, on Wednesday, April 23, 1997, at
10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we also
will report on the operations of the Company during the past year and our plans
for the future. Directors and officers of the Company, as well as
representatives from the Company's independent accountants, Coopers & Lybrand
L.L.P., will be present to respond to appropriate questions from stockholders.
Please mark, date, sign and return your proxy card in the enclosed
envelope at your earliest convenience. This will assure that your shares will
be represented and voted at the meeting, even if you do not attend.
Sincerely,
MARK C. SMITH
Chairman of the Board
and Chief Executive Officer
<PAGE>
ADTRAN, INC.
901 EXPLORER BOULEVARD
HUNTSVILLE, ALABAMA 35806
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1997
NOTICE HEREBY IS GIVEN that the 1997 Annual Meeting of Stockholders of
ADTRAN, Inc. (the "Company") will be held at the Company's headquarters at 901
Explorer Boulevard, Huntsville, Alabama, on Wednesday, April 23, 1997, at 10:00
a.m., local time, for the purposes of considering and voting upon:
1. A proposal to elect seven directors to serve until the 1998 Annual
Meeting of Stockholders;
2. A proposal to approve an amendment to the Certificate of Incorporation
of the Company to increase the number of authorized shares of Common
Stock, par value $.01 per share, from 60,000,000 shares to 200,000,000
shares;
3. A proposal to approve an amendment to the ADTRAN, Inc. 1996 Employees
Incentive Stock Option Plan to increase the number of shares available
for issuance thereunder from 488,100 shares to 2,488,100 shares;
4. A proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year ending
December 31, 1997; and
5. Such other business as properly may come before the Annual Meeting or
any adjournments thereof. The Board of Directors is not aware of any
other business to be presented to a vote of the stockholders at the
Annual Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. Stockholders of record at the close of business on March 14,
1997 are entitled to receive notice of and to vote at the Annual Meeting and any
adjournments thereof.
By Order of the Board of Directors.
MARK C. SMITH
Chairman of the Board
and Chief Executive Officer
Huntsville, Alabama
March 26, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE THE PROXY CARD AND VOTE IN PERSON
IF YOU SO DESIRE.
<PAGE>
ADTRAN, INC.
901 EXPLORER BOULEVARD
HUNTSVILLE, ALABAMA 35806
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1997
This Proxy Statement is furnished to the stockholders of ADTRAN, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the 1997 Annual Meeting of Stockholders
and at any adjournments thereof (the "Annual Meeting"). The Annual Meeting will
be held at the headquarters of the Company, 901 Explorer Boulevard, Huntsville,
Alabama, on Wednesday, April 23, 1997, at 10:00 a.m., local time.
The approximate date on which this Proxy Statement and form of proxy card
are first being sent or given to stockholders is March 26, 1997.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share, with each share entitling its
owner to one vote on each matter submitted to the stockholders. The record date
for determining the holders of Common Stock who are entitled to receive notice
of and to vote at the Annual Meeting is March 14, 1997. On the record date,
______________ shares of Common Stock were outstanding and eligible to be voted
at the Annual Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum at the
Annual Meeting. In counting the votes to determine whether a quorum exists at
the Annual Meeting, the proposal receiving the greatest number of all votes
"for" or "against" and abstentions (including instructions to withhold authority
to vote) will be used.
In voting with regard to the proposal to elect directors (Proposal 1),
stockholders may vote in favor of all nominees, withhold their votes as to all
nominees or withhold their votes as to specific nominees. The vote required to
approve Proposal 1 is governed by Delaware law and is a plurality of the votes
cast by the holders of shares entitled to vote, provided a quorum is present.
As a result, in accordance with Delaware law, votes that are withheld will be
counted in determining whether a quorum is present but will not be counted and
will have no effect on the election of directors.
In voting with regard to the proposal to increase the authorized number of
shares of Common Stock of the Company (Proposal 2), stockholders may vote in
favor of the proposal or against the proposal or may
1
<PAGE>
abstain from voting. The vote required to approve Proposal 2 is governed by
Delaware law and is the affirmative vote of the holders of a majority of the
issued and outstanding shares of Common Stock of the Company. As a result,
abstentions will be considered in determining the number of votes required to
obtain the necessary majority vote and will have the same legal effect as a vote
against the proposal.
In voting with regard to the proposal to increase the number of shares
available for issuance under the ADTRAN, Inc. 1996 Employee Incentive Stock
Option Plan (Proposal 3), and the proposal to ratify the directors' appointment
of independent accountants (Proposal 4), stockholders may vote in favor of the
proposal or against the proposal or may abstain from voting. The votes required
to approve Proposal 3 and Proposal 4 are governed by Delaware law and are the
affirmative vote of the holders of a majority of the shares represented and
entitled to vote at the Annual Meeting, provided a quorum is present. As a
result, abstentions will be considered in determining the number of votes
required to obtain the necessary majority vote in each case and will have the
same legal effect as voting against the respective proposals.
Under the rules of the New York and American Stock Exchanges (the
"Exchanges") that govern most domestic stock brokerage firms, member firms that
hold shares in street name for beneficial owners may, to the extent that such
beneficial owners do not furnish voting instructions with respect to any or all
proposals submitted for stockholder action, vote in their discretion upon
proposals which are considered "discretionary" proposals under the rules of the
Exchanges. Member brokerage firms that have received no instructions from their
clients as to "non-discretionary" proposals do not have discretion to vote on
these proposals. Although "broker non-votes" will be considered in determining
whether a quorum exists at the Annual Meeting, "broker non-votes" will not be
considered as votes cast in determining the outcome of any proposal.
As of March 14, 1997 (the record date for the Annual Meeting), the
directors and executive officers of the Company beneficially owned or controlled
approximately __________ shares of Common Stock of the Company, constituting
approximately _____% of the outstanding Common Stock. The Company believes that
the holders of more than a majority of the Common Stock outstanding on the
record date will vote all of their shares of Common Stock in favor of each of
the four proposals and, therefore, that the presence of a quorum and the
approval of the proposals is reasonably assured.
PROXIES
Stockholders should specify their choices with regard to each of the four
proposals on the enclosed proxy card. All properly executed proxy cards
delivered by stockholders to the Company in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the directions noted thereon. IN THE ABSENCE OF SUCH INSTRUCTIONS, THE SHARES
REPRESENTED BY A SIGNED AND DATED PROXY CARD WILL BE VOTED "FOR" THE ELECTION OF
ALL DIRECTOR NOMINEES, "FOR" THE APPROVAL TO AMEND THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK, "FOR"
THE APPROVAL TO AMEND THE 1996 EMPLOYEES INCENTIVE STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER AND "FOR" THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS. If any other
matters properly come before the Annual Meeting, the persons named as proxies
will vote upon such matters according to their judgment.
Any stockholder delivering a proxy has the power to revoke it at any time
before it is voted by giving written notice to Charlene Little, Assistant
Secretary of the Company, at 901 Explorer Boulevard, Huntsville, Alabama 35806
(for overnight delivery) or at P.O. Box 140000, Huntsville, Alabama 35814-4000
(for mail delivery), by executing and delivering to Ms. Little a proxy card
bearing a later date or by voting in person at the Annual Meeting; provided,
however, that under the rules of the Exchanges, as followed by The Nasdaq
2
<PAGE>
Stock Market, Inc. ("Nasdaq"), any beneficial owner of the Company's Common
Stock whose shares are held in street name by a member brokerage firm may revoke
his proxy and vote his shares in person at the Annual Meeting only in accordance
with applicable rules and procedures of the Exchanges, as employed by the
beneficial owner's brokerage firm.
In addition to soliciting proxies through the mail, the Company may solicit
proxies through its directors, officers and employees in person and by telephone
or facsimile. Brokerage firms, nominees, custodians and fiduciaries also may be
requested to forward proxy materials to the beneficial owners of shares held of
record by them. All expenses incurred in connection with the solicitation of
proxies will be borne by the Company.
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996, (i) by each
person known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, (ii) each director of the Company, (iii) each of the
executive officers of the Company named in the Summary Compensation Table herein
and (iv) all directors and executive officers of the Company as a group, based
in each case on information furnished to the Company by such persons. The
Company believes that each of the named individuals and group has sole voting
and investment power with regard to the shares shown except as otherwise noted.
3
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
--------------------------
NAME AND NUMBER PERCENT
RELATIONSHIP TO COMPANY OF SHARES OF CLASS
- ----------------------- ---------------- ---------
<S> <C> <C>
Mark C. Smith (2)
Chairman of the Board, Chief Executive
Officer and Principal Stockholder................. 12,498,800 32.2%
Lonnie S. McMillian (2)
Senior Vice President, Secretary,
Director and Principal Stockholder................ 7,075,212(3) 18.2%
James L. North
Director.......................................... 137,000(1) *
Irwin O. Goldstein
Vice President-Administration..................... 100,000(1)(3) *
Howard A. Thrailkill
President, Chief Operating Officer
and Director...................................... 63,000(1)(3) *
Roy J. Nichols
Director.......................................... 18,000(1)(3) *
Danny J. Windham
Vice President of Marketing - CPE................. 10,400 *
William L. Marks
Director.......................................... 8,000(1) *
O. Gene Gabbard
Director.......................................... 5,000(1) *
All directors and executive officers
as a group (18 persons)........................... 20,869,265(1)(3) 53.6%
</TABLE>
- ---------
* Represents less than one percent of the outstanding shares of Common
Stock of the Company.
(1) Beneficial ownership as reported in the table has been determined in
accordance with Securities and Exchange Commission (the "SEC") regulations
and includes shares of Common Stock of the Company that may be issued upon
the exercise of stock options that are exercisable within 60 days of
December 31, 1996 as follows: Mr. North - 5,000 shares; Mr. Goldstein -
100,000 shares; Mr. Thrailkill -50,000 shares; Mr. Nichols - 8,000 shares;
Mr. Panetta (Vice President -Manufacturing) - 8,000 shares; Mr. Marks -
8,000 shares; Mr. Gabbard - 5,000 shares; Mr. Stanton (Vice President of
Marketing - Telco) - 3,000 shares and all directors and executive officers
as a group - 187,000 shares. Pursuant to SEC regulations, all shares not
currently outstanding which are subject to options exercisable within 60
days are deemed to be outstanding for the purpose of computing "Percent of
Class" held by the holder thereof but are not deemed to be outstanding for
the purpose of computing the "Percent of Class" held by any other
stockholder of the Company.
(2) The address of Messrs. Smith and McMillian is 901 Explorer Boulevard,
Huntsville, Alabama 35806.
(3) The shares shown include: as to Mr. McMillian, 3,500,825 shares held by
trusts for Mr. McMillian's children for which Mr. McMillian is the trustee
and 27,256 shares owned by his wife; as to
4
<PAGE>
Mr. Jurenko (former Vice President-Sales), 134,000 shares owned by his wife
(as to which beneficial ownership is disclaimed); as to Mr. Goldstein, 500
shares owned by his wife; as to Mr. Nichols, 10,000 shares held in a
revocable trust for Mr. Nichols' children for which Mr. Nichols is the
trustee; as to Mr. Cooper (Vice President-Finance and Chief Financial
Officer), 500 shares owned by his wife and 900 shares owned by his
stepfather (as to which beneficial ownership is disclaimed); as to Mr.
Bruce (Vice President-Engineering), 200 shares owned jointly with his
daughters; as to Mr. Fredrickson (Vice President-Telco Sales), 200 shares
held in a custodial account for his daughter, for which Mr. Fredrickson
serves as custodian; and as to all directors and executive officers as a
group, the 3,500,825 shares held by trusts for Mr. McMillian's children and
163,556 shares owned by spouses and other immediate family members (as to
which beneficial ownership of 134,900 shares is disclaimed).
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
The Board of Directors has set the authorized number of directors of
the Company at seven and has nominated Mark C. Smith, Lonnie S. McMillian,
Howard A. Thrailkill, O. Gene Gabbard, William L. Marks, Roy J. Nichols and
James L. North for re-election as directors at the 1997 Annual Meeting. Each of
the nominees is currently a director of the Company. If re-elected as directors
at the Annual Meeting, each of such persons would serve a one year term expiring
at the 1998 Annual Meeting of Stockholders and until their successors have been
duly elected and qualified.
Each of the nominees has consented to serve another term as a director
if re-elected. If any of the nominees should be unavailable to serve for any
reason (which is not anticipated), the Board of Directors may designate a
substitute nominee or nominees (in which event the persons named on the enclosed
proxy card will vote the shares represented by all valid proxy cards for the
election of such substitute nominee or nominees), allow the vacancies to remain
open until a suitable candidate or candidates are located, or by resolution
provide for a lesser number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE PROPOSAL TO RE-ELECT MARK C. SMITH, LONNIE S. MCMILLIAN, HOWARD
A. THRAILKILL, O. GENE GABBARD, WILLIAM L. MARKS, ROY J. NICHOLS AND JAMES L.
NORTH AS DIRECTORS FOR A ONE YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING OF
STOCKHOLDERS AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
INFORMATION REGARDING NOMINEES FOR DIRECTOR
Set forth below is certain information as of December 31, 1996,
regarding the seven nominees for director, including their ages and principal
occupations (which have continued for at least the past five years unless
otherwise noted).
MARK C. SMITH is one of the co-founders of the Company and has served as
Chairman of the Board and Chief Executive Officer of the Company since it
commenced operations in January 1986. He also served as President of the
Company from 1986 until November 1995. Mr. Smith is 56.
LONNIE S. MCMILLIAN is one of the co-founders of the Company and currently
serves as Senior Vice President, Secretary and a director of the Company. Mr.
McMillian has served as Vice President -
5
<PAGE>
Engineering of the Company since it commenced operations in January 1986 until
August 1996 and as Treasurer of the Company from January 1986 to January 1997.
Mr. McMillian has served as Secretary and a director of the Company since
January 1986. Mr. McMillian is 68.
HOWARD A. THRAILKILL joined the Company in 1992 as Executive Vice President
and Chief Operating Officer. In November 1995, Mr. Thrailkill was elected
President of the Company. From 1988 to 1991, Mr. Thrailkill served as President
and Chief Executive Officer of Floating Point Systems, Inc., a superminicomputer
manufacturer. Mr. Thrailkill has served as a director of the Company since
October 1995. Mr. Thrailkill is 58.
O. GENE GABBARD is a consultant and entrepreneur working with high
technology start-up companies primarily in the Southeast. He is an advisor to
executives of The Walt Disney Company, Nippon Electric Company and Hughes
Network Systems. Mr. Gabbard also served as Chairman and Chief Executive
Officer of SouthernNet and Telcom USA from 1983 to 1990. He served as the
Executive Vice President and Chief Financial Officer of MCI Communications
Corporation from 1990 to 1993. Mr. Gabbard has been a director of the Company
since October 1995. Mr. Gabbard also serves on the Board of Directors of
Dynatech Corporation, a telecommunications equipment manufacturer; InterCel,
Inc., a provider of wireless communications services; and Mindspring
Enterprises, Inc., a provider of Internet access services. Mr. Gabbard is 56.
WILLIAM L. MARKS has served as Chairman of the Board and Chief Executive
Officer of Whitney Holding Corp., the holding company for Whitney National Bank
of New Orleans, since 1990, and served in various executive and management
capacities with AmSouth Bank, N.A. from 1984 to 1990. Mr. Marks has served as a
director of the Company since 1993. Mr. Marks is 54.
ROY J. NICHOLS has served as Vice Chairman of the Board and Chief Technical
Officer of Nichols Research Corporation (a defense and information systems
company) since 1991. Mr. Nichols has served as a director of the Company since
1994. Mr. Nichols is 58.
JAMES L. NORTH is an attorney with James L. North & Associates in
Birmingham, Alabama and has been counsel to the Company since the incorporation
of the Company in November 1985. Mr. North has been a practicing attorney since
1965. Mr. North has served as a director of the Company since 1993. Mr. North
is 60.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the full
Board and through committees of the Board, consisting of an Audit Committee, a
Compensation Committee and a Stock Option Plan Committee. During the fiscal
year ended December 31, 1996, the Board of Directors held five meetings, the
Audit Committee held one meeting and the Stock Option Plan Committee held eight
meetings; the Compensation Committee held no meetings because the Board of
Directors reviewed and approved the compensation paid to the Company's executive
officers and performed the duties that otherwise would have been performed by
the Compensation Committee. Attendance at meetings of the Board and its
committees as a whole averaged 78%. Mr. Marks attended less than 75% of the
aggregate of meetings of the Board of Directors and meetings of the committees
of which he is a member.
The Audit Committee makes recommendations to the Board concerning the
appointment of the Company's independent accountants; reviews with such
accountants their audit plan, the scope and results of
6
<PAGE>
their audit engagement and the accompanying management letter, if any; reviews
the scope and results of the Company's internal auditing procedures; consults
with the independent accountants and management with regard to the Company's
accounting methods and the adequacy of its internal accounting controls;
approves professional services provided by the independent accountants; reviews
the independence of the independent accountants; and reviews the range of the
independent accountants' audit and non-audit fees. The Audit Committee is
composed of William L. Marks and Roy J. Nichols.
The Compensation Committee is responsible for setting the compensation of
the Chairman of the Board and Chief Executive Officer and reviewing his
recommendation regarding the compensation of the Company's other executive
officers. The Compensation Committee is composed of O. Gene Gabbard, William L.
Marks, Roy J. Nichols and James L. North.
The Stock Option Plan Committee is responsible for administering the
Company's 1996 Employee's Incentive Stock Option Plan. The Stock Option Plan
Committee is composed of O. Gene Gabbard, William L. Marks and Roy J. Nichols.
The Board of Directors as a whole functions as the nominating committee to
select management's nominees for election as directors of the Company. The
Board of Directors will consider stockholders' nominees for election as
directors at the Company's 1998 Annual Meeting of Stockholders if submitted to
the Company on or before November 24, 1997. See "Stockholder Proposals for 1998
Annual Meeting" below.
DIRECTOR COMPENSATION
Non-employee directors of the Company are paid an annual fee of $10,000,
plus $1,000 for each Board or committee meeting attended in person and $500 for
attendance at each Board or committee meeting conducted by telephone. Directors
who are employees of the Company receive no directors' fees. All directors are
reimbursed for their reasonable expenses in connection with the performance of
their duties.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth, for the fiscal years ended December 31,
1996, 1995 and 1994, the total compensation earned by the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company who were serving as executive officers as of December
31, 1996 (collectively referred to as the "named executive officers"). For
information regarding the various factors considered by the Board of Directors
in determining the compensation of the Chief Executive Officer and, generally,
the other executive officers of the Company, see "Board of Directors' Report on
Executive Compensation" below.
7
<PAGE>
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION(2)
- ------------------------------------------- ------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Mark C. Smith 1996 $216,408 $75,557 $4,750
Chairman of the Board and 1995 216,408 -0- 4,580
Chief Executive Officer 1994 202,250 -0- 4,025
Lonnie S. McMillian 1996 215,541 74,983 3,962
Senior Vice President and Secretary 1995 205,000 -0- 3,836
1994 191,500 -0- 3,811
Howard A. Thrailkill 1996 213,221 74,072 3,971
President and Chief Operating Officer 1995 202,500 -0- 3,842
1994 186,500 -0- 3,711
Danny J. Windham 1996 157,829 55,472 3,418
Vice President of Marketing-CPE 1995 103,221 -0- 2,562
1994 92,022 -0- 1,839
Irwin O. Goldstein 1996 143,986 50,020 3,560
Vice President-Administration 1995 136,750 -0- 3,385
1994 127,750 -0- 2,542
- --------------------
</TABLE>
(1) Includes amounts deferred at the election of the executive officers
pursuant to the Company's Section 401(k) retirement plan.
(2) Represents Company contributions to the executive officers' Section 401(k)
retirement plan accounts.
OPTIONS
There were no options granted to the named executive officers during
the fiscal year ended December 31, 1996. The following table sets forth option
exercises by the named executive officers during the fiscal year ended December
31, 1996, including the aggregate value of gains on the date of exercise. The
table also sets forth (i) the number of shares covered by options (both
exercisable and unexercisable) as of December 31, 1996 and (ii) the respective
value for "in-the-money" options, which represents the positive spread between
the exercise price of existing options and the fair market value of the
Company's Common Stock at December 31, 1996.
8
<PAGE>
TABLE 2: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of the Unexercised
Options at Fiscal In-the-Money Options at
Year-End(#) Fiscal Year-End($)
Shares Acquired Value -------------------------- --------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Smith -0- -0- -0- -0- -0- -0-
Lonnie S. McMillian -0- -0- -0- -0- -0- -0-
Howard A. Thrailkill 20,000 $627,500 50,000 -0- $2,050,000 -0-
Danny J. Windham -0- -0- -0- -0- -0- -0-
Irwin O. Goldstein -0- -0- 100,000 -0- $3,900,000 -0-
</TABLE>
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
This Report on Executive Compensation of the Board of Directors of the
Company discusses the methods that were used to establish executive compensation
for the fiscal year ended December 31, 1996. The report specifically reviews
the methods employed in setting the compensation of the Company's Chairman of
the Board and Chief Executive Officer (the "Chief Executive Officer") and
generally with respect to all executive officers.
For 1996, the compensation of the Chief Executive Officer was
established by the Board of Directors without any reference to quantitative
measures of individual or Company performance but based instead solely on the
Board's subjective evaluation of the performance of the Chief Executive Officer
and the Company.
The compensation paid to the Company's other executive officers for
1996 was established by the Chief Executive Officer in his discretion and was
recommended by him to the Board of Directors for approval. Similar to the
establishment of the Chief Executive Officer's compensation by the Board of
Directors, the Chief Executive Officer based the compensation levels of the
other executive officers not on any quantitative measures of individual or
Company performance but upon his subjective evaluation of the performance of the
individual executive officers and the Company. The Board of Directors approved
the recommendation of the Chief Executive Officer with regard to the 1996
compensation of each of the other executive officers of the Company.
In 1996, the Board of Directors established a bonus incentive
compensation program (the "Bonus Program") for certain executive officers of the
Company. Bonuses granted under the Bonus Program are determined by a formula
based on targeted increases in per share after tax earnings of the Company from
the end of a fiscal year to the end of the following fiscal year.
9
<PAGE>
LIMITATIONS ON THE DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Pursuant to the Omnibus Budget Reconciliation Act of 1993, certain
non-performance-based compensation in excess of $1,000,000 to executives of
public companies is no longer deductible to these companies. Qualifying
performance-based incentive compensation, however, would be both deductible and
excluded for purposes of calculating the $1,000,000 compensation threshold. In
this regard, the Compensation Committee must determine whether any actions with
respect to this new limit should be taken by the Company. The Company's
executive compensation for 1996 did not exceed the legal limitations. The
Compensation Committee will continue to monitor this situation and will take
appropriate action if it is warranted in the future.
Compensation Committee: O. Gene Gabbard, Williams L. Marks, Roy J. Nichols and
James L. North.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James L. North, a partner in the law firm of James L. North &
Associates, is a director of the Company and beneficially owns 137,000 shares of
the Common Stock of the Company. The Company paid James L. North & Associates
approximately $89,025 for legal services rendered during 1996. All bills for
services rendered by James L. North & Associates are reviewed and approved by
the Company's Vice President -Finance and Chief Financial Officer. Management
believes that the fees for such services are comparable to those charged by
other firms for services rendered to the Company.
STOCK PERFORMANCE GRAPH
The Company's Common Stock began trading on the Nasdaq National Market
on August 9, 1994. The price information reflected for the Company's Common
Stock in the following performance graph and accompanying table represents the
closing sales prices of the Common Stock for the period from August 9, 1994
through December 31, 1996 on an annual basis. The graph and the accompanying
table compare the cumulative total stockholders' return on the Company's Common
Stock with the Nasdaq Telecommunications Index and the Nasdaq US Index. The
calculations in the following graph and table assume that $100 was invested on
August 9, 1994 in each of the Company's Common Stock, the Nasdaq
Telecommunications Index and the Nasdaq US Index and also assume dividend
reinvestment. The closing sale price of the Common Stock on the Nasdaq National
Market was $_________ per share on March 14, 1997.
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COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ TELECOMMUNICATIONS INDEX
AND NASDAQ US INDEX
[Performance Graph appears here]
<TABLE>
<CAPTION>
8/9/94 12/31/94 12/31/95 12/31/96
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADTRAN, Inc. $100 $254 $603 $461
Nasdaq Telecommunications Index $100 $ 96 $126 $129
Nasdaq US Index $100 $105 $148 $182
</TABLE>
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and regulations of the Securities and Exchange Commission
thereunder require the Company's directors, executive officers and persons who
own more than 10% of the Company's Common Stock, as well as certain affiliates
of such persons, to file initial reports of their ownership of the Company's
Common Stock and subsequent reports of changes in such ownership with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. Directors, executive officers and persons owning more than 10% of
the Company's Common Stock are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. Based solely on its review of the copies of such reports received by it,
the Company believes that during the fiscal year ended December 31, 1996, its
directors, executive officers and owners of more than 10% of its Common Stock
complied with all applicable filing requirements.
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
DESCRIPTION OF THE PROPOSED AMENDMENT
The General Corporation Law of the State of Delaware provides that the total
number of shares of each class of stock that a corporation is authorized to
issue shall be set forth in its Certificate of Incorporation. Article FOURTH of
the Company's Certificate of Incorporation presently authorizes the Company to
issue 60,000,000 shares of Common Stock. Of the 60,000,000 shares of Common
Stock authorized, __________ shares had been issued and were outstanding as of
March 14, 1997 and an additional 488,100 shares and 70,000 shares were reserved
for issuance as of such date in connection with the Company's 1996 Employee
Incentive Stock Option Plan and its 1995 Directors Stock Option Plan,
respectively. Accordingly, only __________ shares of Common Stock remained
unreserved and available for issuance as of March 14, 1997. In addition,
Proposal 3 is a proposal to amend the 1996 Employees Incentive Stock Option Plan
to increase the number of shares authorized for issuance thereunder from 488,100
shares to 2,488,100 shares.
The Board of Directors has unanimously approved, and has unanimously
recommended that the stockholders of the Company approve, the proposal to amend
Article FOURTH of the Certificate of Incorporation of the Company to increase
the number of shares of Common Stock that the Company is authorized to issue
from 60,000,000 shares to 200,000,000 shares. If the holders of a majority of
the shares of Common Stock issued and outstanding on the record date adopt the
proposed amendment, the increase in the authorized Common Stock will be
reflected in the Company's Certificate of Incorporation. The full text of
Article FOURTH of the Certificate of Incorporation as proposed to be amended by
this proposal is as follows:
The aggregate number of shares of stock which the corporation shall have
the authority to issue is Two Hundred Million (200,000,000) shares of
common stock of the par value of One Cent ($.01) per share, all of the same
class and constituting a total authorized capital of Two Million Dollars
($2,000,000.00).
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PURPOSES AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that the current level of authorized shares
restricts the Company's ability to continue to issue or reserve Common Stock for
general corporate purposes. The purpose of the proposed amendment is to provide
sufficient authorized shares of Common Stock to enable the Company to declare
stock splits and dividends and to provide the Company the ability to engage in
future equity offerings, to make acquisitions and to engage in other general
corporate transactions requiring the issuance of Common Stock. If the proposed
amendment is adopted, there will be __________ shares of Common Stock
authorized, unissued and unreserved, based on the number of shares outstanding
as of March 14, 1997. No further action or authorization by the Company's
stockholders would be necessary prior to the issuance of additional shares of
Common Stock, except as may be required for a particular transaction by
applicable law or regulatory agencies or by the rules of the Nasdaq National
Market or any stock exchange on which the Company's securities may then be
listed. At the present time, the Board has no specific plans to issue
additional shares of Common Stock other than possibly in connection with future
stock splits or dividends or in connection with the Company's existing 1996
Employees Incentive Stock Option Plan or any similar replacement plan.
Stockholders of the Company have no preemptive rights with respect to any shares
of the Company's Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 60,000,000 SHARES TO
200,000,000 SHARES.
PROPOSAL 3 - AMENDMENT OF THE
1996 EMPLOYEES INCENTIVE STOCK OPTION PLAN
INTRODUCTION
The Company's 1996 Employees Incentive Stock Option Plan (the "1996 Stock
Option Plan") currently permits Incentive Stock Options and Non-Qualified Stock
Options to purchase up to an aggregate of 488,100 shares of common stock of the
Company, subject to adjustment in the event of a recapitalization, merger, stock
split or any other change in the corporate structure or shares of stock of the
Company, to be granted to key employees (including officers and directors who
are also employees) of the Company. The following description of the 1996 Stock
Option Plan is qualified in its entirety by reference to the applicable
provisions of the 1996 Stock Option Plan and agreements related to the 1996
Stock Option Plan.
PROPOSED AMENDMENT
The Board of Directors of the Company has approved, and recommends that the
stockholders of the Company approve, an amendment to the 1996 Stock Option Plan
to increase the number of shares authorized for issuance under the 1996 Stock
Option Plan from 488,100 shares to 2,488,100 shares.
STOCK SUBJECT TO OPTIONS
The stock subject to the options is the Company's authorized but unissued or
reacquired Common Stock. On March 14, 1997, the closing price of the Company's
Common Stock as reported by the Nasdaq National Market on that day was $______
per share. The unexercised portion of shares of Common Stock allocable to
expired or terminated options granted under the Plan may again become subject to
options under the Plan.
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<PAGE>
TYPES OF AWARDS
Incentive stock options ("ISOs") and nonqualified stock options ("NQSOs") may
be granted under the 1996 Stock Option Plan (together, "Options").
ADMINISTRATION
The 1996 Stock Option Plan is administered by the Stock Option Plan Committee
(the "Committee"), consisting of two or more individuals appointed by the Board
of Directors of the Company from among its members. The members of the
Committee cannot participate in the 1996 Stock Option Plan and must be "outside
directors" within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Board from time to time may remove
members from, or add members to, the Committee, and shall fill all vacancies on
the Committee.
The Committee has authority (i) to determine the individuals to whom Options
will be granted from among those individuals who are eligible, as well as the
terms of Options and the number of shares of Common Stock reserved in connection
with such Options, (ii) to determine whether an Option will constitute an ISO
intended to qualify under Section 422 of the Code or a NQSO not intended to
qualify under Section 422 and (iii) to interpret the provisions of, and
prescribe, amend and rescind any rules and regulations relating to, the 1996
Stock Option Plan.
ELIGIBILITY AND GRANTS OF OPTIONS
Under the terms of the 1996 Stock Option Plan, all employees of the Company
(and any parent or subsidiary corporations), including such employees who are
also members of the Board (or of the board of directors of a parent or
subsidiary corporation) are eligible for consideration for the granting of
Options by the Committee. As of December 31, 1996, there were approximately 986
employees of the Company and its subsidiaries, all of whom are eligible to
participate in the 1996 Stock Option Plan. The Company has no definitive plans
to grant stock options to any particular employee at this time.
SHARES AVAILABLE
The stock subject to the Options and other provisions of the 1996 Stock
Option Plan is the authorized but unissued or reacquired shares of Common Stock
of the Company. Subject to adjustment in accordance with the terms of the 1996
Stock Option Plan, up to 488,100 shares of Common Stock, in the aggregate, may
be granted or purchased under the 1996 Stock Option Plan, and the unexercised
portion of shares of Common Stock allocable to expired or terminated Options may
again become subject to Options under the 1996 Stock Option Plan.
TERMS OF OPTIONS
OPTION PRICE. The purchase price of the Common Stock underlying each Option
granted under the 1996 Stock Option Plan will be the fair market value of the
Common Stock on the date the option is granted, unless otherwise determined by
the Committee. However, the option price for ISOs may not be less than 100%
(110% for options granted to an optionee who owns more than 10% of the total
combined voting power of all classes of stock of either the Company or any
parent or subsidiary corporation of the Company) of the fair
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<PAGE>
market value of the Common Stock on the date the ISO is granted, and the option
price for NQSOs may not be less than 75% of the fair market value of the Common
Stock on the date the NQSO is granted.
VESTING. Options granted under the 1996 Stock Option Plan will become
exercisable (i.e., vested) as of the first anniversary of the grant date, unless
otherwise provided by the Committee pursuant to a schedule established at the
time the Options are granted; provided, if the optionee ceases to be an employee
of the Company, the optionee's rights with regard to all non-vested Options
cease immediately. In the event the Committee does not establish a vesting
schedule at the time Options are granted, each such Option will become
exercisable with respect to all shares of Company Common Stock subject to the
Option as of the date of grant of the Option. Notwithstanding the vesting
schedule established by the Committee, all non-vested Options previously granted
to an optionee immediately vest upon the optionee becoming "Disabled" (as
defined in the 1996 Stock Option Plan), or upon his death or upon a "Change of
Control" of the Company (as defined in the 1996 Stock Option Plan). See "Change
of Control" below.
TERM AND EXERCISE OF OPTIONS. Each Option granted under the 1996 Stock
Option Plan may be exercised on such dates, during such periods and for such
number of shares as determined by the Committee and as specified in each option
agreement. The term of any Option will be determined by the Committee in
accordance with the 1996 Stock Option Plan, but the term may not exceed 10 years
from the date of grant (or 5 years in the case of ISOs granted to optionees who
own more than 10% of the total combined voting power of all classes of stock of
either the Company or any parent or subsidiary corporation). No Option may be
granted under the 1996 Stock Option Plan after February 14, 2006. An Option
granted under the 1996 Stock Option Plan may be exercised for less than the full
number of shares of Common Stock subject to such Option, provided that no Option
may be exercised for less than (i) 100 shares or (ii) the total remaining shares
subject to the Option, if less than 100 shares. Upon exercise of an Option, an
optionee must pay for the Common Stock subject to the exercise. Payment may be
made in cash, in shares of Common Stock (including the retention by the Company
of optioned shares of Common Stock with a fair market value equal to the
exercise price), or by a combination of the foregoing.
TRANSFERS. The 1996 Stock Option Plan does not permit an optionee to sell,
assign or otherwise transfer Options except by transfer to a "Beneficiary" at
the death of the optionee, and any other purported transfer is null and void.
Options are exercisable during the optionee's life only by the optionee (unless
the optionee is incapacitated and unable to exercise options). Upon the death
of the optionee, Options will be exercisable by the optionee's "Beneficiary."
TERMINATION OF EMPLOYMENT. Vested Options must be exercised within the
earlier of: (i) three months after an employee optionee ceases to be in the
employ of the Company or any parent or subsidiary for any reason other than
death or disability (unless the employee dies within this three month period) or
for "cause" (as defined in the 1996 Stock Option Plan); (ii) the expiration date
of the option; (iii) immediately upon the removal of the employee for "cause";
(iv) one year after termination of employment with the Company or a parent or
subsidiary because of disability unless the optionee dies within this one year
period; or (v) one year after the death of an optionee who dies (a) while in the
employ of the Company or a parent or subsidiary, (b) within three months after
termination of employment with the Company or a parent or subsidiary, or (c)
within one year after employment with the Company or a parent or subsidiary is
terminated due to disability. However, the Committee may provide different
exercise expiration periods with respect to NQSOs granted under the 1996 Stock
Option Plan.
15
<PAGE>
AMENDMENT AND TERMINATION
The Board of Directors of the Company may amend or terminate the 1996 Stock
Option Plan at any time, provided that (i) no amendment may be effected without
the consent of the optionees if such amendment would affect in any way the
rights of such optionees under the 1996 Stock Option Plan, and (ii) no amendment
may be effected without the prior approval of the stockholders of the Company if
(A) the amendment would cause the applicable portions of the 1996 Stock Option
Plan to fail to qualify as an "incentive stock option plan" pursuant to Section
422 of the Code, (B) the amendment would materially increase the benefits
accruing to participants under the 1996 Stock Option Plan, (C) the amendment
would materially increase the number of securities which may be issued under the
1996 Stock Option Plan, (D) the amendment would materially modify the
requirements as to eligibility for participation in the 1996 Stock Option Plan,
or (E) the amendment would modify the material terms of the 1996 Stock Option
Plan within the meaning of regulations under Section 162(m) of the Code.
The 1996 Stock Option Plan will terminate on the later of (i) the complete
exercise or lapse of the last outstanding Option granted under the 1996 Stock
Option Plan or (ii) the last date upon which Options may be granted under the
1996 Stock Option Plan, February 14, 2006, subject to its earlier termination by
the Board at any time.
CHANGE OF CONTROL
For purposes of the 1996 Stock Option Plan, the term "Change of Control" is
defined to mean any one of the following events:
(i) The acquisition by a Person (including "affiliates" and "associates" of
such Person, but excluding the Company, any "parent" or "subsidiary" of the
Company, or any employee benefit plan of the Company or of any "parent" or
"subsidiary" of the Company) of a sufficient number of shares of the Common
Stock, or securities convertible into the Common Stock, and whether through
direct acquisition of shares or by merger, consolidation, share exchange,
reclassification of securities or recapitalization of or involving the Company
or any "parent" or "subsidiary" of the Company, to constitute the Person the
actual or beneficial owner of greater than 50% of the Common Stock, but only if
such acquisition occurs without approval or ratification by a majority of the
members of the Board prior to such acquisition; or
(ii) Any sale, lease, transfer, exchange, mortgage, pledge or other
disposition, in one transaction or a series of transactions, of all or
substantially all of the assets of the Company or of any "parent" or
"subsidiary" of the Company to a Person described in subsection (a) above, but
only if such transaction occurs without approval or ratification by a majority
of the members of the Board.
ADJUSTMENTS
In the event of changes in the number of outstanding shares of the Common
Stock by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of Common Stock, an
appropriate and equitable adjustment will be made by the Committee to the number
and kind of shares subject to Options granted under the 1996 Stock Option Plan,
and to the number and kind of shares remaining available for the granting of
Options.
Additionally, in the event that the Company is involved in a reorganization
involving a merger, consolidation, acquisition of the stock or acquisition of
the assets of the Company that does not constitute a
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<PAGE>
Change of Control, the Committee, in its discretion, may declare that
(i) outstanding Options apply to the securities of the resulting corporation;
(ii) outstanding Options are nonforfeitable and fully exercisable or vested;
and/or (iii) outstanding Options are nonforfeitable and fully exercisable or
vested and are to be terminated after giving at least 30 days notice to all
optionees. If the Company is dissolved, all of the rights of all optionees will
become immediately nonforfeitable and exercisable through the date of
dissolution.
FEDERAL INCOME TAX CONSEQUENCES
The Company intends that part of the 1996 Stock Option Plan qualify as an
incentive stock option plan and that any option granted in accordance with such
portion of the 1996 Stock Option Plan qualify as an ISO, all within the meaning
of Section 422 of the Code. The tax effects of any other stock option granted
under the 1996 Stock Option Plan should be determined under Section 83 of the
Code. The following is a brief description of the consequences under the Code
of the receipt or exercise of Options.
ISOs. An option holder has no tax consequences upon issuance or, generally,
upon exercise of an ISO. An option holder will recognize income when he sells or
exchanges the shares acquired upon exercise of an ISO. This income will be
taxed at the applicable capital gains rate if the sale or exchange occurs after
the expiration of the requisite holding periods. Generally, the requisite
holding periods expire two years after the date of grant of the ISO and one year
after the date of acquisition of the Common Stock pursuant to the exercise of
the ISO.
If an option holder disposes of the Common Stock acquired pursuant to
exercise of an ISO before the expiration of the requisite holding periods, the
option holder will recognize compensation income in an amount equal to the
difference between the option price and the lesser of (i) the fair market value
of the shares on the date of exercise and (ii) the price at which the shares are
sold. This amount will be taxed at ordinary income rates. If the sale price of
the shares is greater than the fair market value on the date of exercise, the
difference will be recognized as gain by the option holder and taxed at the
applicable capital gains rate. If the sale price of the shares is less than the
option price, the option holder will recognize a capital loss equal to the
excess of the option price over the sale price.
For these purposes, the use of shares acquired upon exercise of an ISO to pay
the option price of another option (whether or not it is an ISO) will be
considered a disposition of the shares. If this disposition occurs before the
expiration of the requisite holding periods, the option holder will have the
same tax consequences as are described in the immediately preceding paragraph.
If the option holder transfers any such shares after holding them for the
requisite holding periods or transfers shares acquired pursuant to exercise of a
NQSO or on the open market, he generally will not recognize any income upon the
exercise. Whether or not the transferred shares were acquired pursuant to an
ISO and regardless of how long the option holder has held such shares, the basis
of the new shares received pursuant to the exercise will be computed in two
steps. In the first step, a number of new shares equal to the number of older
shares tendered (in payment of the option's exercise) is considered exchanged
under Section 1036 of the Code and the rulings thereunder; these new shares
receive the same holding period and the same basis that the option holder had in
the old tendered shares, if any, plus the amount included in income from the
deemed sale of the old shares and the amount of cash or other nonstock
consideration paid for the new shares, if any. In the second step, the number
of new shares received by the option holder in excess of the old tendered shares
receives a basis of zero, and the option holder's holding period with respect to
such shares commences upon exercise.
An option holder may have tax consequences upon exercise of an ISO if the
aggregate fair market value of shares of the Common Stock subject to ISOs which
first become exercisable by an option holder in any one
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calendar year exceeds $100,000. If this occurs, the excess shares will be
treated as though they are subject to a NQSO instead of an ISO. Upon exercise
of an option with respect to these shares, the option holder will have the tax
consequences described below with respect to the exercise of NQSOs.
Finally, except to the extent that an option holder has recognized income
with respect to the exercise of an ISO (as described in the preceding
paragraphs), the amount by which the fair market value of a share of the Common
Stock at the time of exercise of the ISO exceeds the option price will be
included in determining an option holder's alternative minimum taxable income
and may cause the option holder to incur an alternative minimum tax liability in
the year of exercise.
There will be no tax consequences to the Company upon the issuance or,
generally, upon the exercise of an ISO. However, to the extent that an option
holder recognizes ordinary income upon exercise, as described above, the Company
will have a deduction in the same amount.
NQSOs. Neither the Company nor the option holder has income tax consequences
from the issuance of NQSOs. Generally, in the tax year when an option holder
exercises NQSOs, the option holder recognizes ordinary income in the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price for such shares. The Company will have a deduction in the same
amount as the ordinary income recognized by the option holder in the Company's
tax year in which or with which the option holder's tax year (of exercise) ends.
If an option holder exercises a NQSO by paying the option price with
previously acquired shares of Common Stock, the option holder will recognize
income (relative to the new shares he is receiving) in two steps. In the first
step, a number of new shares equivalent to the number of older shares tendered
(in payment of the NQSO exercised) is considered to have been exchanged in
accordance with Section 1036 of the Code and the rulings thereunder, and no gain
or loss is recognized. In the second step, with respect to the number of new
shares acquired in excess of the number of old shares tendered, the option
holder will recognize income on those new shares equal to their fair market
value less any nonstock consideration tendered.
The new shares equal to the number of the older shares tendered will receive
the same basis the option holder had in the older shares, and the option
holder's holding period with respect to the tendered older shares will apply to
those new shares. The excess new shares received will have a basis equal to the
amount of income recognized by the option holder by exercise, increased by any
nonstock consideration tendered. Their holding period will commence upon the
exercise of the option.
LIMITATION ON COMPANY DEDUCTIONS. No federal income tax deduction is allowed
for compensation paid to a "covered employee" in any taxable year of the Company
beginning on or after January 1, 1994, to the extent that such compensation
exceeds $1,000,000. For this purpose, "covered employees" are generally the
chief executive officer of the Company and the four highest compensated officers
of the Company whose annual salary and bonus exceeds $100,000, and the term
"compensation" generally includes amounts includable in gross income as a result
of the exercise of stock options or stock appreciation rights, or the receipt of
stock options. This deduction limitation does not apply to compensation that is
(1) commission-based compensation, (2) performance-based compensation, (3)
compensation which would not be includable in an employee's gross income, and
(4) compensation payable under a written binding contract in existence on
February 17, 1993, and not materially modified thereafter. Currently, the
Company does not have any covered employee to which this limitation would apply.
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Compensation attributable to a stock option will generally satisfy the
limitation exception for performance-based compensation if the grant or award is
made by a "compensation committee" (a committee composed of "outside"
directors), the plan under which the option or right is granted states the
maximum number of shares with respect to which options or rights may be granted
during a specified period to any employee, and, under the terms of the option or
right, the amount of compensation the employee could receive is based solely on
an increase in the value of the stock after the date of the grant or award.
Stock options granted under the 1996 Stock Option Plan may possibly satisfy
these requirements, depending upon the specific terms, provisions, restrictions
and limitations of such options or rights.
ERISA. The 1996 Stock Option Plan is not, and is not intended to be, an
employee benefit plan or qualified retirement plan. The 1996 Stock Option Plan
is not, therefore, subject to the Employee Retirement Income Security Act of
1974, as amended, or Section 401(a) of the Code.
VOTE REQUIRED TO APPROVE PROPOSAL 3
Approval of the proposed amendment to the 1996 Stock Option Plan requires the
affirmative vote of the holders of at least a majority of the outstanding shares
of Common Stock of the Company represented and entitled to be voted at the
Annual Meeting
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT OF THE 1996 STOCK OPTION PLAN.
PROPOSAL 4 - RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has appointed the firm of Coopers & Lybrand L.L.P. to serve as
independent accountants of the Company for the fiscal year ending December 31,
1997, and has directed that such appointment be submitted to the stockholders of
the Company for ratification at the Annual Meeting. Coopers & Lybrand L.L.P.
has served as independent accountants of the Company since 1986 and is
considered by management of the Company to be well qualified. If the
stockholders do not ratify the appointment of Coopers & Lybrand L.L.P., the
Board of Directors will reconsider the appointment.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. They also will be available to respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS OF THE COMPANY.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders, including nominations for the Board of Directors,
intended to be presented at the 1998 Annual Meeting of Stockholders should be
submitted by certified mail, return receipt requested, and must be received by
the Company at its executive offices in Huntsville, Alabama, on or before
November 24, 1997 to be eligible for inclusion in the Company's proxy statement
and form of proxy relating to that meeting and to be introduced for action at
the meeting. Any stockholder proposal must be in writing and must
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set forth (i) a description of the business desired to be brought before the
meeting and the reasons for conducting the business at the meeting, (ii) the
name and address, as they appear on the Company's books, of the stockholder
submitting the proposal, (iii) the class and number of shares that are
beneficially owned by such stockholder, (iv) the dates on which the stockholder
acquired the shares, (v) documentary support for any claim of beneficial
ownership, (vi) any material interest of the stockholder in the proposal,
(vii) a statement in support of the proposal and (viii) any other information
required by the rules and regulations of the Securities and Exchange Commission.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders which
may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournments thereof, it is the intention of the persons named as proxies
on the enclosed form of proxy card to vote the shares represented by all valid
proxy cards in accordance with their judgment of what is in the best interest of
the Company.
By Order of the Board of Directors.
Mark C. Smith
Chairman of the Board and
Chief Executive Officer
Huntsville, Alabama
March 26, 1997
____________________________________
The Company's 1996 Annual Report, which includes audited financial
statements, has been mailed to stockholders of the Company with these proxy
materials. The Annual Report does not form any part of the material for the
solicitation of proxies.
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REVOCABLE PROXY COMMON STOCK
ADTRAN, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF
STOCKHOLDERS
The undersigned hereby appoints Howard A. Thrailkill, John R. Cooper and
Claudia G. Evans, and each of them, proxies, with full power of substitution, to
act for and in the name of the undersigned to vote all shares of Common Stock of
ADTRAN, Inc. (the "Company") which the undersigned is entitled to vote at the
1997 Annual Meeting of Stockholders of the Company, to be held at the
headquarters of the Company, 901 Explorer Boulevard, Huntsville, Alabama, on
Wednesday, April 23, 1997, at 10:00 a.m., local time, and at any and all
adjournments thereof, as indicated below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE BELOW-LISTED
PROPOSALS
1) Elect as directors the seven nominees listed below to serve until the 1998
Annual Meeting of Stockholders and until their successors are elected and
qualified (except as marked to the contrary below):
[_] FOR ALL NOMINEES listed below [_] WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed below.
below).
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.
Mark C. Smith, Lonnie S. McMillian, Howard A. Thrailkill, O. Gene Gabbard,
William L. Marks, Roy J. Nichols and James L. North
2) Approve an amendment to the Certificate of Incorporation of the Company to
increase the number of authorized shares of Common Stock, par value $.01 per
share, from 60,000,000 shares to 200,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3) Approve an amendment to the ADTRAN, Inc. 1996 Employees Incentive Stock
Option Plan to increase the number of shares available for issuance
from 488,100 shares to 2,488,100 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
4) Ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the fiscal year ending December 31, 1997.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting and any and all
adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
(Continued, and to be signed and dated, on the reverse side)
(Continued from the other side)
<PAGE>
PROXY - SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY CARD WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED ON THE REVERSE
SIDE OF THIS PROXY CARD. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL
MEETING, THIS PROXY CARD WILL BE VOTED BY THE PROXIES IN THEIR BEST JUDGMENT.
At the present time, the Board of Directors knows of no other business to be
presented at the Annual Meeting.
The undersigned may elect to withdraw this proxy card at any time prior to its
use by giving written notice to Charlene Little, Assistant Secretary of the
Company, by executing and delivering to Ms. Little a duly executed proxy card
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
---------------------------------------
Signature
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Signature, if shares held jointly
Date: , 1997
----------------------------
Please mark, date and sign exactly as your name appears on this proxy card.
When shares are held jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee, guardian or custodian, please give
your full title. If the holder is a corporation or a partnership, the full
corporate or partnership name should be signed by a duly authorized officer.
Do you plan to attend the Annual Meeting? [_] YES [_] NO
