<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____ )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ADTRAN, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, ifOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined) :
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing .
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
[ADTRAN, INC. LETTERHEAD]
March 19, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of ADTRAN, Inc. to be held at the Company's headquarters at 901 Explorer
Boulevard, Huntsville, Alabama, on Monday, April 27, 1998, at 10:30 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 27, 1998
NOTICE HEREBY IS GIVEN that the 1998 Annual Meeting of Stockholders of
ADTRAN, Inc. (the "Company") will be held at the Company's headquarters at 901
Explorer Boulevard, Huntsville, Alabama, on Monday, April 27, 1998, at 10:30
a.m., local time, for the purposes of considering and voting upon:
1. A proposal to elect seven directors to serve until the 1999 Annual
Meeting of Stockholders;
2. 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, 1998; and
3. 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 12,
1998 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 19, 1998
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 27, 1998
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 1998 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 Monday, April 27, 1998, at 10:30 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 19, 1998.
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 12, 1998. On the record date,
39,402,679 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 have no other effect
on the election of directors.
1
<PAGE>
In voting with regard to the proposal to ratify the directors' appointment
of independent accountants (Proposal 2), stockholders may vote in favor of the
proposal or against the proposal or may abstain from voting. The votes required
to approve Proposal 2 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 whether a quorum is present and the number of votes
required to obtain the necessary majority vote and therefore, 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 12, 1998 (the record date for the Annual Meeting), the
directors and executive officers of the Company beneficially owned or controlled
approximately 19,796,246 shares of Common Stock of the Company, constituting
approximately 50.2% 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 two 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 two
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 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 Stock
Market, Inc., 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,
2
<PAGE>
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, 1997, (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 SHARES
- ----------------------- ------------- ---------
<S> <C> <C>
Mark C. Smith (2)
Chairman of the Board, Chief Executive
Officer and Principal Stockholder............... 12,498,800 31.7
Lonnie S. McMillian (2)
Senior Vice President, Secretary,
Director and Principal Stockholder.............. 7,028,242(3) 17.8
James L. North
Director........................................ 139,000(1) *
Howard A. Thrailkill
President, Chief Operating Officer
and Director.................................... 50,000(1) *
Roy J. Nichols
Director........................................ 20,000(1) *
William L. Marks
Director........................................ 10,000(1) *
O. Gene Gabbard
Director........................................ 7,000(1) *
Steven L. Harvey
Vice President of Sales B CPE................... 7,500(1) *
John R. Cooper
Vice President of Finance and
Chief Financial Officer......................... 5,900(1)(3) *
Robert A. Fredrickson
Vice President of Sales B Telco................. 2,200(1) *
All directors and executive officers as a group
(16 persons).................................... 19,796,246(1)(3) 50.2
- ----------
</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, 1997 as follows: Mr. North - 7,000 shares; Mr. Thrailkill -
30,000 shares; Mr. Nichols - 7,000 shares; Mr. Marks - 10,000 shares; Mr.
Gabbard - 7,000 shares; Mr. Harvey - 7,500 shares; Mr. Fredrickson - 2,000
shares; Mr. Cooper - 3,000 shares and all directors and executive officers
as a group - 90,400 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.
4
<PAGE>
(2) The address of Messrs. Smith and McMillian is 901 Explorer Boulevard,
Huntsville, Alabama 35806.
(3) The shares shown include: as to Mr. McMillian, 3,428,527 shares held by
trusts for Mr. McMillian's children for which Mr. McMillian is the trustee
and 53,083 shares owned by his wife; as to Mr. Cooper, 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; as to Mr. Panetta
(Vice President-Manufacturing), 200 shares owned by his father and as to
all directors and executive officers as a group, the 3,428,527 shares held
by trusts for Mr. McMillian's children and 55,083 shares owned by spouses
and other immediate family members (as to which beneficial ownership of 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 1998 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
1999 Annual Meeting of Stockholders and until their successors have been duly
elected and qualified. There are no family relationships among the directors or
the executive officers.
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 1999 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, 1997, 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).
5
<PAGE>
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 57.
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 served as Vice President - Engineering of the Company from 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 69.
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. Mr. Thrailkill has served as a director of the
Company since October 1995. Mr. Thrailkill is 59.
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 57.
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 55.
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 59.
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 61.
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, 1997, the Board of Directors held seven meetings, the
Audit Committee held one meeting and the Stock Option Plan Committee held three
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
6
<PAGE>
Board and its committees as a whole averaged 82%. No director 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 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
recommendations 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 1999 Annual Meeting of Stockholders if submitted to
the Company on or before November 19, 1998. See "Stockholder Proposals for 1999
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,
1997, 1996 and 1995, 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, 1997 (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 (2) COMPENSATION(3)
- --------------------------- ------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Mark C. Smith 1997 $ 243,900 $ -0- $ 4,750
Chairman of the Board and Chief Executive 1996 216,408 75,557 4,750
Officer 1995 216,408 -0- 4,580
Howard A. Thrailkill 1997 234,179 -0- 3,977
President and Chief Operating Officer 1996 213,221 74,072 3,971
1995 202,500 -0- 3,842
John R. Cooper (4) 1997 179,808 -0- 3,115
Vice President of Finance and 1996 75,385 28,757 -0-
Chief Financial Officer
Steven L. Harvey (4) 1997 129,808 113,374 43,468
Vice President of Sales B CPE 1996 52,885 60,066 83,127
Robert A. Fredrickson (4) 1997 129,808 105,434 6,104
Vice President of Sales B Telco 1996 30,293 49,974 14,843
</TABLE>
____________________
(1) Includes amounts deferred at the election of the executive officers pursuant
to the Company's Section 401(k) retirement plan.
(2) Bonus for Mr. Harvey and Mr. Fredrickson includes amounts earned as
commissions on sales.
(3) Represents Company contributions to the executive officers' Section 401(k)
retirement plan accounts.
(4) Mr. Cooper, Mr. Harvey and Mr. Fredrickson commenced employment with the
Company on July 11, 1996, July 15, 1996 and October 9, 1996,
respectively.
OPTIONS
The Company granted options to the following named executive officers during
the fiscal year ended December 31, 1997: Mr. Harvey B 40,000; Mr. Fredrickson B
40,000 and Mr. Cooper B 30,000. The following table sets forth option exercises
by the named executive officers during the fiscal year ended December 31, 1997,
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, 1997 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, 1997.
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-
Howard A. Thrailkill 20,000 $815,000 30,000 75,000 $750,000 $159,375
John R. Cooper -0- -0- 3,000 42,000 -0- $ 63,750
Steven L. Harvey -0- -0- 75,000 42,500 -0- $ 85,000
Robert A. Fredrickson -0- -0- 2,000 48,000 -0- $ 85,000
</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, 1997. 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 1997, 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 1997 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 recommendations
of the Chief Executive Officer with regard to the 1997 compensation of each of
the other executive officers of the Company.
In 1997, 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 and are reflected in
Table 1.
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 1997 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 139,000 shares of the Common Stock
of the Company. The Company paid James L. North & Associates fees of $61,350
plus expenses of $2,958 for legal services rendered during 1997. 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, 1997 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 $28f per share on March 12, 1998.
10
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ TELECOMMUNICATIONS INDEX
AND NASDAQ US INDEX
<TABLE>
<CAPTION>
8/9/94 12/31/94 12/31/95 12/31/96 12/31/97
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADTRAN, Inc. $100 $254 $603 $461 $306
Nasdaq Telecommunications Index $100 $ 96 $126 $129 $191
Nasdaq US Index $100 $105 $148 $182 $224
</TABLE>
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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, 1997, its
directors, executive officers and owners of more than 10% of its Common Stock
complied with all applicable filing requirements, except that Forms 5 for each
of Robert A. Fredrickson, Jude T. Panetta and Danny A. Windham were filed on
February 24, 1998 which was 10 days after the deadline of February 14, 1998 for
such filings.
PROPOSAL 2 - 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,
1998, 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 1999 ANNUAL MEETING
Proposals of stockholders, including nominations for the Board of Directors,
intended to be presented at the 1999 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 19, 1998 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 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
12
<PAGE>
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 19, 1998
____________________________________
The Company's 1997 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 1998 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 1998 Annual Meeting of Stockholders of the Company, to be held at the
headquarters of the Company, 901 Explorer Boulevard, Huntsville, Alabama, on
Monday, April 27, 1998, at 10:30 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 1999
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 for all nominees listed below.
the contrary 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. Ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the fiscal year ending December 31, 1998.
[ ] 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)
<PAGE>
(Continued from the other side)
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 de-
livering to Ms. Little a duly exe-
cuted proxy card bearing a later
date, or by appearing at the Annual
Meeting and voting in person.
--------------------------------------
Signature
--------------------------------------
Signature, if shares held jointly
Date: __________________________, 1998
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 partner-
ship, the full corporate or partner-
ship name should be signed by a duly
authorized officer.
Do you plan to attend the Annual
Meeting? [_] YES [_] NO
