<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, 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:
-------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
[ADTRAN, INC. LETTERHEAD]
March 8, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of ADTRAN, Inc. to be held at the Company's headquarters at 901 Explorer
Boulevard, Huntsville, Alabama, on Friday, April 21, 2000, 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,
PricewaterhouseCoopers LLP, 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,
/s/ Mark C. Smith
---------------------------
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 21, 2000
NOTICE HEREBY IS GIVEN that the 2000 Annual Meeting of Stockholders of
ADTRAN, Inc. (the "Company") will be held at the Company's headquarters at 901
Explorer Boulevard, Huntsville, Alabama, on Friday, April 21, 2000, 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 2001 Annual
Meeting of Stockholders;
2. A proposal to ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year ending
December 31, 2000;
3. A proposal to approve an amendment to the Company's 1996 Employees
Incentive Stock Option Plan which increases the aggregate number of
shares of Common Stock authorized for issuance under the plan from
2,488,100 to 5,488,100; and
4. 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 1,
2000 are entitled to receive notice of and to vote at the Annual Meeting and any
adjournments thereof.
By Order of the Board of Directors.
/s/ Mark C. Smith
-----------------------------------
MARK C. SMITH
Chairman of the Board
and Chief Executive Officer
Huntsville, Alabama
March 8, 2000
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 21, 2000
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 2000 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 Friday, April 21, 2000, 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 8, 2000.
VOTING
General
The securities that can be voted at the Annual Meeting consist of common
stock of the Company, $.01 par value per share (the "Common Stock"), 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 1,
2000. On the record date, 39,445,813 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.
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
<PAGE>
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 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 proposal.
In voting with regard to the proposal to ratify an increase in the
aggregate number of shares of Common Stock of the Company authorized for
issuance under the 1996 Employees Incentive Stock Option Plan from 2,488,100 to
5,488,100 of Common Stock of the Company (Proposal 3), stockholders may vote in
favor of the proposal or against the proposal or may abstain from voting. The
vote required to approve Proposal 3 is governed by Delaware law and is 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 proposal.
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. The
Company believes that each of the three proposals to be considered at the Annual
Meeting is discretionary.
As of March 1, 2000 (the record date for the Annual Meeting), the directors
and executive officers of the Company beneficially owned or controlled
approximately 18,204,443 shares of Common Stock of the Company, constituting
approximately 46.2% 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 three 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 three
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 ratification of the appointment of independent
accountants and "FOR" an increase in the aggregate number of shares of Common
Stock authorized for issuance under the 1996 Employees Incentive Stock Option
Plan. 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,
2
<PAGE>
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 National Market, 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, 1999, (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 each director and
executive officer included in the 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 31.7%
Lonnie S. McMillian (2)
Senior Vice President, Secretary,
Director and Principal Stockholder.............. 5,383,972 (3) 13.6%
James L. North
Director........................................ 143,000 (1) *
Howard A. Thrailkill
President, Chief Operating Officer
and Director.................................... 95,000 (1) *
Roy J. Nichols
Director........................................ 24,000 (1)(3) *
William L. Marks
Director........................................ 14,364 (1) *
W. Frank Blount
Director........................................ 0 *
Steven L. Harvey
Vice President - Competitive
Service Provider Sales.......................... 35,000 (1) *
Robert A. Fredrickson
Vice President - CN Sales...................... 30,374 (1) *
Thomas R. Stanton
Vice President and General Manager, CN.......... 28,186 (1) *
All directors and executive officers as a group
(15 persons).................................... 18,427,866 (1)(3) 46.7%
</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, 1999 as follows: Mr. North - 11,000 shares; Mr. Thrailkill -
75,000 shares; Mr. Nichols - 11,000 shares; Mr. Marks - 14,000 shares; Mr.
Harvey - 35,000 shares; Mr. Fredrickson - 30,374 shares; Mr. Stanton -
27,786 shares; and all directors and executive officers as a group -358,018
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, 1,670,634 shares held by
trusts for which Mr. McMillian is the trustee, 123,299 shares owned by his
wife and 65,000 shares owned by a private foundation (as to which
beneficial ownership is disclaimed); as to John R. Cooper (Vice President
of Finance, Treasurer 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. Nichols, 10,000 shares held in a
charitable remainder trust; as to M. Melvin Bruce, Jr. (Vice President-CN
Engineering), 200 shares owned jointly with his daughters; and as to all
directors and executive officers as a group, 124,699 shares owned by
spouses and other immediate family members (as to which beneficial
ownership of 900 shares is disclaimed) as well as 1,670,634 shares held by
trusts for which Mr. McMillian is a trustee.
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, W. Frank Blount, William L. Marks, Roy J. Nichols and James L. North
for re-election as directors at the 2000 Annual Meeting. Each of the nominees
is currently a director of the Company. In April 1999, pursuant to the Bylaws
of the Company, the Board of Directors elected W. Frank Blount to fill the
vacancy on the Board that existed following the 1999 Annual Meeting. If re-
elected as a director at the Annual Meeting, each of the nominees would serve a
one year term expiring at the 2001 Annual Meeting of Stockholders and until his
successor has 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, W. Frank Blount, William L. Marks, Roy J. Nichols and James L. North
as directors for a one year term expiring at the 2001 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, 1999, 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 59.
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 71.
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 61.
W. FRANK BLOUNT served as Chief Executive Officer and as a director of
Telstra Corporation, LTD, Australia's principal telecommunications company, from
January 1992 until March 1999. Prior to joining Telstra, he served in various
executive positions for AT&T Corp., including Group President from 1988 to 1991.
He currently serves as a director of Caterpillar, Inc., Entergy Corp., National
Australia Bank, BHP, Inc., Techniche, Inc., Pioneer International Ltd. and
Alcatel, Inc. Mr. Blount has served as a director of the Company since April
1999. Mr. Blount is 61.
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 56.
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 also serves as Vice Chairman of the Board on
ennoVerity.com, Inc. Mr. Nichols has served as a director of the Company since
1994. Mr. Nichols is 61.
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 63.
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, 1999, the Board of Directors held four meetings, the
Audit Committee held one meeting, the Stock Option Plan Committee held two
meetings and the Compensation Committee held one meeting. Attendance at
meetings of the Board and its committees as a whole averaged 95%. 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.
6
<PAGE>
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 William L. Marks, Roy J.
Nichols and James L. North.
The Stock Option Plan Committee is responsible for administering the
Company's 1996 Employees Incentive Stock Option Plan. The Stock Option Plan
Committee is composed of 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 2001 Annual Meeting of Stockholders if submitted to
the Company on or before November 8, 2000. See "Stockholder Proposals for 2001
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,
1999, 1998 and 1997, 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, 1999 (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>
Long Term
---------
Annual Compensation Compensation
------------------- ------------
All Other Securities Under-
Name and Principal Position Year Salary (1) Bonus (2) Compensation(3) Lying Options(#)
- --------------------------- ---- ---------- --------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Mark C. Smith 1999 $278,252 $287,819 $ 4,000 -0-
Chairman of the Board and 1998 265,000 -0- 4,000 -0-
Chief Executive Officer 1997 243,900 -0- 4,750 -0-
Howard A. Thrailkill 1999 273,000 284,275 4,000 75,000
President and Chief Operating 1998 260,000 -0- 4,000 75,000
Officer 1997 234,179 -0- 3,977 75,000
Robert A. Fredrickson 1999 159,588 279,015 4,000 45,000
Vice President - CN Sales 1998 152,000 182,731 4,000 40,000
1997 129,808 105,434 6,104 45,000
Steven L. Harvey 1999 159,588 221,244 4,000 45,000
Vice President - Competitive 1998 152,000 262,561 4,000 40,000
Service Provider Sales 1997 129,808 113,374 43,468 45,000
Thomas R. Stanton 1999 210,002 126,000 4,000 50,000
Vice President and General 1998 200,000 80,000 4,000 50,000
Manager, CN 1997 159,231 -0- 3,963 35,000
</TABLE>
____________________
(1) Includes amounts deferred at the election of the executive officers pursuant
to the Company's Section 401(k) retirement plan.
(2) Includes amounts paid pursuant to Officer Bonus Plan and earned as
commissions on sales.
(3) Represents Company contributions to the executive officers' Section 401(k)
retirement plan accounts and moving expenses related to commencing
employment for Mr. Harvey, Mr. Fredrickson and Mr. Stanton.
8
<PAGE>
Option Grants
The following table sets forth information regarding the number and terms of
stock options granted to the named executive officers during the fiscal year
ended December 31, 1999. Included in such information, in accordance with the
rules and regulations of the Securities and Exchange Commission, is the
potential realizable value of each option granted, calculated using the 5% and
10% option pricing model.
Table 2: Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realization
Individual Grants Value at Assumed
- --------------------------------------------------------------------------------------------
Annual Rates of
Stock Price
Number of % of Total Appreciation for
Securities Options Option Term
--------------------------
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) (2) Date (3) 5%($) 10%($)
- ------------------------ ----------- ------------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Smith -0- - - - - -
Howard A. Thrailkill 75,000(1) 6.6% $36.063 07/15/2009 $1,700,987 $4,310,635
Robert A. Fredrickson 5,000(4) 0.4 19.438 01/04/2009 61,122 154,895
40,000(1) 3.5 36.063 07/15/2009 907,193 2,299,005
Steven L. Harvey 5,000(4) 0.4 19.438 01/04/2009 61,122 154,895
40,000(1) 3.5 36.063 07/15/2009 907,193 2,299,005
Thomas R. Stanton 50,000(1) 4.4 36.063 07/15/2009 1,133,991 2,873,756
</TABLE>
______________
(1) The indicated number of options were granted to the named executive
officers on July 15, 1999 pursuant to the 1996 Employees Incentive Stock
Option Plan. Options for 20% of the shares vest on each anniversary of the
date of grant until fully vested. The options issued on July 15, 1999 will
not become exercisable unless the stockholders approve the amendment to
the 1996 Employees Incentive Stock Option Plan described below under
Proposal 3 of this Proxy Statement.
(2) The exercise price of an option may be paid in cash, by delivery of
already owned shares of Common Stock of the Company, by instructing the
Company to retain shares of Common Stock upon exercise or by a combination
of the above, subject to certain conditions.
(3) The options were granted for a term of 10 years, subject to earlier
termination upon occurrence of certain events related to termination of
employment or change of control of the Company.
(4) The indicated number of options were granted to Mr. Fredrickson and Mr.
Harvey on January 4, 1999 pursuant to the 1996 Employees Incentive Stock
Option Plan. Options for 20% of the shares vest on each anniversary of
the date of grant until fully vested.
9
<PAGE>
Options
The following table sets forth option exercises by the named executive
officers during the fiscal year ended December 31, 1999, 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, 1999 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, 1999.
Table 3: 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 -0- -0- 75,000 180,000 2,701,867 4,133,370
Robert A. Fredrickson -0- -0- 28,374 106,626 701,118 2,440,714
Steven L. Harvey -0- -0- 34,000 101,000 701,746 2,364,461
Thomas R. Stanton -0- -0- 27,786 112,214 653,717 2,520,357
</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, 1999. 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 1999, 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 1999
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
10
<PAGE>
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 1999 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 (i)
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 (ii) achievement of
specified operational targets on a divisional level such as unit volume targets
and revenue targets. In addition, from time to time, the Chief Executive
Officer has granted additional bonuses to executive officers based upon his
assessment of their individual performance; however, no individual performance
bonuses were granted in 1999.
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 1999 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: 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 as of December 31, 1999, beneficially owned
143,000 shares of the Common Stock of the Company. James L. North & Associates
provided legal services to the Company during 1999. 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 December 31, 1994 through
December 31, 1999 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
December 31, 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 $73.375 per share on March 1, 2000.
11
<PAGE>
Comparison of Cumulative Total Return
Among the Company, Nasdaq Telecommunications Index and Nasdaq US Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
=======================================================================================
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
=======================================================================================
<S> <C> <C> <C> <C> <C> <C>
ADTRAN, Inc. $100 $237 $181 $120 $ 80 $225
=======================================================================================
NASDAQ Telecommunications $100 $131 $134 $196 $322 $561
Index
=======================================================================================
NASDAQ US Index $100 $141 $174 $213 $300 $542
=======================================================================================
</TABLE>
12
<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, 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, 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, 1999, its directors, officers and
owners of more than 10% of its Common Stock complied with all applicable filing
requirements.
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 PricewaterhouseCoopers LLP to serve as
independent accountants of the Company for the fiscal year ending December 31,
2000, and has directed that such appointment be submitted to the stockholders of
the Company for ratification at the Annual Meeting. PricewaterhouseCoopers LLP
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 PricewaterhouseCoopers LLP the
Board of Directors will reconsider the appointment.
Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP as
independent accountants of the Company.
PROPOSAL 3 - RATIFICATION OF PROPOSAL TO AMEND 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 2,488,100 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.
13
<PAGE>
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 2,488,100 shares to 5,488,100 shares.
Stock Subject to Options
The stock subject to the options is the Company's authorized but unissued or
reacquired Common Stock. On March 1, 2000, the closing price of the Company's
Common Stock as reported by the Nasdaq National Market on that day was $73.375
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.
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, 1999, there were approximately
1,297 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.
14
<PAGE>
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 2,488,100 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. On July 15,
1999, the Company granted 612,000 options under the 1996 Stock Option Plan to
certain eligible employees, with the exercise of such options being contingent
upon the approval by the stockholders of the Company of the increase in the
number of shares authorized for issuance under the 1996 Stock Option Plan as
described in this Proposal 3.
Options Granted
As of December 31, 1999, the Company has granted options under the 1996
Stock Option Plan to the named executive officers in the following amounts: Mr.
Smith - 0; Mr. Thrailkill - 315,000; Mr. Fredrickson - 135,000; Mr. Harvey -
135,000; and Mr. Stanton - 140,000. Mr. Thrailkill is also the only director
who has been granted options under the 1996 Stock Option Plan and the only
individual who has been granted more than 5% of the total options granted under
the 1996 Stock Option Plan. As of December 31, 1999, the current executive
officers, as a group, have been granted a total of 1,341,000 options under the
1996 Stock Option Plan, and all other employees have been granted a total of
1,864,925 options. Of the options granted under the 1996 Stock Option Plan, the
exercise of 612,000 options granted on July 15, 1999 is contingent upon the
approval by the stockholders of the increase in the number of shares authorized
for issuance as described in this Proposal 3.
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 market value of the
Common Stock on the date the ISO 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. Notwithstanding the vesting schedule established by the
Committee, all non-vested Options previously granted to an optionee immediately
vest upon the optionee's becoming "Disabled" (as defined in the 1996 Stock
Option Plan), or upon his or her death or upon a "Change of Control" of the
Company (as defined in the 1996 Stock Option Plan). See "Change of Control"
below.
15
<PAGE>
Term of Options. 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.
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, disability or for "cause" (as defined in the 1996 Stock Option Plan),
unless the employee dies within this three month period; (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 any
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 any parent or subsidiary, (b) within three
months after termination of employment with the Company or any parent or
subsidiary for a reason other than for "cause," or (c) within one year after
employment with the Company or any parent or subsidiary is terminated due to
disability. Notwithstanding the immediately preceding sentence, if an
optionee's employment terminates for any reason other than death or disability
at any time after a "Change of Control" (as defined under "Change of Control"
below), the term of all options of the optionee will be extended through the
three month period immediately following such termination of employment.
However, the Committee may waive the above expiration periods with respect to
any NQSOs granted under the 1996 Stock Option Plan and provide different
expiration dates in a NQSO option agreement.
Exercise of Options. 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."
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 adversely 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
16
<PAGE>
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; 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 "subsidiary" of the
Company to a Person described in subsection (a) above.
Adjustments
In the event of changes in the number or kind 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 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 Board of
Directors adopts a plan of dissolution and liquidation that is approved by the
stockholders of the Company, all of the rights of all optionees will become
immediately nonforfeitable and exercisable through the date of dissolution.
17
<PAGE>
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 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.
18
<PAGE>
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.
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 "material terms" (including which employees are eligible to
receive compensation, the maximum number of shares that may be granted to an
optionee and the exercise price of
19
<PAGE>
the options) of the plan under which the option or right is granted are
disclosed to stockholders and approved by a majority of the stockholder vote,
the "compensation committee" certifies that performance goals were in fact
satisfied before the compensation is paid, 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 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.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" the proposal to amend the 1996 Employees Incentive Stock Option Plan.
STOCKHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders, including nominations for the Board of Directors,
intended to be presented at the 2001 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 8, 2000 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 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.
20
<PAGE>
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.
/s/ Mark C. Smith
-----------------------------------
Mark C. Smith
Chairman of the Board and
Chief Executive Officer
Huntsville, Alabama
March 8, 2000
____________________________________
The Company's 1999 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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----------------------------TOP--------------------------------
FOLD HERE AND DETACH
REVOCABLE PROXY
COMMON STOCK
ADTRAN, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 2000 ANNUAL MEETING
OF STOCKHOLDERS
The undersigned hereby appoints Howard A. Thrailkill and John R. Cooper, 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 2000 Annual
Meeting of Stockholders of the Company, to be held at the headquarters of the
Company, 901 Explorer Boulevard, Huntsville, Alabama, on Friday, April 21,
2000, 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 2001
Annual Meeting of Stockholders and until their successors are elected and
qualified (except as marked to the contrary below):
<TABLE>
<S> <C>
[_] FOR ALL NOMINEES listed below [_] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below.
</TABLE>
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, W. Frank Blount,
William L. Marks, Roy J. Nichols, and James L. North
2. Ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 2000.
<TABLE>
<S> <C> <C>
[_] FOR [_] AGAINST [_] ABSTAIN
</TABLE>
3. Approve an amendment to the Company's 1996 Employees Incentive Stock Option
Plan which increases the aggregate number of shares of Common Stock
authorized for issuance under the plan from 2,488,100 to 5,488,100.
<TABLE>
<S> <C> <C>
[_] FOR [_] AGAINST [_] ABSTAIN
</TABLE>
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)
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FOLD HERE AND DETACH
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
_______________________________________
Signature, if shares held jointly
Date: ____________________________, 2000
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
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