<PAGE> 1
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
TELTREND INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[TELTREND LOGO]
TELTREND INC.
620 STETSON AVENUE
ST. CHARLES, ILLINOIS 60174
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
ON DECEMBER 10, 1998
---------------------------
TO THE STOCKHOLDERS OF TELTREND INC.:
The annual meeting of stockholders of Teltrend Inc. (the "Company") will be
held on Thursday, December 10, 1998 at 9:00 a.m., local time, at the Company's
headquarters, 620 Stetson Avenue, St. Charles, Illinois 60174, for the following
purposes:
1. To elect directors;
2. To ratify the action of the Board of Directors in appointing Ernst &
Young LLP as the Company's independent auditors for the Company's
fiscal year ending July 31, 1999; and
3. To transact such other business as may properly be brought before the
annual meeting or any adjournment or postponement thereof.
The annual meeting may be postponed or adjourned from time to time without
any notice other than announcement at the meeting, and any and all business for
which notice is hereby given may be transacted at any such postponed or
adjourned meeting.
The Board of Directors has fixed the close of business on October 16, 1998
as the record date for determination of stockholders entitled to notice of and
to vote at the annual meeting.
Stockholders are requested to complete and sign the enclosed proxy, which
is solicited by the Board of Directors, and promptly return it in the
accompanying envelope, whether or not they plan to attend the annual meeting in
person. The proxy is revocable at any time before it is voted. Returning the
proxy will in no way limit your right to vote at the annual meeting if you later
decide to attend in person.
By Order of the Board of Directors
/s/ DOUGLAS P. HOFFMEYER
Douglas P. Hoffmeyer
Sr. Vice President, Finance; Chief
Financial Officer; Secretary and
Treasurer
St. Charles, Illinois
October 30, 1998
<PAGE> 3
TELTREND INC.
620 STETSON AVENUE
ST. CHARLES, ILLINOIS 60174
---------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 10, 1998
---------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Teltrend Inc., a Delaware corporation (the "Company"),
of proxies for use at the Annual Meeting of Stockholders of the Company to be
held on Thursday, December 10, 1998 at 9:00 a.m., local time, at the Company's
headquarters, 620 Stetson Avenue, St. Charles, Illinois 60174, and at any
postponement or adjournment thereof (the "Annual Meeting"). This Proxy Statement
and accompanying proxy are being mailed to stockholders of the Company
commencing on or about October 30, 1998. The mailing address of the principal
executive offices of the Company is 620 Stetson Avenue, St. Charles, Illinois
60174.
RECORD DATE AND SHARES OUTSTANDING
Holders of record of the Company's common stock, $.01 par value per share
(the "Common Stock"), at the close of business on October 16, 1998 are entitled
to notice of and to vote at the Annual Meeting. As of October 16, 1998, there
were 5,948,990 shares of Common Stock outstanding (exclusive of 533,000 shares
held by the Company) and entitled to vote at the Annual Meeting, each such share
being entitled to cast one vote. The Common Stock is traded on the Nasdaq
National Market.
VOTING AND QUORUM
Two proposals are scheduled for stockholder consideration at the Annual
Meeting, each of which is described more fully herein: (i) the election of seven
individuals to the Company's Board of Directors; and (ii) the ratification of
the action of the Board of Directors in appointing Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending July 31, 1999.
All properly executed, unrevoked proxy cards received pursuant to this
solicitation prior to the close of voting will be voted as directed therein. Any
stockholder who has given a proxy may revoke it at any time prior to its use at
the Annual Meeting by executing and delivering to the Secretary of the Company a
proxy bearing a later date, by giving a written notice of revocation to the
Secretary of the Company or by attending the Annual Meeting and voting in
person. Any written notice of revocation or subsequent proxy should be delivered
to Teltrend Inc., 620 Stetson Avenue, St. Charles, Illinois 60174, Attention:
Secretary, or hand delivered to the Secretary, before the closing of the polls
at the Annual Meeting.
The holders of a majority of the outstanding shares of Common Stock as of
October 16, 1998, present at the Annual Meeting in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting.
Assuming the presence of a quorum, the affirmative vote of a plurality of the
votes cast and entitled to vote in the election at the Annual Meeting will be
required for the election of directors, and the affirmative vote of a majority
of the votes cast and entitled to vote thereon will be required to act on all
other matters to come before the Annual Meeting.
Stockholders may vote in favor of or withhold authority to vote for the
nominees for election as directors listed herein. Similarly, stockholders may
vote in favor of, against or abstain from voting with respect to the proposal to
ratify the appointment of the Company's independent auditors described herein.
Directions to withhold authority, abstentions and broker non-votes (which occur
when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner) will be counted in
<PAGE> 4
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting. Directions to withhold authority, because directors are
elected by a plurality of votes cast, will have no effect on the election of
directors. Broker non-votes, because they are not considered "votes cast," are
not counted in the vote totals and will have no effect on any proposal scheduled
for consideration at the Annual Meeting. Abstentions will have the effect of a
vote against the proposal being considered.
If a properly executed, unrevoked proxy does not specifically direct the
voting of the shares covered by such proxy, the proxy will be voted (a) FOR the
election of all nominees for election as director as listed herein, (b) FOR the
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending July 31, 1999; and (c) in
accordance with the judgment of the persons named in the proxy as to such other
matters as may properly come before the Annual Meeting.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR
THE FISCAL YEAR ENDED JULY 25, 1998 WILL BE PROVIDED TO STOCKHOLDERS WITHOUT
CHARGE UPON WRITTEN REQUEST TO TELTREND INC., 620 STETSON AVENUE, ST. CHARLES,
ILLINOIS 60174, ATTENTION: SECRETARY.
ANNUAL REPORT
The Company's annual report to stockholders for the fiscal year ended July
25, 1998 has been included in the mailing of this Proxy Statement. Stockholders
are referred to the report for financial and other information about the
Company, but such report is not incorporated in this Proxy Statement and is not
to be deemed a part of the proxy soliciting material.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 16, 1998 (except
as otherwise indicated) with respect to the beneficial ownership of the
Company's Common Stock by (a) each director and nominee for director of the
Company, (b) each of the executive officers of the Company named in the Summary
Compensation Table, (c) all directors and executive officers of the Company as a
group, and (d) each person known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock. Except as otherwise indicated, all
the persons listed below have the sole voting and investment power with respect
to all shares held by them, except to the extent such power may be shared with a
spouse.
<TABLE>
<CAPTION>
NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF CLASS
---------------- --------- --------
<S> <C> <C>
Heartland Advisors, Inc.(1)............................... 960,450(1) 16.1%
790 N. Milwaukee St.
Milwaukee, WI 53202
Becker Capital Management Inc.(2)......................... 642,700(2) 10.8%
1211 SW 5th Ave.
Suite 2185
Portland, OR 97204
State of Wisconsin Investment Board(3).................... 607,000(3) 10.2%
P.O. Box 7842
Madison, WI 55707
Wellington Management Company, LLP(4)..................... 399,000(4) 6.7%
75 State Street
Boston, MA 02109
Fleet Financial Group, Inc.(5)............................ 332,840(5) 5.6%
One Federal Street
Boston, MA 02110
Howard L. Kirby, Jr.*+.................................... 185,300(6) 3.1%
Gilbert H. Hosie*......................................... 45,001(7) **
Douglas P. Hoffmeyer*..................................... 52,070(8) **
Laurence L. Sheets*....................................... 41,320(9) **
Michael S. Grzeskowiak*................................... 50,820(10) **
Frank T. Cary+............................................ 2,315(11) **
William R. Delk+.......................................... 4,000(12) **
Bernard F. Sergesketter+.................................. 2,500(11) **
Susan B. Major+........................................... 3,400(11) **
Donald R. Hollis+......................................... 4,500(13) **
Harry Crutcher, III+...................................... 3,400(11) **
All directors and executive officers as a group (17
persons)................................................ 422,001(14) 6.8%
</TABLE>
- -------------------------
* Executive Officer
+ Director and Nominee
** Less than one percent
(1) The information set forth reflects Common Stock held by Heartland Advisors,
Inc. on February 6, 1998 and is based solely on a Schedule 13G as filed
with the Securities and Exchange Commission (the "SEC") on February 13,
1998.
footnotes continued on next page
3
<PAGE> 6
(2) The information set forth reflects Common Stock held by Becker Capital
Management Inc. on February 12, 1998 and is based solely on a Schedule 13G
as filed with the SEC on February 13, 1998.
(3) The information set forth reflects Common Stock held by the State of
Wisconsin Investment Board on January 20, 1998 and is based solely on a
Schedule 13G as filed with the SEC on January 20, 1998.
(4) The information set forth reflects Common Stock held by Wellington
Management Company, LLP on January 17, 1998 and is based solely on a
Schedule 13G as filed with the SEC on February 9, 1998.
(5) The information set forth reflects Common Stock held by Fleet Financial
Group, Inc. on December 31, 1997 and is based solely on a Schedule 13G as
filed with the SEC on February 13, 1998.
(6) Includes options to purchase 102,750 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
(7) Includes options to purchase 33,673 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
(8) Includes options to purchase 25,900 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
(9) Includes options to purchase 27,150 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
(10) Includes options to purchase 24,650 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
(11) Includes options to purchase 1,500 shares of Common Stock which will become
exercisable within 60 days of October 16, 1998.
(12) Includes 1,000 shares of Common Stock currently held by Mr. Delk's wife.
Also includes options to purchase 1,500 shares of Common Stock which will
become exercisable within 60 days of October 16, 1998.
(13) Includes 2,000 shares of Common Stock held by the Hollis Family Limited
Partnership, of which Mr. Hollis is the general partner. Also, includes
options to purchase 1,500 shares of Common Stock which will become
exercisable within 60 days of October 16, 1998.
(14) Includes options to purchase 248,098 shares of Common Stock which are
currently exercisable or will become exercisable within 60 days of October
16, 1998.
ELECTION OF DIRECTORS
The Company's Amended and Restated Bylaws (the "Bylaws") set the number of
directors of the Company at between three and nine, which number may be changed
from time to time by the Board of Directors. The Board of Directors currently
consists of seven directors. All directors of the Company are elected at the
Company's annual meeting of stockholders and hold office until their respective
successors have been duly elected and qualified or until their earlier
resignation or removal.
The Board of Directors has nominated the following individuals for election
as directors of the Company at the Annual Meeting: Frank T. Cary; Harry
Crutcher, III; William R. Delk; Donald R. Hollis; Howard L. Kirby, Jr.; Susan B.
Major; and Bernard F. Sergesketter.
While the Board of Directors expects that all nominees for election as a
director will be able to serve, if any of the nominees for election shall be
unable to or for good cause will not serve as a director, the persons listed in
the enclosed proxy shall vote such proxy, if properly executed and returned and
unrevoked, for such other person or persons as shall be recommended by the Board
of Directors, or the Board of Directors may, in its discretion, reduce the
number of directors to be elected. The affirmative vote of a plurality of the
votes cast and entitled to vote at the Annual Meeting is required for the
election of directors.
4
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES LISTED HEREIN.
The name of and certain information regarding the nominees, each being a
current director of the Company, for election as a director of the Company at
the Annual Meeting appear below. Prior to the Company's initial public offering
in June 1995 (the "IPO"), the Company's operations were conducted through an
indirect subsidiary (the "Operating Subsidiary"), which the Company owned
through a direct subsidiary (the "Holding Subsidiary"). In connection with the
IPO, the Holding Subsidiary and Operating Subsidiary were merged into the
Company (the "Mergers"). Effective April 7, 1995, each executive officer of the
Operating Subsidiary was appointed an executive officer of the Company in
contemplation of the IPO and Mergers. Accordingly, all references to Mr. Kirby's
service as an executive officer of the Company prior to April 7, 1995 shall be
deemed to refer to his service as an executive officer of the Operating
Subsidiary.
HOWARD L. KIRBY, JR., PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF
THE BOARD OF DIRECTORS -- Mr. Kirby has served as the President, the Chief
Executive Officer and a director of the Company since January 1990. Mr. Kirby
was named Chairman of the Board of Directors in February 1997. Mr. Kirby began
his career in the telecommunications industry in 1962 with Collins Radio Company
(which subsequently became a part of Rockwell International Corporation), where
he spent 20 years in various management positions in engineering, marketing and
sales. From 1982 to 1984, Mr. Kirby was the Director of Planning and Business
Development for U.S. Telephone, now part of Sprint Corporation. In 1984, Mr.
Kirby became the Vice President and General Manager at Pulse Communications,
Inc., a subsidiary of Hubbell Incorporated, and held that position until he
joined the Company in 1990. Mr. Kirby is 62 years old.
FRANK T. CARY, DIRECTOR -- Mr. Cary has been a director of the Company
since January 1989. Mr. Cary is a former Chairman of the Board and Chief
Executive Officer of International Business Machines Corporation. He is a
director of Celgene Corporation, Cygnus Therapeutic Systems, ICOS Corporation
and Lincare, Inc. Mr. Cary is 77 years old.
HARRY CRUTCHER, III, DIRECTOR -- Mr. Crutcher has been a director of the
Company since July 1996. He has been a practicing attorney for more than thirty
years, specializing in financial transactions. He spends the majority of his
time as a business, management and financial consultant. His companies, Crutcher
Enterprises, Inc. and Resorts Financial Services Co., are involved in
acquisitions, restructurings and strategic planning related to operating
businesses, particularly in the resort and hospitality industry. He is also the
Managing Partner of Grouse Mountain Associates, Ltd., a hotel owner and
operator. Mr. Crutcher's son is married to Mr. Kirby's daughter. Mr. Crutcher is
60 years old.
WILLIAM R. DELK, DIRECTOR -- Mr. Delk has been a director of the Company
since January 1996. Mr. Delk has over 35 years experience in the
telecommunications industry, having held various positions from 1959 to 1984
with Southern Bell and from 1984 to 1994 with BellSouth Corporation and its
subsidiaries. Mr. Delk retired in December 1994 as Vice President of BellSouth
Telecommunications, Inc., a position he had held since April 1993 and in which
his responsibilities included procurement, supply handling and delivery, service
management and other support functions for a nine-state operation. From January
1988 through March 1993, Mr. Delk was a Vice President of BellSouth Enterprises,
Inc., responsible for personnel and executive compensation, information systems
and public relations. Mr. Delk is 60 years old.
DONALD R. HOLLIS, DIRECTOR -- Mr. Hollis has been a director of the Company
since July 1996. Mr. Hollis is currently the president of DRH Strategic
Consulting, Inc., which assists clients in developing strategies for leveraging
technology. Mr. Hollis is also a director of Deluxe Corp., Information Advantage
Inc., Open Port Technology and Edify Corp. From 1981 to 1996, Mr. Hollis was an
Executive Vice President of First Chicago Corporation ("First Chicago"),
responsible for First Chicago's technology and commercial transaction processing
business. Prior to that, Mr. Hollis had various positions at Chase Manhattan
Bank, Interactive Data Corporation, the Glidden Company and Smith-Corona
Marchant. Mr. Hollis is 62 years old.
SUSAN B. MAJOR, DIRECTOR -- Ms. Major has been a director of the Company
since April 1997. Ms. Major is a Vice President and Managing Director for A.T.
Kearney, Inc., a worldwide executive search company with its corporate
headquarters in Chicago, Illinois. Prior to joining A.T. Kearney in April 1997,
Ms. Major had extensive experience in the telecommunications industry. Most
recently, Ms. Major served as the Director
5
<PAGE> 8
of Paging and Wireless Data for Ameritech Cellular Services, Inc., where she was
responsible for the company's paging and wireless data operations from April
1995 to March 1997. Prior to that, Ms. Major held various positions at Motorola
Inc. between 1981 and 1995, including Director of Strategic Marketing for the
wireless data group, where she was involved in the development of cellular
subscriber, wireless data and two-way radio products. Prior to that, she
marketed products for the transmission products division of AT&T. Ms. Major is
46 years old.
BERNARD F. SERGESKETTER, DIRECTOR -- Mr. Sergesketter has been a director
of the Company since January 1996. Since August 1994, Mr. Sergesketter has been
the President and Chief Executive Officer of Sergesketter & Associates Inc., a
firm which provides consulting services in the areas of marketing
telecommunications and quality management. Prior to that, Mr. Sergesketter had
various positions (including positions in engineering, finance, sales and
marketing) during his 36-year career with AT&T including, from January 1983 to
August 1994, Vice President -- Central Region. As Vice President -- Central
Region of AT&T, Mr. Sergesketter's principal responsibilities were for AT&T's
sales and marketing operations in the Midwest. Mr. Sergesketter is a director of
the Illinois Institute of Technology, the Cradle and the Mather Foundation. Mr.
Sergesketter is 62 years old.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met eleven times during the fiscal
year ended July 25, 1998. The Board of Directors presently has four standing
committees -- an Audit Committee, a Compensation Committee, a Nominating
Committee and an Executive Committee. The Audit Committee met once during the
fiscal year ended July 25, 1998. The Compensation Committee met three times
during the fiscal year ended July 25, 1998. The Nominating Committee and the
Executive Committee did not meet in fiscal 1998. The Company anticipates that
the Board of Directors will hold four regular meetings each year.
The Audit Committee recommends the Company's independent auditors and
consults with them regarding the scope, timing and results of their audit and
the Company's internal accounting controls. Further, the Audit Committee reviews
related party transactions in accordance with the rules promulgated by the
National Association of Securities Dealers, Inc. The current members of the
Audit Committee are Bernard F. Sergesketter, William R. Delk and Susan B. Major.
The Compensation Committee reviews and sets the salaries and incentive
compensation for the executive officers (except for the Chief Executive
Officer's compensation, which is set by the full Board of Directors), the
directors and other key personnel of the Company. The Compensation Committee
also generally administers the Company's stock option plans. In its capacity as
administrator of the Company's stock option plans, the Compensation Committee
generally approves grants of stock options and determines the terms thereof. The
current members of the Compensation Committee are Frank T. Cary, William R. Delk
and Susan B. Major.
The Nominating Committee reviews and recommends qualified candidates for
membership to the Board of Directors and to the several committees of the Board
of Directors. The current members of the Nominating Committee are Howard L.
Kirby, Jr. and Harry Crutcher, III.
The Executive Committee, while the Board is not in session, has all the
power and exercises all the duties (with certain limitations) of the Board of
Directors in the management of the Company's business which may lawfully be
delegated to it by the Board. The current members of the Executive Committee are
Frank T. Cary, Donald R. Hollis, Harry Crutcher, III and Howard L. Kirby, Jr.,
ex officio.
The Board of Directors will consider nominees for director recommended by
stockholders. However, the Company's Bylaws establish an advance notice
procedure for stockholders to make nominations of candidates for election as
directors or to bring other business before an annual meeting of stockholders of
the Company. See "Procedure for Submitting Stockholder Proposals."
6
<PAGE> 9
All of the Company's current directors attended at least 75% of the
meetings of the Company's Board of Directors and committees thereof on which
they served during the fiscal year ended July 25, 1998.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company (currently Howard L. Kirby, Jr.,
the Chairman of the Board of Directors) receive no additional compensation for
serving on the Board of Directors or its committees. All directors who are not
employees of the Company are compensated at the rate of $20,000 per year, plus
$1,000 per Board meeting attended and reimbursement for expenses incurred in
attending such meetings. Such directors who serve on a committee of the Board
receive no additional compensation, except they receive $1,000 for each
committee meeting attended which occurs on a date on which there is not also a
meeting of the Board of Directors. In addition, under the Teltrend Inc. 1997
Non-Employee Director Stock Option Plan (the "1997 Director Option Plan") each
director who is not an employee of the Company or its subsidiaries receives upon
his or her initial election to the Board a one-time grant of an option (an
"Initial Option") to purchase up to 6,000 shares of Common Stock. Additionally,
each continuing non-employee director will be granted an additional option (an
"Annual Option") to purchase up to 1,500 shares of Common Stock on each
anniversary of the date his or her Initial Option was granted. The Initial
Options and Annual Options are granted at exercise prices equal to the fair
market value of a share of Common Stock on the date of grant.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth in summary form the aggregate compensation
earned by the President and Chief Executive Officer and each of the four
additional most highly compensated executive officers of the Company
(collectively, with the President and Chief Executive Officer, the "Named
Executive Officers") for services rendered in all capacities to the Company for
the Company's fiscal years ended July 25, 1998, July 26, 1997 and July 27, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS(1)
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
------------------ ------ ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Howard L. Kirby, Jr. ......... 1998 $235,000 $150,000 $9,816(3) 30,000(5) $5,109
President and Chief 1997 235,000 95,000 7,462(3) -- 5,579
Executive Officer 1996 219,519 250,000 -- -- 4,085
Gilbert H. Hosie.............. 1998 $140,000 $ 60,000 $5,437(3) 8,000(5) $3,269
Vice President, RBOC Sales 1997 140,000 30,000 3,897(3) -- --
1996 137,789 90,000 614(3) -- --
Douglas P. Hoffmeyer.......... 1998 $138,000 $ 70,000 -- 10,000(5) $3,896
Sr. Vice President, Finance, 1997 138,000 35,000 -- -- 5,389
CFO, Secretary and Treasurer 1996 134,462 90,000 -- -- 3,785
Laurence L. Sheets............ 1998 $140,000 $ 40,000 -- 3,000(5) $4,003
Vice President and Chief 1997 140,000 30,000 $2,500(4) -- 5,467
Technical Officer 1996 137,789 90,000 2,000(4) -- 3,752
Michael S. Grzeskowiak........ 1998 $135,000 $ 45,000 -- 5,000(5) $4,050
Vice President, Operations 1997 135,000 25,000 -- -- 5,001
1996 132,789 70,000 -- -- 3,752
</TABLE>
- -------------------------
(1) The compensation for the Company's executives does not include restricted
stock awards or payouts pursuant to any long-term incentive plans;
therefore, these columns are omitted from the Summary Compensation Table.
(2) Reflects amounts contributed by the Company to the Teltrend Retirement
Investment Plan on behalf of each respective Named Executive Officer.
(3) Reflects amounts paid by the Company for automobile expenses.
(4) Reflects amounts paid by the Company in respect of patent awards.
(5) Represents options to purchase Common Stock granted pursuant to the Teltrend
Inc. 1996 Stock Option Plan.
8
<PAGE> 11
OPTION GRANT TABLE
The following table and related footnotes set forth certain information
concerning the grant of stock options made to each of the Named Executive
Officers during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED
NUMBER OF GRANTED ANNUAL RATES OF STOCK
SECURITIES TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED(2) YEAR PER SHARE DATE 5% 10%
---- ---------- ---------- -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Howard L. Kirby, Jr......... 30,000 7.2 $17.625 12/11/07 $332,520 $842,670
Gilbert H. Hosie............ 3,000 .7 21.000 10/10/07 39,621 100,404
5,000 1.2 17.625 12/11/07 55,420 140,445
Douglas P. Hoffmeyer........ 10,000 2.4 17.625 12/11/07 110,840 280,890
Laurence L. Sheets.......... 3,000 .7 17.625 12/11/07 33,252 84,267
Michael S. Grzeskowiak...... 5,000 1.2 17.625 12/11/07 55,420 140,445
</TABLE>
- -------------------------
(1) Amounts represent hypothetical gains or "option spreads" that could be
achieved for the respective options based on assumed compound stock
appreciation rates of 5% and 10% over the original full ten-year term of
these options. The 5% and 10% rates of stock appreciation are mandated by
rules of the Securities and Exchange Commission and do not represent the
Company's estimate of the future market price of the Common Stock. The
potential realizable value of the options may be substantially greater than
stated in this table.
(2) Reflects options to purchase Common Stock granted to the Named Executive
Officers during fiscal 1998 pursuant to the Teltrend Inc. 1996 Stock Option
Plan. Each option is exercisable, as to all or part of the number of
securities underlying the options, upon vesting. The options generally vest
and become exercisable as to 25% of the shares covered thereby on the first
anniversary of the date of grant and as to an additional 25% of such shares
on each of the next three anniversaries of the date of grant.
9
<PAGE> 12
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table and related footnotes set forth certain information
concerning the exercise of stock options during fiscal 1998 by each of the Named
Executive Officers, as well as the number and value of securities underlying
options held by each of the Named Executive Officers at the end of fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES OF
COMMON NUMBER OF SECURITIES VALUE OF UNEXERCISED
STOCK UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT JULY 25, 1998 AT JULY 25, 1998(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard L. Kirby, Jr......... -- -- 95,250(2) 61,750(3) -- --
Gilbert H. Hosie............ 15,647 $247,385 31,673(4) 15,050(5) $165,369 --
Douglas P. Hoffmeyer........ -- -- 23,400(2) 17,800(6) -- --
Laurence L. Sheets.......... -- -- 26,400(2) 11,800(7) -- --
Michael S. Grzeskowiak...... -- -- 23,400(2) 12,800(8) -- --
</TABLE>
- -------------------------
(1) Value of "in-the-money" options represents the positive spread between the
respective exercise prices of outstanding options and the value of
securities underlying such options as of July 25, 1998.
(2) Reflects options to purchase Common Stock of the Company at an exercise
price of $16.00 per share granted pursuant to the Teltrend Inc. 1995 Stock
Option Plan.
(3) Reflects options to purchase 31,750 shares of Common Stock of the Company at
an exercise price of $16.00 per share granted pursuant to the Teltrend Inc.
1995 Stock Option Plan. Also, reflects options to purchase 30,000 shares of
Common Stock of the Company at an exercise price of $17.625 per share
granted pursuant to the Teltrend Inc. 1996 Stock Option Plan.
(4) Reflects options to purchase 10,523 shares of Common Stock of the Company at
an exercise price of $0.16 per share granted pursuant to the Company's
option plan in effect prior to the IPO (as adjusted in connection with and
to give effect to the recapitalization of the Company undertaken in
connection with the IPO). Also, reflects options to purchase 21,150 shares
of Common Stock at an exercise price of $16.00 per share granted pursuant to
the Teltrend Inc. 1995 Stock Option Plan.
(5) Reflects options to purchase 7,050 shares of Common Stock of the Company at
an exercise price of $16.00 per share granted pursuant to the Teltrend Inc.
1995 Stock Option Plan. Also, reflects options to purchase 3,000 shares of
Common Stock at an exercise price of $21.00 per share and options to
purchase 5,000 shares of Common Stock at an exercise price of $17.625 per
share granted pursuant to the Teltrend Inc. 1996 Stock Option Plan.
(6) Reflects options to purchase 7,800 shares of Common Stock of the Company at
an exercise price of $16.00 per share granted pursuant to the Teltrend Inc.
1995 Stock Option Plan. Also, reflects options to purchase 10,000 shares of
Common Stock of the Company at an exercise price of $17.625 per share
granted pursuant to the Teltrend Inc. 1996 Stock Option Plan.
(7) Reflects options to purchase 8,800 shares of Common Stock of the Company at
an exercise price of $16.00 per share granted pursuant to the Teltrend Inc.
1995 Stock Option Plan. Also, reflects options to purchase 3,000 shares of
Common Stock of the Company at an exercise price of $17.625 per share
granted pursuant to the Teltrend Inc. 1996 Stock Option Plan.
(8) Reflects options to purchase 7,800 shares of Common Stock of the Company at
an exercise price of $16.00 per share granted pursuant to the Teltrend Inc.
1995 Stock Option Plan. Also, reflects options to purchase 5,000 shares of
Common Stock of the Company at an exercise price of $17.625 per share
granted pursuant to the Teltrend Inc. 1996 Stock Option Plan.
10
<PAGE> 13
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Pursuant to the Company's Executive Severance Plan (the "Severance Plan"),
the Company's executive officers are entitled to severance payments upon (i)
involuntary termination of employment with the Company other than for cause or
in connection with a change in control of the Company ("Standard Termination")
and (ii) certain terminations of employment with the Company in connection with
a change in control of the Company ("Change in Control Termination"). Under the
Severance Plan, an executive receives severance payments which are calculated on
the basis of his annual base salary in effect on the date of termination of
employment and the number of years he has been employed by the Company. The
amount is paid in periodic payments in accordance with the Company's regular
payroll schedule for executives unless the Compensation Committee elects to pay
the amount in a lump sum or a combination of periodic payments and a lump sum.
If a Standard Termination had occurred as of the end of fiscal 1998,
Messrs. Kirby, Hosie, Hoffmeyer, Sheets and Grzeskowiak would have received
$376,000, $140,000, $207,000, $98,000 and $108,000, respectively, under the
Severance Plan. If a Change in Control Termination had occurred as of the end of
fiscal 1998, Messrs. Kirby, Hosie, Hoffmeyer, Sheets and Grzeskowiak would have
received $752,000, $280,000, $414,000, $196,000 and $216,000, respectively,
under the Severance Plan.
Additionally, non-vested stock options held by employees of the Company
generally vest and become exercisable upon certain change of control
transactions involving the Company. The Company's policy is to enter into
confidentiality agreements with each of its key employees, including the Named
Executive Officers, pursuant to which such employees agree not to disclose any
confidential and proprietary information of the Company or of third parties to
whom the Company is obligated to keep such information confidential.
11
<PAGE> 14
The Report of the Compensation Committee on Executive Compensation and the
Performance Graph below shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement or any portion
hereof into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed
filed under such acts.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and sets the salaries and incentive
compensation for the executive officers (except for the chief executive
officer's compensation, which is set by the full Board of Directors), the
directors and other key personnel. The Compensation Committee also generally
administers the Company's stock option plans. In its capacity as administrator
of the Company's stock option plans, the Compensation Committee grants stock
options and determines the terms thereof. Current members of the Compensation
Committee are Frank T. Cary, William R. Delk and Susan B. Major. The
Compensation Committee reviews the Company's compensation program to ensure that
the Company continues to adhere to its compensation philosophy. In conducting
its review of executive compensation matters, the Compensation Committee, from
time to time, utilizes the compensation data and advisory services of
independent compensation consultants.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive compensation program is based on principles
designed to align the Company's executive compensation with the Company's
objectives, management initiatives and business and financial performance. These
principles are applied by the Compensation Committee to: (i) attract, motivate
and retain executives of the highest quality; (ii) link the total annual
compensation of each executive officer to such executive's individual
performance, the performance of the strategic market unit he manages and the
Company's overall performance; and (iii) provide long-term incentives for
consistent high levels of performance.
OVERVIEW OF EXECUTIVE COMPENSATION PROGRAM
The Company's total compensation program for its executive officers
consists of both cash and equity-based compensation. Each executive officer's
annual compensation has consisted of a base salary, eligibility for matching and
discretionary contributions to the Teltrend Retirement Investment Plan and
eligibility for an annual bonus under the Company's informal cash bonus plan.
The Chief Executive Officer generally proposes the base salary and cash bonus
for each of the Company's executive officers. The Chief Executive Officer also
proposes his base salary and bonus to the Board of Directors after working with
the Board of Directors and the Compensation Committee to establish an
appropriate recommendation. The Chief Executive Officer's recommendations and
the Compensation Committee's evaluation thereof are based on the subjective
evaluation of a number of factors and criteria, including the compensation paid
by the Company to its executive officers during the immediately preceding fiscal
year, the rate of inflation, the Company's performance during the fiscal year,
the Company's strategic objectives and the compensation paid to the executive
officers of certain other companies that the Chief Executive Officer and the
Compensation Committee believe are comparable to the Company based on their
location or the nature of their business. Each of (i) the weight and importance
given each year to the foregoing factors, (ii) the individual components of each
factor and (iii) the decision whether to consider additional factors lies within
the subjective discretion of the Chief Executive Officer with respect to the
formulation of his recommendations and, subsequently, with the Compensation
Committee. In addition to annual compensation, the Company provides long-term
incentives to its executive officers through its stock option plans. Because the
compensation levels of the Company's executive officers are generally below
compensation levels that would be affected by the limitations on the deduction
of executive salaries imposed by Section 162(m) of the Internal Revenue Code of
1986, as amended ("Section 162(m)"), the Compensation Committee has not
formulated a policy with respect to Section 162(m).
12
<PAGE> 15
FISCAL 1998 EXECUTIVE COMPENSATION
The Compensation Committee determined the base salaries of the Company's
executive officers during fiscal 1998 based upon the Chief Executive Officer's
recommendations and its subjective evaluation of the factors and criteria
described above. Fiscal 1998 salaries for the Company's executive officers were
based largely on the salaries paid to such executive officers in fiscal 1997 and
the salaries of executives of similarly situated companies. For fiscal 1998, the
base salaries for the Company's executive officers, recommended by the Chief
Executive Officer and determined by the Compensation Committee, were, in
general, at the medium range when compared to the base salaries of similarly
situated companies' executives. The Compensation Committee does not, however,
currently have an established policy with regard to the salaries of the
Company's executive officers, including the salary of the Chief Executive
Officer, relative to the salaries paid to other companies' executive officers.
The Compensation Committee also determined the bonuses to be paid to the
Company's executive officers for fiscal 1998 pursuant to the Company's informal
cash bonus plan based upon the Chief Executive Officer's recommendations and the
Committee's subjective evaluation of the factors and criteria described above,
including the Company's financial performance compared to its peers and the
Company's ability to meet its strategic objectives. Fiscal 1998 bonuses for the
Company's executive officers were higher than those awarded for fiscal 1997.
Bonuses were awarded to executives in an effort to reward those executives who
had performed well within their specific markets and who had reacted well to the
strategic challenges facing the Company.
During fiscal 1998, the Compensation Committee subjectively determined that
options should be granted to various management employees, including the Chief
Executive Officer and the other Named Executive Officers of the Company. The
Compensation Committee did not assign any measurable weight to any of the
factors it considered in approving the grant of stock options to these
individuals. However, the Compensation Committee did consider the amounts and
terms of prior option awards in determining the recipients of option grants in
fiscal 1998.
FISCAL 1998 CHIEF EXECUTIVE OFFICER COMPENSATION
In fiscal 1998, the Compensation Committee, after discussing the Company's
fiscal 1997 results and strategic achievements with the Chief Executive Officer,
maintained a base salary for the Chief Executive Officer of $235,000. The Chief
Executive Officer participates in the informal cash bonus plan. For fiscal 1998,
the Compensation Committee recommended a $150,000 cash bonus for the Chief
Executive Officer under the informal cash bonus plan. This award was $55,000
higher than the fiscal 1997 bonus award to the Chief Executive Officer. By
recommending a bonus, the Compensation Committee acknowledged that the Chief
Executive Officer had improved the Company's strategic position by reacting
skillfully to the efforts of the Company's principal customers to improve the
technological performance, and reduce the cost, of the products they purchase
from their suppliers, by expanding the Company's markets and reducing its
dependence on a limited number of major customers, and by planning for the
Company's future. The Board of Directors awarded the Chief Executive Officer the
compensation recommended by the Compensation Committee.
THE COMPENSATION COMMITTEE,
WILLIAM R. DELK
FRANK T. CARY
SUSAN B. MAJOR
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock from June 9, 1995 (the first trading day for the Company's Common
Stock on the Nasdaq National Market system) through July 25, 1998 (the end of
the Company's last fiscal year), with the cumulative total return of the Nasdaq
Composite Stock Index and a peer group of companies selected by the Company (the
"Peer Group") for purposes of the comparison. Dividend reinvestment has been
assumed and, with respect to companies in the Peer Group, the returns of each
such company have been weighted to reflect relative stock market capitalization.
Past financial performance should not be considered a reliable indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ COMPOSITE INDEX AND A PEER GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ MARKET
(FISCAL YEAR COVERED) TELETREND PEER GROUP INDEX INDEX
<S> <C> <C> <C>
6/9/95 100 100 100
7/29/95 138 120 114
7/27/96 230 185 124
7/26/97 105 200 160
7/25/98 99 166 222
</TABLE>
<TABLE>
<CAPTION>
JUNE 9, 1995 JULY 29, 1995 JULY 27, 1996 JULY 26, 1997 JULY 25, 1998
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Teltrend Inc. ............. $100 $138 $230 $105 $ 99
Nasdaq Composite Index..... $100 $114 $124 $180 $222
Peer Group Index........... $100 $120 $185 $208 $166
</TABLE>
The above comparison graph assumes a $100 investment on June 9, 1995 in the
Company's Common Stock, the Nasdaq Composite Index and the Peer Group Index.
The Peer Group selected by the Company is comprised of the following
companies: ADC Telecommunications, Inc., ADTRAN, Inc., PairGain Technologies,
Inc., Telco Systems, Inc. and Applied Digital Access Inc. The Peer Group was
selected by the Company in good faith based upon similarities in the nature of
the businesses of the companies included in the Peer Group to the Company's
business.
14
<PAGE> 17
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the independent
auditors of the Company's books and records for the fiscal year ending July 31,
1999 and has determined that it would be desirable to ask the stockholders to
ratify this appointment at the Annual Meeting.
Ernst & Young LLP served as independent auditors of the Company's books and
records for the fiscal year ended July 25, 1998 and has acted as auditors for
the Company since the Company's 1989 fiscal year. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY'S BOOKS
AND RECORDS FOR THE FISCAL YEAR ENDING JULY 31, 1999.
The affirmative vote of the majority of the votes cast at the Annual
Meeting and entitled to vote is required for ratification of the appointment of
Ernst & Young LLP as described herein. No determination has been made as to what
action the Board of Directors would take if the appointment is not ratified.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), stockholders may present proper proposals for
consideration for inclusion in the Company's proxy statement relating to the
next annual meeting of stockholders by submitting their proposals to the Company
in a timely manner. In order to be considered for inclusion in the proxy
statement and proxy relating to the Company's 1999 annual meeting of
stockholders, stockholder proposals must be received by the Company at its
principal executive offices no later than July 2, 1999 and must otherwise comply
with the requirements of Rule 14a-8. In addition, the Company's Bylaws establish
an advance notice procedure for stockholders to bring business before an annual
meeting of stockholders of the Company.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Exchange Act. Generally, under
new Rule 14a-4(c), a proxy may confer discretionary authority to vote on any
matter in the event that, among other situations, the Company did not have
notice of the matter at least 45 days before the month and day on which the
Company's proxy materials were mailed for the prior year's annual meeting. For
the 1999 annual meeting of stockholders, this date would be September 15, 1999.
This is in addition to the date for submission of business at the annual meeting
of stockholders under the Company's Bylaws which require, among other things,
that notice of any matter be received by the Company at its principal executive
offices not less than 60 nor more than 90 days prior to the date of the meeting,
except that if less than 70 days' notice or prior public disclosure of the
meeting date is given or made to stockholders, notice of the matter must be
received not later than the 10th day following the date of notice or public
disclosure of the meeting date, whichever occurs first. A copy of the Company's
Bylaws may be obtained from the Secretary of the Company. The requirement under
the new rule is also in addition to the deadline under Rule 14a-8 for submission
of matters to be considered for inclusion in the Company's proxy statement.
PROXY SOLICITATION
Proxies will be solicited by mail. Proxies may also be solicited by
directors, officers and a small number of regular employees of the Company
personally or by mail, telephone or telegraph, but such persons will not be
specially compensated for such services. Brokerage houses, custodians, nominees
and fiduciaries will be requested to forward the soliciting material to the
beneficial owners of Common Stock held of record by such persons, and the
Company will reimburse them for their expenses in doing so. The Company has
retained the services of LaSalle National Bank N.A. to assist in the
distribution of proxy materials and anticipates paying $1,500 for these
services. The full cost of the preparation and mailing of this Proxy Statement
and accompanying materials and the related proxy solicitations will be borne by
the Company.
15
<PAGE> 18
OTHER MATTERS
Management does not intend to present, and does not have any reason to
believe that others will present, any item of business at the Annual Meeting
other than those specifically set forth in the notice of the Annual Meeting.
However, if other matters are properly presented for a vote at the Annual
Meeting, the persons named in the enclosed proxy and acting thereunder will have
discretion to vote on those matters in accordance with their judgment to the
same extent as the person who signed the proxy would be entitled to vote.
By Order of the Board of Directors
Douglas P. Hoffmeyer
Douglas P. Hoffmeyer
Sr. Vice President, Finance; Chief
Financial
Officer; Secretary and Treasurer
St. Charles, Illinois
October 30, 1998
16
<PAGE> 19
PROXY PROXY
TELTREND INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS DECEMBER 10, 1998
Howard L. Kirby, Jr. and Douglas P. Hoffimeyer, or any one of them, with
power of substitution in each, are hereby appointed the proxies of the
undersigned to vote all shares of the Common Stock, $.01 par value per share,
of Teltrend Inc. that the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held December 10, 1998 at the hour of 9:00 A.M., local
time, at the Teltrend Inc. corporate headquarters, 620 Stetson Avenue, St.
Charles, Illinois 60174, and at all adjournments or postponements thereof, upon
such business as may properly come before the meeting, including the items
listed on the reverse side and as more completely described in the enclosed
Notice of Annual Meeting and Proxy Statement.
(THIS PROXY IS CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
(Comments / Change of Address)
----------------------------------
----------------------------------
----------------------------------
----------------------------------
(If you have written in the above
space, please mark the corresponding
box on the reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 20
TELTREND INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE FOLLOWING MATTERS ARE PROPOSED BY THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors FOR WITHHELD FOR ALL
Director Nominees ALL ALL EXCEPT
Frank T. Cary, Harry Crutcher, III, William R. Delk, [ ] [ ] [ ] ----------------------------
Donald R. Hollis, Howard L. Kirby, Jr., Susan B. Major, Nominee Exception
Bernard F. Segesketter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
THE ABOVE NOMINEES.
2. APPROVAL OF APPOINTMENT OF FOR AGAINST ABSTAIN
ACCOUNTANTS: Approval of [ ] [ ] [ ]
appointment of Ernst & Young LLP as
independent auditors for fiscal 1999.
3. UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING: In their discretion the proxies are authorized to vote on
such other matters as may properly come before the annual meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
deemed to constitute direction to vote ifori each of the above proposals.
Please mark, sign, date and return the proxy card using the enclosed envelope.
Comments/ Date , 1998
Change [ ] ---------------------------------------
of
Address ------------------------------------------------
Signature(s)
------------------------------------------------
Signature(s)
(NOTE: Please sign exactly as name appears on this
Proxy. When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee, guardian, corporate officer
or partner, give full title as such. If a corporation,
please sign in corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE, AND RETURN
THIS PROXY FORM PROMPTLY USING THE ENCLOSED POSTPAID ENVELOPE.
