ADC Telecommunications, Inc.

13625 Technology Drive

Eden Prairie, Minnesota 55344-2252

(952) 938-8080

 

ADC TELECOMMUNICATIONS, INC.

 

January 21, 2008

 

Dear ADC Shareowner:

 

You cordially are invited to attend the Annual Shareowners’ Meeting of ADC Telecommunications, Inc., which will be held in the Auditorium at ADC’s World Headquarters on Thursday, March 6, 2008, at 9:00 a.m. Central Standard Time. ADC’s World Headquarters are located at 13625 Technology Drive, Eden Prairie, Minnesota 55344. Details of the business to be conducted at the annual meeting are given in the attached notice of annual shareowners’ meeting.

 

Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to promptly vote and submit your proxy via the Internet, by telephone or by signing, dating, and returning the enclosed proxy card in the accompanying reply envelope. If you decide to attend the annual meeting, you will be able to vote in person, even if you have previously submitted your proxy.

 

We look forward to seeing you at the annual meeting.

 

John A. Blanchard III

Non-executive Chairman of the Board

 

Eden Prairie, Minnesota

 

YOUR VOTE IS IMPORTANT

 

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ADC Telecommunications, Inc.

13625 Technology Drive

Eden Prairie, Minnesota 55344-2252

(952) 938-8080

 

NOTICE OF ANNUAL SHAREOWNERS’ MEETING

TO BE HELD MARCH 6, 2008

 

To the Shareowners of ADC Telecommunications, Inc.:

 

NOTICE IS HEREBY GIVEN that the Annual Shareowners’ Meeting of ADC Telecommunications, Inc. will be held at the Auditorium of the World Headquarters of ADC Telecommunications, Inc., 13625 Technology Drive, Eden Prairie, Minnesota 55344, on Thursday, March 6, 2008, at 9:00 a.m. Central Standard Time, for the purpose of considering and acting upon:

 

1. The election of three directors for terms expiring in 2011;

 

2. A proposal to approve the 2008 Global Stock Incentive Plan;

 

3. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending October 31, 2008; and

 

4. The transaction of such other business as may come properly before the meeting or any adjournment thereof.

 

Shareowners of record at the close of business on January 8, 2008, are the only persons entitled to notice of and to vote at the meeting.

 

Your attention is directed to the attached proxy statement. If you do not expect to be present at the meeting, you may submit your proxy by voting on the Internet or by telephone by no later than 10:59 p.m. Central Standard Time on March 5, 2008 (as directed on your proxy card), or by completing, signing, dating and mailing the enclosed proxy card as promptly as possible. We encourage you to vote on the Internet or by telephone in order to reduce our mailing and handling expenses. If you choose to return the proxy card by mail, we have enclosed an envelope addressed to ADC for which no postage is required if mailed in the United States.

 

By Order of the Board of Directors

 

 

Jeffrey D. Pflaum

Vice President, General Counsel

and Secretary

 

January 21, 2008

 

 

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TABLE OF CONTENTS

 

 

ADC Telecommunications, Inc.

13625 Technology Drive

Eden Prairie, Minnesota 55344-2252

(952) 938-8080

 

 

PROXY STATEMENT

 

ANNUAL SHAREOWNERS’ MEETING

TO BE HELD ON MARCH 6, 2008

 

 

GENERAL INFORMATION ABOUT THE MEETING

 

This proxy statement has been prepared on behalf of the Board of Directors of ADC Telecommunications, Inc. in connection with the solicitation of proxies for our Annual Shareowners’ Meeting to be held on Thursday, March 6, 2008, and at any and all adjournments of the annual meeting. The cost of soliciting proxies, including the cost of preparing and mailing the Notice of Annual Shareowners’ Meeting, the Notice of Internet Availability of Proxy Materials (the “Notice”) and this proxy statement, is being paid by us. In addition, we will, upon the request of brokers, dealers, banks, voting trustees and their nominees who are holders of record of shares of our common stock on the record date specified below, bear their reasonable expenses for mailing copies of these materials to the beneficial owners of these shares. We have retained The Proxy Advisory Group, LLC to assist in the solicitation of proxies for the annual meeting for a fee of approximately $7,500, plus associated costs and expenses. In addition, our officers and other employees may solicit proxies in person or by telephone or facsimile, but will receive no extra compensation for these services. This proxy statement and the accompanying form of proxy card are first being released to shareowners on or about January 21, 2008.

 

Shareowners of record at the close of business on January 8, 2008, are the only persons entitled to notice of and to vote at the annual meeting. As of that date, there were 117,603,641 issued and outstanding shares of our common stock, our only outstanding voting securities. Each shareowner is entitled to one vote for each share held, and there is no cumulative voting.

 

Shareowners can vote their shares through the Internet, by telephone or by completing and mailing the enclosed proxy card. The procedures for Internet and telephone voting are described on the proxy card. The Internet and telephone voting procedures are designed to verify shareowners’ identities, allow shareowners to give voting instructions and confirm that their instructions have been recorded properly. Shareowners who vote through the Internet should be aware that they may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by the shareowner. Shareowners who vote by Internet or telephone need not return a proxy card by mail.

 

Whether shareowners submit their proxies by Internet, telephone or mail, a shareowner may revoke a proxy by sending a written notice of revocation or submitting another proxy with a later date (either by Internet, telephone or mail) at any time prior to the date of the annual meeting or by voting in person at the annual meeting. Unless so revoked, properly executed proxies will be voted in the manner set forth in this proxy statement or as otherwise specified by the shareowner giving the proxy.

Pursuant to new rules recently adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet. Accordingly, we have sent to our shareowners the Notice containing instructions on how to access this proxy statement and our 2007 Annual Report and Form 10-K on-line. Shareowners who have received the Notice will not be sent a printed copy of our proxy materials in the mail, unless they request to receive one.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareowners’ Meeting to Be Held on March 6, 2008: This proxy statement and our 2007 Annual Report and Form 10-K are available at www.investorEconnect.com.

 

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth the number of shares of our common stock that were beneficially owned as of December 31, 2007, by our directors, our executive officers included in the Summary Compensation Table set forth under the caption “Executive Compensation” below, all of our directors and executive officers as a group and all shareowners known by us to be beneficial owners of more than five percent of our common stock. Except as otherwise indicated, the shareowners listed in the table have sole voting and investment power with respect to the common stock owned by them, and the shares are not subject to any pledge.

 

 

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors and executive officers, and persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership of our common stock and other equity securities with the Securities and Exchange Commission. Executive officers, directors and greater-than-10% shareowners are required by Securities and Exchange Commission regulation to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of Section 16(a) reports furnished to us during fiscal year 2007, all Section 16(a) filing requirements applicable to our executive officers, directors and greater-than-10% beneficial owners were satisfied on a timely basis in fiscal year 2007.

 

CORPORATE GOVERNANCE AND BOARD MATTERS

 

Governance Principles and Code of Ethics

 

Our Board of Directors is committed to sound and effective corporate governance practices. The Board has adopted written Principles of Corporate Governance, which govern the composition of the Board, Board meetings and procedures and the standing committees of the Board. The Board of Directors has the following standing committees: Audit Committee, Compensation Committee, Governance Committee (which includes Board nomination responsibility), and Finance and Strategic Planning Committee. Each of these committees has a written charter. Our Principles of Corporate Governance and the charters for each of our standing committees are available for review on our website at www.adc.com/investorrelations/corporategovernance.

 

Our Principles of Corporate Governance provide that a majority of our directors and all members of our Audit Committee, Compensation Committee and Governance Committee will be independent. Currently, we have a Non-executive Chairman of the Board who is not an employee of ADC. Our Board makes an annual determination regarding the independence of each Board member under the current NASDAQ Global Select Market listing standards. Our Board of Directors has determined that all of our directors are independent under these standards, except for Robert E. Switz, who serves as our President and Chief Executive Officer.

During fiscal year 2007, our independent directors met in an executive session of the Board without management on six occasions. Under our Principles of Corporate Governance, executive sessions of the Board are led by our Non-executive Chairman, or, in his absence, by the Chair of the Governance Committee. In addition, each of our Board’s standing committees regularly meets in an executive session led by the chair of the committee.

 

We maintain a Code of Business Conduct which sets forth our standards for ethical behavior and legal compliance and governs the manner in which we conduct our business. Our Code of Business Conduct includes a Financial Code of Ethics applicable to all directors, officers and employees. We conduct required ethics training for our employees. A copy of our Code of Business Conduct and Financial Code of Ethics can be found on our website at www.adc.com/investorrelations/corporategovernance.

 

Meeting Attendance

 

Each of our directors is expected to make reasonable efforts to attend all meetings of the Board, meetings of each committee on which he or she serves and our annual meeting of shareowners. All of our current directors were serving on the Board at the time of our 2007 annual meeting and attended that meeting. During fiscal year 2007, the Board of Directors held ten meetings. Each of our continuing directors attended at least 75% of the aggregate of the total number of these meetings plus the total number of meetings of all committees of the Board on which he or she served.

 

Standing Committees

 

The Audit Committee has sole authority to appoint, review and discharge our independent registered public accounting firm. The Audit Committee also reviews and approves in advance the services provided by our independent registered public accounting firm, oversees the internal audit function, reviews our internal accounting controls and administers our Code of Business Conduct. The Audit Committee currently is composed of Ms. Martin and Messrs. Blanchard, Foret, Wangberg and Wunsch, all of whom meet the existing independence and experience requirements of the NASDAQ Global Select Market and the Securities and Exchange Commission. Mr. Foret is the Chair of this committee. The Board has determined that each of Messrs. Blanchard and Foret and Ms. Martin may be considered an “audit committee financial expert” under the rules of the Securities and Exchange Commission. During fiscal year 2007, the Audit Committee held seven meetings. The Audit Committee has determined to engage Ernst & Young LLP as independent registered public accounting firm for fiscal year 2008 and is recommending that our shareowners ratify this appointment at our annual meeting. The report of our Audit Committee is found on page 47 of this proxy statement.

 

The Compensation Committee determines the compensation for our executive officers and non-employee directors, establishes our compensation policies and practices, and reviews annual financial performance under our employee incentive plans. The Compensation Committee currently is composed of Messrs. Blanchard, Gilligan, Rehfeld and Wunsch, all of whom are independent under the current NASDAQ Global Select Market listing standards. Mr. Gilligan is the Chair of this committee. During fiscal year 2007, the Compensation Committee held seven meetings.

 

The Governance Committee reviews and makes recommendations to the Board of Directors regarding nominees for director, establishes and monitors compliance with our Principles of Corporate Governance and conducts an annual review of the effectiveness of our Board and the performance of our Chief Executive Officer. The Governance Committee will consider qualified director nominees recommended by shareowners. Our process for receiving and evaluating Board member nominations from our shareowners is described below under the caption “Nominations.” The Governance Committee currently is composed of Dr. Spivey and Messrs. Boyle, Rehfeld and Wangberg, all of whom are independent under the current NASDAQ Global Select Market listing standards. Mr. Wangberg is the Chair of this committee. During fiscal year 2007, the Governance Committee held three meetings.

 

The Finance and Strategic Planning Committee assists the Board with respect to strategic planning, financing transactions, evaluation of acquisition and divestiture transactions, and review of any proposed changes to ADC’s capital structure. The Finance and Strategic Planning Committee is composed of Dr. Spivey,

Ms. Martin and Messrs. Boyle, Foret and Gilligan, all of whom are independent under the current NASDAQ Global Select Market listing standards. Mr. Boyle is the Chair of this committee. During fiscal year 2007, the Finance and Strategic Planning Committee held four meetings.

 

Nominations

 

Our Governance Committee is the standing committee responsible for selecting the slate of director nominees for election by our shareowners. The committee recommends these nominees to the full Board for approval. All director nominees approved by the Board and all directors appointed to fill any vacancies created between our annual meetings of shareowners are required to stand for election by our shareowners at the annual shareowners’ meeting following the date of their nomination or appointment. In the past, our Governance Committee has utilized the services of a third party search firm to assist in the identification and evaluation of Board member candidates. The Committee may engage such firms to provide such services in the future, as it deems necessary or appropriate.

 

Our Governance Committee determines the selection criteria and qualifications for director nominees. As set forth in our Principles of Corporate Governance, a candidate must possess the ability to apply good business judgment and properly exercise his or her duties of loyalty and care. Candidates should also exhibit proven leadership capabilities, high integrity and experience in senior levels of responsibility in their chosen fields, and have the ability to grasp complex business and financial concepts and communications technologies. In general, candidates will be preferred who hold a senior level position in business, finance, law, education, research or government. The Governance Committee considers these criteria in evaluating nominees recommended to the Governance Committee by shareowners. When current Board members are considered for nomination for reelection, the Governance Committee also takes into consideration their prior ADC Board contributions, performance and meeting attendance records.

 

The Governance Committee will consider for possible nomination qualified Board candidates that are submitted by our shareowners. Shareowners wishing to make such a submission may do so by sending the following information to the ADC Governance Committee, c/o ADC Corporate Secretary, P.O. Box 1101, Minneapolis, MN 55440: (1) name of the candidate and a resume or brief biographical summary; (2) contact information for the candidate and evidence of the candidate’s willingness to serve as a director if elected; and (3) a signed statement regarding the submitting shareowner’s status as a shareowner and the number of shares currently held by such shareowner.

 

The Governance Committee makes a preliminary assessment of each proposed nominee based upon the resume or biographical sketch, his or her willingness to serve as a director and other information obtained by the committee. Each proposed nominee is evaluated against the criteria set forth above and our specific needs at the time. Based upon the preliminary assessment, those candidates who appear best suited to be directors of ADC may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates. On the basis of information obtained during this process, the Governance Committee determines which nominees to recommend to the Board for submission to our shareowners at the next annual meeting. The Governance Committee uses the same process for evaluating all proposed nominees, regardless of the original source of the candidate.

 

No candidates for director nominations were submitted to the Governance Committee by any shareowner in connection with the 2008 annual meeting. Any shareowners desiring to present a nomination for consideration by the Governance Committee prior to our 2009 annual meeting must do so by September 23, 2008, in order to provide adequate time for the Committee to give due consideration to the nominee while complying with our bylaws.

 

Shareowner Communications with Board

 

The Board of Directors has implemented a process by which our shareowners may send written communications to the Board. Any shareowner desiring to communicate with the Board, or one or more of our directors, may send a letter addressed to the ADC Board of Directors, c/o ADC Corporate Secretary, P.O. Box 1101, Minneapolis, MN 55440. The Corporate Secretary has been instructed by the Board to forward

promptly all such communications to the Board or to the individual Board members specifically addressed in the communication.

 

Related Party Transaction Policies and Procedures

 

Effective as of March 6, 2007, the Board of Directors adopted a written policy regarding transactions with related parties. Under the policy, a “related party” includes any (1) ADC executive officer, director or director nominee, (2) shareowner who beneficially owns more than 5% of our common stock, (3) immediate family member of any of the foregoing, or (4) firm, corporation, charity or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has control or a substantial ownership interest. In accordance with the policy, the Audit Committee is responsible for the review and approval or ratification of any “interested transaction” with a related party. An “interested transaction” is defined in the policy as any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which ADC is a participant and any related party has or will have a material direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). In determining whether to approve or ratify an interested transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the interested transaction is on terms generally consistent with those available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

 

Also, as further described in the policy, the Audit Committee reviewed the types of transactions described below and determined that these types of interested transactions shall be deemed pre-approved by the Audit Committee if the stated conditions are met:

 

 

In connection with each regularly scheduled meeting of the Audit Committee, a summary of each new interested transaction deemed pre-approved pursuant to the policy will be provided to the Audit Committee for its review.

 

DIRECTOR COMPENSATION

 

Fiscal Year 2007 Compensation

 

Cash Fees.  Our non-employee directors receive director fees. During our fiscal year 2007, we paid our non-employee directors:

 

 

In addition, the Non-executive Chairman of the Board received an annual retainer of $100,000, and the respective Chairmen of our Board committees received the following fees:

 

 

Equity Awards.  Each non-employee director annually receives long-term equity compensation approved by the Compensation Committee. An initial grant of non-qualified stock options (with a value on the date of grant of approximately $106,100) is made shortly after the appointment of the director. An annual grant of non-qualified stock options (with a face value on the date of grant of approximately $66,300) is made following each Annual Shareowners Meeting to each non-employee director. The options are immediately vested and may be exercised on the first anniversary of the grant date.

 

Restricted stock units are granted to each non-employee director on the first business day after each annual meeting of shareowners. These grants each have a value of approximately $25,000 on the date of grant, with vesting on the first business day of the calendar year after the date of grant. Shares underlying the restricted stock units are distributed one year following termination of Board service.

 

Charitable Donation Programs.  We offer two charitable donation programs in which our non-employee directors may participate. Under our Corporate Leaders in Community Program (the “CLIC Program”), the ADC Foundation will make a charitable contribution of up to $5,000 in any one year period to a charitable organization to which a non-employee director provides a significant level of service. Under our Matching Gift Program (the “Matching Gift Program”), the ADC Foundation will match dollar for dollar up to $1,000 per year donations made by our non-employee directors to charitable organizations.

 

Reimbursements.  Non-employee directors are reimbursed for reasonable expenses (including costs of travel, food and lodging) incurred in attending Board, committee and shareowner meetings. Directors use commercial transportation or their own transportation. Directors also are reimbursed for reasonable expenses associated with other business activities related to their Board service, including participation in director education programs and memberships in director organizations.

 

Deferred Compensation Plan.  Directors may defer any portion of their cash or stock compensation pursuant to our Compensation Plan for Non-Employee Directors of ADC Telecommunications, Inc. Cash compensation may be deferred into an interest bearing account based upon the prime commercial rate of Wells Fargo Bank, N.A. Stock compensation deferred is converted to phantom stock indexed to ADC Common Stock. Any stock deferrals are converted to ADC common stock at the time of the director’s termination from the ADC Board of Directors. None of our non-employee directors deferred compensation pursuant to our Compensation Plan for Non-Employee Directors of ADC Telecommunications, Inc. during fiscal year 2007.

 

Liability Insurance.  We also pay premiums on directors’ and officers’ liability insurance policies we maintain that cover our directors.

Director Compensation Table.  The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of our non-employee directors for fiscal year 2007.

 

Director Compensation

 

 

 

 

Fiscal Year 2008 Compensation

 

The Compensation Committee periodically reviews Board compensation based on market analysis provided by the Compensation Committee’s compensation consultant, F. W. Cook & Co., Inc. The compensation consultant advises the Compensation Committee regarding the competitive position of Board compensation relative to the peer group of companies used for executive compensation and current market trends.

 

The Compensation Committee reviewed a market analysis performed by F. W. Cook & Co., Inc. on director compensation. Based upon this analysis, which showed that ADC Board members were paid below the market median for other boards of similarly situated companies, the Compensation Committee adopted changes to the cash and equity compensation to be paid to our non-employee directors in fiscal year 2008. In fiscal year 2008, total direct compensation to be paid to our non-employee directors will approximate $140,000 per year, divided equally between cash and equity compensation as set forth below.

Cash Fees.  Our non-employee directors will be paid:

 

 

Equity Awards.  Restricted stock units will be granted to each non-employee director on the first business day after the Annual Shareowners Meeting. These grants will each have a value of approximately $70,000 on the date of grant, with vesting on the first anniversary of the date of grant. Shares underlying the restricted stock units will be distributed 90 days following termination of Board service.

 

The Non-executive Chairman of the Board annual retainer fee and the retainer fee for each Board committee Chairman will be unchanged in fiscal year 2008. Similarly, the additional non-employee director programs and compensation described above under “Charitable Donation Programs,” “Reimbursements,” “Deferred Compensation Plan” and “Liability Insurance” will also remain in effect for fiscal year 2008.

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

We currently have ten directors serving on our Board of Directors. The directors are divided into three classes. The members of each class are elected to serve three-year terms, with the term of office of each class ending in successive years. Mickey P. Foret, J. Kevin Gilligan and John D. Wunsch are the directors currently in the class with a term expiring at the annual meeting. Following the recommendation of our Governance Committee, our Board of Directors has nominated Mr. Foret, Mr. Gilligan and Mr. Wunsch for election to the Board at the annual meeting for terms expiring at the annual shareowners’ meeting in 2011.

 

The Board of Directors recommends that you vote FOR the above-named nominees for election as directors. Proxies solicited by the Board of Directors will, unless otherwise directed, be voted to elect these nominees.

 

In accordance with Minnesota law, directors are elected by a plurality of votes cast. This means that since shareowners will be electing three directors with terms expiring in 2011, the three nominees receiving the highest number of votes will be elected.

 

However, our Board of Directors has adopted a majority voting policy. Under this policy, in an uncontested election (where, as at the annual meeting, the number of nominees does not exceed the number of directors to be elected), any nominee for director who receives more votes “withheld” from his or her election than votes “for” his or her election (a “Majority Withheld Vote”) is required to offer to tender his or her resignation promptly following certification of the shareowner vote. The Governance Committee will consider the resignation offer and recommend to the Board whether to accept it. The Board will act on the Governance Committee’s recommendation within 90 days following certification of the shareowner vote.

 

The Board promptly will disclose its decision-making process and decision whether to accept the director’s resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a Form 8-K report furnished to the Securities and Exchange Commission. Any director who offers to tender his or her resignation as described above will not participate in the Governance Committee’s recommendation or Board action regarding whether to accept the resignation offer. However, if each member of the Governance Committee received a Majority Withheld Vote at the same election, then the independent directors who did not receive a Majority Withheld Vote will appoint a committee amongst themselves to consider the resignation offers and recommend to the Board whether to accept them. In the event that the only directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer directors, all directors may participate in the action regarding whether to accept the resignation offers.

 

Shares represented by proxies as to which the authority to vote for a nominee has been withheld will be deemed present and entitled to vote for purposes of determining the existence of a quorum and calculating the numbers of votes cast, but will be deemed not to have been voted in favor of the candidate with respect to whom the proxy authority has been withheld. In the unlikely event that the nominees are not candidates for election at the annual meeting, the persons named as proxies will vote for such other persons as the Board of Directors or proxies may designate.

Set forth below is information regarding the nominees to the Board of Directors and the other incumbent directors who will continue to serve after the annual meeting.

 

 

Mr. Foret has been a director of ADC since February 2003. From September 1998 to September 2002, Mr. Foret served as Executive Vice President and Chief Financial Officer of Northwest Airlines, Inc., a commercial airline company. From September 1998 to September 2002, he also served as Chairman and Chief Executive Officer of Northwest Airlines Cargo Inc., a subsidiary of Northwest Airlines that specializes in cargo transport. From May 1998 to September 1998, Mr. Foret served as a Special Projects Officer of Northwest Airlines, Inc. Prior to that time he served as President and Chief Operating Officer of Atlas Air, Inc. from June 1996 to September 1997 and as Executive Vice President and Chief Financial Officer of Northwest Airlines, Inc. from September 1993 to May 1996. Mr. Foret previously held other senior management positions with various companies including Northwest Airlines, Continental Airlines Holdings, Inc. and KLH Computers, Inc. Mr. Foret is also a director of Northwest Airlines, Inc., URS Corporation and Nash Finch Company.

 

Mr. Gilligan has been a director of ADC since September 2004. Since October 2004, Mr. Gilligan has served as the Chief Executive Officer of United Subcontractors, Inc., a nationwide construction services company. Prior to joining USI, Mr. Gilligan served as President and Chief Executive Officer of the Automation and Control Solutions Division of Honeywell International, a diversified technology and manufacturing company, from 2001 to 2004. From 2000 to 2001, Mr. Gilligan served as President of the Home and Building Control Division of Honeywell International. He also served as president of the Solutions and Services Division of Honeywell International from 1997 to 1999 and as Vice President and General Manager of the North American Region of the Home and Building Control Division from 1994 to 1997. Mr. Gilligan is also a director of Graco Inc.

 

Mr. Wunsch has been a director of ADC since 1991. Mr. Wunsch served in executive positions with Harris Bank N. A. and Harris myCFO, Inc., which are subsidiaries of the Bank of Montreal, from March 2002 through September 2006. He was an independent consultant in the financial services industry from December 2001 to March 2002. He was President and Chief Executive Officer of Family Financial Strategies, Inc., a registered investment advisory company, from 1997 to 2002. From 1990 to 1997, he served as President of Perrybell Investments, Inc., a registered investment advisory company.

 

Mr. Blanchard has been a director of ADC since November 1999 and has served as Non-executive Chairman of the Board since August 2003. He served as the Chairman of the Board and Chief Executive Officer of eFunds Corporation, a provider of transaction processing and risk management services, from June 2000 to September 2002. He continued to serve as a member of the Board of Directors of eFunds Corporation until his full retirement in December 2002. Previously, Mr. Blanchard had served as President and Chief Executive Officer of Deluxe Corporation, a provider of paper checks and electronic banking services, from May 1995 to May 1996 and as Chairman of the Board and Chief Executive Officer of Deluxe Corporation from May 1996 to December 2000 when eFunds Corporation was spun out of Deluxe Corporation. From January 1994 to April 1995, Mr. Blanchard was Executive Vice President of General Instrument Corporation, a supplier of set boxes and systems components to the cable and satellite television industry. From 1991 to

1993, Mr. Blanchard was Chairman and Chief Executive Officer of Harbridge Merchant Services, Inc., a national credit card processing company. Prior to that, Mr. Blanchard was employed by AT&T for 25 years, most recently as Senior Vice President responsible for national business sales.

 

Ms. Martin has been a director of ADC since March 2004. Ms. Martin has served as Senior Vice President and Chief Financial Officer for Capella Education Company, the publicly held parent company of Capella University, an accredited on-line university, since 2004. From 2002 to 2004, Ms. Martin served as Executive Vice President and Chief Financial Officer of World Data Products, Inc., an industry-leading provider of server, storage, network and telecom solutions worldwide. From 1993 to 2001, Ms. Martin was employed by Deluxe Corporation during which time she held a number of positions, including Senior Vice President and Chief Financial Officer, Vice President and Corporate Controller, Vice President and Controller of Deluxe Financial Services Group, Vice President and Controller of Paper Payment Systems Division, Director of Accounting Services, and Director of Internal Audit. Prior to joining Deluxe Corporation, Ms. Martin served as International Controller for Carlson Companies, a privately held international conglomerate. Ms. Martin is also a director of MTS Systems Corporation.

 

Mr. Rehfeld has been a director of ADC since September 2004. Mr. Rehfeld has served as an adjunct professor for the Executive MBA program at Pepperdine University in California since 1998. Mr. Rehfeld served as Chief Executive Officer of Spruce Technologies, Inc., a DVD authoring software company, during 2001. From 1997 to 2001, Mr. Rehfeld served as Chairman and Chief Executive Officer of ProShot Golf, Inc. He also served as President and Chief Executive Officer of Proxima Corporation from 1995 to 1997 and as President and Chief Executive Officer of ETAK, Inc. from 1993 to 1995. Mr. Rehfeld is also a director of America, Inc., Primal Solutions, Inc., Island Data Corp, Local.com Corporation and Enkeboll Design. He is also Chairman of the Forum of Corporate Directors in Orange County, California.

 

Mr. Boyle has been a director of ADC since November 1999. Mr. Boyle was appointed Chief Executive officer of Arbor Networks, Inc., a company that researches next-generation cyber threats and develops solutions that prevent network attacks, in June 2005. Prior to joining Arbor Networks, Mr. Boyle served as President and Chief Executive Officer of Equallogic, Inc., a company that develops networked storage by building intelligent storage solutions that extend the benefits of consolidated storage throughout the enterprise, from 2003 to 2004. From April 2000 to July 2003, Mr. Boyle served as Chief Executive Officer of Cogentric, Inc., a provider of solutions to enable decision makers to evaluate and enhance their Web-based capabilities. He served as Senior Vice President of ADC from October 1999 to April 2000 following our acquisition of Saville Systems PLC. Prior to joining ADC, Mr. Boyle served as President and Chief Executive Officer of Saville Systems PLC from August 1994 to October 1999 and as Saville’s Chairman of the Board from April 1998 to October 1999.

 

Dr. Spivey has been a director of ADC since September 2004. Dr. Spivey most recently served as President and Chief Executive Officer of Luminent, Inc., a fiber optics transmission products manufacturer, from July 2000 to November 2001. From 1997 to 2000, Dr. Spivey served as Network Products Group President for Lucent Technologies. He also served as Vice President of the Systems & Components Group at AT&T Corporation/Lucent Technologies from 1994 to 1997. Dr. Spivey is also a director of Novellus Systems, Inc., Raytheon Company, The Laird Group, PLC and Cascade Microtech, Inc.

 

Mr. Switz has been a director of ADC since August 2003. Mr. Switz has been President and Chief Executive Officer of ADC since August 2003. From January 1994 until August 2003, Mr. Switz served ADC as Chief Financial Officer as well as Executive Vice President and Senior Vice President. Mr. Switz also served as President of ADC’s former Broadband Access and Transport Group from November 2000 to April 2001. Prior to joining ADC, Mr. Switz was employed by Burr-Brown Corporation, a manufacturer of precision micro-electronics, most recently as Vice President, Chief Financial Officer and Director, Ventures & Systems Business. Mr. Switz is also a director of Broadcom Corporation, Micron Technology, Inc. and the Telecommunication Industry Association (TIA).

 

Mr. Wangberg has been a director of ADC since October 2001. Mr. Wangberg served as Chief Executive Officer and Chairman of the Board of TechTV (formerly ZDTV, Inc.), a cable television network focused on technology information, news and entertainment, from August 1997 until his retirement from these positions in

July 2002. Previously, Mr. Wangberg was Chief Executive Officer and Chairman of the Board of StarSight Telecast, Inc., an interactive navigation and program guide company, from February 1995 to August 1997. Mr. Wangberg is also a director of Autodesk, Inc. and Charter Communications, Inc.

 

EXECUTIVE COMPENSATION

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis (the “CD&A”) with management. Based on our review and discussions with management, we recommend to the Board of Directors that the CD&A be included in this proxy statement and in our Annual Report on Form 10-K for the fiscal year ended October 31, 2007.

 

The Compensation Committee:
J. Kevin Gilligan, Chair
John A. Blanchard III
John E. Rehfeld
John D. Wunsch

 

Compensation Discussion and Analysis

 

Overview

 

This CD&A describes the major elements of our compensation program for the executive officers named in the Summary Compensation Table on page 26 of this proxy statement (the “named executive officers”). This CD&A also discusses the objectives, philosophy, process and decisions underlying the compensation of the named executive officers. The CD&A should be read together with the executive compensation tables and related footnotes found later in this proxy statement.

 

The Compensation Committee of our Board of Directors is composed entirely of independent outside directors, as determined under the current NASDAQ Global Select Market listing standards and Section 162(m) of the Internal Revenue Code. The Compensation Committee reviews and approves executive compensation programs and specific compensation arrangements for the named executive officers.

 

The principal elements of our executive compensation program for fiscal year 2007 were:

 

 

Programs and Objectives and Reward Philosophy

 

Our Compensation Committee is guided by the following key objectives and reward philosophies in the design and implementation of our executive compensation program:

 

 

 

Key Considerations and Process

 

In applying these program objectives and reward philosophies, the Compensation Committee takes into account the following key considerations and adheres to the following processes:

 

Competitive Market Assessment.  We conduct a competitive market assessment for each of the primary elements of our executive compensation program. In setting executive compensation levels, the Compensation Committee reviews market data from the following sources:

 

 

 

 

Our Financial and Strategic Objectives.  Each year our management team develops an annual operating plan and three-year strategic plan for review and approval by our Board of Directors. The Compensation Committee utilizes these financial and strategic plans in the development of compensation plans and performance goals for our named executive officers for the next fiscal year.

Considerations for Mr. Switz.  The Compensation Committee considers the following factors in setting the compensation arrangements for Mr. Switz:

 

 

Considerations for Other Named Executive Officers.  The Compensation Committee considers the following factors in setting the compensation arrangements for each of the other named executive officers:

 

 

Accounting, Tax and Financial Considerations.  The Compensation Committee carefully considers the accounting, tax and financial consequences of the executive compensation and benefit programs implemented by us. These were important considerations in connection with the design of the following compensation programs:

 

 

Application to our Fiscal Year 2007 Executive Compensation Program

 

Total Compensation Mix

 

Fiscal Year 2007 Compensation Mix.  The table below illustrates, for each of the named executive officers, the manner in which (a) the overall mix of total direct compensation was allocated between performance and non-performance-based elements; (b) performance-based compensation was allocated between annual and long-term elements; and (c) total direct compensation was allocated between cash and equity.

 

Fiscal Year 2007
Total Direct Compensation Mix(1)

 

 

 

 

Analysis.  The compensation mix for our named executive officers in fiscal year 2007 was weighted significantly toward performance-based compensation in accordance with our pay for performance reward philosophy. This mix of compensation elements is within the median range for the mix of executive compensation provided by the companies benchmarked in the competitive market data described earlier in this CD&A.

Base Salaries

 

Fiscal Year 2007 Base Salaries.  We pay a competitive base salary to help us attract and retain talented executives. The amount of annualized base salary and year-over-year increase for each of the named executive officers in fiscal year 2007 is set forth in the following table:

 

Base Salary Table

 

 

 

 

In fiscal year 2007, Mr. Switz, received a 5.2% base salary increase based upon an assessment of his performance in fiscal year 2006 and the competitiveness of his base salary utilizing peer group information as the principal benchmark. Annual base salary increases for the other named executive officers were in the range of 3.1% to 6.0%, and the average annual base salary increase for all named executive officers was 4.8% (excluding the special increase to Mr. Mathews due to his promotion). In determining changes to base salary for the other named executive officers, our Compensation Committee considered individual performance, a competitive assessment, and other considerations discussed earlier in this CD&A.

 

Analysis.  Base salaries for each of our named executive officers in fiscal year 2007 fall within plus or minus 25% of the composite range of the median salaries paid by the companies in our peer group and the salary surveys against which we benchmark. The range of annual salary increases also falls within the median competitive range and is consistent with our competitive pay philosophy.

 

Annual Cash Incentives

 

Annual Cash Incentive Plans.  The primary objective of our annual incentive plans is to provide annual financial incentives for our executives to achieve our key company-wide and business unit financial and strategic goals. This is consistent with our pay for performance reward philosophy. Each of our named executive officers participates in one of the following two annual cash incentive plans that we maintain for our executives:

 

 

Under both the EMIP and the MIP, the Compensation Committee establishes the performance goals and determines the payout amounts for each of the named executive officers. The EMIP has been approved by our shareowners and is designed so that annual cash incentive payments will be fully deductible for U.S. federal income tax purposes, even if they cause an executive’s total compensation to exceed $1 million. For fiscal year 2007, Mr. Switz was the only participant in the EMIP, and all of the other named executive officers participated in the MIP.

Target Amount of Annual Incentive Payout.  The Compensation Committee reviews and approves an annual incentive target payout amount (which is a dollar amount stated as a percentage of base salary) under the EMIP and MIP for each named executive officer. For fiscal year 2007, Mr. Switz could earn from 0% to 300% of his individual target payout amount depending on whether company-wide financial performance was higher or lower than the performance goals established for the EMIP. For fiscal year 2007, each of the other named executive officers could earn from 0% to 200% of their individual target payout amount depending on whether company-wide and business unit financial performance was higher or lower than the performance goals established for the MIP. A 100% payout of the target amount is made for achievement of financial performance that is “on-plan” with the pre-established goals. For the named executive officers who are not business unit Presidents, 100% of the EMIP and MIP goals was based upon company-wide financial metrics. For ADC business unit Presidents, 50% of their targeted percentage was based upon financial performance of their respective business unit and the remaining 50% was tied to company-wide financial performance goals. The following table illustrates the targeted percentage of annual incentive for each of the named executive officers for fiscal year 2007:

 

 

 

 

2007 Incentive Plan Performance Goals and Results.  For fiscal year 2007, the performance goals established for the MIP were derived from our annual operating plan, which targeted revenue and profitability growth rates higher than the global revenue growth rates expected for our overall industry at the time the plan was established. The following company-wide performance metrics were used for the 2007 MIP:

 

 

At the company-wide level, 60% of the MIP bonus was based on adjusted operating income for fiscal year 2007. Net sales and free cash flow each accounted for 20% of the MIP bonus.

 

In fiscal year 2007, the business unit performance goals were based on the following performance metrics measured at the business unit level: net sales, adjusted operating income and metrics supportive of our free cash flow objectives (including inventory turns and collection of receivables). After establishing the performance metrics to be used, each metric was then given a relative weighting.

 

For our Global Connectivity Systems (“GCS”) business unit (of which Mr. O’Brien is the President), the free cash flow metric was inventory turns. Inventory turns measures the number of times per year we sell through our inventory balance, and is calculated by dividing third party cost of sales by average monthly net inventory balance.

 

For our GCS business unit, 60% of the MIP bonus was based on adjusted operating income for fiscal year 2007. Net sales and inventory turns each accounted for 20% of the MIP bonus.

 

Under the terms of the EMIP, the Compensation Committee establishes a financial threshold that must be achieved as a condition to any payout. The Committee then has the discretion to lower (but not raise) the payout amount under the EMIP if the specified financial threshold is achieved. For purposes of determining the final incentive payout amount under the EMIP for fiscal year 2007, the Compensation Committee administered the EMIP such that the payout amount for Mr. Switz was the same as it would have been under the MIP based upon performance against the company-wide financial goals established under the 2007 MIP.

 

The following table sets forth the financial goals for the fiscal year 2007 MIP and the corresponding financial results for the year. The table includes only company-wide and GCS business unit goals because these are the goals that affected the amount of the MIP bonuses paid to our named executive officers.

 

Fiscal Year 2007 — Incentive Plan Performance Goals and Results

 

 

 

 

Analysis.  The value of the target payout amounts for our EMIP and MIP is near the median of the short-term incentive payments made by companies included in the market survey data that we used as benchmarks for fiscal year 2007. Based on our 2007 financial performance and the relative weighting of each goal established by the Compensation Committee, Mr. Switz received 126.1% of his total targeted EMIP payout amount for fiscal year 2007. Also, based on these company-wide performance goals as well as applicable business unit performance goals, the other named executive officers were awarded payouts ranging

from 93.6% to 126.1% of their total targeted MIP payout amount for fiscal year 2007. The dollar amounts earned under the EMIP and the MIP in fiscal year 2007 by each of our named executive officers are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table appearing on page 26 of this proxy statement.

 

Over the past two fiscal years, the payout for performance against goals for the named executive officers has ranged from 0% to 126.1% of the annual target payout amount. Consistent with our pay for performance reward philosophy, no annual incentives were paid to our named executive officers in fiscal year 2006 because we did not achieve our pre-established financial goals in that year. In fiscal year 2007, we exceeded the “on-plan” amount for our pre-established company-wide financial goals, which resulted in annual incentive payouts greater than 100% of the targeted amount. The volatile and challenging industry and market conditions in which we operate contributes to significant variations in annual performance against goals and incentive payout amounts against the target level of payout.

 

Long-Term Equity Incentives in Fiscal Year 2007

 

Program Design for Long-Term Equity Incentives.  We make long-term equity incentive awards to our executive officers in December of each year. These awards represent the largest component of the targeted value in the total compensation paid to our named executive officers. The primary objectives of our equity incentive program are to:

 

 

Historically, stock option awards were our primary form of long-term equity incentive awards. Since 2004, we have modified our approach to long-term equity incentives to include other types of equity compensation awards in addition to stock options. This change allows us to provide a mix of long-term equity awards that has an effective incentive and retention impact across a range of business and industry conditions. This change is also responsive to changes in accounting regulations for equity compensation and developments in competitive market practices. All equity-based awards to our named executive officers in fiscal year 2007 were made under our GSIP. The following types of equity compensation awards were used in fiscal year 2007:

 

 

 

Analysis.  Our Compensation Committee believes that the use of long-term equity incentives as a significant component of total compensation is consistent with our philosophy of aligning the interests of our executive officers with those of our shareowners and our pay for performance reward philosophy. The targeted value of equity awards at the time of grant is determined based on consideration of competitive market data, the costs and potential shareowner dilution of the program, overall business and market conditions, and incentive and retention objectives. The specific numbers of stock options, PSUs and RSUs that were granted to each of our named executive officers in fiscal year 2007 are set forth on the table entitled “Grants of Plan-Based Awards” in the executive compensation tables found later in this proxy statement.

 

In fiscal year 2007, Mr. Switz received both an annual equity compensation award and a special, supplemental award. The value of his annual equity compensation grant approximated the market median level and was comprised of a combination of stock options and PSUs. Mr. Switz also received a supplemental award of RSUs in December 2006 in recognition of the renewal of his three-year employment agreement originally entered into with us in August 2003 and the completed vesting of the initial three-year stock option and restricted stock grants made to Mr. Switz at the time he was first appointed as our Chief Executive Officer. This supplemental grant consisted of 225,000 RSUs, which will vest in full on December 18, 2009, subject to Mr. Switz’s continued employment with us. The Compensation Committee made this award to enhance the financial incentives for Mr. Switz to continue serving as our Chief Executive Officer and driving our performance during a challenging period of change for our industry. In determining the size of this award, the Committee also considered the then current value of awards made in prior years to Mr. Switz.

In past years, the Compensation Committee targeted the value of equity compensation grants for the other named executive officers near the median levels for our competitive market. In fiscal year 2007, however, the other named executive officers were awarded annual equity compensation grants that had an aggregate value at the time of grant in the range of approximately 50% above the market median level. The Committee departed from its general philosophy of making awards near the competitive median for 2007 in order to provide a strong financial incentive for the named executive officers to continue serving the Company and to drive our performance over the vesting period. The Committee is not planning to make a permanent departure from its median pay philosophy. In determining the size of these awards, the Committee also considered the then current value of awards made in prior years to each of the named executive officers.

 

Executive Stock Ownership Guidelines.  The Compensation Committee also maintains ADC stock ownership targets for executive officers as another means of aligning the interests of the named executive officers and the interests of our shareowners. The stock ownership targets for executive officers are expressed as a fixed number of shares, which represents the targeted number of shares that each of our executives is encouraged and expected to own over time. For equity compensation awards made since fiscal year 2004, the Committee instituted a requirement that each executive officer must hold at least 50% of shares received upon the exercise of stock options and the vesting of PSUs and RSUs (after reduction for the payment of taxes and the exercise costs) until such time as the targeted stock ownership level is achieved by the executive.

 

Executive Benefits and Perquisites

 

Primary Benefits.  Our named executive officers are eligible to participate in the same employee benefit plans in which all other eligible U.S. salaried employees participate. These plans include medical, dental, life insurance, disability and a qualified retirement savings plan. We also maintain a nonqualified savings plan in which our named executive officers are eligible to participate. This nonqualified plan has the same general plan features and benefits as our qualified retirement plan and is designed for all U.S. salaried employees who are affected by tax law limits on compensation, contributions and/or deductions.

 

Cash Allowance in lieu of Perquisites.  For a number of years, we have maintained a program that provides each named executive officer with an annual cash allowance in lieu of providing the perquisites available at many other companies. In fiscal year 2007, we provided our named executive officers with an annual executive allowance that could be used at their discretion for any purpose, including for various professional services (such as financial counseling, tax preparation, estate planning and investment advice), club membership, automobile purchase/lease, or home security systems and services.

 

While many companies choose to reimburse actual expenses for perquisites provided their officers, we have chosen to simplify that process by providing our executives this annual cash allowance. The executive officer is responsible for all taxes on any imputed income resulting from this program. While this allowance is treated as cash income to the executive, the amount of the allowance is not included in the base salary amount on which an executive’s incentive compensation is calculated. The specific allowance amount paid to each of the named executive officers in fiscal year 2007 is reflected in the Summary Compensation Table found on page 26 of this proxy statement.

 

Other Perquisites.  In addition to a cash allowance for Mr. Switz, we reimburse club membership fees pursuant to the terms of his employment agreement. We also allow Mr. Switz periodic use of a fully depreciated company leased vehicle for which we pay lease maintenance and registration fees, and Mr. Switz pays all operating costs.

 

Charitable Donation Program.  The ADC Foundation offers a charitable donation program, the Corporate Leaders in Community Program (the “CLIC Program”), in which our named executive officers may participate. Under the CLIC Program, the ADC Foundation will make a charitable contribution of up to $5,000 in any one year period to a charitable organization to which a named executive officer provides significant service.

 

Analysis.  The overall value of our benefit plans and perquisites is intended to reflect competitive market practices. These plans are important elements in attracting and retaining qualified executives and other

employees. The amount of the annual cash allowance is generally competitive with the aggregate value of perquisites provided by many other companies to their executive officers and is consistent with our competitive pay philosophy.

 

Executive Severance Pay

 

Severance Pay Arrangements and Practices.  We have an employment agreement with Mr. Switz that contains severance pay arrangements. The severance provisions of the employment agreement are designed to provide clarity with respect to the rights and obligations of the parties upon the termination of his employment with ADC. The terms of this employment agreement are described in the section entitled “Employment and Severance Agreement with Robert E. Switz” in this proxy statement.

 

We do not have formal severance agreements with any of our other named executive officers. However, we do have a practice of providing executives at this level up to 15 months of base salary continuation, reimbursement for two months of continued medical benefits under COBRA and executive outplacement assistance.

 

Executive Change in Control Severance Pay Plan.  If a change in control of ADC were to occur, the Compensation Committee believes that it is in the best interests of shareowners, employees and the communities in which we operate to ensure the retention of key executives to facilitate an orderly transition. For this reason, we maintain an Executive Change in Control Severance Pay Plan covering high-level executives, including Mr. Switz and the other named executive officers. This reduces the risk of losing key management personnel that may occur during a critical period of a potential or actual change in control of ADC. This plan is separate from the severance arrangements described above but would not allow an executive to obtain duplicative severance benefits upon termination of employment.

 

The Executive Change in Control Severance Pay Plan contains a double trigger severance provision, which means that, in order to receive severance benefits, an executive’s employment must be terminated within a specified period following a change in control. The Compensation Committee believes that a double trigger design is more appropriate for severance benefits than the single trigger design as it prevents payments in the event of a change in control where the executive continues to be employed without an adverse effect on compensation, role and responsibility or job location. This plan also has an excise tax gross-up provision under which the executive’s excise tax liability arising from change in control severance payments is paid by us. Additional details about this plan and the potential severance payment amounts for each of our named executive officers can be found under “Executive Change in Control Severance Pay Plan” in this proxy statement.

 

Analysis.  The levels of severance pay and benefits that would be provided under our severance pay arrangements and practices are competitive with market practices. Our Compensation Committee believes that they are important elements of a total compensation program to attract and retain senior executives. Market data also indicates that the other terms and conditions of our change in control severance pay plan are consistent with the design provisions and benefit levels of similar plans at other companies for which we compete for executive talent.

 

Additional Information and Considerations

 

The Role of the Compensation Committee and Its Use of Advisors.  A summary of the role of the Compensation Committee is found in the section entitled “Corporate Governance and Board Matters” in this proxy statement. For more information on the role and responsibilities of the Compensation Committee, we encourage you to review the Compensation Committee charter, which is posted on our website at www.adc.com/investorrelations/corporategovernance.

 

The Compensation Committee charter permits the Compensation Committee to engage independent outside advisors to assist the Compensation Committee in the fulfillment of its responsibilities. The

Compensation Committee engages an independent executive compensation consultant for information, advice and counsel. Typically, the consultant assists the Compensation Committee by providing an independent review of:

 

 

For our 2007 fiscal year, the Compensation Committee engaged F. W. Cook & Co., Inc. as its independent consultant. This selection was made directly by the Compensation Committee. F.W. Cook & Co., Inc. provides no other compensation or benefit consulting services to ADC.

 

The Role of Executive Management in the Process of Determining Executive Compensation.  Mr. Switz makes recommendations to the Compensation Committee regarding executive compensation decisions for the other named executive officers. Ms. Owen, our Chief Administrative Officer, is responsible for administering our executive compensation program. Ms. Owen also reviews significant proposals or topics impacting executive compensation with the Compensation Committee. Mr. Mathews, our Chief Financial Officer, provides information and analysis on various aspects of our executive compensation plans, including financial analysis relevant to the process of establishing performance targets for our MIP and EMIP plans as well PSU awards. Mr. Pflaum, our General Counsel, acts as Secretary to the Compensation Committee as well as the full Board and other Board Committees. Although members of our management team participate in the process of determining executive compensation, the Compensation Committee also meets regularly in executive session without any members of the management team present. The Compensation Committee makes the final determination of the executive compensation package provided to each of our named executive officers.

 

Executive Compensation Changes Anticipated in Fiscal Year 2008.  We currently are implementing certain changes to our executive compensation program for fiscal year 2008. These changes are intended to continue to improve our compensation to achieve our goals of attracting, motivating and retaining key employees in order to drive the performance of our business. The primary changes planned for fiscal year 2008 include:

 

will lead to a range of potential payout amounts from 0% to 200% of the targeted amount of the PSU award. This is different from the “cliff” type vesting utilized in fiscal year 2007, which has an all or nothing payout design based on achievement of a specified performance level. The PSU performance metric will be cumulative pre-tax GAAP Earnings per Share over a three year performance period (fiscal years 2008 through 2010). The target amount of this earnings performance metric will be more directly tied to the planned results of our three-year financial plans than it has been in prior years. The Compensation Committee believes the modified PSU design will better drive executive performance by providing further incentive to perform at the high end of the targeted performance range.

 

 

This new program is intended to recognize that each executive has unique financial circumstances and personal preferences and is being implemented in an effort to optimize the attractiveness of our equity compensation programs to our executives. We believe that this new equity choice program will help differentiate ADC as an attractive and innovative employer and will enhance our efforts to retain and attract superior executive talent.

 

Summary Compensation Table

 

The following table shows the cash and non-cash compensation for the last fiscal year awarded to or earned by individuals who served as our chief executive officer or chief financial officer and each of our three other most highly compensated executive officers during fiscal year 2007 (collectively, the “named executive officers”).

 

Summary Compensation Table

 

 

 

 

Annual Incentive Summary

 

 

 

 

 

 

 

 

 

All Other Compensation

 

 

 

 

 

Grants of Plan-Based Awards

 

The following table summarizes the fiscal year 2007 grants of equity and non-equity plan-based awards to the named executive officers. All of these equity and non-equity plan-based awards were granted under our GSIP and the fiscal year 2007 MIP and EMIP.

 

Grants of Plan-Based Awards

 

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table shows the unexercised stock options, unvested RSUs and unvested PSUs held as of October 31, 2007 by the named executive officers.

 

Outstanding Equity Awards at Fiscal Year-End