| Additional risks of which we are currently unaware or believe to be immaterial may also result in events that could impair our business operations |
| If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of operations may suffer, and the trading price of our common stock could decline |
| 11 _________________________________________________________________ Risks Related to Our Business Our operating results were adversely affected by the significant downturn in the communications equipment industry and the slowdown in the United States economy that occured generally from 2001-2003, and there can be no assurance that we will consistently maintain operating profitability in the future |
| Our operating results during fiscal 2001, 2002 and 2003 were significantly impacted by the substantial downturn in the telecommunications equipment industry |
| We incurred significant losses from continuing operations in our fiscal years 2001, 2002 and 2003 |
| While we returned to profitability in fiscal 2004 and are currently profitable, it is not clear that we will be able to continue to achieve revenue and gross margin levels needed to sustain profitability |
| Further, the increase in our 2004 revenue was primarily because of our acquisition of KRONE in May 2004 |
| During this downturn, many of our customers reduced their equipment purchases and deferred capital spending |
| Our customers are dependent on the level of end-user demand for communications services, and they are likely to defer significant network expansions when they do not believe there is significant demand for greater Internet, data, video and voice services |
| During the downturn of the telecommunications industry that occurred in our fiscal years 2001, 2002 and 2003, some of our customers experienced serious financial difficulties, including bankruptcy filings or cessation of operations |
| The general slowdown in the United States economy in the early part of this decade negatively impacted our business and operating results |
| If general economic conditions in the United States and globally do not continue to improve, and especially if they worsen, we may experience material adverse effects on our business, financial condition and results of operations |
| Further, when our customers announce spending initiatives that might positively impact sales of one or more of our products, it is possible these customers contemporaneously will reduce spending in a manner that would negatively impact one or more of our other products |
| Our gross margins vary among our product groups and have fluctuated from quarter to quarter as a result of shifts in product mix (that is, how much of each product type we sell in any particular quarter), the introduction of new products, decreases in average selling prices and our ability to reduce manufacturing and other costs |
| We expect such fluctuation in gross profit to continue in the future |
| Both KRONE and FONS historically sold certain products at margins lower than the margins at which the majority of our products sold |
| The integration of KRONE has negatively impacted our gross profit margins, and it is likely that the integration of FONS will do so as well |
| In addition, our gross margins could decrease based on the amount of new products we sell that have lower startup gross margins |
| We are becoming increasingly dependent on significant capital deployment initiatives driven by our customers |
| Increasingly our business is focused upon the sale of products serving significant customer initiatives for increased broadband capabilities deep into their networks |
| Examples of products serving these initiatives include our FTTX products, wireless coverage solutions and products used in enterprise networks |
| These products generally are utilized outside the central offices, where we traditionally sold most of our products, of our customer and often are deployed in connection with the construction of specific network projects |
| To date, our experience has been that the deployment of capital for such network projects is driven by our customers’ priorities and the needs of specific projects |
| For this reason, the demand for our products can fluctuate significantly from quarter to quarter |
| In addition, the competition to sell our products can be very intense as the projects often utilize new products that are not incumbent to networks |
| The continued sale of these products by us will also be contingent upon the continued build-out by our customers of networks that utilize these products and the acceptance of our products into such networks |
| We cannot assure that these deployments will continue or that our products will be selected for these deployments on a consistent basis |
| 12 _________________________________________________________________ Consolidation among our customers could result in our losing a customer or experiencing a slowdown as integration takes place |
| We believe there likely will be continued consolidation among our customers in order for them to increase market share, diversify product portfolios and achieve greater economies of scale |
| Consolidation may impact our business as our customers focus on integrating their operations |
| We believe that in certain instances customers engaged in integrating large-scale acquisitions may scale back their purchases of network equipment while the integration is ongoing |
| Further, once consolidation occurs, our customers may choose to pare down the number of vendors they use to source their equipment, although we have not yet seen this impact |
| After a consolidation occurs, there can be no assurance that we will continue to supply equipment to the surviving communications service provider |
| The impact of significant mergers on our business is likely to be unclear until sometime after such transactions have closed |
| Our sales could be negatively impacted if one or more of our key customers substantially reduces orders for our products |
| Our customer base is relatively concentrated, with our top ten customers accounting for 42dtta7prca, 46dtta9prca, and 56dtta7prca of net sales for fiscal years 2005, 2004, and 2003, respectively |
| While our acquisition of KRONE diversified our customer base, our recent acquisitions of FONS may have the effect of mitigating some of this diversification |
| If we lose a significant customer for any reason, including consolidation among our customer base, our sales and gross margins would be negatively impacted |
| Further, in the product areas where we believe the potential for revenue growth is most pronounced (eg, FTTX initiatives and wireless products), our sales remain highly concentrated with the major telephone companies |
| The loss of sales due to a decrease in orders from a key customer could require us to record additional impairment and restructuring charges or exit a particular business or product line |
| In the aftermath of Hurricane Katrina, we may experience a change in the sales of our products and services |
| We sell our products and services to customers operating in some of the areas hardest hit by Hurricane Katrina |
| Communications networks have been impacted adversely, along with other infrastructure in this area |
| Although we are not certain about the effect that Hurricane Katrina may have on sales of our products and services, it is possible that we will experience slower sales in the near term while affected customers work to stabilize their networks and normalize operations |
| Moving forward, there may also be a temporary upturn in our sales as our customers work to replace damaged or destroyed network elements in the areas impacted by the hurricane |
| Conversely, our sales could decrease as our customers divert money from other parts of their budgets to spend on rebuilding |
| Our market is subject to rapid technological change, and to compete effectively, we must continually introduce new products that achieve market acceptance |
| The communications equipment industry is characterized by rapid technological changes, evolving industry standards, changing market conditions and frequent new product and service introductions and enhancements by our competitors |
| The introduction of products using new technologies or the adoption of new industry standards can make our existing products or products under development obsolete or unmarketable |
| For example, it is possible that FTTX initiatives may negatively impact sales of non-fiber products |
| In order to grow and remain competitive, we will need to adapt to these rapidly changing technologies, to enhance our existing solutions and to introduce new solutions to address our customers’ changing demands |
| We may not accurately predict technological trends or the success of new products in the communications equipment market |
| New product development often requires long-term forecasting of market trends, development and implementation of new technologies and processes and a substantial capital commitment |
| In addition, we do not know whether our products and services will meet with market acceptance or be profitable |
| Many of our competitors have greater engineering and product development 13 _________________________________________________________________ resources than we do |
| Although we expect to continue to invest substantial resources in product development activities, our efforts to achieve and maintain profitability will require us to be more selective and focused with our research and development expenditures |
| If we fail to anticipate or respond in a cost-effective and timely manner to technological developments, changes in industry standards or customer requirements, or if we have any significant delays in product development or introduction, our business, operating results and financial condition could be materially adversely affected |
| Strategic changes to our product portfolio may not yield the benefits that we expect |
| In connection with the downturn in the communications industry, we divested or ceased operating numerous product lines and businesses that either were not profitable or did not match our new strategic focus |
| We may make further divestitures or closures of product lines and businesses |
| In addition, we have recently made acquisitions that we believe are aligned with our current strategic focus |
| The impact of potential changes to our product portfolio and the effect of such changes on our business, operating results and financial condition are evolving and not fully known at this time |
| If we acquire other businesses in our areas of strategic focus, we may have difficulty assimilating these businesses and their products, services, technologies and personnel into our operations |
| These difficulties could disrupt our ongoing business, distract our management and workforce, increase our expenses and adversely affect our operating results and financial condition |
| Furthermore, we may not be able to retain key management, technical and sales personnel after an acquisition |
| In addition to these integration risks, if we acquire new businesses, we may not realize all of the anticipated benefits of these acquisitions |
| Divestitures or elimination of existing businesses or product lines could also have disruptive effects and may cause us to incur material expenses |
| If we are unable to garner customer support for our combined portfolio following the FONS acquisition, we may not be able to realize the gains we anticipated |
| Both ADC and FONS rely heavily on the business generated from one customer for a large percentage of sales in the FTTX space |
| If this particular customer decreases the amount of products it purchases, or seeks out additional suppliers for products rather than allowing us to consolidate the combined revenue share of both ADC and FONS, the efficiencies that we projected with this acquisition may not materialize |
| If we seek to secure additional financing, we may not be able to obtain it |
| Also, if we are able to secure additional financing, our shareowners may experience dilution of their ownership interest or we may be subject to limitations on our operations |
| We currently anticipate that our available cash resources, which include existing cash, cash equivalents and available-for sale securities, will be sufficient to meet our anticipated needs for working capital and capital expenditures to execute our near-term business plan, based on current business operations and economic conditions |
| If our estimates are incorrect and we are unable to generate sufficient cash flows from operations, we may need to raise additional funds |
| In addition, if one or more of our strategic acquisition opportunities exceeds our existing resources, we may be required to seek additional capital |
| We do not currently have any significant available lines of credit or other significant credit facilities, and we are not certain that we can obtain commercial bank financing on acceptable terms |
| If we raise additional funds through the issuance of equity or equity-related securities, our shareowners may experience dilution of their ownership interests and the newly issued securities may have rights superior to those of common stock |
| See “Risks Related to our Common Stock” below |
| If we raise additional funds by issuing debt, we may be subject to restrictive covenants that could limit our operating flexibility and interest payments could dilute earnings per share |
| 14 _________________________________________________________________ Our industry is highly competitive and subject to significant downward pricing pressure for our products |
| Competition in the communications equipment and related services industry is intense |
| We believe our success in competing with other manufacturers of communications equipment products and related services will depend primarily on our engineering, manufacturing and marketing skills, the price, quality and reliability of our products, our delivery and service capabilities and our control of operating expenses |
| We have experienced and anticipate greater pricing pressures from current and future competitors as well as our customers |
| Our industry is currently characterized by many vendors pursuing relatively few and very large customers, which provides our customers with the ability to exert significant pressure on their suppliers, both in terms of pricing and contractual terms |
| Many of our competitors have more extensive engineering, manufacturing, marketing, financial and personnel resources than we do |
| As a result, other competitors may be able to respond more quickly to new or emerging technologies or changes in customer requirements, or offer more aggressive price reductions |
| Possible consolidation among our competitors could result in a loss of sales |
| This could result in our competitors becoming financially stronger and obtaining broader product portfolios |
| It is possible that such consolidation could lead to a loss of sales for us as our competitors increase their resources through consolidation |
| Our operating results fluctuate significantly, and if we miss quarterly financial expectations, our stock price could decline |
| Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter |
| It is likely that our operating results in some periods will be below investor expectations |
| If this happens, the market price of our common stock is likely to decline |
| Fluctuations in our future quarterly earnings may be caused by many factors, including without limitation: • the volume and timing of orders from and shipments to our customers; • work stoppages and other developments affecting the operations of our customers; • the timing of and our ability to obtain new customer contracts and sales recognition; • the timing of new product and service announcements; • the availability of products and services; • the overall level of capital expenditures by our customers; • market acceptance of new and enhanced versions of our products and services; • variations in the mix of products and services we sell; • the location and utilization of our production capacity and employees; and • the availability and cost of key components |
| Our expense levels are based in part on expectations of future revenues |
| If revenue levels in a particular period are lower than expected, our operating results will be affected adversely |
| In addition, prior to fiscal 2001 and during fiscal 2004, our operating results were subject to seasonal factors |
| We historically had stronger demand for our products and services in our fourth fiscal quarter ending October 31 |
| Conversely, we typically experienced weaker demand for our products and services in the first fiscal quarter, primarily as a result of the number of holidays in late November, December and early January, the development of annual capital budgets by our customers, as well as a general industry slowdown, during that period |
| In our fourth fiscal quarter of 2005, we did not experience this historical pattern of seasonality, primarily because of less predictable spending patterns for our FTTX and wireless products |
| 15 _________________________________________________________________ The regulatory environment in which our customers operate is changing |
| Although our business is not subject to a significant amount of direct regulation, the communications service industry in which our customers operate is subject to significant and evolving federal and state regulation in the United States as well as regulation in other countries |
| The United States Telecommunications Act of 1996 (the “Act”) lifted certain restrictions on the ability of companies, including the major telephone companies and other ADC customers, to compete with one another |
| The Act also made other significant changes in the regulation of the telecommunications industry |
| These changes generally increased our opportunities to provide solutions for our customers’ Internet, data, video and voice needs |
| The established telecommunications providers have stated that some of these changes have diminished the profitability of additional investments made by them in their networks, which reduces their demand for our products |
| Recently, however, the Federal Communications Commission (“FCC”) ended the practice of forced “line-sharing”, which means that major telephone companies are no longer legally mandated to lease space to DSL resellers |
| This ruling also included language allowing major telephone companies to maintain sole ownership of newly built networks that include fiber deployment (ie, FTTX) |
| While it is anticipated that this ruling will benefit us, there can be no assurance that it will have any impact on sales of our products |
| Additional regulatory changes affecting the communications industry are anticipated both in the United States and internationally |
| A European Union directive on waste electrical and electronic equipment (“WEEE”) and the restriction of hazardous substances (“RoHS”) in such equipment is in the process of being implemented in member states |
| The directive sets a framework for producers’ obligations in relation to manufacturing (including the amounts of named hazardous substances contained in products sold), labeling, and treatment, recovery and recycling of electronic products in the European Union |
| We have established policies and procedures to comply with these directives as they are implemented in various member states |
| Detailed regulations on practices and procedures related to WEEE and RoHS are evolving in member states |
| These changes could affect our customers and alter demand for our products |
| Recently announced or future changes could also come under legal challenge and be altered, thereby reversing the effect of such regulations or changes and the impact we expected |
| In addition, competition in our markets could intensify as the result of changes to existing or new regulations |
| Accordingly, changes in the regulatory environment could adversely affect our business and results of operations |
| Customer payment defaults could have an adverse effect on our financial condition and results of operations |
| As a result of adverse conditions in the communications market, some of our customers have experienced and may continue to experience serious financial difficulties |
| In some cases these difficulties have resulted or may result in bankruptcy filings or cessation of operations |
| If customers experiencing financial problems default on paying amounts owed to us, we may not be able to collect these amounts or recognize expected revenue |
| It is possible those customers from whom we expect to derive substantial revenue will default or that the level of defaults will increase |
| Any material payment defaults by our customers would have an adverse effect on our results of operations and financial condition |
| Some of our competitors engage in financing transactions with some of their customers for the purchase of equipment |
| To remain competitive, it may become necessary for us to offer similar financing arrangements |
| If such financings occur, it would be our intent to sell all or a portion of these commitments and outstanding receivables to third parties |
| In the past, we have sold some receivables with recourse and have had to compensate the purchaser for the related losses |
| Conditions in global markets could affect our operations |
| Our sales outside the United States accounted for approximately 45dtta4prca, 39dtta5prca, and 24dtta8prca of our net sales in fiscal 2005, 2004, and 2003, respectively |
| We expect non-US sales to remain a significant percentage of net sales in the future |
| In addition to sales and distribution in numerous countries, we own or lease operations located in Australia, Austria, Belgium, Brazil, Canada, Chile, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Norway, Philippines, Puerto Rico, 16 _________________________________________________________________ Russia, Singapore, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand, the United Arab Emirates, the United Kingdom, the United States, Venezuela and Vietnam |
| Due to our non-US sales and our non-US operations, we are subject to the risks of conducting business globally |
| These risks include, without limitation: • local economic and market conditions; • political and economic instability; • unexpected changes in or impositions of legislative or regulatory requirements; • fluctuations in foreign currency exchange rates; • tariffs and other barriers and restrictions; • longer payment cycles; • difficulties in enforcing intellectual property and contract rights; • greater difficulty in accounts receivable collection; • potentially adverse taxes; and • the burdens of complying with a variety of non-US laws and telecommunications standards |
| We also are subject to general geopolitical and environmental risks, such as terrorism, political and economic instability, changes in the costs of key resources such as oil, changes in diplomatic or trade relationships and natural disasters |
| Economic conditions in many of the non-US markets in which we do business represent significant risks to us |
| We cannot predict whether our sales and business operations in these markets will be affected adversely by these conditions |
| Instability in non-US markets, which we believe is most likely to occur in the Middle East, Asia and Latin America, could have a negative impact on our business, financial condition and operating results |
| The wars in Afghanistan and Iraq and other turmoil in the Middle East and the global war on terror also may have negative effects on the operating results of some of our businesses |
| In addition to the effect of global economic instability on non-US sales, sales to United States customers having significant non-US operations could be impacted negatively by these conditions |
| Our intellectual property rights may not be adequate to protect our business |
| Our future success depends in part upon our proprietary technology |
| Although we attempt to protect our proprietary technology through patents, trademarks, copyrights and trade secrets, these protections are limited |
| Accordingly, we cannot predict whether such protection will be adequate, or whether our competitors can develop similar technology independently without violating our proprietary rights |
| In addition, rights that may be granted under any patent application in the future may not provide competitive advantages to us |
| Intellectual property protection in foreign jurisdictions may be limited or unavailable |
| In addition, many of our competitors have substantially larger portfolios of patents and other intellectual property rights than us |
| As the competition in the communications equipment industry intensifies and the functionality of the products further overlaps, we believe that companies are becoming increasingly subject to infringement claims |
| We have received and may continue to receive notices from third parties, including some of our competitors, claiming that we are infringing third-party patents or other proprietary rights |
| We have also asserted certain of our patents against third parties |
| We cannot predict whether we will prevail in any litigation over third-party claims, or whether we will be able to license any valid and infringed patents on commercially reasonable terms |
| It is possible that unfavorable resolution of such litigation could have a material adverse effect on our business, results of operations or financial condition |
| Any of these claims, whether with or without merit, could result in costly litigation, divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or licensing agreements, which 17 _________________________________________________________________ could be expensive |
| A third party may not be willing to enter into a royalty or licensing agreement on acceptable terms, if at all |
| If a claim of product infringement against us is successful and we fail to obtain a license or develop or license non-infringing technology, our business, financial condition and operating results could be affected adversely |
| We are dependent upon key personnel |
| Like all technology companies, our success is dependent on the efforts and abilities of our employees |
| Our ability to attract, retain and motivate skilled employees is critical to our success |
| In addition, because we may acquire one or more businesses in the future, our success will depend, in part, upon our ability to retain and integrate our own personnel with personnel from acquired entities who are necessary to the continued success or the successful integration of the acquired businesses |
| Our recent initiatives to focus our business on core operations and products by restructuring and streamlining operations, including substantial reductions in our workforce, have created uncertainty on the part of our remaining employees regarding future employment with us |
| This uncertainty, together with our recent past history of operating losses and general industry uncertainty, may have an adverse effect on our ability to retain and attract key personnel |
| Internal Controls |
| Although we have now completed the documentation and testing of the effectiveness of our internal control over financial reporting for fiscal 2005, as required by Section 404 of the Sarbanes-Oxley Act of 2002, we expect we will have to incur continuing costs, including increased accounting fees and increased staffing levels, in order to maintain compliance with that section of the Sarbanes-Oxley Act |
| Further, if we complete acquisitions in the future, our ability to integrate operations of the acquired company could impact our compliance with Section 404 |
| In the future, if we fail to complete the Sarbanes-Oxley 404 evaluation in a timely manner, or if our independent registered public accounting firm cannot attest in a timely manner to our evaluation or to the efficacy of our internal controls, we could be subject to regulatory scrutiny and a loss of public confidence in our internal controls |
| In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations |
| Integration of Key Finance Employees |
| In recent weeks, we have hired many new employees in our internal finance and accounting staff |
| Until such personnel become familiar with our operations, our ability to maintain effective internal controls over financial reporting could be impaired |
| Product defects could cause us to lose customers and revenue or to incur unexpected expenses |
| If our products do not meet our customers’ performance requirements, our customer relationships may suffer |
| Also, our products may contain defects |
| Any failure or poor performance of our products could result in: • delayed market acceptance of our products; • delayed product shipments; • unexpected expenses and diversion of resources to replace defective products or identify and correct the source of errors; • damage to our reputation and our customer relationships; • delayed recognition of sales or reduced sales; and • product liability claims or other claims for damages that may be caused by any product defects or performance failures |
| 18 _________________________________________________________________ Our products are often critical to the performance of communications systems |
| Many of our supply agreements contain limited warranty provisions |
| If these contractual limitations are unenforceable in a particular jurisdiction or if we are exposed to product liability claims that are not covered by insurance, a successful claim could harm our business |
| We may encounter difficulties obtaining raw materials and supplies needed to make our products and the prices of these materials and supplies are subject to fluctuation |
| Our ability to produce our products is dependent upon the availability of certain raw materials and supplies |
| The availability of these raw materials and supplies is subject to market forces beyond our control |
| From time to time, there may not be sufficient quantities of raw materials and supplies in the marketplace to meet the customer demand for our products |
| In addition, the costs to obtain these raw materials and supplies are subject to price fluctuations because of global market demands |
| Further, some raw materials or supplies may be subject to regulatory actions, which may affect available supplies |
| Many companies utilize the same raw materials and supplies in the production of their products as we use in our products |
| Companies with more resources than our own may have a competitive advantage in obtaining raw materials and supplies due to greater purchasing power |
| Reduced supply and higher prices of raw materials and supplies may affect our business, operating results and financial condition adversely |
| We rely upon our contract manufacturing relationships |
| We have significant reliance on contract manufacturers to make certain of our products on our behalf |
| If these contract manufacturers do not fulfill their obligations to us, or if we do not properly manage these relationships, our existing customer relationships may suffer |
| We may outsource additional functions in the future |
| We may encounter litigation that has a material impact on our business |
| We are a party to various lawsuits, proceedings and claims arising in the ordinary course of business or otherwise |
| Many of these disputes may be resolved amicably without resort to formal litigation |
| The amount of monetary liability resulting from the ultimate resolution of these matters cannot be determined at this time |
| As of October 31, 2005, we had recorded approximately dlra8dtta4 million in loss reserves for certain of these matters |
| In light of the reserves we have recorded, at this time we believe the ultimate resolution of these lawsuits, proceedings and claims will not have a material adverse impact on our business, results of operations or financial condition |
| Because of the uncertainty inherent in litigation, it is possible that unfavorable resolutions of these lawsuits, proceedings and claims could exceed the amount currently reserved and could have a material adverse affect on our business, results of operations or financial condition |
| We are subject to risks associated with changes in commodity prices, interest rates, security prices, and foreign currency exchange rates |
| We face market risks from changes in certain commodity prices, security prices and interest rates |
| Market fluctuations could affect our results of operations and financial condition adversely |
| At times, we reduce this risk through the use of derivative financial instruments |
| However, we do not enter into derivative instruments for the purpose of speculation |
| Also, we are exposed to market risks from changes in foreign currency exchange rates |
| From time to time, we hedge our foreign currency exchange risk |
| The objective of this program is to protect our net monetary assets and liabilities in non-functional currencies from fluctuations due to movements in foreign currency exchange rates |
| We attempt to minimize exposure to currencies in which hedging instruments are unavailable or prohibitively expensive by managing our operating activities and net assets position |
| As a result of our increased international exposure due to the KRONE acquisition, we may expand our foreign currency hedging program in the future |
| At October 31, 2005, the principal currency for which we have implemented a hedging strategy is the Australian dollar |
| Based on the trading history of our common stock and the nature of the market for publicly traded securities of companies in our industry, we believe that some factors have caused and are likely to continue to cause the market price of our common stock to fluctuate substantially |
| These fluctuations could occur from day-to-day or over a longer period of time |
| The factors that may cause such fluctuations include, without limitation: • announcements of new products and services by us or our competitors; • quarterly fluctuations in our financial results or the financial results of our competitors or our customers; • customer contract awards to us or our competitors; • increased competition with our competitors or among our customers; • consolidation among our competitors or customers; • disputes concerning intellectual property rights; • the financial health of ADC, our competitors or our customers; • developments in telecommunications regulations; • general conditions in the communications equipment industry; • general economic conditions in the US or internationally; and • rumors or speculation regarding ADC’s future business results and actions |
| In addition, stocks of companies in our industry in the past have experienced significant price and volume fluctuations that are often unrelated to the operating performance of such companies |
| This market volatility may adversely affect the market price of our common stock |
| We have not in the past and do not intend in the foreseeable future to pay cash dividends on our common stock |
| We have not in the past and currently do not pay any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future |
| We intend to retain future earnings, if any, to finance our operations and for general corporate purposes |
| Anti-takeover provisions in our charter documents, our shareowner rights plan and Minnesota law could prevent or delay a change in control of our company |
| Provisions of our articles of incorporation and bylaws, our shareowner rights plan (also known as a “poison pill”) and Minnesota law may discourage, delay or prevent a merger or acquisition that a shareowner may consider favorable and may limit the market price for our common stock |
| These provisions include the following: • advance notice requirements for shareowner proposals; • authorization for our Board of Directors to issue preferred stock without shareowner approval; • authorization for our Board of Directors to issue preferred stock purchase rights upon a third party’s acquisition of 15prca or more of our outstanding shares of common stock; and • limitations on business combinations with interested shareowners |
| 20 _________________________________________________________________ Some of these provisions may discourage a future acquisition of ADC even though our shareowners would receive an attractive value for their shares or a significant number of our shareowners believe such a proposed transaction would be in their best interest |