UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x☒                              Filed by a Party other than the Registrant  ¨☐

Check the appropriate box:

ADTRAN, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF 20162018 ANNUAL MEETING

AND

PROXY STATEMENT

		Corporate Office		U.S. Mail		Toll Free: 1 800 9ADTRAN
		901 Explorer Blvd.		P.O. Box 140000		Telephone: 256 963.8000
		Huntsville, AL 35806		Huntsville, AL 35814-4000		http://www.adtran.com

April 4, 20162018

Dear Stockholder:

You are cordially invited to attend the 20162018 Annual Meeting of Stockholders of ADTRAN, Inc. to be held at ADTRAN’s headquarters at 901 Explorer Boulevard, Huntsville, Alabama, on Wednesday, May 11, 2016,9, 2018, at 10:30 a.m., local time. The meeting will be held in the East Tower on the second floor.

The attached Notice of Annual Meeting and Proxy Statement describes the formal business to be transacted at the meeting. During the meeting, we also will report on ADTRAN’s operations during the past year and our plans for the future. Our directors and officers, as well as representatives from our independent registered public accounting firm, PricewaterhouseCoopers LLP, will be present to respond to appropriate questions from stockholders.

Please mark, date, sign and return your proxy card in the enclosed envelope, or vote by telephone or over the Internet as directed on the enclosed proxy card, at your earliest convenience. This will assure that your shares will be represented and voted at the meeting, even if you do not attend.

For ease of voting, stockholders are encouraged to vote using the Internet. If you would like to reduce the costs incurred by ADTRAN, Inc. in mailing proxy materials, you can consent to receive all future proxy statements, proxy cards, and annual reports electronically. To sign up for electronic delivery, please vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.

Sincerely,

THOMAS R. STANTON

Chairman of the Board

ADTRAN, INC.

901 EXPLORER BOULEVARD

HUNTSVILLE, ALABAMA 35806

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 11, 20169, 2018

NOTICE HEREBY IS GIVEN that the 20162018 Annual Meeting of Stockholders of ADTRAN, Inc. will be held at ADTRAN’s headquarters at 901 Explorer Boulevard, Huntsville, Alabama, on the second floor of the East Tower, on Wednesday, May 11, 2016,9, 2018, at 10:30 a.m., local time, for the purposes of considering and voting upon:

“RESOLVED, that the stockholders approve the overall executive compensation policies and procedures employed by the Company as well as the compensation of the named executive officers, all as described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation in this Proxy Statement.”

Information relating to the above matters is set forth in the attached Proxy Statement. Stockholders of record at the close of business on March 14, 201612, 2018, are entitled to receive notice of and to vote at the Annual Meeting and any adjournments thereof.

By Order of the Board of Directors.

ROGER D. SHANNON

Senior Vice President of Finance, Chief Financial Officer,

Corporate Secretary and Treasurer

Huntsville, Alabama

April 4, 20162018

Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Stockholders to be Held on May 11, 2016:9, 2018:

This Notice, the Proxy Statement and the 20152017 Annual Report to Stockholders of ADTRAN, Inc. are

available at www.proxyvote.com.

PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE OR VOTE BY TELEPHONE OR OVER THE INTERNET AS INSTRUCTED ON THE ENCLOSED PROXY CARD.

ADTRAN, INC.

901 EXPLORER BOULEVARD

HUNTSVILLE, ALABAMA 35806

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 11, 20169, 2018

We are providing this Proxy Statement to the stockholders of ADTRAN, Inc. in connection with the solicitation of proxies by our Board of Directors to be voted at the 20162018 Annual Meeting of Stockholders and at any adjournments of that meeting. The Annual Meeting will be held at ADTRAN’s headquarters, 901 Explorer Boulevard, Huntsville, Alabama, on Wednesday, May 11, 2016,9, 2018, at 10:30 a.m., local time. The meeting will be held in the East Tower on the second floor. When used in this Proxy Statement, the terms “we,” “us,” “our” and “ADTRAN” refer to ADTRAN, Inc.

The approximate date on which this Proxy Statement and form of proxy card are first being sent or given to stockholders is April 4, 2016.2018.

This Proxy Statement, the attached Notice of Annual Meeting and our 20152017 Annual Report to Stockholders are available at www.proxyvote.com.

VOTING

General

The securities that can be voted at the Annual Meeting consist of our common stock, $0.01 par value per share, with each share entitling its owner to one vote on each matter submitted to the stockholders. The record date for determining the holders of common stock who are entitled to receive notice of and to vote at the Annual Meeting is March 14, 2016.12, 2018. On the record date, 48,989,61647,904,092 shares of common stock were outstanding and eligible to be voted at the Annual Meeting.

Quorum and Vote Required

The presence, in person or by proxy, of a majority of the outstanding shares of our common stock is necessary to constitute a quorum at the Annual Meeting. In counting the votes to determine whether a quorum exists at the Annual Meeting, we will use the proposal receiving the greatest number of all votes “for” or “against” and abstentions, including instructions to withhold authority to vote.

In voting with regard to Proposal 1, the election of directors, stockholders may vote in favor of all nominees, withhold their votes as to all nominees or withhold their votes as to specific nominees. The vote required to approve Proposal 1 is governed by the Bylaws of the Company and is a majority of the votes cast by the holders of shares represented and entitled to vote at the Annual Meeting, provided a quorum is present. As a result, abstentions will be considered in determining whether a quorum is present and the number of votes required to obtain the necessary majority vote for the nominees and, therefore, will have the same legal effect as voting against the proposal.

In voting with regard to Proposal 2, an advisory vote to approve the Company’s executive compensation, stockholders may vote in favor of the proposal or against the proposal or may abstain from voting. As the vote is advisory only and not binding, there is no required vote. In determining the results of the vote, however, abstentions will have the same legal effect as voting against the proposal.

1

In voting with regard to Proposal 3, the ratification of the appointment of the independent registered public accounting firm, stockholders may vote in favor of the proposal or against the proposal or may abstain from voting. The vote required to approve of Proposal 3 is governed by Delaware law and is the affirmative vote of the holders of a majority of the shares represented and entitled to vote on the proposals at the Annual Meeting, provided a quorum is present. As a result, abstentions will be considered in determining whether a quorum is present and the number of votes required to obtain the necessary majority vote for each proposal and, therefore, will have the same legal effect as voting against the proposal.

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Under the rules of the national stock exchanges that govern most domestic stock brokerage firms, member firms that hold shares in street name for beneficial owners may, to the extent that those beneficial owners do not furnish voting instructions with respect to any or all proposals submitted for stockholder action, vote in their discretion upon proposals that are considered “discretionary” proposals under the rules of the exchanges. These votes by brokers are considered as votes cast in determining the outcome of any discretionary proposal. We believe that Proposal 3 is discretionary. Member brokerage firms that have received no instructions from their clients as to “non-discretionary”“non-discretionary” proposals do not have the discretion to vote on these proposals. If the brokerage firm returns a proxy card without voting on anon-discretionary proposal because it received no instructions, this is referred to as a “brokernon-vote” on the proposal. “Brokernon-votes” are considered in determining whether a quorum exists at the Annual Meeting, but “brokernon-votes” are not considered as votes cast in determining the outcome of anynon-discretionary proposal. We believe Proposals 1 and 2 arenon-discretionary.

As of March 14, 2016,12, 2018, the record date for the Annual Meeting, our directors and executive officers beneficially owned or controlled approximately 1,483,3891,235,907 shares of our common stock, constituting approximately 2.96%2.53 % of the outstanding common stock. We believe that these holders will vote all of their shares of common stock in favor of each of the proposals.

Proxies

You should specify your choices with regard to each of the proposals (1) by telephone as directed on the enclosed proxy card, (2) over the Internet as directed on the enclosed proxy card, or (3) on the enclosed proxy card by signing, dating and returning it in the accompanying postage paid envelope. All properly executed proxy cards delivered by stockholders to ADTRAN in time to be voted at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the directions noted on the proxy card.In the absence of such instructions, the shares represented by a signed and dated proxy card will be voted “FOR” the election of all director nominees, “FOR” approval of a shareholder advisory vote on executive compensation and “FOR” the ratification of the appointment of the independent registered public accounting firm.If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon those matters according to their judgment.

Any stockholder delivering a proxy has the power to revoke it at any time before it is voted by:

Please note, however, that under the rules of the national stock exchanges, any beneficial owner of our common stock whose shares are held in street name by a member brokerage firm may revoke his proxy and vote his shares in person at the Annual Meeting only in accordance with applicable rules and procedures of the exchanges, as employed by the beneficial owner’s brokerage firm.

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In addition to soliciting proxies through the mail, we may solicit proxies through our directors, officers and employees in person and by telephone or facsimile. We have hired Georgeson Inc. to assist in the solicitation of proxies from stockholders at a fee of approximately $9,000 plus reasonableout-of-pocket expenses. We will pay all expenses incurred in connection with the solicitation of proxies. We may also request that brokerage firms, nominees, custodians and fiduciaries forward proxy materials to the beneficial owners of shares held of record by them. We will also reimburse such brokerage firms and other nominees for their reasonable expenses in forwarding proxy materials to beneficial owners of our common stock.

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SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock as of March 14, 2016,12, 2018, by (1) each of our directors and director emeritus, (2) each of our executive officers named in the Summary Compensation Table in this Proxy Statement and (3) all of our directors and executive officers as a group, based in each case on information furnished to us by these persons. We believe that each of the named individuals and each director and executive officer included in the group has sole voting and investment power with regard to the shares shown except as otherwise noted.

* Represents less than one percent of the outstanding shares of our common stock.

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The following table sets forth information regarding the beneficial ownership of our common stock as of the date indicated for each person, other than the officers or directors of ADTRAN, known to us to be the beneficial owner of more than 5% of our outstanding common stock.

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PROPOSAL 1 – ELECTION OF DIRECTORS

Nominees

The Board of Directors currently consists of seveneight members. Also, Roy J. Nichols, who was a Board member until his resignation in August 2016, currently serves as a director emeritus of ADTRAN. Each of Thomas R. Stanton, H. Fenwick Huss, William L. Marks, Anthony J. Melone, Balan Nair, Roy J. NicholsJacqueline H. Rice, and Kathryn A. Walker were elected at the 20152017 Annual Meeting. AnthonyOn May 11, 2017, Gregory J. MeloneMcCray was appointed as a director by the Board on February 8, 2016,of ADTRAN to fill a previously existing vacancy.newly created Directorship resulting from the Board’s increase in the authorized number of Directors.

The Board of Directors has nominated Thomas R. Stanton, H. Fenwick Huss, William L. Marks, Gregory J. McCray, Anthony J. Melone, Balan Nair, Roy J. NicholsJacqueline H. Rice and Kathryn A. Walker for election as directors at the 20162018 Annual Meeting. If elected as a director at the Annual Meeting, each of the nominees would serve aone-year term expiring at the 20172019 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified. There are no family relationships among the directors, director nominees or the executive officers.

Each of the nominees has consented to serve his term as a director if elected. If any of the nominees should be unavailable to serve for any reason (which is not anticipated), the Board of Directors may designate a substitute nominee or nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxies for the election of the substitute nominee or nominees), allow the vacancies to remain open until a suitable candidate or candidates are located, or by resolution provide for a lesser number of directors.

Our products and our success in our markets depend on our ability to stay abreast of and respond to developments in communications and information technologies. We have also grown profitably; in order to protect and enhance our growth and profitability, it is important for us to understand the financial environments which impact us and the risks in those environments as well as the tools of corporate finance available to us to navigate and manage those risks. We also have a significant number of employees and numerous locations. In selecting directors, we are concerned to have a diverse group of directors so that our board has an effective mix of technical, financial, operating and management experience in our directors. We have a long-standing policy of keeping our board relatively small. We also believe that our Board should be comprised predominantly of independent directors from diverse backgrounds external to the company but should nevertheless include the insight and judgment of our senior management; sixseven of our seveneight directors are not employees.

The Board of Directors unanimously recommends that the stockholders vote “FOR” the proposal to elect Thomas R. Stanton, H. Fenwick Huss, William L. Marks, Gregory J. McCray, Anthony J. Melone, Balan Nair, Roy J. NicholsJacqueline H. Rice and Kathryn A. Walker as directors for a one year term expiring at the 20172019 Annual Meeting of Stockholders and until their successors have been duly elected and qualified.

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Information Regarding Nominees for Director

Set forth below is certain information as of January 31, 20162018 regarding the seveneight nominees for director, including their ages and principal occupations.

THOMAS R. STANTON has served as our Chief Executive Officer and a director since September 2005, and as our Chairman of the Board since April 2007. Prior toBefore becoming our Chief Executive Officer, Mr. Stanton served as our Senior Vice President and General Manager – Carrier Networks from 2001 to September 2005, Vice President and General Manager – Carrier Networks from 1999 to 2001, and Vice President – Carrier Networks Marketing from 1995 to 1999. Before joining ADTRAN, Mr. Stanton served as Vice President – Marketing & Engineering for Transcrypt International, Inc. in 1995. He also served as Director, Marketing and then Senior Director, Marketing, for the E.F. Johnson Company from 1993 until joining Transcrypt in 1995. Mr. Stanton has served on the board of directors for a number of technology companies, the Chamber of Commerce of Huntsville/Madison County, as Chairman for the Federal Reserve Bank of Atlanta’s Birmingham Branch and currently serves as Chairman for the Telecommunications Industry Association (TIA). He is also a board member for the Economic Development Partnership of Alabama (EDPA). Mr. Stanton has been selected as a nominee for director because he is our Chief Executive Officer and has extensive knowledge of all facets of our company and extensive experience in all aspects of our industry. Mr. Stanton is 51.53.

H. FENWICK HUSS has served as the Willem Kooyker Dean of the Zicklin School of Business at Baruch College, a senior college of The City University of New York since July 1, 2014. He is also a tenured Professor in Baruch’s Stan Ross Department of Accountancy. He previously served as Dean of the J. Mack Robinson College of Business at Georgia State University from 2004 to 2014. Prior to his appointment as Dean, Dr. Huss was Associate Dean from 1998 to 2004 and Director of the School of Accountancy at Georgia State from 1996 to 1998, and on the faculty since 1989. He also served on the faculty of the University of Maryland as an assistant professor from 1983 to 1989 and is a visiting professor at the Université Paris 1 Pantheon-Sorbonne. Dr. Huss has been a member of our Board of Directors since October 2002 and has served as our lead director since May 2015. Dr. Huss also currently serves as a member of our Audit, Compensation and Nominating and Corporate Governance Committees. Dr. Huss has been selected as a nominee for director because he brings the point of view of academia and in particular the information and new concepts that develop in the business school environment, because he has extensive experience and knowledge of financial accounting and corporate finance and because he has management experience in the academic environment. Dr. Huss is 65.67.

5

WILLIAM L. MARKS served as Chairman of the Board and Chief Executive Officer of Whitney Holding Corp., the holding company for Whitney National Bank of New Orleans, from 1990 to his retirement in March 2008, and served in various executive and management capacities with AmSouth Bank, N.A. from 1977 to 1990. Mr. Marks currently servesserved as a director of CLECO Corporation and CLECO Power, LLC.,LLC from 2001 to April 2016, and as a Life Trustee of Wake Forest University. Mr. Marks has served as a director of ADTRAN since 1993 and currently serves as a member of our Audit Compensation and Nominating and Corporate Governance Committees. Mr. Marks has been selected as a nominee for director because of his career in finance and financial services, because of his expertise in banking and corporate finance and because of his extensive experience as an executive and senior manager in the course of his career. Mr. Marks is 72.74.

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GREGORY MCCRAY is an experienced executive with 30 years of business, marketing, sales, engineering, operations, M&A, management and international experience in the communications and technology industries. Currently, Mr. McCray is the President of McCray Consulting providing technical, management and business consulting to technology companies and investors. He also operated this firm in 2016 with clients that included software, cyber security, clean technology, telecom, systems integration and data networking companies. In 2017 he was the Chief Executive Officer of Alphabet’s Access/Google Fiber/Wireless Internet company that provides 1Gbps internet, TV, and phone service in several markets across the United States. Prior to that, from 2013 through 2015, Mr. McCray served as Chief Executive Officer of Aero Communications Inc., which provides installation, construction, engineering and support services to the communications industry. From 2003 through 2012, he was Chief Executive Officer and Board Chair of Antenova Limited, a global company that developed antenna components and RF modules for mobile devices and then sold to Microsoft. Previous to Antenova, he was the Chairman and CEO of PipingHot Networks from 2000 to 2002, which brought broadband fixed wireless access equipment to market and eventual acquisition by Motorola. In 1997 to 2000, Mr. McCray was Senior VP of Customer Operations at Lucent Technologies for Europe, Middle East, and Africa. He preceded this by leading sales operations for the Eastern Region of the United States for Lucent from 1994 to 1997. Earlier in his career, he held engineering, product management and other managerial roles at AT&T, Bell Laboratories, and IBM. From 2005 to February 2017, he was on the Board of Directors of CenturyLink, Inc. (NYSE:CTL), where he was Chairman of the Cyber Security & Risk Committee, member of the Compensation Committee and the Nominating & Corporate Governance Committee. Greg holds a B.S. in Computer Engineering from Iowa State University, an M.S. in Industrial & Systems Engineering from Purdue University, and Executive Business Programs at the University of Illinois, Harvard, and INSEAD. Mr. McCray has been selected as a nominee for director because of his extensive experience as an executive and senior manager in the telecommunications and technology industries during the course of his career. Mr. McCray serves as a member of our Audit Committee. Mr. McCray is 54.

ANTHONY J. MELONE has over 3230 years of experience in the telecommunications industry, including having served as Executive Vice President and Chief Technology Officer for Verizon Communications from December 2010 to April 2015. In addition, Mr. Melone served in a variety of positions with Verizon Wireless from 2000 to December 2010, including as Senior Vice President and Chief Technical Officer from 2007 to December 2010. Over his 32 year career with Verizon and its predecessor, Bell Atlantic, he also has served as Vice President of Network Operations and Staff Vice President of Network Planning and Administration. Since 2008, he has servedMr. Melone also serves as Chief Technology Officer and Senior Vice Presidenta director of Rural Cellular Corporation.Crown Castle International Corp. Mr. Melone received a Bachelor of Science degree in electrical engineering from Villanova University and a Master of Science degree in engineering from the University of Pennsylvania. Mr. Melone currently serves as a member of our Audit Compensation and Nominating and Corporate Governance Committees. Mr. Melone has been selected as a nominee for director because of his extensive experience as an executive and senior manager in the telecommunications industry. Mr. Melone is 55.57.

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BALAN NAIR is president and Chief Executive Officer of Liberty Latin America. Liberty Latin America is an integrated telecommunications company, focused on the Caribbean Islands and Latin America. Balan is an experienced and proven business executive with more than 20 years in the telecommunications industry. He has been a part of the Liberty family of companies since 2007 when he joined Liberty Global as its Senior Vice President and Chief Technology Officer. He most recently served as Executive Vice President and Chief Technology Officer for Liberty Global, Inc., a telecommunications company.and Innovation Officer. In this capacityrole, he iswas responsible for overseeing the globalLiberty Global’s worldwide network, as well as Technology and technologyInnovation operations, which span three continentsincluding Product Development, IT, Network Operations, Mobile Operations and over 33 million homes.Global Supply Chain functions. He iswas also responsible for new product development, oversees global procurement functionsCorporate Strategy and leads Liberty Global’s Technology Investment Venture group. Mr. Nair isinvestments. Balan was an executive officer of Liberty Global and sitssat on the company’sLiberty Global’s Executive Management CommitteeLeadership Team and the Investment Committee. Prior toBefore joining Liberty Global, in July of 2007, Mr. NairBalan served as AOL’s chief technology officer overseeing the company’s network operationsChief Technology Officer and back-office systems. After joiningExecutive Vice President for AOL in 2006, Mr. Nair led the Technology Operations organization in creating synergies, improving productivity, and increasing efficiencies.LLC, a global web services company, from 2006. Prior to his role at AOL Mr. NairLLC, he spent more than 12 years at Qwest Communications International Inc. (Qwest), most recently as Chief Information Officer (CIO). As CIO, he was responsible for supporting Qwest’s internal and external applications, legacy systems including maintenance, internal network operations, data centers,Chief Technology Officer. Balan has a long history of working in the telco industry, the web world and help desknow the cable and desktop support functions.media industry. He also headed Qwest’s technology management operations that included technical aspects of the company’s product rollouts in broadband, video, call center technology, VoIP, and wireless, among other offerings. As Qwest’s Chief Technology Officer from 2003 to 2005, he spoke often in public forums on technology and strategic topics in the telecommunications industry. Mr. Nair sits on the boardboards of Charter Communications, a leading cable operator in the United States, and on the BoardLiberty Latin America. He graduated from Iowa State University, with a Masters in Business Administration and a Bachelor of Telenet Group Holding NV, Liberty Global’s Belgium subsidiary.Science in Electrical Engineering. He holds a patent in systems development and is a Licensed Professional Engineer in Colorado. Mr. Nair holds a Masters of Business Administration and a Bachelor of Science in electrical engineering, both from Iowa State University. Mr. Nair is alsocurrently serves as a member of our Audit, Compensation and Nominating and Corporate Governance Committees.Committee. Mr. Nair has been selected as a nominee for director because he has extensive experience with the technologies that influence our industry and our markets and because he has management experience, particularly managing technical personnel. Mr. Nair is 49.51.

ROY J. NICHOLS foundedJACQUELINE (JACKIE) RICEhas more than 20 years of legal, risk and compliance experience. From 2014 to 2017, she served as the Executive Vice President and Chief Risk and Compliance Officer for Target and a member of Nichols Research Corporation,its executive team. She was responsible for the centralized oversight of enterprise risk management, compliance and ethics, vendor management, food safety and corporate security. She led a defenseteam focused on evolving and information systems company, enhancing enterprise risk and compliance standards to protect Target and its stakeholders, including guests, team members, and vendors. Prior to her work at Target, she served as Chief Compliance Officer and Senior Legal Counsel for General Motors from 2010 to 2014,where he workedshe led a global team of lawyers and compliance professionals to develop programs focused on global compliance. From 1997 to 2009, Ms. Rice served as counsel to various GM business units. Ms. Rice graduated from 1976 until its merger with Computer Sciences Corporationthe University of Detroit Mercy School of Law, where she wasEditor-in-Chief of the Law Review. She obtained her undergraduate degree from James Madison College at Michigan State University. Ms. Rice joined the board in November 1999. Mr. Nichols currently2016. Ms. Rice serves as a director of Blue Creek Investments and the Hudson Alpha Institute of Biotechnology. Mr. Nichols has served as a director of ADTRAN since 1994, and previously served as our lead director from October 2006 through May 2015. Mr. Nichols is also a member of our Audit and Compensation and Nominating and Corporate Governance Committees. Mr. Nichols has been selected as a nominee for director because he has extensive experience with leadership, risk assessment, information technologies and extensive knowledge of and history with our company. Mr. NicholsMs. Rice is 77.46.

KATHRYN A. WALKER has more than 30 years of experience in the communications industry. Since 2009, she has served as a managing director for OpenAir Equity Partners, a venture capital firm focusing on the wireless, communications and mobile Internet sectors. Prior to joining OpenAir, Ms. Walker worked in a variety of roles at various subsidiaries of Sprint Corporation from 1985 to 2009, culminating in the position of Chief Information and Chief Network Officer at Sprint Nextel Corporation. She currently serves on the board of directors for SmartHome Ventures, Zubie, on the Council of Trustees at South Dakota State University, and as a member of the Board of Trustees at Missouri University of Science and Technology.Technology and as a member of the board of directors of the Heartland Chapter of the National Association of Corporate Directors. Ms.��Walker currently serves as a director of ADTRAN and is a member of our Audit, Compensation and Nominating and Corporate Governance Committees. Ms. Walker has been selected as a nominee for director because she has extensive experience with the technologies that influence our industry and our markets and because she has management experience, particularly managing technical personnel. Ms. Walker is 56.58.

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Information Regarding Director Emeritus

Set forth below is certain information as of January 31, 2018, regarding our director emeritus, including his age and principal occupation.

ROY J. NICHOLS founded and served as President of Nichols Research Corporation, a defense and information systems company, where he worked from 1976 until its merger with Computer Sciences Corporation in November 1999. Mr. Nichols currently serves as a director of Blue Creek Investments and the Hudson Alpha Institute of Biotechnology. Mr. Nichols currently serves as a director emeritus of ADTRAN and served as a director from 1994 to August 2016, including as our lead director from October 2006 through May 2015. Mr. Nichols has been asked to remain as a director emeritus because he has extensive experience with leadership, risk assessment, information technologies and extensive knowledge of and history with our company. Mr. Nichols is 79.

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CORPORATE GOVERNANCE

Board Structure– Independent Directors

The Nominating and Corporate Governance Committee and the Board of Directors have determined that Messrs. Marks, McCray, Melone, Nair and Nichols,Nair, Dr. Huss, Ms. Rice and Ms. Walker do not have any relationships that would interfere with the exercise of independent judgment in carrying out their responsibilities as directors and are independent in accordance with Rule 4200(a)(15) of the NASDAQ Marketplace Rules. The incumbent independent directors also constitute all of the members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Prior to each regularly scheduled Audit Committee meeting, these directors convene and hold a separate executive session as the independent directors of the Board. Dr. Huss, our independent lead director, presides over these meetings, coordinates the activities of the independent directors and serves as liaison between the independent directors and our Chief Executive Officer and senior management. We believe this structure facilitates the development of a productive relationship with our Chief Executive Officer and ensures effective communication between our Chief Executive Officer and the independent directors.

Mr. Stanton is both our Chief Executive Officer and our Chairman; his predecessor, Mark Smith, one of our founders, also held both of these positions and we believe that having our Chief Executive Officer also holding the position of Chairman is important in underscoring his authority to our customers, our vendors and our employees and in our markets generally. We believe that this structure enhances ourday-to-day operating effectiveness and does not undercut the benefits available to the Board of having separated these functions because we have established a lead director whose role is extensive and who in relationship to the other directors performs many of the functions that might otherwise be performed by a board chairman.

Meetings of the Board of Directors and its Committees

The Board of Directors conducts its business through meetings of the full Board and through committees of the Board, consisting of an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. During the fiscal year ended December 31, 2015,2017, the Board of Directors held seven meetings, the Audit Committee held eight meetings, the Compensation Committee held sixfive meetings, and the Nominating and Corporate Governance Committee held three meetings. All members of the Board of Directors attended at least 75% of the aggregate of meetings of the Board of Directors and of the committees of which he or she is a member. Five of the incumbent directors attended the 20152017 Annual Meeting of Stockholders on May 13, 2015.10, 2017.

Audit Committee

The Audit Committee is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities with respect to: (1) the financial reports and other financial information provided by us to the public or any governmental body; (2) our compliance with legal and regulatory requirements; (3) our systems of internal controls regarding finance, accounting and legal compliance that have been established by management and the Board; (4) the qualifications and independence of our independent registered public accounting firm; (5) the performance of our internal audit function and the independent registered public accounting firm; and (6) our auditing, accounting and financial reporting processes generally. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. In connection with its responsibilities, the Board has delegated to the Audit Committee the authority to select and hire our independent registered public accounting firm and determine their fees and retention terms. The Audit Committee operates under a charter approved by the Board. The charter is posted on our website atwww.adtran.com. The Audit Committee is composed of H. Fenwick Huss, William L. Marks, Gregory J. McCray, Anthony J. Melone Balan Nair, Roy J. Nichols and Kathryn A. Walker,Jacqueline H. Rice, each of whom is independent under NASDAQ listing standards. William L. Marks is the Chair of the Audit Committee. The Board has determined that Dr. Huss is an audit committee financial expert.

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Compensation Committee

The Compensation Committee is responsible for setting the compensation of our Chief Executive Officer and assisting the Board in discharging its responsibilities regarding the compensation of our other executive officers. In addition,Also, the Compensation Committee is responsible for administering our 2015 Employee Stock Incentive Plan, our 2010 Directors Stock Plan, our Variable Incentive Compensation Plan and our Deferred Compensation Plan. The Compensation Committee operates under a charter approved by the Board. The charter is posted on our website atwww.adtran.com.The Compensation Committee is composed of H. Fenwick Huss, William L. Marks, Anthony J. Melone, Balan Nair, Roy J. NicholsJacqueline H. Rice and Kathryn A. Walker, each of whom is independent under NASDAQ listing standards. Mr. Nair is the Chair of the Compensation Committee.

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Compensation Committee Process

Under our Compensation Committee’s charter, the Committee has the power and duty to discharge our Board’s responsibilities related to compensation of our executive officers, within guidelines established by the Board. Generally, the Compensation Committee reviews and approves all compensation, including base salary, annual incentive awards and equity awards, for the Chief Executive Officer and our other officers. The Compensation Committee also makes recommendations to the Board regarding our incentive compensation plans and equity plans and approves equity grants. The Committee has authority to review and approve annual performance goals and objectives for our Chief Executive Officer, to evaluate his performance and to set his compensation based on the evaluation. The Committee is also responsible for reviewing and approving executive officers’ compensation and establishing performance goals related to their compensation within 90 days of the beginning of each fiscal year.compensation. The Committee oversees our benefit plans and evaluates any proposed new retirement or executive benefit plans. The Committee also advises the Board on trends in compensation programs fornon-employee directors. The Compensation Committee has the authority to delegate its duties to subcommittees, but to date has not done so. In accordance with Delaware law, in November 20152017 the Compensation Committee also delegated to the Chief Executive Officer the authority to approve individual incentiverestricted stock optionunit awards to employees of ADTRAN who are not officers, subject to a maximum aggregate limit of 979,660282,501 restricted stock options,units andpre-approved terms and conditions.

At the beginning of each calendar year, our Compensation Committee reviews the variable incentive cash compensation (“VICC”) program results from the prior year and approves any payouts thereunder, establishes the performance goals for the current year, considers and establishes any other incentive compensation programs and the goals of such programs as well as the standards for measuring achievement of those goals, approves any increases in executive salaries or other compensation, recommends plan changes, if any, for submission to our stockholders at the annual meeting, and approves the Compensation Committee’s report for our proxy statement.Mid-year, the Compensation Committee generally reviews our compensation programs and makes recommendations to the Board regarding outside director compensation and, as necessary throughout the year, approves any equity awards and/or compensation for newly hired or promoted executives. Our Compensation Committee generally meets in the latter part of each calendar year to determine and approve annual equity awards.

Our Compensation Committee generally receives proposals and information from our Chief Executive Officer for its consideration regarding executive and director compensation. Our Chief Executive Officer makes recommendations regarding salary increases, annual cash incentives and equity awards for all of our executive officers other than himself. In doing so, he consults with our Chief Financial Officer.

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Our Compensation Committee has authority to retain and terminate any outside advisors, such as compensation consultants. Though our CompensationThe Committee has not historically employed compensation consultants to assist it in designing our compensation programs, theprograms. The Committee did engagehas, however, periodically engaged Willis Towers Watson, in 2008 and again in 2011as an independent compensation consultant, to provide information and analysis of our executive compensation in the context of the telecom industry and our peer companies in the industry and to present this information with possible modifications to our compensation of executives and directors for the Committee’s consideration. This methodology,The Committee engaged Willis Towers Watson in 2016 to evaluate the competitiveness of the base salaries, annual bonuses and long-term incentives awarded to the company’s executive officers, to provide competitive market data on new compensation arrangements and to evaluate the continued appropriateness of existing arrangements. The results of this consultation, in combination with our own research and analysis, remainswere a part of the process the Compensation Committee undertakes each yearundertook in determining the compensation packages (including the grants of incentive awards in 2016 and 2017, as well as the finalization of the VICC awards for 2016 and 2017, of our executives and directors.directors). See “Executive Compensation – Compensation Discussion and Analysis – Overview and Philosophy.Executive Summary.”

Compensation Committee Interlocks and Insider Participation

None of our executive officers or directors serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for assisting the Board in identifying and attracting highly qualified individuals to serve as directors of ADTRAN, selecting director nominees and recommending them to the Board for election at annual meetings of stockholders. The Nominating and Corporate Governance Committee operates under a charter approved by the Board. The charter is posted on our website atwww.adtran.com.The.The Nominating and Corporate Governance Committee is composed of H. Fenwick Huss, William L. Marks, Anthony J. Melone, Balan Nair Roy J. Nichols and Kathryn A. Walker, each of whom is independent under NASDAQ listing standards. Ms. Walker is the Chair of the Nominating and Corporate Governance Committee.

Consideration of Director Nominees

The Nominating and Corporate Governance Committee seeks to create a Board that as a whole is strong in its collective knowledge of, and has a diversity of skills and experience with respect to, accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance and global markets. When the Committee reviews a potential new candidate, the Committee looks specifically at the candidate’s qualifications in light of the needs of the Board and ADTRAN at that time given the then current mix of director attributes.

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In accordance with NASDAQ listing standards, we ensure that at least a majority of our Board is independent under the NASDAQ definition of independence and that the members of the Board as a group maintain the requisite qualifications under NASDAQ listing standards for populating the Audit, Compensation and Nominating and Corporate Governance Committees. The Board has adopted Corporate Governance Principles that set forth the principles that guide us and the Board on matters of corporate governance. The Corporate Governance Principles are posted on our website atwww.adtran.com.

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As provided in its charter, the Nominating and Corporate Governance Committee will consider nominations submitted by stockholders. To recommend a nominee, a stockholder should write to the Nominating and Corporate Governance Committee, care of Roger D. Shannon, Secretary of ADTRAN, at 901 Explorer Boulevard, Huntsville, Alabama 35806 (for overnight delivery) or at P.O. Box 140000, Huntsville, Alabama 35814-4000 (for mail delivery). Any recommendation must include:

To be considered by the Nominating and Corporate Governance Committee for nomination and inclusion in our proxy statement for the 20172019 Annual Meeting, stockholder recommendations for director must be received by us no later than December 5, 2016.2018. Once we receive the recommendation, we will deliver a questionnaire to the candidate that requests additional information about the candidate’s independence, qualifications and other information that would assist the Nominating and Corporate Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in the proxy statement, if nominated. Candidates must complete and return the questionnaire within the time frame provided to be considered for nomination by the Committee.

All of the current nominees for director recommended by the Board for election by the stockholders at the 20162018 Annual Meeting are current members of the Board. In evaluating candidates for director, the Committee uses the qualifications described above and evaluates stockholder candidates in the same manner as candidates from all other sources. Based on the Committee’s evaluation of each nominee’s satisfaction of the qualifications described above and his or her prior performance as a director, the Committee determined to recommend each incumbent director forre-election.The Committee has not received any nominations from stockholders for the 20162018 Annual Meeting.

Communications with the Board of Directors

The Board has established a process for stockholders to communicate with members of the Board. If you have any concern, question or complaint regarding any accounting, auditing or internal controls matter, as well as any issues arising under our Code of Conduct or other matters that you wish to communicate to ADTRAN’s Audit Committee or Board of Directors, you can reach the ADTRAN Board of Directors through our Corporate Governance Hotline by email at hotline@adtran.com, by mail at ADTRAN, Inc. Hotline, P.O. Box 5765, Huntsville, Alabama 35814, or by calling the hotline at1-888-723-8726(1-888-7ADTRAN). Information about the Corporate Governance Hotline can be found on our website atwww.adtran.com under the links “Investor Relations – Corporate Governance.”

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EXECUTIVE COMPENSATION

Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Overview and Philosophy

The goals of our executive compensation program are to:

We design our executive compensation programspackages in a manner to help us achieve these goals. For instance,More specifically, in any given year we consider retentionevaluate the compensation packages in the context of a number of considerations, including:

We believe that retention involves two interrelated components – maintainingalso maintain a positive working environment that provides intangible benefits to our executives and encourages longevity and providing total compensation that is generally competitive within our industry and among companies of comparable size and complexity. Augmentinglongevity. Combining compensation with a desirable working environment enablesallows us to maintain a compensation program that generally provides overall compensation to our executive officers that is approximately at the median when compared to companies with which we compete for talent, but still remains competitive with those companies.

BeginningEach year we consider the messages we receive from our shareholders regarding our compensation packages, principles, and process, including the annual votes on Say on Pay. At the 2017 annual meeting over 97% of the votes cast voted to approve the Company’s executive compensation policies and the compensation of the company’s named executive officers. Since 2011, all Say on Pay votes have been favorable, by percentages ranging from 96.28% to 99.48%. We believe that the strong shareholder vote results in the past indicate that shareholders are supportive of the Company’s executive compensation programs.

2017 Compensation

Our compensation packages are comprised of base salary and incentive opportunities which can be both annual and long-term and paid in cash or equity. In designing incentive compensation packages, we use performance measures related to company financial goals as well as the Company’s TSR, all with an in-depth reviewthe goal of increasing shareholder return. We use TSR in 2008,comparison with the Boardcompanies comprising the NASDAQ Telecommunications Index. We also individualize certain performance measures for individual executives.

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Executive compensation for 2017 was comprised of Directors,Base Compensation, Annual Cash Incentive Awards, and Long Term Incentive Awards, and reflects a number of considerations and factors:

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Total compensation levels for 2017 were also set with consideration of market information obtained from a 2016 comprehensive review of our executive compensation program as well as considerations for the individual executives.

2016 Compensation Market Evaluation

In 2016, the Compensation Committee, with the assistance of Willis Towers Watson, undertook a comprehensive review of our executive compensation program to further align our program design with the best market practices. With the level of success achievedto-date of our strategic initiatives, both domestically and internationally, the Committee retainedalso wanted to ensure that our compensation levels remained competitive and aligned with the peer group median to ensure continuity of the executive team. The executive packages developed for 2017 put a stronger emphasis on “at risk” compensation consulting firmthat is based on achievement of Towers Watsonpreset performance hurdles and included the components described below and in more detail in the discussion of Executive Compensation which follows:

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The Committee believed the resulting packages would properly align our executives’ expectations and incentives with respect to the telecom industry and to our peer companies within the industry.shareholder return. The Committee also considered information collected by senior managementbelieved that the changes in the executive compensation packages were necessary to bring the Company’s executive compensation (in particular that of the CEO) in line with median industry, peer and the Committee from industry and other sources, surveys and databases, including publicly available compensation information of othercompetitor groups when compared to companies both those with which we compete and those within our geographic labor market, to gauge the competitiveness of our compensation programs. Having determined at the time of these studies that our compensation levels for some senior managers were not competitive within the telecom industry or among our peers, the Committee recommended that compensationtalent.

Considerations for these positions should be increased toward a more competitive level in multiple steps over a reasonable time period. The Board concurred, and each year the Committee continues to guide executive and director compensation to achieve this goal.Individuals

The Compensation Committee awards equity compensation after taking into account the Company’s absolute and relative performance, in addition to the industry and peer group compensation benchmarks. The compensation decisions made in 2015 for senior managers continue the theme and represent another step toward attaining more competitive levels of compensation.

In addition to the analysis with Towers Watson conducted in each of 2008 and 2011, as described above, in 2010, the Compensation Committee undertook a review of the compensation of certain officers and management employees. As a result of this review, the Compensation Committee determined that, to better incentivize officers and managers and to attract and retain qualified executives, the Board, among other things, should consider increasing the maximum performance award that may be granted in a plan year. To effectuate this change, effective January 1, 2011, the Company revised its VICC program for executives under the ADTRAN, Inc. Variable Incentive Compensation Plan (the “Variable Incentive Compensation Plan”) and adopted a group of VICC programs designed to encourage and reward growth in pretax income, and in various categories of revenue. The Variable Incentive Compensation Plan was then approved by the Company’s stockholders and adopted by the Company at the 2011 annual meeting. Under the Variable Incentive Compensation Plan as adopted by the Company, the maximum performance award that may be granted to any recipient for any plan year was increased to $3,000,000.

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The Compensation Committee also focuses on to establishing and maintaining a compensation structure that is internally consistent and provides appropriate compensation for our executives in relation to one another. Consequently, the Compensation Committee does not focus on any particular benchmark to set executive compensation. Instead, we believe that a successful compensation program requires the application of judgment and subjective determinations based on the consideration of a number of factors. These factors include the following:

The Compensation Committee does not assign relative weights or rankings to these factors. Our allocation of compensation between cash and equity awards, our two principal forms of compensation, is based upon our historical practice and our evaluation of the cost of equity awards, as discussed in more detail below. An important part of this evaluation is the Committee’s consideration of the goals of the several initiatives undertaken in the execution of the company’s business plan and the progress made in achieving those goals at the time of setting base compensation and performance targets for executive compensation packages.

Our Chief Executive Officer works closely with the Compensation Committee to maintain an open dialogue regarding the Compensation Committee’s goals, progress towards achievement of those goals and expectations for future performance. The Chief Executive Officer updates the Compensation Committee regularly on results and compensation issues. Our Chief Executive Officer also provides the Compensation Committee, and in particular, the Committee Chair, with recommendations regarding compensation for our executive officers other than himself. In part because the Chief Executive Officer works closely with the Compensation Committee and its several members throughout the year, the Compensation Committee is in a position to evaluate his performance and make its own determinations regarding appropriate levels of compensation for the Chief Executive Officer.

AppointmentDiscussion of New Chief Financial OfficerResults Relative to Compensation

In 2015,Aligning executive compensation with stockholder interests is a primary consideration in determining our executive compensation program. As a result, we appointed Roger D. Shannon asbelieve that Company performance and shareholder returns are important factors to consider when making executive compensation decisions. We use TSR, measured over rolling three-year periods relative to a broad-based industry peer group, to determine our new Chief Financial Officer. In connection with Mr. Shannon’s hiring, hisperformance-based equity compensation. Additionally, we believe that achievement of performance measurement targets used in our annual incentive compensation includes a base salaryprogram leads to positive shareholder returns. Below are some of $365,000, a make-whole bonus as discussed below, provision for incentive awards, as discussed below, and reimbursement for certain relocation expenses, which relocation expenses must be repaid if he voluntarily leaves the Company, other than for Good Reason, or does not relocate his family, in each case, within the first twelve months of employment. In his prior employment, Mr. Shannon was a participant in a bonus program and to compensate him for amounts he would be foregoing to join the Company, we designed the one-time make-whole bonuses described below. We agreed to pay Mr. Shannon the make-whole bonus, structured as follows: (i) a one-time payment of $220,000, payable in the first quarter of 2016, which he must repay if he voluntarily leaves the Company, other than for Good Reason, or does not relocate his family, in each case, within the first twelve months of employment; and (ii) a one-time payment of $109,500, payable in the first quarter of 2017, which will be reduced on a dollar-for-dollar basis by any amount that Mr. Shannon earns for 2016 under the Company’s VICC program, and which he will only be entitled to receive if he is still employedkey performance measures considered by the CompanyCompensation Committee in 2017.

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ComponentsDiscussion of Executive Compensation Components

Our executive compensation program consists of base salary, commissions for sales executives, an annual VICC program under our Variable Incentive Compensation Plan (which, if earned, is paid in cash), and long-term equity incentives in the form of both restricted stock optionsunits (“RSUs”) and performance-based restricted stock units.units (“Performance Shares”). In 2017, as a continuation of the practice begun in 2016, the Compensation Committee decided to grant equity in the form of RSUs that vest over time (in addition to performance-based restricted stock units) in lieu of stock option grants. Executive officers also are eligible to participate in a nonqualified deferred compensation program (and the Board approved the inclusion of directors in this program beginning in 2010) and in certain benefit programs that are generally available to all of our employees, such as medical insurance programs, life insurance programs and our 401(k) plan. The Compensation Committee of our Board of Directors oversees our executive compensation program. Additionally, in January of 2017, the Compensation Committee made aone-time grant of performance shares that vest over a three year performance period (Three-Year Award).

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Base Salary and Commissions.

Base salaries are the most basic form of compensation and are integral to any competitive employment arrangement. At the beginning of each fiscal year, the Compensation Committee establishes an annual base salary for our executive officers as well as commission structures for our sales executives, based on recommendations made by our Chief Executive Officer, in consultation with our Chief Financial Officer. Consistent with our compensation objectives and philosophy described above, the Compensation Committee attempts to setsets base salary compensation, and adjustadjusts it when warranted, based on company financial performance, the individual’s position and responsibility within our company and performance in that position, the importance of the executive’s position to our business, and the compensation of other executive officers of ADTRAN with comparable qualifications, experience and responsibilities. The Committee also generally takes into account its perceived range of salaries of executive officers with comparable qualifications, experience, and responsibilities at other companies with which we compete for executive talent.

For our sales executives, commissions are an important element of cash compensation because they tie the executive’s pay directly to his success in his area of responsibility. Our sales executives generally receive half of their cash compensation (not including annual VICC, if any) in salary and half in commissions, which is consistent with our historical practice and our understanding of the standard practice in the market for sales executives. The Committee also reviews historical salary and commission information for each of the executive officers as part of its analysis in setting base salaries and commission structures. The Committee uses this information to review historical progression of each executive officer’s compensation and to identify variations in compensation levels among the executive officers.

In January 2015,2017, the Compensation Committee reviewed the base salaries of our executive officers, taking into account the considerations described above. TheUsing a standard of up to 4%, the Committee approved salary increases for each of the named executive officers which areas reflected in the following table:

Additionally, in November, 2015, Roger D. Shannon joined the Company as our Senior Vice President of Finance and Chief Financial Officer, replacing Mr. Matthews who resigned in March, 2015. In connection with Mr. Shannon’s hiring, the Committee approved an annual salary for Mr. Shannon of $365,000. Mr. Matthews’ resignation became effective on March 16, 2015, and Mr. Foliano served as Interim Chief Financial Officer until Mr. Shannon assumed that position.

Annual Cash Incentive Compensation.Compensation

We provide our executives the opportunity to earn annual VICCincentive compensation under our Variable Incentive Compensation Plan, which is designed to motivate and reward executives for their contribution to ADTRAN’s performance during the fiscal year. A significant portion of the total cash compensation that our executive officers could receive each year is paid through this program, and thus is dependent upon our corporate performance. The Variable Incentive Compensation Plan was approved by the Company’s stockholders and adopted by the Company at the Company’s 2011 annual stockholders’ meeting. Under the Variable Incentive Compensation Plan as adopted by the Company, the maximum performance award that may be granted to any recipient for any plan year was increased to $3,000,000. VICC available for 20152017 was determined by a formula based on designated performance measures for total company operating income, total company revenue, Carrier Network performance, Enterprise Network performance and certain other subcategories of revenue, as well as personal goal elements for some participants, as described in the narrative above in the Executive Summary and following the Summary Compensation Table and the Grants of Plan-Based Awards table. We use these performance measures for our annual incentive awards because we consider them as the most appropriate drivers of stockholder value. Total company operating income and total company revenue performance measures required a growth rate of at least 2.5%1% in that measure over the prior year’s performance for officers to receive any VICC. While the minimum threshold was set at 1% over the prior year’s performance, the attainment of a significant amount of VICC required performance against progressively challenging performance levels which were aligned with the Company’s own internal goals. As a matter of policy, we do not disclose specific target information either for the general program or specific programs for each individual. In establishing these performance goals, the Committee considered the performance goals for prior years and the anticipated growth in geographic markets the company had entered and in products the company had introduced, and also considered that the pace of growth in those years had not matched expectations. The Committee further considered that the results in prior years in executing the growth in the several initiatives had been positive and had also laid the groundwork for more expansive growth. The Committee also determined that the VICC program was a critical motivating element of each participating officer’s compensation package, as it is intended. In consequence, the committee established performance goals that were designed to stimulate executives to intensify their efforts to exploit more fully the growth drivers and overcome any market or industry conditions which might impede growth and also capped the maximum payout any officer could receive under the program to avoid an excessive payout should the results significantly exceed the expectations on which the several participating officers’ programs were based.

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The Committee does not have the discretion under the Variable Incentive Compensation Plan to grant a VICC award absent attainment of the minimum performance measures. The Committee has the discretion to decrease a VICC payout under the plan even if performance measures are met, but the Committee does not have any discretion under the plan to increase a VICC payout above the amount determined pursuant to the established VICC formula.

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ForAlthough there were no payouts under the VICC for 2015, the Company did not meetexceeded the minimum performance measures established for the 2015 program under the Variable Incentive Compensation Plan.Plan for each of the 2016 and 2017 programs. Consequently, our executives did not earn any bonusesearned annual incentive compensation for 2015 performanceeach of 2016 and 2017 under that plan. The 2017 awards were recommended by the Compensation Committee and approved by the Board of Directors at its January 16, 2018, meeting.

As a result, our named executive officers were awarded the following amounts for 2017:

Long-Term Incentive Awards.Awards

Summary Information

We compensate our executive officers in part with annual grants of stock optionequity awards under our 2015 Employee Stock Incentive Plan, which isare described in detail in the narrative following the Summary Compensation Table and the Grants of Plan-Based Awards table. Our annual long-term equity incentive awards are timed to occur in the latter part of each year, to coincide with an open trading window under our insider trading policy. In November 2017, the Compensation Committee approved RSU awards to our executive officers that vest over a four year period, with 25% vesting on each anniversary of the grant date. In addition, in November 2017, the Committee approvedperformance-based equity awards to the Chief Executive Officer and the Senior Vice Presidents, as discussed above, and in January 2017, the Committee approvedone-timeperformance-based equity awards, which, unlike the annual November grants, would vest based on achievement ofpre-defined levels of the Company’s CAGR of Adjusted EBIT (as defined above in the Executive Summary) over a three year period. The total awards to the named executive officers in 2017 were as follows, and are described in the narrative below the Grants of Plan-Based Awards table at “Equity Compensation”:

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In determining the amount of these incentive equity awards, the Compensation Committee began by deciding on an overall pool amount for the company, taking into account the estimated expense to us of the awards and the earnings per share impact of that expense. We typically establish an internal target for the aggregate expense from company-wide equity awards, which, based on our review of industry data as discussed above, we believe is at the low end of the expense levels incurred by our competitors. The Committee established a pool of up to 338,103 RSUs (of which, 55,602 were allocated to executive officers) and 55,602 performance shares for the 2017 annual grant, as compared to a pool of up to 360,000 RSUs (of which 62,790 were allocated to executive officers) and 62,790 performance shares for the 2016 annual grant. The Committee allocated the pool of RSUs and performance shares among the different functions throughout the company based on the importance and performance of the function and considerations such as retention and competitive compensation levels. The Compensation Committee then set each executive’s individual award from the amount allocated to the function in which the individual serves, based on the recommendation of our Chief Executive Officer (other than with respect to his own award). In determining the amount of the RSU awards and performance shares for the named executive officers, the Committee considered the conclusions of its 2016 compensation review described above.

The Company did not include performance measures in the grant of RSUs in 2017 because we believe that performance of the Company is an implicit feature of every RSU and that the RSUs themselves provide significant incentive to each employee who receives such an award (including our executives) to perform his or her job tasks optimally for the overall performance of his or her group and the Company as a whole. Prior to 2016, the Company typically granted options instead of RSUs; however, RSU grants are typically not more than 40% of the number of shares that would previously have been granted under options. We do, however, include a TSR performance metric as the sole measure for the performance-based restricted stock units (or “performance shares”) program described below and at “Grants of Plan-Based Awards in 2017 – Equity Compensation” at page 30.

RSU Program

Prior to 2016, we granted stock options every year because the Compensation Committee determined that these awards are consistent with our compensation goals of aligning executives’ interests with those of our stockholders in the long term and because these awards are a standard form of compensation among the companies with which we compete for executive talent. In 2016, however, the Compensation Committee determined that annual equity awards to our executive officers would be in the form of RSUs that would vest over a period of time. The Compensation Committee believes that stock optionRSU awards are an especially valuable tool in linking the personal interests of executives to those of our stockholders because, executives’ compensation under these awardswith an RSU, the officer receives assurance of some value from the time of grant and the value increase experienced is directly linked to our stock price.the same as that of stockholders. These awards give executive officers a significant, long-term interest in ADTRAN’s success. In addition, they can provide beneficial tax treatment that executives value due to the fact that we have typically granted incentive stock options to our executives to the maximum extent permitted under the tax laws. Moreover, the vesting component of our stock optionRSU awards provides a valuable retention tool, and retention is a significant consideration in making these awards.

Performance Shares Program

As discussed above, under “Overview and Philosophy,” in 2008 the Compensation Committee, based on discussions with the Chief Executive Officer and after considering information received from Towers Watsonthe compensation consulting firm and other industry surveys and databases, determined to allow for performance-based restricted stock units, referred to as “performanceperformance shares,” in addition to other equity-based awards for the Chief Executive Officer and the Senior Vice Presidents.named executive officers. The Committee chose this form of award to further implement our executive compensation goals of better aligning the interests of these executives, who can most directly impact our overall financial performance, with the interests of our stockholders and of our Company by making the awards dependent on corporate performance, and allocated a portion of the long-term incentive awards for these executive officers accordingly. The number of performance shares earned by the executive officers is based on our relative total shareholder return, or “TSR,” against a peer group over a three-year performance period. For 2015,2017, the Compensation Committee selected as a peer group allthe companies in the NASDAQ Telecommunications Index.Index as the peer group for TSR measurement purposes. The Committee chose this index based on the fact that it contains a significant number of companies and is a broad sample of our industry.

We believe that TSR is an important tool in aligning our business goals with our executive compensation program, and ADTRAN is committed to delivering strong total shareholder return. Our 2015 TSR was negatively impacted by a significant decline in the value of the euro compared to the U.S. dollar, and the cancellation of a project with a major tier 1 service provider in the U.S. Although U.S. sales growth in 2015 was 10%, the resulting revenue and operating income we believe negatively impacted our resulting TSR. During the course of 2015, the company has taken steps to reduce operating expense by consolidating facilities and believes this, in combination with market share gains and improving environment should lead to better TSR performance in the future. To this end, we believe our executive compensation programs provide significant incentive to our management to work towards long-term TSR growth.

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As discussed in more detail below at “Equity Compensation” (following the “Grants of Plan-Based Awards” table), depending on our relative TSR over the performance period, the executive officers may earn from 0% of the number of target performance shares if the relative TSR performance is not at least equal to the 20^th20th percentile of the peer group to 150% of the number of target performance shares if relative TSR performance equals or exceeds the 80^th80th percentile of the peer group, based on the sliding scale as shown below.in that discussion.

SharesPerformance shares earned are distributed at the end of the three-year performance period. Under the award agreements, a portion of the granted performance shares also vest and become deliverable upon the death or disability of a recipient or upon a change of control of ADTRAN, as discussed in more detail below under the heading “Potential Payments Upon Termination or Change of Control.” The recipients of the performance shares under the award agreements receive dividend credits based on the shares of common stock underlying the performance shares. The dividend credits are paid in cash upon vesting of those shares under the applicable awards.

The 20122014 grant of performance shares vested on November 3, 201514, 2017, and the Compensation Committee certified in November 20152017 that the TSR relative to its peer group over the performance period was 40.1%68.3%. As a result, as indicated in the table below at “Equity Compensation” (following the “Grants of Plan-Based Awards” table), the recipients earned 75.26%130.28% of the performance shares originally granted and payment, in cash, of the dividend credits accrued on such earned performance shares.

Our long-term equity incentive awards are timed to occur in the latter part of each year, to coincide with an open trading window under our insider trading policy. One-Time Performance Share CAGR Awards (Three-Year Award)

In November 2015,January 2017, the Compensation Committee approved stock option awards to ourawarded executive officers that vest over a four year period, with 25% vesting on each anniversary of the grant date. In addition, in November 2015, the Committee approvedCompany aone-time performance share awardsgrant under our 2015 Employee Stock Incentive Plan. Under thisone-time grant, the performance shares would vest after a three-year performance period if the CAGR of the Company’s Adjusted EBIT (defined as the Company’s earnings before interest and tax, determined based on the Company’s audited financial results, and adjusted to remove any restructuring charges, equity compensation and amortization of acquisition-related expenses) was at least 22.2%. If the CAGR of Adjusted EBIT over the three-year performance period is at least 22.2%, but less than 25%, the recipients would receive 100% of the awarded performance shares; if the CAGR of Adjusted EBIT is at least 25%, but less than 27.8%, the executives would receive 121.4% of the awarded performance shares; if the CAGR of Adjusted EBIT is 27.8% or more, then the recipients would receive 142.9% of the awarded performance shares. The Compensation Committee determined that, if the performance measures set for theone-time performance share grants were met, the Company would have provided significant value to its shareholders, thereby aligning the executives’ performance with shareholder return. In determining to use the growth (CAGR) of Adjusted EBIT, the Compensation Committee selected a challenging performance metric that it believes is closely aligned with an increase in the equity price of the company, and therefore in an increase in TSR. After the first year of the three-year performance period, the CAGR of the Company’s Adjusted EBIT was 5%, which is well below the 22.2% three year threshold and below plan for 2017 due to the Chief Executive Officermerger and acquisition activity at one of our Tier 1 North American CSPs (further discussed below) that resulted in our full year falling short of original expectations.

Employment Agreements

Mr. Scheiterer is employed pursuant to a Secondment Agreement with ADTRAN, Inc., dated January 1, 2016. The Secondment Agreement contemplates that Mr. Scheiterer’s secondment from ADTRAN GmbH will last until December 31, 2019. During this time, his employment agreement with ADTRAN GmbH is suspended. If and when his secondment terminates, his employment agreement with ADTRAN GmbH will reactivate; however, if Mr. Scheiterer remains in the Senior Vice Presidents, as discussed above, including Roger D. Shannon, uponU.S. after five years, he will convert to a localized, ADTRAN, Inc. employee and both the Secondment Agreement and his appointmentemployment agreement with ADTRAN GmbH will terminate.

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Pursuant to the Secondment Agreement, Mr. Scheiterer will serve as Senior Vice President of FinanceGlobal Research and Chief Financial Officer ofDevelopment for ADTRAN. During the Companysecondment, he will continue to participate in November 2015. The total awardsthe ADTRAN GmbH retirement savings plan and will, to the named executive officersextent permissible, continue to be covered under ADTRAN GmbH’s life and disability insurance plans, although he will be entitled to participate in 2015 were as follows,ADTRAN’s U.S. health and are describedwelfare plans, the VICC plan and equity incentive plans. ADTRAN will reimburse Mr. Scheiterer for all income taxes due in the narrative below the GrantsU.S. and Germany; however, his compensation will be reduced by his hypothetical German tax liability. Mr. Scheiterer is entitled to tax advice and tax return preparation services as well as 30 days of Plan-Based Awards table:

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In determining the amountvacation annually and certain expatriate allowances, including a housing allowance of these incentive equity awards, the Compensation Committee began by deciding on an overall pool amount$2,850 per month, relocation allowance equal to one month’s base salary, reimbursement for the company, taking into account the estimated expense to us of the awards and the earnings per share impact of that expense. We typically establish an internal target for the aggregate expense from company-wide option awards and performance shares, which, based on our review of industry data as discussed above, we believe is at the low end of the expense levels incurred by our competitors. The Committee established a pool of up to 1,181,488 stock options4 home leaves for Mr. Scheiterer and 34,247 performance shares for the 2015 annual grant, as compared to a pool ofhis spouse and up to 1,197,595 stock optionstwo home leave visits per year for his children, and 29,947 performance sharesan allowance of $5,000 for the 2014 annual grant. The Committee allocated the pool of options and performance shares among the different functions throughout the company, based on the importance and performance of the function and considerations such as retention and competitive compensation levels. The Compensation Committee then set each executive’s individual award from the amount allocated to the functionmaintenance costs for Mr. Scheiterer’s home in which he serves, based on the recommendation of our Chief Executive Officer (other than with respect to his own award) with input from our Chief Financial Officer. In determining the amount of the options awards and performance shares for the named executive officers, the Committee considered the conclusions of its 2015 compensation review described above.

The Company has not historically included a performance measure as a component of vesting of stock options for executive officers because we believe that performance of the Company is an implicit feature of every stock option and that the option itself provides significant incentive to each employee who receives an option (including our executives) to perform his or her job tasks optimally for the overall performance of his or her group and the Company as a whole. It does include performance metrics as the sole measure for the performance-based restricted stock units (or “performance shares”) program described below at “Grants of Plan-Based Awards in 2015 – Equity Compensation” at page 20.Germany.

Other Compensation.Compensation

We maintain general broad-based employee benefit plans in which our executives participate, such as a health insurance plan and a 401(k) plan. These benefits are provided as part of the basic conditions of employment for all of our employees, and therefore providing them to our executive officers does not represent a significant incremental cost to us. In addition, we believe that providing these basic benefits is necessary for us to attract talented executives. We also maintain a nonqualified deferred compensation plan, which is described under the Nonqualified Deferred Compensation table below. This plan permits executives and directors to voluntarily defer a portion of their income and performance shares and save money for retirement on atax-deferred basis. Although the plan permits discretionary employer contributions, to date we have not made any contributions to this plan. Therefore, this plan provides a valuable benefit to executives and directors at virtually no cash cost to us.

As described in more detail under “Potential Payments Upon Termination or Change of Control” below, we provide limited benefits to participants upon a change of control or upon termination of employment for specified reasons (provided, in some cases, that termination must be a “separation from service” as defined in Section 409A of the Internal Revenue Code) including the named executive officers, in our equity incentive plans and our Variable Incentive Compensation Plan. All of these benefits are consistent with the basic benefits provided by the companies with which we compete for executive talent and help us to attract valuable executives. These benefits help to provide additional security that executives may need and reward loyal service in situations that create insecurity and present special challenges for executives. We provide the limited change of control benefits to encourage our executives to seek out and pursue business transactions that could be beneficial to ADTRAN and its stockholders.

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Tax Considerations

Section 162(m) of the Internal Revenue Code limitslimited ADTRAN’s tax deduction for compensation over $1,000,000 paid to the Chief Executive Officer or to certain other executive officers. CompensationFor 2017, compensation that meets the requirements for qualified performance-based compensation or certain other exceptions under the Internal Revenue Code is not included in this limit. Except for certain contractual incentive compensation grants made prior to November 2, 2017, this performance-based compensation exclusion is eliminated for 2018 and future years as a result of the Tax Cuts and Jobs Act enacted in December 2017. Generally, the Compensation Committee desires to maintain the tax deductibility of compensation for executive officers to the extent it is feasible and consistent with the objectives of our compensation programs. To that end, our 2015 Employee Stock Incentive Plan and our Variable Incentive Compensation Plan were originally designed to meet the requirements so that awards and annual VICC under those plans willwould be performance-based compensation for Section 162(m) purposes. However, in the past, our executives’ compensation has not been high enough to make Section 162(m) a critical issue for ADTRAN.ADTRAN other than for our CEO. With the elimination of the Section 162(m) performance-based compensation deductibility limit exclusion resulting from the Tax Cuts and Jobs Act enacted in December 2017, it is no longer possible to deduct performance-based compensation in excess of $1 million after 2017, other than for certain eligible performance-based incentive compensation plans enacted prior to November 2, 2017. We believe that the one time performance share CAGR awards previously described meet the deductibility requirements of Section 162(m), but that any incentive compensation granted in 2018 or beyond does not. Therefore, deductibility under Section 162(m) is only onewill no longer be a consideration in determining executive compensation after 2017, and the Compensation Committee may approve compensation that is not deductible in order to compensate executive officers in a manner consistent with performance and our need for executive talent.

Risk Assessment

We have evaluated our compensation program and each element of the program to ensure that our policies and practices do not create risks that are reasonably likely to have a material adverse effect on ADTRAN. The Compensation Committee has attempted to create a compensation system that values current goals along with long-term growth. While the use of annual cash incentive opportunities creates the potential for short termshort-term risk taking, we believe the risk is more than offset by the fact that an annual cash incentive is only one of three primary elements of our overall compensation program; and the Compensation Committee has the ability to utilize discretion to reduce the amount of annual cash incentive awards if an executive officer takes unnecessary risks.

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We believe the two other primary elements of our total compensation program – base salaries and long term equity awards – are either risk neutral or help lower risk. The Compensation Committee determines the annual base salaries based on numerous factors, as discussed above. These factors lend themselves to an overall evaluation that emphasizes improvement of ADTRAN and its operations rather than taking risks for short termshort-term gain. Our equity incentive awards vest or are earned over several years, so while the potential compensation an executive can receive through equity incentive awards is tied directly to the appreciation of our stock price or other performance metrics,metrics. Consequently, taking excessive risk for a short termshort-term gain is incompatible with an executive officer maximizing the value of equity incentive awards over the long term.

Clawback Policy

The Board has adopted a policy providing that, in the event the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Company will recover incentive-based compensation paid to current or former executive officers of the Company during the three years prior to the date as of which the accounting restatement is required, to the extent that any of that compensation was based upon the erroneous data that made the restatement necessary. Under this policy, incentive-based compensation includes stock options, performance shares, and other monetary or equity-based compensation awards. To implement this policy, the Board has entered into a current agreement with each of the named executive officers providing for their agreement to such repayment.

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Policy Against Hedging Instruments and Pledging

Under the Company’s Insider Trading Policy, employees and directors of the Company and any designee of any employee or director, are prohibited from purchasing financial instruments (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, exchange funds, and options) that are designed to hedge or offset any decrease in the market value of equity securities of the Company held directly or indirectly by the employee or director. Additionally, employeeemployees and directors are prohibited from holding Company securities in a margin accountaccounts or pledging Company securities as collateral for a loan.

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Compensation Committee Report

The following report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933, as amended, or the Exchange Act.

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement.statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

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Summary Compensation Table

The following table sets forth, for the fiscal years ended December 31, 2015,2017, December 31, 20142016, and December 31, 20132015, the total compensation earned by our Chief Executive Officer, Chief Financial Officer, including our former Chief Financial Officer, and each of our three other most highly compensated executive officers who were serving as executive officers as of December 31, 20152017 (collectively referred to as the “named executive officers”).

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(b) Represents the aggregate grant date fair value of theone-time performance share awards made in 2017, which awards vest over a three year performance period (Three-Year Award) if the Company achieves at least a 22.2% compounded annual growth rate of Adjusted EBIT (the Three-Year Plan is discussed in more detail under “Equity Compensation” below), computed in accordance with the Stock Compensation Topic of the FASB ASC, based on the market price of our common stock on the date of grant. For a description of the assumptions used to determine these amounts, see Note 3 in the Notes to the Consolidated Financial Statements in our Annual Reports on Form10-K for the fiscal year ended December 31, 2017, except that, as required by SEC regulations, the amounts in the table above do not reflect any assumed forfeitures. For the 12 month period ended December 31, 2017, the Company had achieved a 5% compounded annual growth rate of Adjusted EBIT. The maximum values of the performance share awards, assuming the highest level of performance conditions is probable, are: for Mr. Stanton $2,999,990, for Mr. Shannon $999,960, for Mr. Wilson $999,960; for Mr. Foliano $999,960, and for Mr. Scheiterer $999,960.

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1929

Grants of Plan-Based Awards in 20152017

2030

Annual Cash Incentive Awards

We provide our named executive officers with the opportunity to earn annual VICCincentive compensation under our Variable Incentive Compensation Plan. Under the Variable Incentive Compensation Plan, within 90 days of the beginning of each year, our Compensation Committee establishes corporate goals to determine the eligibility for, and amount of, any annual incentive compensation for our executives. The Compensation Committee also determines the eligible individuals to receive awards and establishes the terms and conditions of all awards under the Variable Incentive Compensation Plan.

In January 2015,2017, our Compensation Committee established a group of VICC programs under the Variable Incentive Compensation Plan to determine 2015 amounts and designated each executive as a participant in a particular program. Each program was designed to encourage growth in company pretaxoperating income and company revenue including international revenue, carrier networks revenue and enterprise networks revenue.which is believed to lead to greater shareholder returns. The participants could earn VICC was available under each program only if both of certain minimumtotal company operating income and total company revenue thresholds were achieved.grew by at least 1% over the prior year. If these minimum thresholdstwo threshold growth measures were both achieved, they could earn VICC was availablefor growth in multiple categories (no more than four categories for any participant):one or both of total company operating income or total company revenue, carrier network revenue, enterprise network revenueeach of which comprises 50% of the total companyperformance-based VICC opportunity and certain other subcategories of revenue. Additionally, some participants could earn up to fifty percent of their target VICC through achievement of personal goal elements. For the categories other than personal goal elements, VICC wasis scaled depending upon the amount of growth the company experienced in excess of the minimum threshold in any category.threshold. In order to measure the value of each possible VICC award, the programs assigned to each participating executive a numbermonetary amount identified as the target VICC. VICC available in each category was expressed as percentages of the target VICC and ranged from a small percentage if the required threshold was reached through the possibility of as much as 200% of the target VICC.VICC for maximum performance in each category. Additionally, Messrs. Shannon, Wilson, Foliano, and Scheiterer could earn up to twenty-five percent of their target VICC through achievement of personal goal elements that are approved by our CEO, Mr. Stanton, during the first 90 days of the year based on opportunities where these individuals can directly influence the Company’s financial performance. Mr. Stanton’s VICC opportunity is based entirely on the achievement of the Company’s performance metrics discussed above. The personal goal elements were not scaled but rather were based on achieving or not achieving the goal. In no event could any executive receive more than 200% of the target VICC in any combination of VICC awards for all categories, including any personal goals. In determining the target VICC for each executive, the Compensation Committee considered, among other things, the executive’s responsibilities and opportunity to influence the outcomes in the several categories under which VICC could be earned, as well as the executive’s prior contributions to company performance.

UnderFor 2017, the program in which Messrs. Stanton, FolianoCompany exceeded the minimum performance measures established under the Variable Incentive Compensation Plan, and prior to his resignation, Matthews, participated, they could earn VICC only if each of total company operating income and total company revenue grew by at least 2.5% over the prior year. If these two threshold growth measures were both achieved, they couldour executives did earn VICC for growth in any one of total company operating income or total company revenue. Additionally, Mr. Foliano and, prior to his resignation, Mr. Matthews, could earn half of their target VICC by achievement of certain personal goal elements.

Under the program in which Mr. Schansman participated, he could earn VICC only if each of total company operating income and total enterprise networks revenue grew by at least 2.5% over the prior year. If these two threshold growth measures2017 performance under that plan. These awards were both achieved, he could earn VICC for growth in any one of total company operating income, total company revenue, total enterprise networks operating income as a percentage of total enterprise networks revenue or total enterprise networks revenue. Additionally, Mr. Schansman, could earn half of his target VICC by achievement of certain personal goal elements.

Under the program in which Mr. Wilson participated, he could earn VICC only if each of total company pretax income and total carrier networks revenue grew by at least 2.5% over the prior year. If these two threshold growth measures were both achieved, he could earn VICC for growth in any one of total company operating income, total company revenue, total carrier networks operating income as a percentage of carrier network revenue or total domestic and Americas carrier networks revenue. Additionally, Mr. Wilson, could earn half of his target VICC by achievement of certain personal goal elements.

None of the threshold growth targets establishedrecommended by the Compensation Committee was achieved. Consequently, as shownand approved by the Board of Directors at its January 16, 2018, meeting. Actual VICC amounts awarded to our named executive officers for 2017 under the Variable Incentive Compensation Plan are included in the “Non-Equity“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above, no VICC was awarded to our named executive officers for 2015 under the Variable Incentive Compensation Plan.above.

Additionally, in connection with Mr. Shannon’s employment with the Company, the Committee awarded Mr. Shannon a one-time signing bonus of $220,000, which is payable in the first quarter of 2016, as part of a make-whole bonus, as described above in “Compensation Discussion and Analysis – Appointment of New Chief Financial Officer”, which amount must be repaid if Mr. Shannon voluntarily leaves the Company, other than for Good Reason (as such term is described above in “Compensation Discussion and Analysis – Appointment of New Chief Financial Officer”), or does not relocate his family, in each case, within the first twelve months of employment. Additionally, in recognition of Mr. Foliano’s service to the Company as interim Chief Financial Officer, the Committee awarded Mr. Foliano a one-time discretionary bonus of $50,000.

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Equity Compensation

We granted stock optionsRSUs and performance-based restricted stock units, or “performance shares,“Performance Shares,” during 20152017 to our named executive officers under the ADTRAN, Inc. 2015 Employee Stock Incentive Plan. The Stock Incentive Plan permits awards of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units. Our Compensation Committee administers the Stock Incentive Plan, determines who will receive awards and establishes the terms and conditions of all awards. Awards of restricted stock or restricted stock units granted under the plan will reduce the number of authorized shares available by 2.5 shares of our common stock for each share underlying the award. The total number of remaining shares authorized for grant for awards other than options under all equity compensation plansthe ADTRAN, Inc. 2015 Employee Stock Incentive Plan at December 31, 20152017, was 6,680,6393,204,391 shares.

The per share exercise price of the options we granted to our named executive officers during 2015 was equal to the fair market value of a share of our common stock on the date of grant. Fair market value is defined in the Stock Incentive Plan as the closing price of our common stock on the business day immediately before the date of grant. The option price may be paid in cash, in shares of our common stock, by broker-assisted cashless exercise (if permitted by applicable laws and regulations), or by any other method permitted by the Committee.

The optionsRSUs we granted in 20152017 to our named executive officers will become exercisablevest with respect to 25% of the shares on each of the first four anniversaries of the grant date. The optionsRSUs become immediately vested and exercisable upon the executive’s death or disability, andor upon a change of control. The options may be exercised for one year after termination due to the executive’s death, disability or retirement, or for 90 days after termination for any other reason other than for cause, in which case the options immediately terminate. In addition,Also, the Compensation Committee, in its discretion, may accelerate the vesting at any time. The provisions regarding acceleration of the optionsRSUs are described in more detail in the section on the Stock Incentive Plan below under the heading entitled “Potential Payments Upon Termination or Change of Control.”

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The number of performance shares earned by the executive officers under the 20152017 annual grant is based on our relative total shareholder return, or “TSR,” against a peer group over a three-year performance period. The peer group is set forth above in “Compensation Discussion and Analysis – Components of Executive Compensation – Long-Term Incentive Awards.”the companies comprising the NASDAQ Telecommunications Index. Depending on our relative TSR over the performance period, the executive officers may earn shares of common stock on a sliding scale from 0% to 150% of the performance shares (approximately 2.5% of the grant for each 1 percentile increase up to 100% of the grant and then approximately 1.67% of the grant for each 1 percentile increase up to 150% of the grant) granted depending on our relative TSR performance against the peer group, as shown below:

Shares earned are distributed at the end of the three-year performance period, and after that time there is no additional holding period for the shares. Under the award agreements, a portion of the granted performance shares also vest and become deliverable upon the death or disability of a recipient or upon a change of control of ADTRAN, as discussed in more detail below under the heading “Potential Payments Upon Termination or Change of Control.” The recipients of the performance shares under the award agreements receive dividend credits based on the shares of common stock underlying the performance shares. The dividend credits are vested, earned and distributed in cash upon vesting of the performance shares. Recipients may choose to defer shares under the Deferred Compensation Plan instead of receiving the shares at the time they are entitled to distribution of the shares.

The 2014 grant of performance shares vested on November 14, 2017, and the Compensation Committee certified in November 2017 that the TSR relative to its peer group over the performance period was 68.3%. As a result, as indicated in the table above, the recipients earned 130.28% of the performance shares originally granted and payment, in cash, of the dividend credits accrued on such earned performance shares.

In addition to the performance share awards typically awarded in November of each year, the Compensation Committee also made aone-time grant of performance shares in January, 2017 that would vest after a three-year performance period if the CAGR of the Company’s Adjusted EBIT (defined as the Company’s earnings before interest and tax, determined based on the Company’s audited financial results, and adjusted to remove any restructuring charges, equity compensation and amortization of acquisition-related expenses) was at least 22.2% (Three-Year Award). If the CAGR of Adjusted EBIT during the performance period is at least 22.2%, but less than 25%, the recipients will receive 100% of the awarded performance shares; if the CAGR of Adjusted EBIT is at least 25%, but less than 27.8%, the executives will receive 121.4% of the awarded performance shares; if the CAGR of Adjusted EBIT is 27.8% or more, then the recipients will receive 142.9% of the awarded performance shares.

2232

Outstanding Equity Awards at 20152017 FiscalYear-End

The following table sets forth information regarding all outstanding equity awards held by the named executive officers aton December 31, 2015.2017.