UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2007
C-COR
INCORPORATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
of
ARRIS GROUP, INC.
A Delaware Corporation
IRS Employer Identification No. 58-2588724
SEC File Number 000-31254
3871 Lakefield Drive
Suwanee, GA 30024
(678) 473-2000
C-COR Incorporated
Supplemental Executive Retirement Plan
Financial Statements
For The Years Ended
December 31, 2007 and 2006
&
Report of Independent Registered
Public Accounting Firm
Report Of Independent Registered
Public Accounting Firm
C-COR Incorporated Supplemental Executive Retirement Plan
and Board of Directors of ARRIS Group, Inc.:
We have audited the accompanying statement of net assets available for benefits of C-COR
Incorporated Supplemental Executive Retirement Plan as of December 31, 2007 and 2006, and the
related statement of changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plans management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31, 2007 and 2006, and
the changes in its net assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Parente Randolph, LLC
Wilkes-Barre, Pennsylvania
June 27, 2008
- 2 -
C-COR INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2007 AND 2006
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2007
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2006
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Assets:
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Investments, at fair value
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$
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3,647,139
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$
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2,339,345
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Cash receivable from stock conversion (See Note 8)
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34,434
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Total assets
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$
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3,681,573
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$
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2,339,345
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Liabilities
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Net assets available for benefits
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$
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3,681,573
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$
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2,339,345
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See accompanying notes to financial statements
- 3 -
C-COR INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
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2007
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2006
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Additions to net assets attributed to:
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Investment income:
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Interest and dividend income
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$
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164,517
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$
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78,334
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Net (depreciation) appreciation in fair value
of investments
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(60,792
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)
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427,809
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Net investment income
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103,725
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506,143
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Contributions:
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Employer
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490,234
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188,663
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Employee
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770,313
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74,031
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Total contributions
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1,260,547
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262,694
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Total additions
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1,364,272
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768,837
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Deductions from net assets attributed to:
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Benefits paid to participants
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22,041
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314,021
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Administrative expenses
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3
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7
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Total deductions
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22,044
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314,028
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Net increase
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1,342,228
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454,809
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Net assets available for benefits:
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Beginning of year
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2,339,345
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1,884,536
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End of year
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$
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3,681,573
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$
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2,339,345
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See accompanying notes to financial statements
- 4 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
1.
Description Of Plan
The following brief description of the C-COR Incorporated Supplemental Executive Retirement
Plan (the Plan) provides only general information. Participants should refer to the Plan
document for a more complete description of the Plans provisions.
General
The Plan is intended to provide the accumulation of supplemental funds for retirement on a
tax-deferred basis for a select group of management employees or highly compensated
employees. The Plan was established May 1, 1996, and was amended and restated effective
January 1, 2003. Participation in the Plan is limited to eligible employees of C-COR
Incorporated, (the Company) or (C-COR), who have completed 30 consecutive days of
employment and who are designated by the Committee appointed by the Board of Directors (the
Committee) to administer the Plan or the officer(s) of the Company authorized to act on
the Committees behalf. Although the Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA), it is exempt from certain of its
substantive requirements as it is a Top Hat plan which is unfunded and maintained to
provide deferred compensation for a select group of highly compensated employees.
Assets of the Plan are subject to the claims of the general creditors of the Company in the
event of bankruptcy or insolvency. Plan participants have no direct or secured claim in any
asset of the Plan and have the status of general unsecured creditors of the Company with
respect to any amounts due under the Plan.
On December 14, 2007, C-COR was acquired by ARRIS Group, Inc. (ARRIS). As a result of the
acquisition, the shares of C-COR common stock held in participant accounts were converted
into a combination of cash and shares of ARRIS common stock. The conversion of C-COR shares
into ARRIS shares is further explained in Note 8. Pursuant to the acquisition, the Plan has
been frozen with regards to future contributions. The last contributions to the Plan were
made in December 2007.
- 5 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
Contributions
Employee Directed Contributions
Participants may direct the Company to reduce their base salary by up to 30% (in whole
percentages). In addition, participants may contribute up to 100% (in whole percentages)
of their incentive plan compensation. Participants direct the investment of their
contributions into various investment options offered by the Plan. The Plan currently
offers mutual funds, Company common stock and an insurance company investment contract as
investment options for participants.
Employer Matching Contributions
The Company may match eligible employee contributions. The employer matching rate
percentage is determined annually by the Companys Compensation Committee of the Board of
Directors. In 2007 and 2006, the employer match was equal to one dollar for each dollar
contributed up to 6% of eligible compensation. Participants are eligible to contribute
to both the C-COR Incorporated Retirement Savings and Profit Sharing Plan and the Plan.
The employer match may not exceed a total of six percent between the two plans, with the
match going first to the C-COR Incorporated Retirement Savings and Profit Sharing Plan.
Employer Discretionary Contributions
Subject to the approval by the Companys Compensation Committee of the Board of
Directors, the Company may contribute a discretionary amount to the Plan. In October
2005, the Plan was amended to state the Company will pay discretionary contributions to
each eligible participant equal to 8% of the participants base and bonus compensation
that is paid each pay period. The Companys discretionary contributions for the years
ended December 31, 2007 and 2006 were $375,408 and $182,366, respectively.
Participant Accounts
Each participants account is credited with the participants contribution, the employer
matching and discretionary contribution and allocations of Plan earnings. Allocations are
based on participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the participants vested
account.
- 6 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
Vesting
Participants are vested immediately in their contributions plus actual earnings thereon.
Employer matching contributions are vested at 100% starting January 1, 2003, based on
approval by the Compensation Committee of the Board of Directors. The Compensation
Committee of the Board of Directors will review and make a determination of the employer
matching contributions on an annual basis. For years prior to 2003, employees become vested
in the employers contribution portion of their account according to the following schedule:
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PERCENT
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YEARS OF CREDITED SERVICE
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VESTED
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Less than 1 year
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0
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1 year but less than 2 years
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20
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2 years but less than 3 years
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40
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3 years but less than 4 years
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60
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4 years but less than 5 years
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80
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5 years or more
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100
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%
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Employer discretionary contributions are based on cliff vesting attained at five years of
service.
Payment Of Benefits
Benefits under the Plan are paid upon separation from service, death, disability, or
retirement. Upon a participants death, the entire account balance will be paid to his/her
beneficiary. Effective January 1, 2003, In-Service distributions were allowed in the Plan
as well as unscheduled deferral distributions. Beginning January 1, 2006, the unscheduled
deferral distributions are no longer allowed in the Plan for amounts deferred and/or first
vested in 2005 and later years, in accordance with Section 409A of the Internal Revenue Code
(IRC). The Plan will, however, preserve the unscheduled distribution feature with respect
to that portion of the participants account consisting of pre-2005 deferrals and vested
contributions, and the earnings thereon. Hardship withdrawals are permitted for severe
financial hardships, as defined by the Plan. Payment of benefits shall be in the form of a
lump-sum payment or in annual installments over a period not extending beyond the shorter of
ten years or a participants life expectancy or the joint and last survivor expectancy of
the participant and his/her beneficiary. Payment shall be determined each year based upon
the amount of the participants accrued benefit as of the prior December and the remaining
number of payment periods.
- 7 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
Administrative Costs
Certain administrative expenses of the Plan were paid by the Company in 2007 and 2006.
Forfeited Accounts
Employer matching contributions that are forfeited are used to offset the amount of employer
matching contributions to the Plan. Employer matching contributions were reduced by $29,618
and $16,365 from forfeited nonvested accounts in 2007 and 2006, respectively. Nonvested
forfeitures were $0 at December 31, 2007 and 2006.
2.
Summary Of Significant Accounting Policies
Basis Of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting.
Risks And Uncertainties
The Plan provides for various investment options in various combinations of investment
funds. Investment funds are exposed to various risks, such as interest rate, market and
credit risks. Due to the level of risk associated with certain investment securities, it is
at least reasonably possible that changes in the values of investment securities will occur
in the near term and that such changes could materially affect participants account
balances and the amounts reported in the statement of net assets available for benefits.
Use Of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of net assets available for benefits, and
changes therein, and disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
- 8 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
FSP AAG INV-1 And SOP 94-4-1
As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP
94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain
Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution
Health and Welfare and Pension Plans (the FSP), investment contracts held by a
defined-contribution plan are required to be reported at fair value. However, contract
value is the relevant measurement attribute for that portion of the net assets available for
benefits of a defined-contribution plan attributable to fully benefit-responsive investment
contracts because contract value is the amount participants would receive if they were to
initiate permitted transactions under the terms of the Plan. As required by the FSP, the
statement of net assets available for benefits presents the fair value of the investment
contracts. The adjustment of the fully benefit-responsive investment contracts from fair
value to contract value was $0 for 2007 and 2006 as the fair value as determined by the
investment manager was equal to contract value. The statement of changes in net assets
available for benefits is prepared on a contract value basis. The Plan adopted the
financial statement presentation and disclosure requirements of the FSP effective December
31, 2006.
Application Of Accounting Standard
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in a companys financial statements and prescribes a recognition threshold of
more-likely-than-not to be sustained upon examination by the appropriate taxing authority.
Measurement of the tax uncertainty occurs if the recognition threshold has been met. FIN 48
also provides guidance on derecognition, classification, interest and penalties, accounting
in interim periods and disclosure. FIN 48 is effective for annual periods beginning after
December 31, 2007. There was no effect on the Plan.
- 9 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
Investment Valuation and Income Recognition
The Plans investments are stated at fair value. The Plans mutual funds are valued at
quoted market prices, which represent the net asset value of shares held by the Plan at
year-end. ARRIS and C-COR common stocks are stated at market value as quoted on the
National Association of Securities Dealers Automated Quotation System. The guaranteed
investment contract, a declared rate fund, is valued at contract value, which equals fair
value as determined by the investment manager. Purchases and sales of securities are
recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest is
recorded on the accrual basis of accounting.
Payment Of Benefits
Benefits are recorded when paid.
New Accounting Pronouncements
In September 2006, FASB issued Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in accounting principles generally accepted in the United States of
America, and expands disclosure about fair value measurements. SFAS No. 157 applies to
other accounting standards that require or permit fair value measurements. Accordingly, it
does not require any new fair value measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal years. In
February 2008, FASB issued FASB Staff Position (FSP) FAS 157-2, Effective Date of FASB
Statement No. 157, which defers the effective date of SFAS No. 157 for all nonfinancial
assets and liabilities, except those recognized or disclosed at fair value on an annual or
more frequently recurring basis, until years beginning after November 15, 2008 and interim
periods within those years. The Plan has not determined the impact of adopting SFAS 157 and
FSP FAS 157-2.
In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, which permits entities to choose to measure at fair value eligible
financial instruments and certain other items that are not currently required to be measured
at fair value. SFAS No. 159 requires that unrealized gains and losses on items for which
the fair value option has been elected be reported in earnings at each reporting date. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. The Plan is
currently assessing the impact the adoption of SFAS No. 159 will have on the financial
position and results of operations.
- 10 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
3.
Investments
The following table presents investments at December 31, 2007 and 2006. Investments that
represent five percent or more of the Plans net assets are separately identified.
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2007
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2006
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Investments at quoted fair value:
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Mutual funds:
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Money Mart Assets
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$
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1,106,796
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$
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Oppenheimer Global
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461,243
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538,036
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Dryden S&P 500 Index
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449,286
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340,631
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Janus Balanced
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197,560
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197,093
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Fidelity Advisors Equity Income
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191,124
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131,472
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Alliance Bernstein Balanced
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147,945
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*
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184,393
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Other
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527,821
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278,912
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Total mutual funds
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3,081,775
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1,670,537
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ARRIS common stock
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510,587
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C-COR common stock
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557,119
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Investment at contract value, which
equals fair value
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Guaranteed Income Fund
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54,777
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*
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111,689
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*
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Total investments
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$
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3,647,139
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$
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2,339,345
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*
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Denotes less than 5% of Plan assets for the respective Plan Year.
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During the years ended December 31, 2007 and 2006, the Plans investments (including gains and
losses on investments bought, sold, and held during the year) (depreciated) appreciated in
value as follows:
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2007
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2006
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Investments at quoted fair value:
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Mutual funds
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$
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(49,643
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$
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113,537
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Common stock
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(11,149
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)
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314,272
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Net (depreciation) appreciation in fair value
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$
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(60,792
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)
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$
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427,809
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- 11 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
4.
Investment Contract with Insurance Company
The Plan has a benefit-responsive investment contract with Prudential Retirement Insurance and
Annuity Company (Prudential), and contributions are maintained in a general account. The
account is credited with earnings on the underlying investments and charged for participant
withdrawals and administrative expenses. The contract is included in the financial statements
at contract value as reported by Prudential. Contract value represents contributions made
under the contract, plus earnings, less participant withdrawals and administrative expenses.
Participants may ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value. The guaranteed investment contract issuer is contractually
obligated to repay the principal and a specified interest rate that is guaranteed to the Plan.
As described in Note 2, because the guaranteed investment contract is fully benefit-responsive,
contract value is the relevant measurement attribute for that portion of the net assets
available for benefits attributable to the guaranteed investment contract. Contract value, as
reported to the Plan by Prudential, represents contributions made under the contract, plus
earnings, less participant withdrawals and administrative expenses. Participants may
ordinarily direct the withdrawal or transfer of all or a portion of their investment at
contract value. There are no reserves against contract value for credit risk of the contract
issuer or otherwise. The fair value of the investment contract at December 31, 2007 and 2006
was $54,777 and $111,689, respectively. The crediting interest rate is based on a formula
agreed upon with the issuer, but may not be less than 1.00%. The average yield of the
guaranteed income contract was 3.35% in 2007 and 2006. The crediting interest rate was 3.35%
as of December 31, 2007 and 2006. Interest rates are reviewed on a semi-annual basis.
Certain events limit the ability of the Plan to transact at contract value with the issuer.
Such events include the following: (1) amendments to the plan documents (including complete or
partial plan termination or merger with another plan), (2) changes to plans prohibition on
competing investment options or deletion of equity wash provisions, (3) bankruptcy of the plan
sponsor or other plan sponsor events (for example, divestitures or spin-offs of a subsidiary)
that cause a significant withdrawal from the plan, or (4) the failure of the trust to qualify
for exemption from federal income taxes or any required prohibited transaction exemption under
Employee Retirement Income Security Act of 1974. The Plan administrator does not believe that
the occurrence of any such value event, which would limit the Plans ability to transact at
contract value with participants, is probable. Accordingly, the contract value approximates
fair value.
The guaranteed investment contract does not permit Prudential to terminate the agreement prior
to the scheduled maturity date.
- 12 -
C-COR Incorporated
Supplemental Executive Retirement Plan
Notes to Financial Statements
5.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right to terminate the
Plan. No termination of this Plan shall alter the right of the participant (or his/her
beneficiary) to payments of benefits previously credited to such participants contribution
accounts under the Plan.
6.
Tax Status
The Plan is a nonqualified deferred compensation plan which is exempt from certain provisions
of ERISA, as participation is limited to certain highly compensated members of management and
employees who are selected for participation in the Plan. The Plan is not subject to any
provisions of and is not qualified under Section 401(a) of the IRC.
7.
Related-Party Transactions
Plan investments include a general account administered by Prudential. Prudential is the
custodian of the Plan and, therefore, these transactions qualify as party-in-interest
transactions. Additionally, the Plan maintains investments in the Companys common stock.
8.
Stock Conversion
On December 14, 2007, ARRIS completed its acquisition of
100% of the outstanding shares of C-COR. As a result, pursuant to the Agreement and Plan of Merger each issued and outstanding
share of C-COR common stock held in participant accounts was converted into the right to receive $0.688 in cash and 1.0245 shares of ARRIS common stock (plus additional cash in lieu of any fractional shares). The shares held by
participants evidenced the rights acquired in the acquisition as of December 14, 2007 through the date
of conversion. At December 31, 2007, these rights were valued on a per share basis using the respective exchange ratio for the combination
of cash and shares. The rights represented by
shares of ARRIS common stock were valued using the quoted market price of ARRIS common stock at December 31, 2007; whereas the rights of the cash component were recorded
at a fair value of $0.688 per common share and reflected as a receivable to the Plan at December 31, 2007.
Subsequently in January 2008, the conversion of C-COR common stock held by participants was completed.
- 13 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons
who administer the employee savings plan) have duly caused this annual report to be signed by the
undersigned thereunto duly authorized,
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ARRIS GROUP, INC.
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C-COR INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
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By:
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Administrative Committee
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(Plan Administrator)
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/s/ LAWRENCE A. MARGOLIS
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Lawrence A. Margolis
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Executive Vice President,
Strategic Planning,
Adminstration, and Chief Counsel
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Dated:
June 27, 2008
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