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
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Arris Group, 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):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class of securities to which
transaction applies:
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(2)
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Aggregate number of securities to which
transaction applies:
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(3)
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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TABLE OF CONTENTS
ARRIS
GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21,
2009
To the
Stockholders of ARRIS Group, Inc.:
The Annual Meeting of Stockholders of ARRIS Group, Inc. will be
held at the Companys corporate headquarters, located at
3871 Lakefield Drive, Suwanee, Georgia, on Wednesday,
May 21, 2009, at 10:00 a.m. local time, for the
purposes of:
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1.
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electing eight directors;
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2.
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ratifying the retention of Ernst & Young LLP as the
independent registered public accounting firm for ARRIS Group,
Inc. for 2009;
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3.
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approving an amendment to the Companys Employees Stock
Purchase Plan in order to increase the number of shares
available thereunder; and
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4.
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transacting such other business as may be brought before the
meeting or any adjournment(s) thereof.
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These matters are more fully described in the proxy statement
accompanying this notice.
As stockholders of ARRIS, your vote is important. Whether or not
you plan to attend the Annual Meeting in person, it is important
that you vote as soon as possible to ensure that your shares are
represented. Therefore, I urge you to promptly vote and submit
your proxy via the Internet, by telephone or by signing, dating,
and returning the enclosed proxy card in the accompanying reply
envelope. If you decide to attend the annual meeting, you will
be able to vote in person, even if you previously have submitted
your proxy.
The Board of Directors has fixed the close of business on
March 24, 2009, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment(s) thereof. A complete list of the
stockholders entitled to vote at the meeting will be open for
examination at the Companys corporate headquarters by any
stockholder for any purpose germane to the meeting during
ordinary business hours for ten days prior to the meeting and at
the meeting.
A copy of our 2008 annual report is enclosed. Additional copies
of these materials may be obtained without charge by writing the
Secretary of ARRIS Group, Inc., 3871 Lakefield Drive, Suwanee,
Georgia 30024.
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence A. Margolis,
Secretary
Suwanee, Georgia
April 17, 2009
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding Internet Availability of Proxy
Materials for the Shareholder Meeting to be Held on May 21,
2009
The proxy materials for the Companys Annual Meeting of
Shareholders, including the 2008
10-K,
the
Proxy Statement and other materials, are available over the
Internet at
http://www.arrisi.com/proxy
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PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OF ARRIS GROUP, INC.
To Be Held May 21, 2009
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of ARRIS
Group, Inc., a Delaware corporation, in connection with the
Annual Meeting of Stockholders of the Company to be held on
May 21, 2009 at 10:00 a.m. local time at the
Companys corporate headquarters, 3871 Lakefield
Drive, Suwanee, Georgia, and any adjournment(s) thereof. The
Companys corporate headquarters is located at 3871
Lakefield Drive, Suwanee, Georgia 30024 (telephone
678-473-2000).
This proxy statement and form of proxy are first being mailed to
stockholders on or about April 17, 2009.
This solicitation is being made by mail, although directors,
officers and regular employees of the Company may solicit
proxies from stockholders personally or by telephone,
e-mail
or
letter. The costs of this solicitation will be borne by the
Company. The Company may request brokerage houses, nominees or
fiduciaries and other custodians to forward proxy materials to
their customers and will reimburse them for their reasonable
expenses in so doing. In addition, the Company has retained
Morrow & Co., LLC, 470 West Ave., Stamford, CT
06902 to assist in the solicitation for a fee of approximately
$22,500 plus expenses.
VOTING
Shares of Common Stock of the Company represented by proxies in
the accompanying form, which are properly executed and returned
to the Company (and which are not effectively revoked), will be
voted at the meeting in accordance with the stockholders
instructions contained therein. In the absence of contrary
instructions, except as discussed below, shares represented by
such proxies will be voted
IN FAVOR OF
Proposal 1 to
elect as directors the nominees listed herein,
IN FAVOR OF
Proposal 2 to ratify the retention of Ernst &
Young LLP as the independent registered public accounting firm
for the Company for 2009,
IN FAVOR OF
Proposal 3 to
approve the amendment of the Companys Employees Stock
Purchase Plan (ESPP), and in the discretion of the
appointed proxies upon such other business as may properly be
brought before the meeting.
Each stockholder has the power to revoke his or her proxy at any
time before it is voted by (1) delivering to the Company,
prior to or at the meeting, written notice of revocation or a
later dated proxy, or (2) attending the meeting and voting
his or her shares in person.
The Board of Directors has fixed the close of business on
March 24, 2009, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment(s) thereof. As of that date,
123,214,164 shares of Common Stock were outstanding. Each
holder of Common Stock is entitled to one vote per share.
A quorum, which is a majority of the outstanding shares of
Common Stock as of the record date, must be present in order to
hold the meeting. Your shares will be counted as being present
at the meeting if you appear in person at the meeting or if you
submit a properly executed proxy.
A broker non-vote occurs when a nominee holding
shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have the discretionary
voting power with respect to that item and has not received
instructions from the beneficial owner. Broker
non-votes are not deemed to be entitled to vote for
purposes of determining whether stockholder approval of that
matter has been obtained. As a result, broker
non-votes are not included in the tabulation of the
voting results on the election of directors or issues requiring
the approval of a majority of the shares of Common Stock present
or represented by proxy and entitled to vote. Proxies that
contain a broker non-vote are counted towards a quorum and voted
on the matters indicated. If a quorum is
1
present, the votes required to approve the various matters
presented to stockholders at the meeting shall be as follows:
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Proposal 1 (Election of Directors)
The
nominees receiving the most votes i.e., a
plurality will be elected. Abstentions and broker
non-votes will not be counted as votes cast and will have no
effect on the result of the vote.
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Proposal 2 (Retention of Ernst & Young LLP as
the Independent Registered Public Accounting
Firm)
Ratification of the retention of
Ernst & Young LLP as the independent registered public
accounting firm for the Company for 2009 requires the
affirmative vote of holders of a majority of the shares present
or represented by proxy and entitled to vote at the meeting.
Abstentions will have the same effect as a negative vote. Broker
non-votes will have no effect on the outcome of this proposal.
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Proposal 3 (Amendment of ESPP)
Approval
of the amendment of the ESPP requires the affirmative vote of
holders of a majority of the shares present or represented by
proxy and entitled to vote at the meeting. Abstentions will have
the same effect as a negative vote. Broker non-votes will have
no effect on the outcome of this proposal.
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PROPOSAL 1
ELECTION OF DIRECTORS
In the absence of contrary instructions, the proxies received
will be voted for the election as directors of the nominees
listed below, all of whom presently serve on the Board of
Directors, to hold office until the next annual meeting of
stockholders or until their successors are elected and
qualified. Although the Board of Directors does not contemplate
that any nominee will decline or be unable to serve as director,
in either such event the proxies will be voted for another
person selected by the Board of Directors, unless the Board acts
to reduce the size of the Board of Directors in accordance with
the provisions of ARRIS by-laws. The current number of
Directors has been set by the Board at eight. Upon his
re-election at this years Annual Meeting,
Mr. Stanzione is expected to serve as Chairman of the Board.
NOMINEES
TO SERVE FOR A ONE-YEAR TERM EXPIRING IN 2010
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Name:
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Alex B. Best
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Age:
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68
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Director since:
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2003
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ARRIS Board Committee:
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Compensation Committee, Nominating and Corporate Governance
Committee and Technology Committee (Chairman)
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Principal occupation and recent business experience:
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Prior to his retirement in 2000, Mr. Best was the Executive Vice
President of Cox Communications, Inc. From 1986 through 1999, he
served as the Vice President of Engineering of Cox. Since 2000,
Mr. Best has continued to consult for Cox on a part-time basis.
From 1966 through 1986, Mr. Best worked for Scientific-Atlanta
and was involved in nearly every aspect of its cable television
product development and business applications. Mr. Best served
as Chairman of the National Cable Television Associations
Engineering Advisory Committee from 1995 until 2000.
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2
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Name:
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Harry L. Bosco
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Age:
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63
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Director since:
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2002
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ARRIS Board Committee:
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Audit Committee and Nominating and Corporate Governance
Committee (Chairman)
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Principal occupation and recent business experience:
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Since 2000, Mr. Bosco has served as the Chief Executive Officer
and President of OpNext, Inc. As of April 1, 2009, Mr. Bosco
became the Chairman of the Board of OpNext, Inc. and no longer
serves as the Chief Executive Officer and President. From 1965
to 2000, Mr. Bosco held numerous senior management positions
within Lucent Technologies, formerly Bell Labs.
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Other directorships:
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OpNext, Inc.
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Name:
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John Anderson Craig
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Age:
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66
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Director since:
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1998
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ARRIS Board Committee:
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Audit Committee and Compensation Committee
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Principal occupation and recent business experience:
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Mr. Craig is a business consultant. From 1999 through 2000, Mr.
Craig was Chief Marketing Officer of Nortel Networks, Inc. From
1981 to 1999, he held various senior management positions within
Northern Telecom Inc., now known as Nortel Networks Inc.
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Other directorships:
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Bell Canada International and CAE, Inc.
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Name:
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Matthew B. Kearney
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Age:
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69
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Director since:
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2003
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ARRIS Board Committee:
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Audit Committee (Chairman)
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Principal occupation and recent business experience:
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Prior to his retirement in 1997, Mr. Kearney was the Chief
Financial Officer of Griffin Gaming & Entertainment, Inc.
(formerly Resorts International, Inc.). Mr. Kearney also served
as President of Griffin Gaming & Entertainment, Inc. from
1993 through 1995. Prior to joining Resorts International, Inc.,
Mr. Kearney worked in public accounting for Price Waterhouse
& Co. Mr. Kearney is a CPA (inactive) in New York and
Florida.
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Name:
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William H. Lambert
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Age:
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72
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Director since:
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1997
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ARRIS Board Committee:
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Compensation Committee (Chairman) and Nominating and Corporate
Governance Committee
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Principal occupation and recent business experience:
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Mr. Lambert is retired. From 1988 to 1997, Mr. Lambert served as
the Chairman, President and Chief Executive Officer of TSX
Corporation, which was acquired by ARRIS in 1997. Mr. Lambert
has been a private investor since 1998.
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3
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Name:
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John R. Petty
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Age:
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78
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Director since:
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1993
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ARRIS Board Committee:
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Audit Committee and Nominating and Corporate Governance
Committee. Mr. Petty is also the Lead Independent Director.
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Principal occupation and recent business experience:
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Mr. Petty is the Chairman of TECSEC Incorporated, a data
security company. Mr. Petty also has served as the Chairman of
Federal National Payables, Inc., Federal National Commercial,
Inc., and Federal National Services, Inc., since 1992. Mr. Petty
has been a private investor since 1988.
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Name:
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Robert J. Stanzione
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Age:
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61
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Director since:
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1998
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ARRIS Board Committee:
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Technology Committee
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Principal occupation and recent business experience:
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Mr. Stanzione has been Chief Executive Officer of the Company
since 2000. From 1998 through 1999, Mr. Stanzione was President
and Chief Operating Officer of the Company. Mr. Stanzione has
been Chairman of the Board of Directors since 2003. From 1995 to
1997, he was President and Chief Executive Officer of Arris
Interactive L.L.C. From 1969 to 1995, he held various positions
with AT&T Corporation.
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Other directorships:
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National Cable & Telecommunications Association (NCTA) and
Symmetricom, Inc.
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Name:
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David A. Woodle
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Age:
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53
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Director since:
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2007
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Principal occupation and recent business experience:
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In April 2008, Mr. Woodle became Chairman of the Board and Chief
Executive Officer of NanoHorizons Inc., a nanotechnology company
that specializes in producing nanosilver particles for
anti-microbial applications. Prior to ARRIS acquisition of
C-COR Incorporated on December 14, 2007, Mr. Woodle was
C-CORs Chairman and Chief Executive Officer, positions
that he had held since 2000. Prior to joining C-COR, Mr. Woodle
was Vice President and General Manager of Raytheon E-Systems/HRB
Systems, and led merger transition efforts to successfully
position that company in the wireless data telecommunications
marketplace.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THESE NOMINEES.
4
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the
firm of Ernst & Young LLP to serve as the independent
registered public accounting firm of ARRIS Group, Inc. for the
fiscal year ending December 31, 2009, subject to
stockholder approval. This firm has audited the accounts of the
Company since 1993. If stockholders do not ratify this
appointment, the Committee will consider other independent
registered public accounting firms. One or more members of
Ernst & Young LLP are expected to be present at the
Annual Meeting, will be able to make a statement if they so
desire, and will be available to respond to appropriate
questions.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM.
PROPOSAL 3
APPROVAL OF AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE
PLAN
Recommendation.
The Board of Directors has
approved an amendment and restatement of the Companys
Employee Stock Purchase Plan (the ESPP) to increase
the number of shares reserved for issuance under the ESPP from
1,800,000 shares to 3,800,000 shares, an increase of
2,000,000 shares, and make minor compliance changes to the
ESPP. A copy of the ESPP reflecting the proposed amendments is
attached to this Proxy Statement as Appendix A.
Purpose.
The purpose of the ESPP is to align
more closely the interest of Company employees with those of the
Company and its stockholders by providing employees of the
Company and specified subsidiaries the opportunity to purchase
shares of common stock at favorable prices and terms. The
proposed amendment to the ESPP would increase the number of
shares reserved for issuance under the ESPP from 1,800,000 to
3,800,000, subject to adjustments to reflect certain
circumstances. The proposed amendment also makes minor changes
to the ESPP in order to clarify its administration.
Administration and Amendment.
The Plan is
administered by the Compensation Committee of the Companys
Board of Directors. Subject to the provisions of the ESPP, the
Committee has the authority and responsibility for the
interpretation, administration and application of the provisions
of the ESPP. The Board of Directors or the Compensation
Committee may, from time to time, suspend, terminate, revise or
amend the ESPP or the terms of any grant except that, without
the approval of stockholders, no such revision or amendment may
increase the number of shares subject to the ESPP, reduce the
exercise price provided in the ESPP, or cause the ESPP not to be
in conformance with the requirements of Section 423 of the
Internal Revenue Code of 1986.25 amended (the code).
Participation.
All employees of the Company or
any subsidiary of the Company (provided the Company authorizes
such subsidiary to participate) whose customary employment is
twenty hours or more per week are eligible to purchase shares
through regular payroll deductions. However, no employee who
owns (directly or indirectly), or holds options to purchase 5%
or more of the Companys or any subsidiarys voting
securities may participate in the ESPP.
Number of Shares.
As of the date of this
proxy, only 194,814 shares remained available for purchase
by participants. As amended, the ESPP would provide for the
issuance of 2,194,814 of the Companys authorized but
unissued shares of common stock. Of this amount
2,000,000 shares are subject to stockholder approval of
this Proposal. The ESPP share reserves are subject to
adjustments to reflect certain transactions.
Time and Manner of Exercise.
The Company will
grant eligible employees options to purchase shares through a
payroll deduction program. These options are granted once every
six months on a date specified by the Compensation Committee.
The term of the option is a six-month period beginning on the
date of the grant. Eligible employees are able to designate an
amount to be withheld from their regular pay within the minimum
and maximum limits as specified under the ESPP. No one is
permitted, in any year, to receive an option that would be
exercisable for the first time during any year in a way that
would permit the employee to purchase shares having a total fair
5
market value on the grant date of greater that $25,000. The
maximum number of shares subject to each option is the number of
whole shares which the projected payroll deductions, authorized
by the participant for the option period, would purchase at an
exercise price per share equal to 85% of the fair market value
of a share on the grant date.
Purchase Price.
An option is exercised
automatically on the last day of the six-month option period,
the exercise date, at which time the Company deducts, from the
participants account, an amount which is sufficient to
purchase, at the option price, up to the number of shares
subject to participants option. The balance of the
participants account is refunded to the participant
promptly after the exercise date. The option price per share is
equal to 85% of the fair market value of shares on the grant
date or exercise date, whichever is less.
Withdrawal and Termination of
Employment.
Participation in the ESPP is
terminated when the participant voluntarily withdraws from the
ESPP, resigns or is discharged, or retires or dies. Upon
termination of participation, all funds in the
participants account are refunded to the participant
without interest, except that upon retirement or death, the
participant or the participants executor, as the case may
be, may elect to exercise any outstanding options of the
participant.
Federal Income Tax Consequences.
The ESPP is
intended to be an employee stock purchase plan
within the meaning of Section 423 of the Code. All payroll
deductions elected by a participant under the ESPP are made on
an after-tax basis. So long as the ESPP qualifies under
Section 423 of the Code, no taxable income will be
recognized by a participant, and no deductions will be allowable
to the Company, upon either the grant or the exercise of the
options. Taxable income will not be recognized until there is a
sale or other disposition of the shares acquired under the ESPP
or in the event the participant should die while still owning
the purchased shares.
If the participant sells or otherwise disposes of the purchased
shares within two years after the grant date, the participant
will recognize ordinary income in the year of sale or
disposition equal to the amount by which the fair market value
of the shares on the exercise date exceeded the exercise price
of those shares. Any additional gain or loss upon the
disposition will be taxed as a short-or-long-term capital gain
or loss, depending on if the participant held the stock for more
than one year (long-term if held for more than one year and
short-term if otherwise). If the participant sells or otherwise
disposes of the purchased shares more than two years after the
grant date, then the participant will recognize ordinary income
in the year of sale or disposition equal to the lesser of
(i) the amount by which the fair market value of the shares
on the sale or disposition date exceeded the exercise price paid
for those shares or (ii) 15% of the fair market value of
the shares on the grant. Any additional gain or loss upon the
disposition will be taxed as a long-term capital gain or loss.
If the participant still owns shares acquired under the ESPP at
the time of death, the lesser of (i) the amount by which
the fair market value of the shares on the date of death exceeds
the exercise price or (ii) 15% of the fair market value of
the shares on the grant date will constitute ordinary income in
the year of death.
If the purchased shares are sold or otherwise disposed of within
two years after the participants grant date, the Company
will be entitled to a tax deduction in the year of such sale or
disposition equal to the amount of ordinary income recognized by
the participant as a result of such sale or disposition. In all
other cases, no deduction will be allowed. No withholding is
required by the Company.
New Plan Benefits.
No new plan benefits table
for the ESPP, as amended, is included in this proxy statement.
Participation in the ESPP is voluntary and dependent on each
employees election to participate and his or determination
as to the level of payroll deductions. Accordingly, future
purchases under the ESPP are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE ESPP AMENDMENT
6
SECURITY
OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth, as of March 24, 2009,
certain information with respect to the Common Stock of the
Company that may be deemed beneficially owned by each director
or nominee for director of the Company, the officers named in
the Summary Compensation Table and by all directors, officers
and nominees as a group.
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Shares
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Shares that
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Total Shares
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Beneficially
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May Be Acquired
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Percentage of
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Beneficial Owner(1)
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Owned(2)
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Within 60 Days
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Class if > 1%(3)
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Alex B. Best
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50,100
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2,225
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*
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Harry L. Bosco
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30,400
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2,225
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*
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John Anderson Craig
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60,100
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12,225
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*
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Matthew B. Kearney
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30,100
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2,225
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*
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William H. Lambert
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48,350
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12,225
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*
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John R. Petty
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49,700
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17,225
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*
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David A. Woodle
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58,951
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718,725
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*
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Robert J. Stanzione
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205,327
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1,666,040
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1.5
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%
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Lawrence A. Margolis
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114,496
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475,718
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*
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David B. Potts
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53,891
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275,058
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*
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James D. Lakin
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92,907
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258,140
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*
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Ronald M. Coppock
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46,099
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93,386
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*
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All directors, nominees and executive officers as a group
including the above named persons (16 persons)
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920,650
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4,104,058
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3.9
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%
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*
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Percentage of shares beneficially owned does not exceed one
percent of the class.
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(1)
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Unless otherwise indicated, each person has sole investment
power and sole voting power with respect to the securities
beneficially owned by such person.
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(2)
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Includes an aggregate of 184,950 stock units awarded to
directors (other than Mr. Stanzione) that convert on a
one-for-one basis into shares of Common Stock at a time
predetermined at the time of issuance.
|
|
(3)
|
|
The shares underlying all equity awards that may be exercised
within 60 days are deemed to be beneficially owned by the
person or persons for whom the calculation is being made and are
deemed to have been exercised for the purpose of calculating
this percentage, including the shares underlying options where
the exercise price is above the current market price.
|
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 24,
2009, with respect to each person who is known by the management
of the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock. Unless otherwise indicated,
the beneficial owner has sole voting and investment power and
the information below is based upon SEC filings by the person.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
Percent
|
|
Beneficial Owner
|
|
Beneficial Ownership
|
|
|
of Class
|
|
|
Barclays Global Investors, NA(1)
|
|
|
8,409,722
|
|
|
|
6.8
|
%
|
Dimensional Fund Advisors LP(2)
|
|
|
6,854,104
|
|
|
|
5.6
|
%
|
EARNEST Partners, LLC(3)
|
|
|
8,388,490
|
|
|
|
6.8
|
%
|
Janus Capital Management LLC(4)
|
|
|
9,741,960
|
|
|
|
7.9
|
%
|
Shamrock Activist Value Fund, L.L.C.(5)
|
|
|
7,020,514
|
|
|
|
5.7
|
%
|
Wellington Management Co LLP(6)
|
|
|
6,142,838
|
|
|
|
5.0
|
%
|
|
|
|
(1)
|
|
Based on information included in a Schedule 13G filed
February 5, 2009, Barclays Global Investors, NA has sole
voting power with respect to 6,502,436 shares and sole
dispositive power with respect to 8,409,722 shares. The
address for Barclays Global Investors is 400 Howard
Street, San Francisco, California 94105.
|
7
|
|
|
(2)
|
|
Based on information included in a Schedule 13G filed
February 9, 2009, Dimensional Fund Advisors LP. has sole
voting power with respect to 6,711,749 shares, and sole
dispositive power with respect to 6,854,104 shares. The
address for Dimensional Fund Advisors LP is Palisades West,
Building One, 6300 Bee Cave Road, Austin, Texas 78746.
|
|
(3)
|
|
Based on information included in a Schedule 13G/A filed
February 13, 2009, EARNEST Partners LLC, has sole voting
power with respect to 2,677,972 shares, shared voting power
with respect to 1,941,799 shares, and sole dispositive
power with respect to 8,388,490 shares. The address for
EARNEST Partners LLC, is 1180 Peachtree Street NE,
Suite 2300, Atlanta, Georgia 30309.
|
|
(4)
|
|
Based on information included in a Schedule 13G/A filed
February 17, 2009. The address for Janus Capital Management
LLC is 151 Detroit Street, Denver, Colorado 80206.
|
|
(5)
|
|
Based on information included in a Schedule 13D filed
December 1, 2008. The address for Shamrock Partners
Activist Value Fund, L.L.C. is 4444 W. Lakeside Drive,
Burbank, California 91505.
|
|
(6)
|
|
Based on information included in a Schedule 13G/A filed
February 17, 2009, Wellington Management CO LLP has shared
dispositive power with respect to 6,089,938 shares, and
shared voting power with respect to 4,589,938 shares. The
address for Wellington Management CO LLP is 75 State Street,
Boston, MA 02109.
|
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers and persons who
own more than ten percent of a registered class of the
Companys equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of the
Companys Common Stock and other equity securities. To the
Companys knowledge, based solely on review of the copies
of such reports furnished to the Company or filed with the SEC
and written representations that no other reports were required,
for the fiscal year ended December 31, 2008 all
Section 16(a) filing requirements applicable to its
directors, executive officers and
greater-than-ten-percent
beneficial owners were properly filed, with the exception of
late reports for each of Ronald Coppock, Marc Geraci, Bryant
Isaacs, James D. Lakin, Lawrence A. Margolis, Bruce McClelland,
David B. Potts and Robert J. Stanzione related to the
April 18, 2008 withholding of taxes from the restricted
stock lapse and for Alex B. Best and John Ian Craig for the
purchase of shares on February 19, 2008 and May 2,
2008, respectively.
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth information concerning Common
Stock that may be issued upon exercise of options, warrants and
rights under all equity compensation plans as of
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average
|
|
|
Equity Compensation
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights(1)
|
|
|
Warrants and Rights(2)
|
|
|
1st Column)(3)
|
|
|
Equity compensation plans approved by security holders
|
|
|
13,421,107
|
|
|
$
|
9.19
|
|
|
|
13,868,352
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,421,107
|
|
|
$
|
9.19
|
|
|
|
13,868,352
|
|
|
|
|
(1)
|
|
Includes unexercised vested stock options, unvested stock
options, unvested restricted stock, and unvested performance
shares. Also includes 4,708,354 of stock options issued as a
result of the C-COR acquisition in December 2007.
|
|
(2)
|
|
The weighted-average exercise price is calculated on the
outstanding options and does not include restricted stock or
rights with no exercise price.
|
|
(3)
|
|
Includes securities available for future issuance under
ARRIS stock incentive plans (13,673,538) and 2001 Employee
Stock Purchase Plan (194,814).
|
8
BOARD AND
COMMITTEE MATTERS
DIRECTOR
INDEPENDENCE
For purposes of determining the independence of its directors,
the Board of Directors has adopted the definition of
independence used in the listing standards of the NASDAQ. It
also considers the definition of independence used in the
Internal Revenue Code and Securities Exchange Act of 1934 for
purposes of determining whether members of the Audit Committee
and Compensation Committee are independent. In making
determinations, the Board of Directors considers that in the
ordinary course of business, transactions may occur between the
Company and companies at which some of the Directors are or have
been outside Directors. The Board of Directors determines
whether the transaction and whether it has any implications to
the directors independence. A copy of the director
independence standards is available on the Companys
website at
www.arrisi.com
under the caption
Investor
Relations: Corporate Governance
. Based upon these standards,
the Board of Directors has determined that all of the directors,
other than Robert J. Stanzione and David A. Woodle, who
constitute a majority of the Board of Directors, are
independent. Mr. Stanzione, as the Companys Chief
Executive Officer and President, and Mr. Woodle, as a
former officer of C-COR, are not considered independent.
COMPENSATION
OF DIRECTORS
2008 and
2009 Compensation
Cash Fees.
The non-employee directors receive
director fees. During 2008, the Company paid its non-employee
directors:
|
|
|
|
|
an annual cash retainer of $30,000 (paid in equal quarterly
installments);
|
|
|
|
$2,000 for each Board meeting and $1,000 for each committee
meeting that they attended in person or;
|
|
|
|
$2,000 for each teleconference Board meeting and $1,000 for each
teleconference committee meeting in which they
participated; and
|
|
|
|
$1,000 for each in-person Board meeting and $500 for each
in-person committee meeting that they attended by telephone
|
For 2009, the annual cash retainer has been increased to $40,000
and all Board meeting fees have been eliminated. Committee
meetings fees remain unchanged. Starting in 2009, the Lead
Independent Director, John Petty, will receive an
additional annual cash retainer of $10,000. Each member of the
Audit Committee will continue to receive an additional annual
cash retainer of $5,000, and the respective Chairmen of our
Board committees will continue to receive the following
additional annual cash retainers:
|
|
|
|
|
Audit Committee: $10,000
|
|
|
|
Compensation Committee: $7,500
|
|
|
|
Nominating and Corporate Governance Committee: $5,000
|
|
|
|
Technology Committee: $5,000
|
Stock Awards and minimum holding
requirement.
Each non-employee director also
receives annual compensation paid in the form of stock units.
Stock units have been granted as of July 1 of each year and vest
in fourths in sequential calendar quarters. The number of units
is determined by dividing the dollar amount of the award by the
closing price of the Common Stock on the most recent trading day
rounded to the nearest one hundred units. One-half of the number
of stock units converts, on a
one-for-one
basis, into shares of the Companys Common Stock when such
director is no longer a member of the Board. The remaining
units, if vested, convert, on a
one-for-one
basis, into shares of the Companys Common Stock at a date
selected by the individual director. The number of shares that
are granted to directors that they do not convert until no
longer a director
i.e.
, a hold until
retirement period functions as a minimum
holding requirement. The number of units held by each director
that do not convert until he is no longer a director is set
forth in the table below under the caption Director Compensation
Table.
9
For 2008, the stock award grant portion of director compensation
was $50,000. For 2009, the stock award portion of director
compensation has been increased to $75,000. Of the 2009 total
award, $50,000 continues to be paid in stock units as of
July 1, as described above. The additional $25,000 was paid
as of January 2, 2009 and vests in fourths in sequential
calendar quarters.
Reimbursements.
Non-employee directors are
reimbursed for reasonable expenses (including costs of travel,
food and lodging) incurred in attending Board, committee and
shareholder meetings. Directors also are reimbursed for
reasonable expenses associated with other business activities
related to their Board service, including participation in
director education programs and memberships in director
organizations.
Liability Insurance.
The Company maintains
customary directors and officers liability insurance
and is obligated under its bylaws to indemnify its officers and
directors under certain circumstances.
Director Compensation Table.
The following
tables set forth information about the compensation paid to the
non-employee members of the Board of Directors for the last
fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Held
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
Until Board
|
|
Name(1)
|
|
Paid in Cash ($)
|
|
|
Stock Awards ($)
|
|
|
Total Compensation ($)
|
|
|
Retirement
|
|
|
Alex B. Best
|
|
|
59,000
|
|
|
|
49,682
|
(2)
|
|
|
108,682
|
|
|
|
14,700
|
|
Harry L. Bosco
|
|
|
61,000
|
|
|
|
49,682
|
(2)
|
|
|
110,682
|
|
|
|
23,800
|
|
John Anderson Craig
|
|
|
61,000
|
|
|
|
49,682
|
(2)
|
|
|
110,682
|
|
|
|
50,100
|
|
Matthew B. Kearney
|
|
|
57,500
|
|
|
|
49,682
|
(2)
|
|
|
107,682
|
|
|
|
23,900
|
|
William H. Lambert
|
|
|
56,500
|
|
|
|
49,682
|
(2)
|
|
|
106,682
|
|
|
|
47,650
|
|
John R. Petty
|
|
|
63,000
|
|
|
|
49,682
|
(2)
|
|
|
112,682
|
|
|
|
17,600
|
|
David A. Woodle
|
|
|
40,000
|
|
|
|
36,984
|
(3)
|
|
|
76,984
|
|
|
|
4,300
|
|
|
|
|
(1)
|
|
Mr. Stanzione, as an employee of the Company, receives no
additional compensation for his service and participation as a
member of the Board.
|
|
(2)
|
|
Historically, the non-employee members of the Board of Directors
received stock units granted on July 1 each year that vested
quarterly through June 30 of the following year. Therefore, the
2008 fiscal year stock awards compensation is comprised half
from the July 1, 2007 grant and half from the July 1,
2008 grant. The number of stock units granted on July 1,
2007 was 2,800 per member, which was determined by dividing
$50,000 by the June 29, 2007 closing price of $17.59 per
share and rounding to the nearest 100 units. The number of
stock units granted on July 1, 2008 was 5,800, which was
determined by dividing $50,000 by the July 1, 2008 closing
price of $8.64 per share and rounding to the nearest
100 units. As of December 31, 2008, the number of
vested stock awards for the grant on July 1, 2008,
consisted solely of restricted stock units, held by each
non-employee director is as follows: Alex B. Best, 2,900; Harry
L. Bosco, 2,900; John A. Craig, 2,900; Matthew B. Kearney,
2,900; William H. Lambert, 2,900; and John R. Petty, 2,900.
|
|
(3)
|
|
David A. Woodle joined the board as of December 14, 2007.
Had he been a member of the board as of July 1, 2007 he
would have received 2,800 stock units as described above. Since
he only served on the board for a portion of the term related to
the July 1, 2007 grant, he received a prorated amount of
1,400 stock units. These units were granted on May 28, 2008
based on the closing price of the stock that day which was
$8.52. Therefore the 2008 calendar year stock awards expense is
comprised of the expense from the May 28, 2008 grant and
half of the expense from the July 1, 2008 grant. As of
December 31, 2008, 2,900 of the units granted on
July 1, 2008 to David A. Woodle had vested.
|
10
COMMITTEES
OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors has standing Audit, Compensation,
Nominating and Corporate Governance, and Technology committees.
The table below shows current membership for each of the Board
committees.
|
|
|
|
|
|
|
|
|
Compensation
|
|
Nominating and Corporate
|
|
Technology
|
Audit Committee
|
|
Committee
|
|
Governance Committee
|
|
Committee
|
|
Harry L. Bosco
|
|
Alex B. Best
|
|
Alex B. Best
|
|
Alex B. Best*
|
John Anderson Craig
|
|
John Anderson Craig
|
|
Harry L. Bosco*
|
|
Robert J. Stanzione
|
Matthew B. Kearney*
|
|
William H. Lambert*
|
|
William H. Lambert
|
|
|
John R. Petty
|
|
|
|
John R. Petty
|
|
|
The Board of Directors held five meetings in 2008. During 2008,
each of the directors attended 75% or more of the total of all
meetings held by the Board and the committees on which the
director served.
The Company has not adopted a formal policy on Board
members attendance at annual meetings of stockholders;
however, all directors are encouraged to attend the meetings.
All of the Companys directors attended the 2008 annual
meeting of stockholders on May 28, 2008.
Audit
Committee
The Audit Committee in 2008 consisted of Messrs. Petty
(Chairman), Bosco, Craig, and Kearney. On February 24, 2009
Mr. Kearney became Chairman of the Committee. The
membership of the Committee was not otherwise changed.
Information regarding the functions performed by the Audit
Committee is set forth in the Report of the Audit
Committee, included in this proxy statement. The Audit
Committee is governed by a written charter that is available on
the Companys website at
www.arrisi.com
. The Board
of Directors believes that each of its Audit Committee members
is independent and financially literate as defined by the SEC
and the current listing standards of the NASDAQ. The Board has
identified John R. Petty and Matthew B. Kearney as audit
committee financial experts, as defined by the SEC. The
Audit Committee held eleven meetings in 2008.
Compensation
Committee
The Compensation Committee in 2008 consisted of
Messrs. Lambert (Chairman), Best and Craig. No member of
the Compensation Committee is currently or has served as an
executive officer or employee of the Company and none of the
members of the Compensation Committee had any
interlocks within the meaning of Item 407(e)(4)
of the SEC
Regulation S-K
during fiscal 2008. The Compensation Committee is governed by a
written charter that is available on the Companys website
at
www.arrisi.com
. The Compensation Committee determines
the compensation for our executive officers and non-employee
directors, establishes our compensation policies and practices,
and reviews annual financial performance under our employee
incentive plans. The Compensation Committee generally exercises
all powers of the Board of Directors in connection with
compensation matters, including incentive compensation, benefit
plans and stock grants, except as relates to the Chairman and
CEO, in which case the entire Board of Directors approves or
ratifies all said compensation matters. The Compensation
Committee held six meetings in 2008.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee in 2008
consisted of Messrs. Bosco (Chairperson), Best, Lambert,
and Petty. The Nominating and Corporate Governance
Committees operations are governed by a written charter
that is available on the Companys website at
www.arrisi.com
. The Nominating and Corporate Governance
Committee identifies individuals qualified to become directors
and recommends candidates to the Board of Directors. The
Nominating and Corporate Governance Committee held two meetings
in 2008.
The Nominating and Corporate Governance Committee supervises the
conduct of director self-evaluation procedures including the
performance of an anonymous survey of directors as to the
Boards processes and effectiveness and governance
practices in general. The Nominating and Governance Committee
together with the
11
Board actively review succession issues and plans for both
management and the Board of Directors. It is anticipated that at
least one new member of the Board with specific industry
expertise or experience may be appointed during the next year or
two.
With respect to the Committees evaluation of director
nominee candidates, the Committee considers each candidate on
his or her own merits. In evaluating candidates, there are a
number of criteria that the Committee generally views as
relevant and is likely to consider. Some of these factors
include the candidates:
|
|
|
|
|
career experience, particularly experience that is germane to
the Companys business, such as telecommunications products
and services, legal, human resources, finance, marketing, and
regulatory experience;
|
|
|
|
whether the candidate is an audit committee financial
expert (as defined by the SEC);
|
|
|
|
experience in serving on other boards of directors or in the
senior management of companies that have faced issues generally
of the level of sophistication that the Company faces;
|
|
|
|
contribution to diversity of the Board of Directors;
|
|
|
|
integrity and reputation;
|
|
|
|
ability to work collegially with others;
|
|
|
|
whether the candidate is independent;
|
|
|
|
other obligations and time commitments and the ability to attend
meetings in person; and
|
|
|
|
current membership on the Board the Board values
continuity (but not entrenchment).
|
The Committee does not assign a particular weight to the
individual factors. Similarly, the Committee does not expect to
see all (or even more than a few) of these factors in any
individual candidate. Rather, the Committee looks for a mix of
factors that, when considered along with the experience and
credentials of the other candidates and existing Board members,
will provide stockholders with a diverse and experienced Board
of Directors.
With respect to the identification of nominee candidates, the
Board recommends candidates whom they are aware of personally or
by reputation. The Company historically has not utilized a
recruiting firm to assist in the process but could do so in the
future.
The Committee welcomes recommendations from stockholders. The
Committee evaluates a candidate for director who was recommended
by a stockholder in the same manner that the Committee evaluates
a candidate recommended by other means. In order to make a
recommendation, the Committee asks that a stockholder send the
Committee:
|
|
|
|
|
a resume for the candidate detailing the candidates work
experience and credentials;
|
|
|
|
written confirmation from the candidate that he or she
(1) would like to be considered as a candidate and would
serve if nominated and elected, (2) consents to the
disclosure of his or her name, (3) has read the
Companys Policy on Business Ethics and Conduct and that
during the prior three years has not engaged in any conduct
that, had he or she been a director, would have violated the
Policy or required a waiver, (4) is, or is not,
independent as that term is defined in the
Committees charter, and (5) has no plans to change or
influence the control of the Company;
|
|
|
|
the name of the recommending stockholder as it appears in the
Companys books, the number of shares of Common Stock that
are owned by the stockholder and written confirmation that the
stockholder consents to the disclosure of his or her name. (If
the recommending person is not a stockholder of record, he or
she should provide proof of share ownership);
|
|
|
|
personal and professional references, including contact
information; and
|
|
|
|
any other information relating to the candidate required to be
disclosed in a proxy statement for election of directors under
Regulation 14A of the Securities Exchange Act of 1934 (the
Exchange Act).
|
12
This information should be sent to the Nominating and Corporate
Governance Committee,
c/o Corporate
Secretary, ARRIS Group, Inc., 3871 Lakefield Drive, Suwanee, GA
30024, who will forward it to the chairperson of the Committee.
The Committee does not necessarily respond to recommendations.
The nomination must be accompanied by the name and address of
the nominating stockholder and must state the number of shares
held. For potential nominees to be considered at the 2010 annual
stockholders meeting, the Corporate Secretary must receive
this information by December 15, 2009.
In addition to the procedures described above for recommending
prospective nominees for consideration by the Committee,
stockholders may directly nominate directors for consideration
at any annual meeting of stockholders.
Technology
Committee
The Technology Committee consists of Mr. Best (Chairman)
and Mr. Stanzione. The Technology Committee monitors the
development of the Companys technology and operates as an
intermediary between the Company and its customers and the
Technology Advisory Board of the Company.
Executive
Committee
The Board of Directors formerly had an Executive Committee
consisting of Mr. Bosco (Chairman), Mr. Kearney,
Mr. Lambert and Mr. Petty. The Executive Committee was
formed of independent directors to consider and act on matters
when the full Board cannot be convened and action by an
executive committee is deemed appropriate by the full Board. The
Executive Committee held one meeting in 2008. The Executive
Committee was dissolved in May 2008 since it was rarely used and
a special committee could be established if and when the need
arises.
Executive
Sessions
The Board of Directors traditionally has held regular Executive
Sessions where members of management (including
Mr. Stanzione) are excluded. The Companys Governance
Guidelines recently have been amended to require that the Board
meet in Executive Session at each regular Board meeting. The
Lead Independent Director presides over Executive Sessions.
Lead
Independent Director
The Companys Governance Guidelines recently were amended
to require that at any time the Board of Directors does not have
an Independent Chairman, the Board of Directors must have a Lead
Independent Director. The Lead Independent Director presides
over Executive Sessions of the Board of Directors and other
meetings where the Chairman is not present. The Lead Independent
Director also approves the agenda for Board meetings and
approves the information sent to the Board. He also is the
liaison between the Chairman and the independent directors and
may call meetings of the independent directors. Lastly, he is
available for consultation and direct communications, if so
requested by a major shareholder and has various other
communications and administrative responsibilities.
Mr. Petty currently is the Lead Independent Director.
COMMUNICATION
WITH THE BOARD
Stockholders may communicate with the Board of Directors,
including the Lead Independent Director, by sending a letter to
the ARRIS Group, Inc. Board of Directors,
c/o Corporate
Secretary, ARRIS Group, Inc., 3871 Lakefield Drive,
Suwanee, GA 30024. The Corporate Secretary will submit the
correspondence to the Lead Independent Director or to any
specific director to whom the correspondence is directed.
13
REPORT OF
THE AUDIT COMMITTEE
Pursuant to its written charter, the Audit Committee oversees
the Companys financial reporting process on behalf of the
Board of Directors. Our responsibility is to monitor and review
these processes. It is not our duty or our responsibility to
conduct auditing or accounting reviews or procedures. We are not
employees of the Company and we do not represent ourselves to
be, or to serve as, accountants or auditors by profession.
Therefore, we have relied, without independent verification, on
managements representation that the consolidated financial
statements have been prepared with integrity and objectivity and
in conformity with U.S. generally accepted accounting
principles and on the representations of the independent
registered public accounting firm included in their report on
the Companys consolidated financial statements. Our
oversight does not provide us with an independent basis to
determine that management has maintained appropriate accounting
and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Furthermore, our considerations and discussions with management
and the independent registered public accounting firm do not
assure that the Companys consolidated financial statements
are presented in accordance with U.S. generally accepted
accounting principles, that the audit of our Companys
consolidated financial statements has been carried out in
accordance with the standards of the Public Company Accounting
Oversight Board (United States) or that our Companys
independent registered public accounting firm is in fact
independent.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal controls. In fulfilling our oversight responsibilities,
we reviewed the audited financial statements in the Annual
Report with management, including a discussion of the quality,
not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the disclosures in
the financial statements.
We reviewed with the independent registered public accounting
firm, who is responsible for expressing an opinion on the
conformity of those audited financial statements with
U.S. generally accepted accounting principles, its
judgments as to the quality, not just the acceptability of the
Companys accounting principles required by Statement on
Auditing Standards No. 61, as amended by Statement of
Auditing Standards No. 90, and such other matters as are
required to be discussed with the Committee under the standards
of the Public Company Accounting Oversight Board (United
States). In addition, we discussed with the independent
registered public accounting firm their independence from
management and the Company, including the matters in the written
disclosures required by the Public Company Accounting Oversight
Board Rule 3526, and considered the compatibility of
nonaudit services provided by the independent registered public
accounting firm to the Company with their independence.
We discussed with the Companys internal auditors and
independent registered public accounting firm the overall scope
and plans for their respective audits. We met with the internal
auditors and the independent registered public accounting firm,
with and, as deemed advisable, without management present, to
discuss the results of their examinations, their evaluations of
the Companys internal controls and the overall quality of
the Companys financial reporting. We reviewed proposed
interim financial statements with management and the independent
registered public accounting firm. We oversaw the Companys
compliance with Section 404 of the Sarbanes-Oxley Act of
2002.
In 2008, we had eleven meetings. In reliance on the reviews and
discussions referred to above, we recommended to the Board of
Directors (and the Board of Directors has accepted that
recommendation) that the audited financial statements be
included in the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, for filing
with the Securities and Exchange Commission. In addition, we
have appointed Ernst & Young LLP as the Companys
independent registered public accounting firm for calendar year
2009, subject to stockholder ratification.
The Company maintains a corporate governance hotline system in
which employees may directly contact the members of the Audit
Committee concerning potential failures to meet corporate
standards of conduct, including questionable accounting or
auditing matters. These calls are completely confidential and
anonymous.
John R. Petty, Chairman until February 24, 2009
Harry L. Bosco
John A. Craig
Matthew B. Kearney, Chairman
14
Notwithstanding anything to the contrary which is or may be
set forth in any of the Companys filings under the
Securities Act of 1933 or the Exchange Act that might
incorporate Company filings, including this proxy statement, in
whole or in part, the preceding Report of the Audit Committee
shall not be incorporated by reference into any such filings.
EXECUTIVE
COMPENSATION
Summary
Each of the named executive officers has an employment agreement
with the Company. Employment agreements were amended in November
2008, primarily to assure compliance with the requirements of
section 409A of the Internal Revenue Service and for other
harmonizing changes. Each agreement establishes the base salary
for the officer, which is subject to annual review. The target
bonus is established at 60% of base salary for each of the named
executive officers, except Mr. Stanzione, whose target
bonus is 100% of base salary. Each year the Compensation
Committee establishes the performance criteria for the bonuses.
The agreements also contemplate the grant of equity awards
annually in the discretion of the Compensation Committee. The
agreements renew annually automatically until the employee
reaches age 65 In the event an executive is terminated
without cause or in connection with a change of control of the
Company, the executive is entitled to receive one years
salary and bonus (two years in the case of Mr. Margolis and
Mr. Potts and three years in the case of
Mr. Stanzione); all unvested options and stock awards vest
immediately and the executive is entitled to continued benefits,
for example, life, medical and disability insurance, during the
severance period (one, two or three years as noted above).
The Compensation Committee reviews base salaries, bonus plans
and equity awards annually. It regularly, but not necessarily
annually, retains consultants, who are not engaged by management
for any other matters, to review executive compensation levels
compared to selected peer companies, companies in the technology
industries generally and companies of similar size. The Company
has sought to establish salaries at approximately the median
levels (with exceptions to recognize outstanding performance)
and to have equity and annual bonus target opportunities at or
above median levels. The survey conducted for the Companys
deliberations for 2008 compensation decisions indicated that,
taken as a whole, the Companys base salaries, target
annual incentive, and targeted long term equity compensation are
at or moderately above median levels. Compensation has been
actively managed. For example, in 2002 salary levels for
executives were frozen for a year and during 2003 executive
salaries were reduced by 5%. The reduction was reinstated in
2004. Raises were not reinstated above the 2002 level until 2005
(with the exception of Mr. Stanzione whose salary was not
changed until 2006). In 2009, normal annual merit raises for the
2009 year (which normally would go into effect
April 1, 2009) have been deferred and no raises have
occurred for 2009. It is possible that the Compensation
Committee may reconsider this deferral if business conditions or
performance warrant reconsideration. ARRIS shareholder
return has been affected by the current financial downturn.
ARRIS total shareholder return for the three years ended
December 31, 2008 was down approximately 16.1% which was
above the NASDAQ composite performance, which was down
approximately 28.5%.
Compensation
Discussion and Analysis (CD&A)
Overview
This CD&A describes the major elements of our compensation
program for the executive officers named in the Summary
Compensation Table later in this proxy statement (the
named executive officers or NEO). This
CD&A also discusses the objectives, philosophy and
decisions underlying the compensation of the named executive
officers. The CD&A should be read together with the
executive compensation tables and related footnotes found later
in this proxy statement.
Authority over compensation of the Companys senior
executives is within the province of the Compensation Committee
of our Board of Directors. The Compensation Committee is
composed entirely of independent directors, as determined under
the applicable NASDAQ listing standards and Section 162(m)
of the Internal Revenue Code. The Compensation Committee reviews
and approves executive compensation programs and specific
compensation arrangements for the executive officers. The
Compensation Committee reports to the Board, and all
compensation
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decisions with respect to the Chief Executive Officer are
reviewed and approved by the whole Board, without participation
by the Chief Executive Officer.
The principal elements of our executive compensation program for
2006, 2007 and 2008 were:
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Base salary;
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Annual, performance-based cash incentives (Bonus);
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Long-term equity incentives;
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Benefits and perquisites; and
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A change in control severance pay plan and other severance pay
arrangements and practices.
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Programs
and Objectives and Reward Philosophy
Our Compensation Committee is guided by the following key
objectives and reward philosophies in the design and
implementation of our executive compensation program:
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Competitive Pay.
Competitive compensation
programs are required to attract and retain a high-performing
executive team, particularly for a technology focused company.
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Pay for performance.
Our compensation program
must motivate our executive officers to drive ARRIS
business and financial results and is designed to reward both
near-term performance as well as sustainable performance over a
longer period through equity compensation. The at
risk portion of total compensation (i.e., the incentive
programs under which the amount of compensation realized by the
executive is not guaranteed, and increases with higher levels of
performance) should be a significant component of an
executives compensation.
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Alignment with shareholders.
Our
executives interests must be aligned with the interests of
our shareholders. Our compensation program should motivate and
reward our executives to drive performance which leads to the
enhancement of long-term shareholder value.
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Key
Considerations
In applying these program objectives and reward philosophies,
the Compensation Committee takes into account the key
considerations discussed below:
Competitive Market Assessment.
We regularly,
but not necessarily annually, conduct a competitive market
assessment for each of the primary elements of our executive
compensation program. In setting executive compensation levels,
the Compensation Committee reviews market data from the
following sources:
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Peer Group Information.
The Compensation
Committee considers information from the proxy statements of
peer group public companies. The peer group is
composed primarily of communications infrastructure companies.
The peer group was selected by the Compensation Committee based
on input from third party consultants and management. The
following companies were included in our peer group for 2007 and
2008:
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3Com Corporation
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JDS Uniphase Corporation
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ADC Telecommunications
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Loral Space & Communications Ltd.
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Avocent Corporation
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Mastec, Inc.
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Black Box Corporation
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Netgear, Inc.
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Ciena Corporation
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Plantronics, Inc.
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CommScope, Inc.
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Polycom, Inc.
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Dycom Industries, Inc.
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Powerwave Technologies
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Hughes Communications, Inc.
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Tellabs, Inc.
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Survey Data.
Survey data from various sources
also are utilized, including the following:
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ERI Executive Compensation Assessor 2008 (Economic Research
Institute)
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2007/2008 Top Management Compensation Industry
Report (Watson Wyatt)
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2007 Mercer Benchmark Database Executive (Mercer Human Resources
Consulting)
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Information from Longnecker &
Associates.
Our Compensation Committee also
considers competitive market information and the recommendations
provided by Longnecker & Associates, an independent
advisor retained by the Compensation Committee, and not retained
by management for other matters.
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Our Financial and Strategic Objectives.
Each
year our management team develops an annual operating plan for
review and approval by our Board of Directors. The Compensation
Committee utilizes the financial plan in the development of
compensation plans and performance goals for our named executive
officers for the next year.
Considerations for Mr. Stanzione.
In
setting the compensation arrangements for Mr. Stanzione,
the primary factors considered by the Compensation Committee
include:
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An assessment of his skill set, experience and recent
performance, as well as his performance over a sustained period
of time, (based on evaluations from the entire Board);
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The financial and strategic results achieved by ARRIS for the
last year relative to the pre-established objectives in our
annual operating plan;
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Other strategic and operational factors critical to the
long-term success of our business;
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The competitive market survey information described
above; and
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Guidance from the Compensation Committees independent
compensation consultant.
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Considerations for Other Named Executive
Officers.
The Compensation Committee considers
the same factors in setting the compensation arrangements for
each of the other named executive officers as well as:
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Mr. Stanziones assessment and recommendation of the
named executive officers individual performance and
contributions to our performance for the most recent year as
well as the performance and contributions made over a sustained
period of time (through both positive and negative business
cycles); and
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An evaluation of the skill set and experience of each named
executive officer, including an assessment of how effective or
unique the skill set is, how difficult it would be to replace
and the relative importance of that particular skill set to the
accomplishment of our business objectives and each named
executives ability to assume additional responsibility.
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Accounting, Tax and Financial
Considerations.
The Compensation Committee
carefully considers the accounting, tax and financial
consequences of the executive compensation and benefit programs
implemented by us. These were important considerations in
connection with the design of the following compensation
programs:
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Our Stock Incentive Plan (SIP) and Annual Incentive
Plan (AIP) were designed to allow for
tax-deductibility of performance based stock awards, stock
options, and annual cash incentive awards, respectively, under
Section 162(m) of the Internal Revenue Code. The AIP and
the issuance of grants and awards under the SIP are topics
discussed in greater detail later in this CD&A.
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We have taken steps to ensure that our supplemental retirement
plans and executive employment agreements, including change in
control, comply with the recently implemented regulations on
non-qualified deferred compensation under Section 409A of
the Internal Revenue Code.
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In recent years, the Compensation Committee made a decision not
to use stock options as the sole form of long-term equity
incentives and began using a mix of stock options and restricted
stock with time-based vesting. During 2008 and 2009, all awards
were made in the form of restricted stock with one half of the
awards granted to Executives in the form of performance based
restricted shares. This change was made, in part, due to the
implementation of new accounting regulations under
SFAS 123(R) concerning the expensing of equity-based
incentive awards and to reduce the dilution associated with
long-term equity compensation. Given the increasing trend in
favor of using restricted shares instead of stock options, it is
anticipated that future long-term equity awards will be in the
form of restricted shares (including performance shares for
senior executives) and not stock options. The timing and amount
of expense recorded for each of these
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various forms of equity awards will vary depending on the
requirements of SFAS 123(R). The use of these various forms of
long-term equity compensation awards for each of our named
executive officers is discussed in greater detail later in this
CD&A.
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The Company adopted a clawback policy that enables
the Company to recoup compensation paid to certain executives if
that compensation was based on (i) financial results or
operating metrics satisfied as a result of fraudulent or illegal
conduct of the Executive, or (ii) intentional misconduct
that materially contributes to improper or incorrect financial
data. The policy is effective with respect to compensation for
the year 2009 and following and, in certain situations, prior
compensation as well. The policy is discussed more fully later
in this proxy statement.
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Additional
Information and Considerations
The Role of the Compensation Committee and Its Use of
Advisors.
A summary of the role of the
Compensation Committee is found in the section entitled
Corporate Governance and Board Matters in this proxy
statement. For more information on the role and responsibilities
of the Compensation Committee, we encourage you to review the
Compensation Committee charter, which is posted on our website
at www.arrisi.com.
The Compensation Committee charter permits the Compensation
Committee to engage independent outside advisors to assist the
Compensation Committee in the fulfillment of its
responsibilities. The Compensation Committee engages an
independent executive compensation consultant for information,
advice and counsel. Typically, the consultant assists the
Compensation Committee by providing an independent review of:
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Our executive compensation policies, practices and designs;
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The mix of compensation established for our named executive
officers as compared to external benchmarks;
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Market trends and competitive practices in executive
compensation; and
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The specific compensation package for Mr. Stanzione.
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For 2006, 2007 and 2008, the Compensation Committee engaged
Longnecker and Associates as its independent consultant. This
selection was made directly by the Compensation Committee.
Longnecker and Associates provides no other compensation or
benefit consulting services to ARRIS.
The Role of Executive Management in the Process of
Determining Executive
Compensation.
Mr. Stanzione makes
recommendations to the Compensation Committee regarding
executive compensation decisions for the other named executive
officers. Mr. Margolis, our Executive Vice President of
Strategic Planning, Administration and Chief Counsel, is
responsible for administering our executive compensation program
and acts as Secretary to the Compensation Committee as well as
the full Board and other Board Committees. Mr. Potts, our
Chief Financial Officer, provides information and analysis on
various aspects of our executive compensation plans, including
financial analysis relevant to the process of establishing
performance targets for our annual cash incentive plan and the
cost of long term equity incentive plans. Although members of
our management team participate in the process of determining
executive compensation, the Compensation Committee also meets
regularly in executive session without any members of the
management team present. The Compensation Committee makes the
final determination of the executive compensation package
provided to each of our named executive officers subject, in the
case of Mr. Stanzione, Chairman and CEO, to full board
approval.
Equity awards generally are granted annually from January to May
depending on board meeting schedule, shareholder approval of new
equity plans and other factors. The Compensation Committee has
determined that grant dates should occur as early as practicable
after final budgets for the new year have been approved by the
Board of Directors and after year-end results have been
announced to the public. Equity grant and annual compensation
adjustments and incentive plan performance criteria generally
will be decided simultaneously, although they may be implemented
at various times. (For example, raises generally are effective
April 1, while bonuses generally are paid earlier.) We plan
for equity grants generally to be analyzed, determined and
granted in the mid-February to mid-April time frame. The
exercise price for options is the closing price of the Common
Stock on the date of grant.
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Annual
Cash Incentives
Annual cash bonuses are tied to Company performance. Annual
bonus targets for senior executives have been established as a
percentage of base pay level including the annual raise, if any,
in the relevant years and are set forth in the employment
agreements of each executive officer. Mr. Stanziones
bonus target is 100% of base salary, which was established when
his employment agreement was amended in 1999 in connection with
his becoming the Chief Executive Officer. The remaining senior
executives annual bonus targets are 60% of base salary.
The maximum bonus payout for each of the named executive
officers is 200% of the annual bonus target.
The Compensation Committee seeks to establish variable pay in
the form of annual cash bonus opportunity at or above
50th percentile levels of the peer group and survey
analysis described above. The Compensation Committee believes
that variable pay target should be at or above the
50th percentile levels to encourage and reward exceptional
performance, while assuring in years where Company performance
may be weaker that total cash compensation is less. The
Compensation Committee believes that the bonus targets for the
senior executives are at or modestly above the
50th percentile of the peer group and survey analysis
described above.
In 2008, annual incentives were measured not only by targeted
financial performance (for 80% of the target bonus), but by
individual assigned objectives which may be objectively or
subjectively measured. 20% of the target bonus for
Mr. Stanzione and the other senior executives were based on
assigned objectives. Specific financial performance criteria
have varied; however, in 2006, 2007 and 2008 the only financial
performance criterion was the achievement of budgeted adjusted
operating income for the Company. The Compensation Committee
chose a single earnings metric in order to focus the senior
executives as a team on earnings growth. The annual budget was
developed by management in collaboration with and approved by
the Board of Directors. In reviewing the budget, the Board of
Directors considers, in addition to the detailed budget as
presented, expected capital expenditure trends in the
telecommunications industry generally and the cable segment of
the telecommunications industry more specifically and the
Companys market share and market share growth.
For 2008, 80% of the target bonus was based on financial
performance. The target for consolidated adjusted operating
income (excluding goodwill amortization, goodwill impairment,
restructuring, certain acquisition and other items) that would
yield 100% payment of the financial performance part the
targeted bonus for senior executives was $167 million. If
actual adjusted operating income achieved was below 90% of
adjusted operating income for 2007, the bonus payout would have
been zero. For performance in the range between that 90%
threshold and 100% of budgeted adjusted operating income, the
bonus payout would have been between a 25% payout and 100%
payout. For performance in the range between budget and 118% of
budget, the bonus payout would have been between a 100% payout
and 200% payout. For performance between these specific levels,
bonus payouts were to be determined by straight line
interpolation. Actual performance for 2008 was approximately 91%
of the target performance and, accordingly, the financial
performance portion of the bonus payouts were approximately 76%
of the annual bonus target payout related to targeted financial
performance
The 20% assigned subjective portion of the bonus target was
based on management objectives established by the Compensation
Committee. Bonus awards for individual accomplishments of
objectives can range from 0% to 200% of target. For 2008, the
management objectives for the senior executives included:
1. Complete the C-COR acquisition integration
2. Continue to diversify the business on a product and
customer basis
3. Expand gross margins
4. Communicate the ARRIS story to investors, shareholders
and employees
5. Rationalize overlapping products resulting from
acquisition
6. Achieve projected expense synergies
7. Develop cross product line product strategy
8. Use IT to reduce operating expense
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Measure, focus and motivate improvement on return on assets,
return on equity, return on investment and cash generation.
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Invest R&D dollars for short and long term return and for
products migration beyond current generation.
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Maintain and develop relationships with senior customer
executives, expand customer base and grow strategic accounts
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Develop and implement strategies for litigation defense and cost
control for pending and possible claims
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Develop teamwork collaboration and staff on an inter and intra
group basis
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Based on the success of senior management, particularly with
respect to market penetration, timely product development,
margin improvement, cash generation and the C-COR acquisition
integration, the specific management objective portion of the
bonus paid out at between 129% and 133% of target as reflected
in the Summary Compensation Table under the heading Non-Equity
Incentive Plan Compensation.
In the past six years bonuses have ranged from 0% to the maximum
as achieved in 2005 and 2006 based on the performance criteria
then in effect. Consistent with our pay for performance reward
philosophy, no annual incentives were paid to our named
executive officers in fiscal year 2003 because we did not
achieve our pre-established financial goals in that year. In
2006 and 2007, we exceeded the budgeted amounts for our
pre-established financial goals, which resulted in annual
incentive payouts greater than 100% of the targeted amounts. In
2008, 91% of the financial performance target was achieved and
the resulting payout was approximately 76% of target. The
volatile and challenging industry and market conditions in which
we operate contributes to significant variations in annual
performance against goals and incentive payout amounts against
the target level of payout.
The value of the target payout amounts for our annual incentive
plan approximates in the aggregate the 50th percentile of
the short-term incentive payments made by companies included in
the market survey data that we used as benchmarks. The dollar
amount of annual cash incentive bonus paid in 2008 to each of
our named executive officers is reported in the Non-Equity
Incentive Plan Compensation column of the Summary
Compensation Table appearing later in this proxy statement.
The Compensation Committee has the authority to adjust bonuses,
including additions to the bonuses earned (or pay bonuses when
no bonus has been earned) under the bonus plan. For example, in
2006, bonuses for Messrs. Lakin, Potts and Coppock exceeded
the 150% maximum payout originally established because actual
performance was over 244% of budgeted operating income, and in
2007 the amount of bonus for executive officers was adjusted up
or down based on individual unit performance as reflected in the
Summary Compensation Table under the heading Bonus
($). The Company does not have a formal policy for
payments above the amounts established under the bonus plans.
The Compensation Committee also may adjust the performance
criteria if circumstances dictate (e.g., acquisitions,
financings or other items that may not have been incorporated in
the budget and therefore might require adjustment).
Long-Term
Equity Incentives
We make long-term equity incentive awards to our executive
officers each year. The primary objectives of our equity
incentive program are to:
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Align the interests of our executive officers with the interests
of our shareholders through stock awards which have multi-year
vesting requirements and which provide a significant incentive
for executives to focus on increasing long-term shareholder
value;
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Provide a total compensation package that is competitive based
upon our assessment of the market data described earlier in this
CD&A; and
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Provide financial incentive to retain our executives over a
multi-year period.
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The long term incentive compensation for senior executives in
the past three years has consisted of grants of stock options
(in 2008 time vested restricted shares were granted in lieu of
options) and performance-based restricted stock with time based
vesting. Previously, long term incentive compensation consisted
predominantly of stock options. During the past three years, the
Company has included restricted stock to reduce the share
dilution associated with option grants since restricted stock
awards are for fewer shares than comparably valued stock option
awards. Moreover, recent changes in accounting standards require
that stock options as well as restricted stock be expensed.
Prior to these changes, the Company, like most companies,
utilized primarily stock options to take advantage of the then
available favorable accounting treatment for stock options. In
2008 and in future years, the Company intends to use restricted
shares instead of stock options to reduce dilution associated
with long term incentive compensation and to maintain retention
incentive even in challenging periods when our stock price may
be depressed. When granted stock options had a term of seven
years (for some prior grants the term was ten years) and vest
annually over four years (in some prior years the vesting was
annually over three years).
For 2006, 2007 and 2008, the Compensation Committee established
an aggregate value for equity grants for Company wide
distribution focusing on cost to be reflected in the
Companys financial statements, the annual grant level as a
percent of shares outstanding and, using the Black-Scholes
methodology, the value of the aggregate grants as a percentage
of the Companys total market capitalization. A value
expressed in dollars was allocated to the senior executives
based on the survey data concerning long term incentive values
for senior executives in comparable positions and the level of
expense and dilution the Compensation Committee deemed
appropriate. One-half of that value was awarded in shares of
restricted stock and, using the Black-Scholes methodology,
one-half in options at the then fair market value of the shares.
(For 2008 stock options were replaced with restricted shares.)
For Mr. Stanzione, the target value for long term
incentives was approximately 200% of base salary, and for the
other senior executives, the value ranged from approximately
130% to 170% of base salary. The Compensation Committee seeks to
establish long-term incentive targets for senior executives,
like bonuses, at or above 50th percentile levels of the
peer group and survey analysis described above to emphasize long
term stock appreciation. The most recent survey data reviewed in
connection with the Compensation Committees 2008
deliberations indicates that awards of long term incentives in
2008 approximated the 50th percentile levels for the senior
executive officers in the aggregate.
The restricted stock awarded to the senior executives in 2005,
2006 and 2007 and one-half of the restricted stock rewards
granted in 2008 were awarded in the form of performance shares.
Under the performance criteria, senior executives earned 100% of
the target or assigned value at the time of grant if the Company
achieved budgeted consolidated sales for the applicable year.
For 2007, for performance below 94% of budgeted sales, the
restricted stock awards paid out zero shares, and for
performance at 94% of budget, the shares paid out 50% of the
assigned value. For performance at budgeted sales, the shares
paid out at 100% of the assigned value. For sales at or above
116% of budgeted sales, the shares paid out a number of shares
equal to 150% of the assigned value. For 2008, senior executives
earned 100% of target shares at 100% of budgeted sales. For
performance below approximately 82% of budgeted sales, stock
awards paid out zero shares with 50% of target being paid at the
approximate 82% of the targeted sales. For sales at or above
105% of targeted sales, the shares paid 150% of targeted shares.
Straight line interpolation was applied for performance between
the designated levels. The Compensation Committee believes that
performance based awards better align the executives and
shareholders interests in that awards are reduced or eliminated
if Board of Directors approved budgets are not met while
achievement beyond targeted achievement is more highly rewarded.
The 2008 restricted stock awards paid out was approximately 55%
as actual sales were approximately 84% of budgeted sales. The
2007 restricted stock award payout was 115% as actual sales were
approximately 105% of budgeted sales. The specific numbers of
stock options and restricted stock that were granted to each of
our named executive officers in 2007 and 2008 are set forth on
the table entitled Grants of Plan-Based Awards in
the executive compensation tables found later in this proxy
statement.
For 2009, the performance criterion for performance shares was
changed. The new criterion is based on the Companys total
shareholder return as compared to the shareholder return of the
NASDAQ composite over a three year period (the TSR
measurement) beginning with the calendar year of 2009. The
TSR measurement will allow for payment from 0% and 200% based on
underperforming, meeting or exceeding the NASDAQ composite
three year return. Both 2009 and 2010 are transition years
where a portion of the performance share awards will be paid at
100% since the Company has exceeded the three year NASDAQ
composite shareholder return in each of the
21
last three fiscal years. For 2009, two-thirds of the awards will
pay out at 100% vesting on the first and second anniversaries of
the grant date, and the remaining one-third will be based on the
three-year Total Shareholder Return and will vest on
January 31, 2012. The 2010 grant is expected to be
similarly structured but only one-third of the grant will be
paid at 100% and will vest on the first anniversary of the grant
date, and two-thirds will be based on the Total Shareholder
Return measurement and will vest on January 31, 2013. The
2011 grant is expected to be 100% based on the Total Shareholder
Return measurement and will vest on January 31, 2014.
Executive
Stock Ownership Guidelines
The Company has share ownership guidelines that require each
senior executive to own shares having a value equal to a
multiple of the senior executives annual base salary at
the time the executive became subject to the ownership
requirement. For Mr. Stanzione, the multiple was three
times base salary; for Messrs. Margolis, Potts and Lakin it
was twice base salary; and for Mr. Coppock it was one times
base salary. Once the ownership level is achieved, the changes
in share value are no longer monitored. Each of the senior
executives has achieved the requisite level of share ownership.
Summary
Compensation Table
The summary compensation table below presents the total
compensation earned by our Named Executive Officers during
2006, 2007 and 2008. This amount is not the actual compensation
received by our NEOs. In addition to cash and other forms of
compensation actually received, total compensation includes the
amount of the annual change in actuarial present value of
accumulated pension benefit which will not be paid, or begin to
be paid, until retirement, and the calculated dollar amounts set
forth in the Stock Awards and Option
Awards columns. These stock and option amounts reflect the
compensation expense we recognized for financial statement
reporting purposes with respect to equity awards granted to our
NEOs in 2008, as well as grants made in prior years, to the
extent such awards vested during 2006, 2007 and 2008. The
compensation expense included in the Stock Awards
and Option Awards columns likely will vary from the
actual amounts ultimately realized by any NEO based on a number
of factors, including the number of shares that ultimately vest,
the timing of any exercise or sale of shares, and the price of
our stock. The actual value realized by our NEOs from stock
awards and options during 2008 is presented in the Option
Exercises and Stock Vested table below. Details about the
equity awards granted to our NEOs during 2008 can be found in
the Grants of Plan-Based Awards table below.
22
Summary
Compensation Table
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|
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|
|
|
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|
|
|
|
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|
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|
|
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|
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|
|
|
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|
Change in
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Pension
|
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Equity-based
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Value and
|
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|
|
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|
|
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Incentive Plan
|
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Non-Qualified
|
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Compensation
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Non-Equity
|
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Deferred
|
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All
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|
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Base
|
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|
|
|
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Stock
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Option
|
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Incentive Plan
|
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Compensation
|
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Other
|
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Total
|
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Name and
|
|
|
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Salary
|
|
|
Bonus
|
|
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Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Compensation
|
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Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)(4)
|
|
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($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
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($)(5)
|
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($)(6)
|
|
|
($)
|
|
|
Robert J. Stanzione
|
|
|
2008
|
|
|
|
722,500
|
|
|
|
|
|
|
|
707,652
|
|
|
|
465,753
|
|
|
|
630,000
|
|
|
|
3,197,992
|
|
|
|
48,142
|
|
|
|
5,772,039
|
|
Chief Executive,
|
|
|
2007
|
|
|
|
687,500
|
|
|
|
|
|
|
|
732,368
|
|
|
|
546,959
|
|
|
|
763,000
|
|
|
|
2,404,431
|
|
|
|
22,305
|
|
|
|
5,156,563
|
|
Chairman of the Board
|
|
|
2006
|
|
|
|
637,500
|
|
|
|
|
|
|
|
519,594
|
|
|
|
740,423
|
|
|
|
1,300,000
|
|
|
|
742,915
|
|
|
|
27,130
|
|
|
|
3,967,562
|
|
Lawrence A. Margolis
|
|
|
2008
|
|
|
|
382,250
|
|
|
|
|
|
|
|
244,590
|
|
|
|
162,795
|
|
|
|
200,000
|
|
|
|
318,383
|
|
|
|
40,200
|
|
|
|
1,348,218
|
|
Executive Vice
|
|
|
2007
|
|
|
|
368,125
|
|
|
|
2,366
|
|
|
|
255,583
|
|
|
|
203,298
|
|
|
|
242,634
|
|
|
|
53,843
|
|
|
|
31,916
|
|
|
|
1,157,765
|
|
Strategic Planning,
|
|
|
2006
|
|
|
|
356,875
|
|
|
|
|
|
|
|
183,925
|
|
|
|
312,827
|
|
|
|
431,400
|
|
|
|
59,956
|
|
|
|
33,899
|
|
|
|
1,378,882
|
|
Administration, Legal, HR, and Strategy, Chief Counsel, &
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David B. Potts
|
|
|
2008
|
|
|
|
370,000
|
|
|
|
|
|
|
|
240,543
|
|
|
|
162,146
|
|
|
|
200,000
|
|
|
|
69,401
|
|
|
|
17,558
|
|
|
|
1,059,648
|
|
Executive Vice
|
|
|
2007
|
|
|
|
320,000
|
|
|
|
22,450
|
|
|
|
255,583
|
|
|
|
203,298
|
|
|
|
212,550
|
|
|
|
32,037
|
|
|
|
17,562
|
|
|
|
1,063,480
|
|
President, Chief
|
|
|
2006
|
|
|
|
302,000
|
|
|
|
25,500
|
|
|
|
183,925
|
|
|
|
299,402
|
|
|
|
274,500
|
|
|
|
21,709
|
|
|
|
15,660
|
|
|
|
1,122,696
|
|
Financial Officer, and Chief Information Officer
|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James D. Lakin
|
|
|
2008
|
|
|
|
332,508
|
|
|
|
|
|
|
|
225,410
|
|
|
|
162,146
|
|
|
|
175,000
|
|
|
|
143,730
|
|
|
|
34,137
|
|
|
|
1,072,931
|
|
President, Advanced
|
|
|
2007
|
|
|
|
320,000
|
|
|
|
22,450
|
|
|
|
255,583
|
|
|
|
203,298
|
|
|
|
212,550
|
|
|
|
132,166
|
|
|
|
21,621
|
|
|
|
1,167,668
|
|
Technology & Services
|
|
|
2006
|
|
|
|
302,000
|
|
|
|
25,500
|
|
|
|
183,925
|
|
|
|
305,773
|
|
|
|
274,500
|
|
|
|
28,805
|
|
|
|
22,878
|
|
|
|
1,143,381
|
|
Ronald M. Coppock
|
|
|
2008
|
|
|
|
315,500
|
|
|
|
|
|
|
|
239,760
|
|
|
|
157,560
|
|
|
|
170,000
|
|
|
|
66,597
|
|
|
|
29,952
|
|
|
|
979,369
|
|
President,
|
|
|
2007
|
|
|
|
282,000
|
|
|
|
22,302
|
|
|
|
251,724
|
|
|
|
193,559
|
|
|
|
187,698
|
|
|
|
31,338
|
|
|
|
19,388
|
|
|
|
988,009
|
|
Worldwide Sales
|
|
|
2006
|
|
|
|
263,000
|
|
|
|
34,700
|
|
|
|
174,863
|
|
|
|
263,849
|
|
|
|
240,300
|
|
|
|
14,148
|
|
|
|
21,065
|
|
|
|
1,011,925
|
|
|
|
|
(1)
|
|
The amount shown in this column relates to the discretionary
portion of the Annual Incentive Bonus for each NEO that was
above the strictly calculated amount listed under the Non-Equity
Incentive Plan Compensation column.
|
|
(2)
|
|
The amounts in this column relate to restricted stock awards.
One-half of the restricted shares granted in 2008 were
performance shares and the other half were time-vested
restricted shares vesting equally over four years. The number of
performance shares issued depends upon performance criteria and
can range from zero to 150% of the target award. During 2008, as
described above, the number of performance shares ultimately
issued was approximately 55% of the target amount of shares.
During 2007, the Company achieved the performance conditions
required for the 115% issuance of target award. The amounts in
this column are calculated based on SFAS 123R and equal the
financial statement compensation cost for restricted stock
awards as reported in the Companys 2008 consolidated
statements of operations. Under SFAS 123R, for
performance-related restricted shares compensation expense is
recognized using the graded method of amortizing the grant
expense over its vesting period. The expenses reported in this
column relate to a portion of performance-based restricted
grants made on April 18, 2005, April 25, 2006 and
March 9, 2007 and March 28, 2008. The total cost of
these awards was based on the number of shares awarded and the
fair market value of the Companys Common Stock on the date
the grant was made. Assumptions used in the calculation of these
amounts are included in Note 16, Stock Based
Compensation to the Companys audited financial
statements for the fiscal year ended December 31, 2008,
included in the Companys Annual Report on
Form 10-K
filed with the SEC.
|
|
(3)
|
|
The amounts in this column are calculated based on
SFAS 123R and equal the financial statement compensation
cost for stock option awards as reported in our 2008
consolidated statements of operations. Under SFAS 123R, a
pro-rata portion of the total expense at the time of grant is
recognized over the applicable service period generally
corresponding with the vesting schedule of the grant. The
initial expense is based on the fair value of the stock option
granted using the Black-Scholes option-pricing model. The
expenses reported in this column relate to options granted on
April 18, 2005, April 25, 2006 and March 9, 2007.
Assumptions used in the calculation of these amounts are
included in Note 16, Stock Based Compensation
to the Companys audited financial statements for the
fiscal year ended December 31, 2008, included in the
Companys Annual Report on
Form 10-K
filed with the SEC.
|
23
|
|
|
(4)
|
|
For 2008, the amount reflects annual bonus earned for 2008
performance (paid in 2009). As described above, the amount
reflects a 76% payout of the financial performance piece of the
bonus plan (80% of the plan), and the individual performance
objective portion of the bonus plan (20%) paying at between
129% 133% of target based on performance of assigned
objectives. For 2007, the amount reflects annual bonus earned
with respect to 2007 performance (paid in 2008), which was 109%
of target bonus. For 2006, actual performance was over 244% of
target and accordingly, bonus payouts were at the maximum payout
which for Messrs. Stanzione and Margolis was 200% of
target. Due to the very strong performance of the Company, the
Compensation Committee determined that for Messrs. Lakin
and Potts bonus payout would be 164% of target, and for
Mr. Coppock would be 172% of target.
|
|
(5)
|
|
Change in pension value reflects the aggregate annual change in
the actuarial present value of accumulated pension benefits
under the qualified and non-qualified defined benefit pension
plans. The change in pension value does not include changes
under any of the Companys defined contribution plans
because there is no above-market or preferential earnings
provided under such plans.
|
|
(6)
|
|
Included in all other compensation for 2008 are a matching
contribution by ARRIS Group Inc. into the 401(k) savings plan,
the non-qualified 401(k) wrap plan, the incremental cost for
supplemental life insurance coverage, expenses related to
financial planning (except for Mr. Potts), club membership
fees (except for Mr. Stanzione), airline club dues, and
patent awards.
|
Grants of
Plan-Based Awards 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Grant
|
|
|
|
Non-Equity
|
|
|
Estimated Future Payouts Under
|
|
|
Shares of
|
|
|
Base
|
|
|
Date
|
|
|
|
Incentive Plan Awards(2)
|
|
|
Equity Incentive Plan Awards(3)
|
|
|
Stock or
|
|
|
Price of
|
|
|
Fair
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Award
|
|
|
Value of
|
|
Name
|
|
Date(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)(4)
|
|
|
($/sh)
|
|
|
Award(5)
|
|
|
Robert J. Stanzione
|
|
|
|
|
|
$
|
182,500
|
|
|
$
|
730,000
|
|
|
$
|
1,460,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,835
|
|
|
|
121,670
|
|
|
|
182,505
|
|
|
|
121,670
|
|
|
$
|
5.65
|
|
|
$
|
1,064,149
|
|
Lawrence A. Margolis
|
|
|
|
|
|
|
57,900
|
|
|
|
231,600
|
|
|
|
463,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,835
|
|
|
|
41,670
|
|
|
|
62,505
|
|
|
|
41,670
|
|
|
$
|
5.65
|
|
|
|
364,453
|
|
David B. Potts
|
|
|
|
|
|
|
57,750
|
|
|
|
231,000
|
|
|
|
462,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,835
|
|
|
|
41,670
|
|
|
|
62,505
|
|
|
|
41,670
|
|
|
$
|
5.65
|
|
|
|
364,453
|
|
James D. Lakin
|
|
|
|
|
|
|
50,250
|
|
|
|
201,000
|
|
|
|
402,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
35,000
|
|
|
|
52,500
|
|
|
|
35,000
|
|
|
$
|
5.65
|
|
|
|
306,117
|
|
Ronald M. Coppock
|
|
|
|
|
|
|
48,750
|
|
|
|
195,000
|
|
|
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,835
|
|
|
|
41,670
|
|
|
|
62,505
|
|
|
|
41,670
|
|
|
$
|
5.65
|
|
|
|
364,453
|
|
|
|
|
(1)
|
|
Grant date is the date the awards, in the form of restricted
stock and performance shares, were made.
|
|
(2)
|
|
The non-equity incentive awards reflect the Companys
annual bonus plan. The plan calls for the payment of from 0% to
200% based upon the achievement of specified adjusted
consolidated adjusted operating income levels for the Company in
2008. The plan would pay out $0 if actual results did not reach
90% of the budgeted adjusted operating income level of 2007. The
Companys performance for 2008 was 91% of target
performance and the financial portion of the plan accordingly
paid out at 76%. The individually assigned objectives portion of
the plan, as indicated above under the caption annual
incentives, paid out between 129% and 133% of their portion of
the targeted bonus. Overall bonus for the named executive
officers paid out at the approximately 86% to 87% range of
target bonuses. Bonus target payout levels are a percent of the
ending 2008 base salary level; for Mr. Stanzione the
percent is 100% of base salary and it is 60% of base salary for
the other named executive officers. The amounts reflected herein
are duplicative of the amounts reflected in the Summary
Compensation Table and the Outstanding Equity at Year End Table.
For additional discussion of 2008 bonus payment, see
Compensation Disclosure and Analysis Annual
Cash Incentives.
|
|
(3)
|
|
The amounts shown under the Equity Incentive Plan Awards are the
number of shares of restricted stock that were granted to each
of the named executives in 2008 that were performance shares.
Performance shares would vest based upon achievement of certain
2008 consolidated sales levels by the Company. Sales were
|
24
|
|
|
|
|
$1.145 billion in 2008, and fell below the targeted sales
of $1.363 billion such that a 55% payout of the target
grant was earned. If sales had been less than 82% of the
targeted sales for 100% (target) payout, no shares would have
been earned. The shares also are subject to a vesting schedule
under which they vest annually over four years with the first
vesting occurring on March 28, 2009. The amounts reflected
here are duplicative of the amounts reflected in the Outstanding
Equity Awards at Year End Table.
|
|
(4)
|
|
The amounts shown under All Other Equity Awards reflect the
number of restricted shares granted to the named executives on
the grant date. These shares vest annually over four years with
the first vesting occurring on March 28, 2009. The table
reflects the full amounts of the awards even though the awards
vest over four years and are subject to forfeiture prior to
vesting except in certain cases. The amounts reflective herein
are duplicative of the amounts reflected in the Outstanding
Equity Awards at Year End Table.
|
|
(5)
|
|
Represents the value at $5.65 of the March 28, 2008 equity
awards to the named executives including the restricted shares
described above in footnote four and the performance shares
described above in footnote three. All of these shares vest over
four years.
|
Equity awards for senior executives and for employees generally
are granted annually at the same time and are priced (if
options) at the close of business on the date of grant.
Currently, options vest equally over four years and have a seven
year life. In the past, some grants have had 10 year lives
and some have vested over three years. Exceptions to annual
grants have been made in cases such as new hire grants and
grants in connection with significant promotions or increases in
responsibilities. Target annual equity grants in the last three
years for senior executives have consisted of equal amounts of
value in performance shares and in restricted shares (or stock
options prior to 2008). The number of performance shares earned
has depended upon on the Companys sales performance in the
year of grant. The number of shares earned can vary from zero,
if the minimum sales threshold was not reached, to 50% at the
minimum level. A 100% level and 150% level were also
established. In 2006, the maximum threshold was reached, as
sales were more than 120% of targeted sales. In 2007, 115% of
target was earned. In 2008, no options were granted, instead
restricted shares were granted. Half of the restricted shares
were performance shares, as in past years, and half of the
shares, like options previously granted, are time based and vest
over four years. In 2008, the performance shares paid out at
approximately 55% as sales reached approximately 84% of the
targeted sales.
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of Stock
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock Held
|
|
|
That Have
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Not Vested (#)
|
|
|
($)(5)
|
|
|
Robert J. Stanzione
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188,345
|
(1)(6)
|
|
|
1,497,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,969
|
(7)
|
|
|
357,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,368
|
(8)
|
|
|
233,476
|
|
|
|
|
28,913
|
|
|
|
86,742
|
(2)
|
|
$
|
13.45
|
|
|
|
03/09/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
43,507
|
|
|
|
43,508
|
(3)
|
|
$
|
13.28
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
73,636
|
|
|
|
26,546
|
(4)
|
|
$
|
6.44
|
|
|
|
04/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
$
|
4.90
|
|
|
|
05/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
165,000
|
|
|
|
|
|
|
$
|
8.12
|
|
|
|
01/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
$
|
10.20
|
|
|
|
08/06/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
$
|
8.00
|
|
|
|
12/19/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
$
|
22.875
|
|
|
|
04/29/2009
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of Stock
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock Held
|
|
|
That Have
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Not Vested (#)
|
|
|
($)(5)
|
|
|
Lawrence A. Margolis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,505
|
(1)(6)
|
|
|
512,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,418
|
(7)
|
|
|
122,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,448
|
(8)
|
|
|
83,062
|
|
|
|
|
9,913
|
|
|
|
29,740
|
(2)
|
|
$
|
13.45
|
|
|
|
03/09/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
15,478
|
|
|
|
15,479
|
(3)
|
|
$
|
13.28
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
27,993
|
|
|
|
9,332
|
(4)
|
|
$
|
6.44
|
|
|
|
04/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
67,000
|
|
|
|
|
|
|
$
|
4.90
|
|
|
|
05/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
|
|
|
$
|
4.85
|
|
|
|
07/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
$
|
8.12
|
|
|
|
01/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
10.20
|
|
|
|
08/06/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
10.20
|
|
|
|
08/06/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
$
|
8.00
|
|
|
|
12/19/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
22.875
|
|
|
|
04/29/2009
|
|
|
|
|
|
|
|
|
|
David B. Potts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,505
|
(1)(6)
|
|
|
512,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,418
|
(7)
|
|
|
122,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,448
|
(8)
|
|
|
83,062
|
|
|
|
|
9,913
|
|
|
|
29,740
|
(2)
|
|
$
|
13.45
|
|
|
|
03/09/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
15,478
|
|
|
|
15,479
|
(3)
|
|
$
|
13.28
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
27,993
|
|
|
|
29,740
|
(4)
|
|
$
|
6.44
|
|
|
|
04/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
33,340
|
|
|
|
|
|
|
$
|
4.90
|
|
|
|
05/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
8.12
|
|
|
|
01/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
$
|
10.20
|
|
|
|
08/06/2011
|
|
|
|
|
|
|
|
|
|
James D. Lakin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,180
|
(1)(6)
|
|
|
430,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,418
|
(7)
|
|
|
122,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,448
|
(8)
|
|
|
83,062
|
|
|
|
|
9,913
|
|
|
|
29,740
|
(2)
|
|
$
|
13.45
|
|
|
|
03/09/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
15,478
|
|
|
|
15,479
|
(3)
|
|
$
|
13.28
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
18,662
|
|
|
|
9,332
|
(4)
|
|
$
|
6.44
|
|
|
|
04/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
33,334
|
|
|
|
|
|
|
$
|
4.90
|
|
|
|
05/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
|
|
|
$
|
10.20
|
|
|
|
08/06/2011
|
|
|
|
|
|
|
|
|
|
Ronald M. Coppock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,505
|
(1)(6)
|
|
|
512,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,418
|
(7)
|
|
|
122,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,448
|
(8)
|
|
|
83,062
|
|
|
|
|
9,913
|
|
|
|
29,740
|
(2)
|
|
$
|
13.45
|
|
|
|
03/09/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
7,739
|
|
|
|
15,479
|
(3)
|
|
$
|
13.28
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
8,366
|
|
|
|
29,740
|
(4)
|
|
$
|
6.44
|
|
|
|
04/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
$
|
38.938
|
|
|
|
01/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
38.938
|
|
|
|
01/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These shares are duplicative of the shares reflected in the Plan
Based Awards Table.
|
|
(2)
|
|
The options were granted on March 9, 2007 and vest annually
over four years with the first vesting occurring on
March 9, 2008.
|
|
(3)
|
|
The options were granted on April 25, 2006 and vest
annually over four years with the first vesting occurring on
April 30, 2007.
|
|
(4)
|
|
The options were granted on April 18, 2005 and vest
annually over four years with the first vesting occurred on
April 18, 2006.
|
|
(5)
|
|
Reflect the value as calculated based on the closing price of
the Companys Common Stock on December 31, 2008 of
$7.95 per share.
|
|
(6)
|
|
Shares of restricted stock were granted on March 28, 2008
and vest annually over four years with the first vesting
occurring on March 28, 2008.
|
|
(7)
|
|
Shares of restricted stock were granted on March 9, 2007
and vest annually over four years with the first vesting
occurring on March 9, 2008.
|
|
(8)
|
|
Shares of restricted stock were granted on April 25, 2006
and vest annually over four years with the first vesting
occurring on April 30, 2007.
|
26
Option
Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
Acquired on Exercise (#)
|
|
|
on Exercise ($)(1)
|
|
|
Acquired on Vesting (#)
|
|
|
On Vesting ($)(2)
|
|
|
Robert J. Stanzione
|
|
|
|
|
|
|
|
|
|
|
64,055
|
|
|
|
429,844
|
|
Lawrence A. Margolis
|
|
|
|
|
|
|
|
|
|
|
22,449
|
|
|
|
150,878
|
|
David B. Potts
|
|
|
|
|
|
|
|
|
|
|
22,449
|
|
|
|
150,878
|
|
James D. Lakin
|
|
|
|
|
|
|
|
|
|
|
22,449
|
|
|
|
150,878
|
|
Ronald M. Coppock
|
|
|
|
|
|
|
|
|
|
|
21,199
|
|
|
|
142,616
|
|
|
|
|
(1)
|
|
Amount shown for each named executive officer is the aggregate
number of options granted in previous years that were exercised
and sold during 2008 and the taxable compensation realized
(aggregate sales price less aggregate exercise price) on such
shares exercised and sold. The amounts are not reflected in the
Summary Compensation Table.
|
|
(2)
|
|
Amounts shown for each named executive officer represent the
aggregate number of shares of restricted stock granted in the
previous years that vested during the calendar year. Vested
shares may have been held or sold by the executive in his
discretion. The Company withholds taxes by retaining an
appropriate number of shares (equal to the value of the amount
required to be withheld) that vest. The amounts shown above
include the number of shares withheld. These amounts are not
reflected in the Summary Compensation Table.
|
Executive
Benefits and Perquisites
Primary Benefits.
Our named executive officers
are eligible to participate in the same employee benefit plans
in which all other eligible U.S. salaried employees
participate. These plans include medical, dental, and a
non-qualified retirement savings plan, life insurance,
disability and a qualified retirement savings plan. We also
maintain a nonqualified retirement plan in which our named
executive officers are eligible to participate.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Present Value Of
|
|
|
Payments During
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
Robert J. Stanzione
|
|
Qualified Pension Plan
|
|
|
5
|
|
|
|
65,634
|
|
|
|
|
|
|
|
Non Qualified Plan
|
|
|
39
|
|
|
|
9,428,268
|
|
|
|
|
|
Lawrence A. Margolis
|
|
Qualified Pension Plan
|
|
|
18
|
|
|
|
296,864
|
|
|
|
|
|
|
|
Non Qualified Plan
|
|
|
26
|
|
|
|
1,058,709
|
|
|
|
|
|
David B. Potts
|
|
Qualified Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan
|
|
|
13
|
|
|
|
185,471
|
|
|
|
|
|
James D. Lakin
|
|
Qualified Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan
|
|
|
12
|
|
|
|
455,755
|
|
|
|
|
|
Ronald M. Coppock
|
|
Qualified Pension Plan
|
|
|
5
|
|
|
|
33,399
|
|
|
|
|
|
|
|
Non Qualified Plan
|
|
|
12
|
|
|
|
159,156
|
|
|
|
|
|
The Company maintains qualified and non-qualified Defined
Benefit pension plans. The qualified plan for the named
executive officers has been frozen since December 31, 1999,
and no further accrual of benefit under that plan has occurred
since that date. Neither Mr. Potts nor Mr. Lakin
participated in the qualified plan. The non-qualified plan is a
mirror image of the qualified plan, but covers only earnings
levels and payments levels that are or would be excluded under
the qualified plan under applicable Internal Revenue Services
regulations. Benefits under the plans are calculated based on
the named executive officers base salary and annual bonus
amounts. The benefit formula is the number of years of
continuous service (up to a maximum of 30 years) times the
sum of (a) 0.65% of the individuals final
annual compensation up to the named executive
officers social security covered compensation level, plus
(b) 1.3% of the final average salary in excess
of the named executive officers social security covered
compensation level. The social security covered compensation
level is the
35-year
average of the taxable wage
27
bases (for Social Security purposes) in effect prior to the
participants Social Security retirement date. Final
average salary is the average of the five highest consecutive
years of compensation in the ten years preceding retirement. In
calculating benefits under the non-qualified plan, it is assumed
that the qualified plan remains in effect; that is, the amount
of compensation that would have been covered under the qualified
plan had it remained in effect is excluded from the
non-qualified plan. The benefit is paid monthly on a single life
annuity basis or, subject to discount, on a 50% joint and
survivor annuity basis. Normal retirement under the plans is
age 65, and benefits are discounted for early retirement,
which is available at age 55. Messrs. Stanzione,
Margolis and Lakin are 61, 61 and 65 years of age,
respectively, and thus could elect to retire early. The discount
is calculated to be the actuarial equivalent of an age 65
retirement using an 8% discount factor. There is no lump sum
payment option available, except for Mr. Stanzione (see
below).
The Company has established a Rabbi Trust to hold funds set
aside to meet the obligations under the non-qualified defined
benefit plans. The Company intends to fully fund the Rabbi Trust
such that the amount of the actuarially accrued liability under
the non-qualified deferred benefit plan as set forth in the
Companys financial statements has been set aside in a
Rabbi Trust by the time the actuarial liability has been
established. Amounts contributed to the Rabbi Trust remain the
funds of the Company but can be used only to discharge
obligations under the non-qualified plan, provided however, the
funds in the trust remain subject to the claims of creditors.
The Company maintains on Mr. Stanziones behalf a
supplemental employee retirement plan (SERP), which is included
in the information provided in the Pension Benefits table set
forth above. Under the SERP, normal retirement age is 62, and a
lump sum payment on termination is the form of payment. In
addition, under the SERP, final average compensation is
Mr. Stanziones actual annual salary at the time of
his retirement plus the average of the three highest bonuses
received in the five years preceding retirement. Years of
continuous service are Mr. Stanziones actual service
multiplied by three and are not limited to 30 years. The
benefit calculation is otherwise the same as described above,
although Mr. Stanziones benefit may not exceed 50% of
his final average compensation. In the event of
Mr. Stanziones termination of employment by the
Company without cause, termination by him as a result of a
material uncured breach of his employment agreement by the
Company, or termination by him following a change of control and
the diminution of his position, then Mr. Stanziones
pension benefit cannot be lower than $33,333 per month. The
Company has established a separate Rabbi Trust to
hold funds equal to the Companys obligations under the
non-qualified defined benefit plan and SERP to
Mr. Stanzione. Pursuant to Mr. Stanziones
employment agreement, the Company will fully fund those
obligations by the date of Mr. Stanziones
62nd birthday. Mr. Stanziones defined benefit
value at age 62 is frozen. Thereafter such funds will be
credited only with the benefit or losses of independently
managed investment vehicles elected by Mr. Stanzione from a
menu of vehicles made available by the Company.
The Company maintains a 401(k) defined contribution plan to
which employees may contribute a portion of their salary and
bonus compensation. The Company matches 100% of the first 3% of
employee contributions of pay and matches 50% of the next 2% of
employee contributions of pay subject to the Internal Revenue
Service maximum contribution (which was $15,500 during 2008).
The named executives participate in this plan and received the
Company match, which could not exceed $9,200 for 2008.
In addition, effective as of July 1, 2008, the Company
established a non-qualified defined contribution retirement plan
(the 401(k) Wrap) that mirrors the 401(k) plan. The
plan allows certain senior executives, including the named
executive officers, to contribute amounts in excess of the
amounts allowed under applicable tax laws under the 401(k) plan.
The tax law for 2008 disallows contribution on income above
$230,000 or contributions more than $15,500. The Company will
match employee contributions under the 401(k) Wrap in a manner
analogous to the 401(k). Provided the employee contributes the
maximum amount allowed under the 401(k), the Company will
contribute to the 401(k) and 401(k) Wrap in the aggregate 100%
on the first 3% of pay and 50% of the next 2% of pay, less the
amount of employer matches made to the 401(k). The amounts of
employee and employer contributions to the 401(k) Wrap are held
in a Rabbi Trust. Funds held under the 401(k) and the 401(k)
Wrap are invested in authorized and independently managed mutual
funds and other vehicles that the employee elects from a menu of
vehicles offered under the plans. The employee account receives
the benefit or loss of the increases or decreases based only on
such funds performance. The Company does not enhance or
guarantee performance.
28
The Company previously maintained a non-qualified deferred
compensation plan that enabled certain executives, including the
named executives, to defer amounts above the IRS maximum. This
plan, and employee contributions and Company matches under it,
were frozen in September 2004. No employee contributions or
Company matching contributions have been made since that time
under such plan. The accounts under this plan remain in
existence, but the Company has never enhanced the earnings of
the accounts, which earnings are determined by the actual
earnings of investment vehicles selected by the employee. The
table below reflects the change in value of the named
executives account under the Companys Non-Qualified
Deferred Compensation arrangements (both current and frozen)
during calendar year 2008. The amounts shown reflect dividends
and interest and appreciation (or depreciation) in investments
whether or not realized. The change in value reflects the
performance of any of several mutual funds which may be selected
by the executive.
Nonqualified
Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Balance at Last
|
|
|
|
in Last FY
|
|
|
Contributions in
|
|
|
Earnings in Last
|
|
|
Withdrawals/
|
|
|
Fiscal Year-End
|
|
Name
|
|
($)(1)
|
|
|
Last FY ($)(2)
|
|
|
Fiscal Year ($)
|
|
|
Distributions ($)
|
|
|
($)
|
|
|
Robert J. Stanzione
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan
|
|
|
|
|
|
|
|
|
|
|
(291,306
|
)
|
|
|
|
|
|
|
389,731
|
|
Active Plan
|
|
|
18,250
|
|
|
|
24,550
|
|
|
|
(2,607
|
)
|
|
|
|
|
|
|
15,643
|
|
Lawrence A. Margolis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan
|
|
|
|
|
|
|
|
|
|
|
(174,713
|
)
|
|
|
|
|
|
|
217,967
|
|
Active Plan
|
|
|
9,650
|
|
|
|
12,784
|
|
|
|
(919
|
)
|
|
|
|
|
|
|
8,731
|
|
David B. Potts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James D. Lakin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan
|
|
|
|
|
|
|
|
|
|
|
(178,150
|
)
|
|
|
|
|
|
|
287,695
|
|
Active Plan
|
|
|
8,375
|
|
|
|
11,269
|
|
|
|
(840
|
)
|
|
|
|
|
|
|
7,535
|
|
Ronald M. Coppock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan
|
|
|
|
|
|
|
|
|
|
|
(29,907
|
)
|
|
|
|
|
|
|
50,551
|
|
Active Plan
|
|
|
8,125
|
|
|
|
10,495
|
|
|
|
(385
|
)
|
|
|
|
|
|
|
7,740
|
|
|
|
|
(1)
|
|
Excludes deferral of bonuses paid in 2009 with respect to the
2008 calendar year.
|
|
(2)
|
|
Matches are made only with respect to deferrals made during
calendar year 2008. The match was paid in February 2009.
|
|
(3)
|
|
Year-end balance excludes Company match paid in 2009 and
employee deferrals of bonuses paid in 2009.
|
Other Perquisites.
We reimburse certain club
membership fees, airline club dues and pay for financial
counseling services for our named executive officers.
Clawback
Policy.
In February 2009, the Board of Directors adopted the Executive
Compensation Adjustment and Recovery Policy. This policy is a
so-called clawback policy that enables the Company
to recoup compensation paid to any president, vice president,
secretary, treasurer or principal financial officer, comptroller
or principal accounting officer, or any other officer routinely
performing corresponding functions with respect to the Company
when such compensation was based on financial results or
operating metrics that were satisfied as the result of a
fraudulent or illegal conduct of any of the officers. The Board
of Directors is entitled to recover compensation when it
concludes that it is attributable to such officers conduct
and would not have been awarded had such financial results or
operating metrics not been satisfied. In addition, if an officer
engaged in intentional misconduct that contributed in any
material respect to the improper accounting or incorrect
financial data, the Board of Directors may seek to
29
recoup any profits realized from the officers sale of
securities of the Company during or subsequent to the impacted
accounting period. A copy of the Policy is available at
www.arrisi.com
under the caption Investor Relations.
The Company is in the process of implementing the Policy.
Beginning in 2008, equity awards contemplated that the Board of
Directors might adopt a clawback policy and the compensation
committee made those awards subject to any policy that the Board
of Directors ultimately adopted. Future long-term incentive
awards and annual incentive awards will similarly be subject to
the Policy.
Employment
Contracts and Termination of Employment and
Change-in-Control
Arrangements
Executive employment agreements were amended in November 2008 to
comply with the timely payment and other provisions of
Section 409A of the Internal Revenue Code and to harmonize
certain benefits.
The employment agreements generally are one year agreements and
automatically renew until normal retirement at age 65,
define initial salary and target bonus percent, general
employment benefits and business expense reimbursements. The
agreements contain one year non-competition, non-solicitation
and non-disclosures of trade secret provisions. The amendments
provided not only 409A compliance provisions but also that
executives terminating their employment who are 62 years
old or older with ten or more years of experience, their
outstanding equity awards will continue to vest and remain
outstanding for their original term (notwithstanding such
termination) provided they continue to comply with the
non-competition trade secret protection provisions of the
agreement. The amendments also reflect for the Rabbi Trust and
funding elements described above with respect to the
Companys non-qualified deferred benefit plan and the SERP
of Mr. Stanzione. The term of Mr. Margolis
contract is until he reaches age 65 subject to termination
on 24 months notice. Mr. Stanzione agreement has
been amended so that it is terminable on 24 months
notice until he reaches age 62 at which time it is
terminable on 12 months notice. (His prior agreement
terminated at age 62). Also, Mr. Stanziones SERP
benefit is frozen at his age 62 benefit amount, which
amount will thereafter be credited with the investment returns
or losses of the independently managed funds and investment
vehicles elected by Mr. Stanzione from a menu of investment
vehicles made available by the Company. Upon his retirement from
the Company, Mr. Stanzione is entitled to receive a lump
sum benefit. Thus, Mr. Stanziones employment as
Chairman, CEO and President may continue beyond age 62
subject to termination or resignation of 12 months prior
written notice.
30
The table below sets forth the approximate value of salary,
bonus and accelerated equity payable to each NEO assuming a
change in control or termination event had occurred on
December 31, 2008.
Termination
Benefit Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerate
|
|
|
|
|
|
|
Duration (1)
|
|
|
Salary
|
|
|
Bonus (10)
|
|
|
Benefits
|
|
|
Equity
|
|
|
Total
|
|
|
Robert J. Stanzione
Change in Control or Without Good Cause
|
|
|
3 years
|
|
|
$
|
2,190,000
|
|
|
$
|
3,263,000
|
(6)
|
|
$
|
42,852
|
|
|
$
|
2,128,414
|
|
|
$
|
7,624,267
|
|
Lawrence A. Margolis
Change in Control or Without Good Cause
|
|
|
2 years
|
|
|
|
772,000
|
|
|
|
490,000
|
(7)
|
|
|
43,340
|
|
|
|
732,541
|
|
|
|
2,037,881
|
|
David B. Potts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death (2)
|
|
|
3 months
|
|
|
|
96,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,250
|
|
Disability (3)
|
|
|
6 months
|
|
|
|
192,500
|
|
|
|
|
|
|
|
10,949
|
|
|
|
|
|
|
|
203,449
|
|
Without Good Cause (4)
|
|
|
2 years
|
|
|
|
770,000
|
|
|
|
462,000
|
(8)
|
|
|
43,796
|
|
|
|
732,541
|
|
|
|
2,008,337
|
|
Change in Control (5)
|
|
|
2 years
|
|
|
|
770,000
|
|
|
|
535,000
|
(9)
|
|
|
43,796
|
|
|
|
732,541
|
|
|
|
2,081,337
|
|
James D. Lakin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death (2)
|
|
|
3 months
|
|
|
|
83,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,750
|
|
Disability (3)
|
|
|
6 months
|
|
|
|
167,500
|
|
|
|
|
|
|
|
12,215
|
|
|
|
|
|
|
|
179,715
|
|
Without Good Cause (4)
|
|
|
1 year
|
|
|
|
335,000
|
|
|
|
201,000
|
(8)
|
|
|
24,430
|
|
|
|
650,457
|
|
|
|
1,210,887
|
|
Change in Control (5)
|
|
|
1 year
|
|
|
|
335,000
|
|
|
|
267,500
|
(9)
|
|
|
24,430
|
|
|
|
650,457
|
|
|
|
1,277,387
|
|
Ronald M. Coppock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death (2)
|
|
|
3 months
|
|
|
|
81,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,250
|
|
Disability (3)
|
|
|
6 months
|
|
|
|
162,500
|
|
|
|
|
|
|
|
10,371
|
|
|
|
|
|
|
|
172,871
|
|
Without Good Cause (4)
|
|
|
1 year
|
|
|
|
325,000
|
|
|
|
195,200
|
(8)
|
|
|
20,743
|
|
|
|
731,082
|
|
|
|
1,271,825
|
|
Change in Control (5)
|
|
|
1 year
|
|
|
|
325,000
|
|
|
|
242,500
|
(9)
|
|
|
20,743
|
|
|
|
731,082
|
|
|
|
1,319,325
|
|
|
|
|
(1)
|
|
Represents the termination period during which payments are made
|
|
(2)
|
|
Three months of salary continuation paid to NEOs estate.
|
|
(3)
|
|
Six months of salary and benefits continuation paid.
|
|
(4)
|
|
Continuation of salary, bonus and benefits for the duration
period, plus accelerated equity vesting.
|
|
(5)
|
|
Most recent salary and average of prior 2 year bonuses
times the severance duration period.
|
|
(6)
|
|
Average of highest three bonuses earned in previous five years.
|
|
(7)
|
|
Most recent annual bonus paid or payable.
|
|
(8)
|
|
Target bonus equal to 60% of annual base salary.
|
|
(9)
|
|
Average of two prior paid annual bonuses.
|
|
(10)
|
|
Does not include bonus earned in 2008 but not paid until 2009:
Stanzione ($630,000), Margolis ($200,000), Lakin ($175,000),
Potts ($200,000) and Coppock ($170,000).
|
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis section of this
proxy statement with management and, based on such review and
discussion, the Compensation Committee recommends to the Board
of Directors that it be included in this proxy statement.
William H. Lambert, Chairman
Alex B. Best
John Anderson Craig
Notwithstanding anything to the contrary which is or may be
set forth in any of the Companys filings under the
Securities Act of 1933 or the Exchange Act that might
incorporate Company filings, including this proxy statement, in
whole or in part, the preceding Compensation Committee Report
shall not be incorporated by reference into any such filings.
31
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company has adopted a related person transaction policy that
governs the review, approval or ratification of covered related
person transactions. Our Audit Committee manages this policy.
The policy generally provides that we may enter into a related
person transaction only if the Audit Committee approves or
ratifies such transaction in accordance with the guidelines set
forth in the policy and if the transaction is on terms and
conditions that are reasonable under the circumstances and in
the best interests of the shareholders.
Under the policy a related party transaction is one
in which the Company is a participant and that, individually or
taken together with related transactions, exceeds, or is
reasonably likely to exceed, $100,000 in amount in any year and
in which any of the following individuals (a covered
person) has a direct or indirect material interest:
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any director or executive officer;
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any nominee for election as a director;
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any security holder who is known by the Company to own of record
or beneficially more than 5% of any class of the Companys
voting securities; or
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any immediate family member of any of the foregoing persons,
including any child; stepchild; parent; stepparent; spouse;
sibling; mother-, father-, son-, daughter-, brother-, or
sister-in-law;
and any person (other than a tenant or employee) sharing the
same household.
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For purposes of the policy, a material interest in a transaction
shall not be deemed to exist when a covered persons
interest in the transaction results from (a) the covered
persons (together with his immediate familys) direct
or indirect ownership of less than a 10% economic interest in
the other party to the transaction,
and/or
the
covered persons service as a director of the other party
to the transaction, or (b) the covered persons pro
rata participation in a benefit received by him solely as a
security holder.
A transaction is deemed to involve the Company if it involves a
vendor or partner of the Company or any of its subsidiaries and
relates to the business relationship between the Company or any
of its subsidiaries and that vendor or partner.
There have been no related party transactions since the
beginning of the 2008 fiscal year nor are there any such
transactions proposed.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as
the independent registered public accounting firm of the Company
for the fiscal year ended December 31, 2008.
Ernst & Young LLP also acted in such capacity during
the fiscal year ended December 31, 2007. Representatives of
Ernst & Young LLP, who are expected to be present at
the meeting, will be given an opportunity to make a statement if
they so desire and to respond to appropriate questions asked by
stockholders. The fees billed by Ernst & Young LLP for
the last two Company fiscal years were as follows, all of which
were approved by the Audit Committee:
Audit
Fees
Fees for audit services totaled $2,107,153 and $3,672,253 in
2008 and 2007, respectively, and include fees associated with
the annual audits, the Sarbanes-Oxley Section 404
attestation, the reviews of the Companys quarterly reports
on
Form 10-Q,
other SEC filings, audit consultations, and one-time audit
procedures related to the acquisition of C-COR and the
terminated Tandberg merger.
Audit-Related
Fees
Fees for audit-related services totaled $77,979 and $474,077 in
2008 and 2007, respectively. Audit-related services include due
diligence in connection with acquisitions, consultation on
accounting and internal control matters, and audits in
connection with employee benefit plans.
32
Tax
Fees
Fees for tax services, including tax compliance, tax advice and
tax planning, totaled $302,517 and $90,672 in 2008 and 2007,
respectively.
All Other
Fees
Fees for all other services not included above were $0 for both
2008 and 2007.
Audit
Committee Pre-approval Policy
The Audit Committee has adopted a policy that requires advance
approval of all audit, audit-related, tax services, and other
permissible non-audit services performed by the independent
registered public accounting firm. Prior to engagement, the
Audit Committee pre-approves independent registered public
accounting firm services and fee amounts or ranges within each
category. Either the independent registered public accounting
firm or the Companys Chief Financial Officer (or his
designee) must submit to the Audit Committee requests for
services to be provided by the independent registered public
accounting firm. The Audit Committee may delegate pre-approval
authority to one of its members. The member to whom such
authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its
next meeting.
The Audit Committee requires the Companys Internal Audit
Director to report to the Audit Committee on a periodic basis
the results of the Internal Audit Directors monitoring of
the independent registered public accounting firms
performance of all services to the Company and whether the
performance of those services was in compliance with the Audit
Committees pre-approval policy. Both the Internal Audit
Director and management are required to report immediately to
the Audit Committee any breaches by the independent registered
public accounting firm of the policy.
STOCKHOLDER
PROPOSALS
Proposals of stockholders intended to be presented at the 2010
Annual Meeting of Stockholders must be received by the Company
at its principal offices by December 15, 2009, in order to
be considered for inclusion in the Companys proxy
statement and proxy relating to the 2010 Annual Meeting of
Stockholders.
CONCLUSION
The Board of Directors knows of no other matters to be presented
for stockholder action at the meeting. However, if other matters
do properly come before the meeting, it is intended that the
persons named in the proxies will vote upon them in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence A. Margolis,
Secretary
April 17, 2009
33
APPENDIX A
ARRIS
GROUP, INC.
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Amended and Restated Employee Stock Purchase
Plan (the Plan) of ARRIS Group, Inc. (the
Company) is to furnish to eligible employees an
incentive to advance the best interests of the Company by
providing a method whereby they voluntarily may purchase shares
of Common Stock, $.01 par value, of the Company (Common
Stock) at a favorable price and upon favorable terms.
All employees of the Company and those of any present or future
direct or indirect subsidiary (as defined in Section 424(f)
of the Code) of the Company (provided the Company authorizes
such Subsidiary to adopt the Plan), except for employees whose
customary employment is less than 20 hours per week, shall
be eligible to participate in the Plan; provided, however, no
option shall be granted to an employee if such employee,
immediately after the option is granted, owns stock (as defined
by Sections 423(b)(3) and 424(d) of the Internal Revenue
Code of 1986, as amended (the Code)) possessing five
percent or more of the total combined voting power or value of
all classes of stock of the Company or of any subsidiary
(whether or not the subsidiary participates in the Plan). No
option shall be granted to any executive officer who is a highly
compensated employee (within the meaning of Section 414(q)
of the Code) of the Company or any of its subsidiaries unless
the Committee for administration of the Plan shall otherwise
provide. No option shall be granted to any employee where, in
the judgment of the Compensation Committee of the Board of
Directors of the Company, such grant would be unlawful or
impractical under the laws of any local or foreign jurisdiction,
provided, however, that such decision not to grant an option
would not otherwise violate Section 423 of the Code. All
employees granted options under the Plan shall have the same
rights and privileges, subject to subparagraph 4(b) below.
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3.
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STOCK
SUBJECT OF THE PLAN.
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Subject to the provisions of paragraph 10, the stock which
may be sold pursuant to options under the Plan shall not exceed
in the aggregate 3,800,000 shares of the authorized Common
Stock of the Company (the Shares). The Shares may be
authorized but unissued Shares or Shares reacquired by the
Company and held in its treasury. Options issued under the Plan
will reduce the number of Shares available under the Plan by the
number of Shares subject to the issued option. If unexercised
options expire or terminate for any reason, in whole or in part,
the number of Shares subject to the unexercised portion of such
options will be available again for issuance under the Plan.
(a)
General statement; date of grant;
option period; date of
exercise
.
Following the effective date
of the Plan and continuing while the Plan remains in force, the
Company will offer options under the Plan to all eligible
employees to purchase shares of Common Stock. These options
shall be granted twice each year on dates to be determined by
the Committee for administration of the Plan (each of which is
hereinafter referred to as a date of grant). The
term of each option will be for six months (or such other period
(not to exceed 12 months) as the Committee for
administration of the Plan may specify) ending on the last day
of the option period (hereinafter referred to as the date
of exercise). The number of Shares subject to each option
shall be the quotient of the payroll deductions authorized by
each participant in accordance with subparagraph
(b) extended for the option period divided by 85% of the
fair market value of the Common Stock on the date of grant, as
defined by subparagraph 5(b), rounded down to the closest whole
number.
(b)
Election to participate: payroll deduction
authorization
.
Except as provided in
subparagraph (f), an eligible employee may participate in the
Plan only by means of payroll deduction. Each eligible employee
who elects to participate in the Plan shall deliver to the
Company during the calendar month next preceding a date of grant
(by
A-1
enrolling on line or by completing the appropriate election
forms, in either case by the deadline imposed by the Committee)
a written payroll deduction authorization in a form prepared by
the Company whereby the employee gives notice of the
employees election to participate in the Plan as of the
next following date of grant, and whereby the employee
designates a stated amount to be deducted from the
employees compensation on each payday during the option
period and paid into the Plan for the employees account.
The stated amount which the employee may designate for payroll
deduction may not be less than $2.00 each payday (although the
Committee for administration of the Plan may select another
minimum amount to be designated for payroll deductions which
minimum may not be greater than $5.00 per pay period). The
Committee may authorize payroll deductions of less than the
minimum per pay period or of less than the amount the employee
may designate to be deducted if not doing so would likely result
in a refund to the employee at the end of the option period
because the employees payroll deductions were the minimum
per pay period or in excess of the option price of the shares
the employee can purchase. The payroll deductions may not exceed
either of the following: (i) 10% (or such other percentage
as the Committee for administration of the Plan may specify) of
the amount of eligible compensation (as defined in
subparagraph (d) from which the deduction is made); or
(ii) an amount which will result in noncompliance with the
$25,000 limitation stated in subparagraph (e).
(c)
Changes in payroll
authorization
.
The payroll deduction
authorization referred to in subparagraph (b) may not be
changed during the option period.
(d)
Eligible compensation
defined
.
The term eligible
compensation means regular rate of pay on the date of
grant. In the case of salespeople, regular rate of pay includes
regular commissions. Eligible compensation does not
include management incentives and bonuses, overtime, extended
work-week premiums, or other special payments, fees, or
allowances.
(e)
$25,000 limitation
.
No
employee shall be granted an option under the Plan or under any
other employee stock purchase plan of the Company or of any of
its subsidiaries (within the meaning of Section 423(b)(8)
of the Code) which permits the employees rights to
purchase Company stock to first become exercisable at a rate
which exceeds $25,000 in fair market value of stock (determined
at the time the option is granted) for each calendar year in
which any such option granted to such employee is outstanding at
any time.
(f)
Leaves of absence
.
During
leaves of absence approved by the Company and meeting the
requirements of Treasury Regulation l.421-7(h)(2), a participant
may continue participation in the Plan by cash payments to the
Company on the participants normal paydays equal to the
reduction in the participants payroll deductions caused by
such leave.
(a)
General statement
.
Each
eligible employee who is a participant in the Plan automatically
and without any act on the employees part will be deemed
to have exercised the employees option on each date of
exercise to the extent that the balance then in the
employees account under the Plan is sufficient to purchase
at the option price (as defined in subparagraph (b))
whole shares of the Companys stock subject to the
employees option. Any balance remaining in the
employees account after payment of the purchase price of
those whole shares shall be refunded (without interest) to the
employee promptly.
(b)
Option price
defined
.
The option price per share shall be
a sum equal to 85% of the fair market value of the
Companys stock subject to the Plan on the date of exercise
or on the date of grant, whichever amount is lesser. Fair market
value of the Companys stock on the date of exercise or, as
the case may be, on the date of grant, shall be the per share
price of the last sale of such stock prior to such date as
reported by NASDAQ or, if listed on a United States stock
exchange, as reported in the composite transactions for the
principal such exchange on which the common stock is traded.
(c)
Delivery of share
certificates
.
As soon as reasonably
practicable after each date of exercise, the shares each
participant purchases on such date of exercise shall be credited
to an account in the participants name with one or more
brokers the Committee may designate. A participant will be
issued a certificate for participants shares upon request
or when the Plan is terminated. In the event the Company is
required to obtain from any commission or agency authority to
credit any shares or issue any certificates, the Company will
seek to obtain such authority. Inability of the Company to
obtain from any such commission or agency authority which
counsel for the Company deems necessary
A-2
for the lawful crediting of such shares or issuance of any such
certificates shall relieve the Company from liability to any
participant in the Plan except to return to the optionee the
amount of the balance in the optionees account.
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6.
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WITHDRAWAL
FROM THE PLAN.
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(a)
General statement
.
Any
participant may withdraw in whole from the Plan at any time. A
participant who wishes to withdraw from the Plan must deliver to
the Company a notice of withdrawal in a form prepared by the
Company. The Company, promptly following the time when the
notice of withdrawal is delivered, will refund to the
participant (without interest) the amount of the balance in the
participants account under the Plan; and thereupon,
automatically and without any further act on the
participants part, the participants payroll
deduction authorization, the participants interest in the
Plan, and the participants option under the Plan shall
terminate.
(b)
Eligibility following
withdrawal
.
A participant who withdraws from
the Plan shall be eligible to participate again in the Plan for
the option period next following the option period during which
the participant withdrew.
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7.
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TERMINATION
OF EMPLOYMENT.
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(a)
Termination of employment other than by
retirement or death
.
If the employment of a
participant terminates other than by retirement or death, the
participants interest in the Plan automatically and
without any act on the participants part shall terminate
as of the date of the termination of the participants
employment. The Company promptly will refund to the participant
(without interest) the amount of the balance in the
participants account under the Plan, and thereupon the
participants interest in the Plan and the
participants option under the Plan shall terminate.
(b)
Termination by retirement
.
A
participant who retires on the participants normal
retirement date (on or after having attained age 65), may,
at the participants election, either (i) by written
notice to the Company exercise the participants option as
of the participants retirement date, in which event the
Company shall apply the balance in the participants
account under the Plan to the purchase at the option price whole
shares of the Companys stock and refund the excess, if
any, or (ii) by written notice to the Company request
payment of the balance in the participants account under
the Plan, in which event the Company promptly shall make such
payment, and thereupon the participants interest in the
Plan and the participants option under the Plan shall
terminate. If the participant elects to exercise the
participants option, the date of the participants
retirement shall be deemed to be a date of exercise for the
purpose of computing the amount of the purchase price of the
Companys stock. If the Company does not receive such
notice within 90 days of the Participants retirement
and before the date of exercise, the participant shall be
conclusively presumed to have elected alternative (ii) and
requested payment of the balance of the participants
account. Notwithstanding the foregoing, the date
participants option may first become exercisable will not
be any earlier than would be permitted under the $25,000
limitation set forth in subparagraph 4(e) above, in which case
such later date will be the date of exercise for the purpose of
computing the amount of the purchase price of the stock.
(c)
Termination by death
.
If the
employment of a participant is terminated by the
participants death, the executor of the participants
will or the administrator of the participants estate by
written notice to the Company may either (i) exercise the
participants option as of the date of the
participants death, in which event the Company shall apply
the balance in the participants account under the Plan to
the purchase at the option price of whole shares of the
Companys stock and refund the excess, if any, or
(ii) request payment of the balance in the
participants account under the Plan, in which event the
Company promptly shall make such payment, and thereupon the
participants interest in the Plan and the
participants option under the Plan shall terminate. If the
option is exercised, the date of the participants death
shall be deemed to be a date of exercise for the purpose of
computing the amount of the purchase price of the Companys
stock. If the Company does not receive such notice within
90 days of the participants death and before the date
of exercise, the participants representative shall be
conclusively presumed to have elected alternative (ii) and
requested payment of the balance of the participants
account. Notwithstanding the foregoing, the date
participants option may first become exercisable will not
be any earlier than would be permitted under the $25,000
limitation set forth in subparagraph 4(e) above, in which case
such later date will be the date of exercise for the purpose of
computing the amount of the purchase price of the stock.
A-3
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8.
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RESTRICTION
UPON ASSIGNMENT.
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An option granted under the Plan shall not be transferable
otherwise than by will or the laws of descent and distribution,
and is exercisable during the optionees lifetime only by
optionee. The Company will not recognize and shall be under no
duty to recognize any assignment or purported assignment by an
optionee of an option or of any rights under an option.
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9.
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NO RIGHTS
OF STOCKHOLDER UNTIL CERTIFICATE ISSUED.
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With respect to shares subject to an option, an optionee shall
not be deemed to be a stockholder and shall not have any of the
rights or privileges of a stockholder. An optionee shall have
the rights and privileges of a stockholder when, but not until,
following the exercise of the option, the Shares have been
credited to the employees account or a certificate has
been issued to the employee.
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10.
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CHANGES
IN STOCK ADJUSTMENTS.
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Whenever any change is made in the stock subject to the Plan, by
reason of stock dividend on such stock or by reason of
subdivision, combinations, or reclassification of shares of such
stock, appropriate action will be taken by the Committee for
administration of the Plan to adjust accordingly the number of
shares subject to the Plan and the number and option price of
shares subject to options outstanding under the Plan.
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11.
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USE OF
FUNDS; NO INTEREST PAID.
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All funds received or held by the Company under the Plan will be
included in the general funds of the Company free of any trust
or other restriction, and may be used for any corporate purpose.
No interest will be paid or credited to any participant under
the Plan.
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12.
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AMENDMENT
OF THE PLAN.
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The Board of Directors or the Committee for administration of
the Plan may from time to time suspend, terminate, revise or
amend the Plan in any respect whatsoever except that, without
the approval of stockholders of the Company, no such revision or
amendment may increase the number of shares subject to the Plan,
reduce the exercise price below that provided in the Plan, or
cause the Plan not to be in conformance with the requirements of
Section 423 of the Code. No suspension, discontinuation,
revision or amendment may adversely affect any award theretofore
made, without the consent of the optionee, unless necessary to
comply with applicable law.
Any reference to any Section or provision of the Code shall
include any successor provision thereto.
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13.
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ADMINISTRATION
BY COMMITTEE; RULES AND REGULATIONS.
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The Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company, which shall be composed
of not less than two directors of the Company, none of whom
shall be eligible to serve on the Committee unless such person
is then a Non-Employee Director within the meaning of the rules
adopted by the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934, if and
as such rules are then in effect. Each member shall serve for a
term commencing on a date specified by the Board of Directors
and continuing until such member dies or resigns or is removed
from office by the Board of Directors.
The Committee shall have the power to make, amend and repeal
rules and regulations for the interpretation and administration
of the Plan.
The effective date of this restatement of the Plan is the date
it is approved by the Board of Directors or the Committee but no
options may be exercised for shares of Common Stock of the
Company in excess of the 1,800,000 shares set forth in the
Plan before this amendment and restatement unless and until the
Plan has been approved by the stockholders of the Company within
12 months after the date the Plan is approved by the Board
of Directors or the Committee.
A-4
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR ITEMS 1
THROUGH 3.
Please mark your
votes as indicated
in this example
WITHHOLD
FOR ALL FOR ALL *EXCEPTIONS
1. ELECTION OF DIRECTORS Nominees:
01 Alex B. Best
02 Harry L. Bosco
03 John Anderson Craig
04 Matthew B. Kearney
05 William H. Lambert
06 John R. Petty
07 Robert J. Stanzione
08 David A. Woodle
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the Exceptions box and write
that nominees name in the space provided below.)
*Exceptions FOR AGAINST ABSTAIN
2. Vote to ratify Ernst & Young LLP as our Independent public accountant
3. Approval of 2001 Employee Stock Purchase Plan amendment
4. In their discretion, such other matters as may properly come before the Annual meeting or at any
adjournments thereof. YES
I will Attend the Meeting
Mark Here for Address Change or Comments SEE REVERSE
Signature Signature Date
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
FOLD AND DETACH HERE
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A
DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual
meeting day.
Arris Group, Inc.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of
shareholders
The Proxy Statement and the 2008 Annual Report to Stockholders are available at:
http://www.arrisi.com/proxy
INTERNET http://www.eproxy.com/arrs
Use the Internet to vote your proxy. Have your
proxy card in hand when you access the web site.
OR TELEPHONE
1-866-580-9477
Use any touch-tone telephone to vote your proxy.
Have your proxy card in hand when you call.
If you vote your proxy by Internet or by
telephone, you do NOT need to mail back your proxy
card.
To vote by mail, mark, sign and date your proxy
card and return it in the enclosed postage-paid
envelope.
Your Internet or telephone vote authorizes the
named proxies to vote your shares in the same
manner as if you marked, signed and returned your
proxy card.
47554
PROXY
ARRIS GROUP, INC.
Annual Meeting of Stockholders May 21, 2009
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Robert J. Stanzione, Lawrence A. Margolis and David B. Potts, and
each of them, with power to act without the other and with power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side,
all the shares of Arris Group, Inc. Common Stock which the undersigned is entitled to vote, and, in
their discretion, to vote upon such other business as may properly come before the Annual Meeting
of Stockholders of the company to be held May 21, 2009 or at any adjournment or postponement
thereof, with all powers which the undersigned would possess if present at the Meeting.
(Continued and to be marked, dated and signed, on the other side)
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER
SERVICES P.O. BOX 3550 SOUTH
HACKENSACK, NJ 07606-9250
FOLD AND DETACH HERE
You can now access your
BNY Mellon Shareowner Services
account online.
Access your BNY Mellon Shareowner Services shareholder/stockholder account online via Investor
ServiceDirect
®
(ISD).
The transfer agent for Arris Group, Inc. now makes it easy and convenient to get current
information on your shareholder account.
· View account status
· View certificate history
· View book-entry information
· View payment history for dividends
· Make address changes
· Obtain a duplicate 1099 tax form
· Establish/change your PIN
Visit us on the web at http://www.bnymellon.com/shareowner/isd For Technical Assistance
Call 1-877-978-7778 between 9am-7pm Monday-Friday Eastern Time ****TRY IT OUT****
www.bnymellon.com/shareowner/isd
Investor ServiceDirect
®
Available 24 hours per day, 7 days per week
Choose MLinkSM for fast, easy and secure 24/7 online access to your future
proxy materials, investment plan statements, tax documents and more. Simply
log on to Investor ServiceDirect
®
at www.bnymellon.com/shareowner/isd where
step-by-step instructions will prompt you through enrollment.
47554
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