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 þ
Filed by a Party other than the Registrant ¨
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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) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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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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ARRIS GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 2015
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 30024, on Thursday, May 14, 2015, at 10:00 a.m. local time, for the purposes of:
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electing ten directors; |
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voting, on a non-binding advisory basis, on executive compensation (Say on Pay) as disclosed in Proxy Statement; |
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ratifying the retention of Ernst & Young LLP as the independent registered public accounting firm for the Company for 2015; and |
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transacting such other business as may properly be brought before the meeting or any adjournment(s) thereof. |
These matters are more fully described in the Proxy Statement accompanying this notice.
As stockholders of the Company, 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. A broker or other nominee will NOT be able to vote your shares with respect to the matters expected to be considered (other than matter (3)) if you have not provided
directions to your broker or other nominee. We strongly encourage you to submit your voting instruction card and exercise your right to vote as a stockholder. Therefore, we urge you to promptly vote and submit your proxy by 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 fixed the close of business on March 16, 2015, as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting and 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 2014
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.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Lawrence A. Margolis, Secretary |
Suwanee, Georgia
April 9, 2015
NOTICE OF INTERNET
AVAILABILITY OF PROXY STATEMENT
Important Notice Regarding Internet Availability of Proxy Statement for the Stockholder Meeting to
be Held on May 14, 2015
The Proxy Statement for the Companys Annual Meeting of Stockholders, including the Companys
Annual Report on Form 10-K for the year ended December 31, 2014 and the Proxy Statement, are available over the Internet at www.arris.com/proxy.
SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. Since this summary does not contain all of that information, you are encouraged to read the entire Proxy Statement before
voting. As used in this Proxy Statement, the terms we, us, our, ARRIS and the Company refer to ARRIS Group, Inc.
Annual Meeting of Stockholders
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Time and Date: |
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10:00 a.m., local time, on Thursday, May 14, 2015 |
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Place: |
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ARRIS Group, Inc., 3871 Lakefield Drive, Suwanee, Georgia 30024 |
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Record Date: |
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March 16, 2015 |
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Voting: |
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Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be
voted on. |
Voting Recommendations
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Proposal |
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Board Vote Recommendation |
Election of Directors |
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FOR EACH NOMINEE |
Advisory
vote on executive compensation |
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FOR |
Ratification of the retention of
Ernst & Young LLP |
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FOR |
Director Nominees
The following table provides summary information about each nominee. Directors are elected annually. ARRIS has majority voting in uncontested elections of directors, such as this election. In the event
that a nominee does not receive the affirmative vote of a majority of the votes cast in person or by proxy, he or she is required to tender his or her resignation, which will be considered by the Nominating and Corporate Governance Committee, which
Committee will then make a recommendation to the full Board whether or not to accept the resignation.
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Name |
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Age |
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Director Since |
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Brief Biography |
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Independent |
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Committee
Membership |
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AC |
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CC |
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GC |
Alex B.
Best |
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74 |
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2003 |
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Former Executive Vice President, Cox Communications, Inc. |
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X |
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X |
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Harry L. Bosco |
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69 |
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2002 |
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Former Chairman, President and CEO, OpNext, Inc. |
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X* |
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J. Timothy Bryan |
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54 |
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N.A. |
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CEO, National Rural Telecommunications
Cooperative
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X |
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James A.
Chiddix |
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69 |
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2009 |
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Former Chairman and CEO, OpenTV Corporation |
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C |
Andrew T. Heller |
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59 |
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2011 |
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Former Vice Chairman, Turner Broadcasting System, Inc.; Board member of Starz |
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X |
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Dr. Jeong Kim |
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54 |
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2014 |
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Former President, Bell Labs |
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Robert J. Stanzione |
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67 |
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1998 |
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Chairman & CEO, ARRIS Group, Inc. |
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Doreen A.
Toben |
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65 |
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2013 |
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Former Executive Vice President, Verizon Communications,
Inc. |
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C |
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Debora J. Wilson |
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57 |
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2011 |
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Former President & CEO, The Weather Channel Inc. |
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C |
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David A.
Woodle |
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59 |
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2007 |
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Chairman & CEO, Nano Horizons, Inc. |
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* Lead Independent Director AC Audit Committee
CC Compensation Committee |
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GC Nominating and Corporate Governance Committee C Chair
X Member |
Executive Compensation Advisory Vote
We are asking stockholders to approve on a non-binding advisory basis our named executive officer compensation. The compensation paid to
our named executive officers reflects the following principles of our 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. We target the 50th percentile of the Peer Group for our base pay and annual cash compensation. |
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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 stockholders. Our executives interests must be aligned with the interests of our stockholders. Our
compensation program should motivate and reward our executives to grow long-term stockholder value. We target the
75th percentile for our annual long-term equity awards,
one-half of which are performance-based. |
For more information on the Companys executive compensation
programs, please see Proposal Number 2 Approval, on a Non-binding Advisory Basis, of Executive Compensation as Disclosed in These Proxy Statement and Compensation Discussion and Analysis in this Proxy Statement.
2014 Executive Compensation Highlights
Compensation awarded to, earned by or paid to the Companys named executive officers during 2014 is set forth in the Summary Compensation Table and described in the Compensation Discussion
and Analysis section in this Proxy Statement. The table below is an overview of the total direct annual compensation received by our named executive officers in 2014, which indicates the significance of incentive compensation relative to base
salary. The table does not include all of the information included in the Summary Compensation Table.
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Name |
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Salary ($) |
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Annual Incentive Cash Awards ($) |
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Annual Long-Term Incentive
Awards ($) |
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Total Annual Direct Compensation ($) |
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Robert J. Stanzione |
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968,750 |
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2,500,000 |
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4,499,953 |
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7,968,703 |
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David B. Potts |
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517,501 |
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848,026 |
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1,399,961 |
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2,765,488 |
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Lawrence A. Margolis |
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490,001 |
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800,032 |
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1,300,121 |
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2,590,154 |
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Bruce McClelland |
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475,008 |
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768,016 |
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1,200,006 |
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2,443,029 |
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Lawrence Robinson |
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475,008 |
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768,016 |
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1,200,006 |
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2,443,029 |
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Independent Registered Public Accounting Firm
As a matter of good corporate governance, we are asking our stockholders to ratify the selection of Ernst & Young LLP as our
independent registered public accounting firm for 2015. This firm has audited the accounts of the Company since 1993. Set forth below is summary information with respect to Ernst & Young LLPs fees for services provided in 2014 and
2013.
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Type of Fees |
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2014 |
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2013 |
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(in thousands) |
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Audit Fees |
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$ |
7,513 |
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$ |
8,167 |
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Audit-Related Fees |
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189 |
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139 |
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Tax Fees |
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950 |
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846 |
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Other Fees |
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2,807 |
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Total |
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$ |
8,653 |
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$ |
11,959 |
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TABLE OF CONTENTS
i
PROXY STATEMENT
FOR
ANNUAL MEETING OF
STOCKHOLDERS
OF ARRIS GROUP, INC.
To Be Held May 14, 2015
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 14, 2015 at 10:00 a.m. local time at the Companys corporate headquarters, and any adjournment(s) thereof. The Companys corporate
headquarters are 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 9, 2015.
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. No additional compensation will be paid to those individuals for any such services. The costs of this solicitation will be borne by the Company. The Company will request brokerage houses,
nominees and other custodians to forward Proxy Statement to their customers and will reimburse them for their reasonable expenses in so doing. In addition, the Company has retained Morrow & Co., LLC to assist in the solicitation for a fee
of approximately $8,000 plus expenses.
VOTING
Shares of Common Stock of the Company represented by proxies, 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
FOR the election as director of each of the nominees listed below (Proposal 1), FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement (Proposal 2),
FOR the ratification of the retention of Ernst & Young LLP as the independent registered public accounting firm for the Company for 2015 (Proposal 3), 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 fixed the close of business on March 16, 2015, 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, 144,641,145 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. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is
present for the transaction of business.
An abstention is the voluntary act of not voting by a stockholder who is present at
a meeting in person or by proxy and entitled to vote. Broker non-votes occur when shares held by a brokerage firm or other nominee (for the benefit of its client) are represented at the meeting, but with respect to which such broker or
nominee is not instructed to vote on a particular proposal and does not have discretionary authority to vote on that proposal. If you are a beneficial owner whose shares are held in street name and you do not submit voting instructions to
1
your broker or other nominee, your broker or other nominee may generally vote your shares in its discretion on routine matters. We believe that Proposal Three is routine and may be voted on by
your broker if you do not submit voting instructions. However, pursuant to rules of The NASDAQ Stock Market, brokers and nominees do not have the discretion to vote their clients shares on non-routine matters, unless the broker receives voting
instructions from the beneficial owner. Proposals One and Two are considered non-routine matters. Consequently, if your shares are held in street name, you must provide your broker with instructions on how to vote your shares in order for your
shares to be voted on Proposals 1 and 2. On Proposals 1 and 2, broker non-votes will not be counted as shares cast and accordingly will not affect the outcome with respect to any matter to be voted on at the Annual Meeting.
If a quorum is 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) In the absence of a contested election, a nominee who does not receive the affirmative vote of a majority of the votes cast for the election of directors is required to
tender his or her resignation. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote for this proposal. |
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Proposal 2 (Approval, on a non-binding advisory basis, of executive compensation as disclosed in this Proxy Statement) Approval, on a non-binding advisory basis, of executive compensation as disclosed in
these Proxy Statement requires the affirmative votes of the holders of the majority of the vote cast on this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote for this
proposal. |
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Proposal 3 (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 2015 requires the affirmative vote of holders of a majority of the votes cast on this proposal. Abstentions will not be counted as votes cast and will have no effect on the result of the vote for this.
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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, other than J. Timothy Bryan, 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 or until their earlier resignation or removal. 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 of Directors acts to reduce the size of the Board of Directors in accordance with the provisions of ARRIS by-laws. Upon
their re-election at this years Annual Meeting, Mr. Stanzione is expected to serve as Chairman of the Board and Mr. Bosco is expected to serve as Lead Independent Director.
The Companys by-laws provide for a majority voting standard in the election of Directors. In the absence of a contested election (as
defined in the by-laws), each nominee shall be elected by the vote of a majority of the votes cast for such nominee. If a nominee who is an incumbent director (in the absence of a contested election) is not elected, the director shall promptly
tender his or her resignation to the Board of Directors, subject to acceptance by the Board of Directors. The Nominating and Governance Committee will consider the resignation and make a recommendation to the Board of Directors. The Board of
Directors must determine whether to accept the resignation and must publicly disclose its decision and the rationale behind its decision within ninety days from the date of the certification of the stockholder vote. If a directors resignation
is accepted or a nominee who is not an incumbent director is not elected, the Board of Directors may fill the resultant vacancy by appointment or election or may reduce the size of the Board pursuant to the by-laws of the Company.
2
Matthew B. Kearney, after 12 years of dedicated service as a director, will not stand for
reelection at the Annual Meeting. Throughout his tenure, Mr. Kearney has provided significant financial expertise, strategic guidance and leadership for the Company. His dedicated service and contributions to the Board and the Company will be
missed. The Board has nominated J. Timothy Bryan to fill the vacancy that will result on the Board as a result of Mr. Kearney not standing for reelection.
NOMINEES TO SERVE FOR A ONE-YEAR TERM EXPIRING IN 2015
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Name: |
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Alex B. Best |
Age: |
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74 |
Director since: |
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2003 |
ARRIS Board Committees: |
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Compensation Committee and Nominating and Corporate Governance Committee |
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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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Other directorships: |
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Deep Fiber Solutions. |
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Director skills and qualifications: |
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Mr. Best brings to the Board industry-specific engineering and technology experience derived from an extensive engineering and
executive career, both on the behalf of major equipment suppliers (Scientific Atlanta, now part of Cisco Incorporated) and a major system operator (Cox Communications, Inc.). Mr. Best is a member of the Cable Centers Cable Hall of
Fame. |
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Name: |
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Harry L. Bosco |
Age: |
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69 |
Director since: |
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2002 |
ARRIS Board Committees: |
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Audit Committee, Compensation Committee and Lead Independent
Director |
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Principal occupation and recent business experience: |
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Mr. Bosco served as the Chief Executive Officer and President of OpNext, Inc. from 2000 until April 1, 2009 when he became the Chairman of the Board. In 2010,
Mr. Bosco assumed the interim CEO position of Opnext in addition to Chairman of the board until July of 2012 when Opnext was merged with Oclaro. 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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GSI Group Inc. |
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Director skills and qualifications: |
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Mr. Bosco brings to the Board broad recent experience as an executive, including being the CEO and Chairman of a public company, in
the telecommunication technology equipment supply business focused on telecom operators. |
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Name: |
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J. Timothy Bryan |
Age: |
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54 |
Director since: |
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N.A. |
ARRIS Board Committees: |
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N.A. |
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Principal occupation and recent business experience: |
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Since 2011, Mr. Bryan has served as the Chief Executive Officer of the National Rural Telecommunications Cooperative (NRTC), an organization focused on providing
commercial technology solutions to the nations rural electric and telephone cooperatives and companies. Prior to NRTC, Mr. Bryan served as an outside advisor to IMAX Corporation (January 2011 May 2011), DBSD (formerly ICO North
America) (September 2010 February 2011), NRTC (March 2010 September 2010) and O3b Networks (April 2009 November 2009). Mr. Bryan previously served, from September 2005 to February 2009, as the Chief Executive
Officer of ICO Global Communications, a next generation satellite and terrestrial wireless company, the domestic portion of which was subsequently sold to DISH Networks in 2011. Mr. Bryan resigned prior to ICO North America, a
subsidiary of ICO, filing for bankruptcy protection in May 2009. Prior to ICO, Mr. Bryan served as the Chief Financial Officer of Eagle River Holdings and served on the Boards of Directors of Nextel Communications and Clearwire Communications.
Mr. Bryan also served as the President of United Pan Europe Communications, now Liberty Global, which was the largest private cable/telecom provider in Europe and as Chief Financial Officer of UnitedGlobalCom, also now part of Liberty
Global. Mr. Bryan previously served as the Vice President/Finance and Treasurer of Jones Financial Group and Jones Intercable (now part of Comcast) and began his career in banking, including as the Vice President and Manager of the
Communications Division at NationsBank Corporation (now Bank of America). In 2012 Mr. Bryan was appointed by the United States Secretary of Commerce to the Board of Directors of FirstNet, an independent authority charged with constructing
and operating a nationwide wireless network for first responders, and currently serves as the Chair of the Finance Committee of the Board for FirstNet. |
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Other directorships: |
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FirstNet. |
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Director skills and qualifications: |
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Mr. Bryan brings to the Board significant
experience in the telecommunications, satellite and cable industries. This includes broad financial experience including prior service as CFO and treasurer, as well as prior service as audit committee chairperson for several public companies.
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Name: |
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James A. Chiddix |
Age: |
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69 |
Director since: |
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2009 |
ARRIS Board Committees: |
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Nominating and Corporate Governance Committee (Chairperson) |
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Principal occupation and recent business experience: |
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Mr. Chiddix has over 40 years of experience in the cable industry. Prior to his retirement in 2007, Mr. Chiddix was the Chairman and Chief Executive Officer of
OpenTV Corporation. From 2007 to 2009, he served as the Vice-Chairman of the Board of OpenTV. Prior to 2004, his previous roles included President at MystroTV (a division of Time Warner), Chief Technology Officer and Senior Vice President,
Engineering and Technology at Time Warner Cable, Senior Vice President, Engineering at Oceanic Cable, and General Manager at Waianae Cablevision. |
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Other directorships: |
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Magnum Semiconductor, Virgin Media, Inc., Symmetricom Inc. (acquired by Microsemi Corporation) and Dycom Industries, Inc. |
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Director skills and qualifications: |
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Mr. Chiddix has spent a career of over 40
years in the cable industry, including senior roles at both major service providers and equipment suppliers. Mr. Chiddix brings rich industry specific technology and product experience, including video experience, to the Board from both an
operator and supplier point of view derived from having served as Chief Technology Officer of Time Warner Cable, currently the second largest Multiple System Operator in the United States, and as Chief Executive Officer of Open TV, a middle-ware
supplier to the cable industry. |
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Name: |
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Andrew T. Heller |
Age: |
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59 |
Director since: |
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2011 |
ARRIS Board Committee: |
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Nominating and Governance Committee |
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Principal occupation and recent business experience: |
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Mr. Heller was a consultant for MacAndrews & Forbes Holdings Inc., a privately owned company until 2014. Mr. Heller was Vice Chairman of Turner
Broadcasting System, Inc. based in Atlanta, GA until his retirement in 2013. He also served until such time as senior adviser to TBS, Inc. Chairman and CEO Phil Kent on a host of business and corporate strategy-setting issues. Mr. Heller joined
TBS in 1998. Most recently, he was president of domestic distribution, running the division responsible for the distribution of 10 domestic networks to the cable, satellite and telco industries, and was also responsible for Turner Private Networks.
Previously, he was assistant general counsel of Time Warner Cable. Earlier, Heller served as associate counsel and senior counsel, litigation, for HBO. |
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Other directorships: |
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Mr. Heller is a member of the Board of Directors of Starz. Prior to his retirement on April 1, 2013, he was Chair of CTAM (Cable and Telecommunication
Association for Marketing) Educational Foundation Board and was a member of the CTAM and Cable Center boards of directors. He is a member of the Advisory Board of the S.I. Newhouse School of Public Communications. |
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Director skills and qualifications: |
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Mr. Heller brings to the board experience
and leadership in the evolution of video services to devices everywhere, as well as extensive program content distribution experience.
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Name: |
|
Dr. Jeong Kim |
Age: |
|
54 |
Director since: |
|
2014 |
ARRIS Board Committee: |
|
Compensation Committee |
|
|
Principal occupation and recent business experience: |
|
Dr. Kim is Executive Chairman of Kiswe Mobile Inc., a startup company focused on development of interactive mobile applications for sports. Dr. Kim was formerly
President of Bell Labs and Chief Strategy Officer of Alcatel-Lucent. He also served as Chief Operating Officer and later President of the Optical Networking Group of Lucent Technologies. Dr. Kim also served as Professor of Electrical and
Computer Engineering at the University of Maryland. Dr. Kim was the founder and CEO of Yurie Systems, Inc., a global leader in data networking access technology which he took public and ultimately sold to Lucent Technologies in 1998. |
|
|
Other directorships: |
|
Schneider Electric, S.A. (France) and The Nuclear Threat Initiative. |
|
|
Director skills and qualifications: |
|
Dr. Kim provides the Board with significant
experience and leadership in the telecommunications industry from a technology, engineering and strategy point of view.
|
|
|
|
Name: |
|
Robert J. Stanzione |
Age: |
|
67 |
Director since: |
|
1998 |
|
|
Principal occupation and recent business experience: |
|
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. |
|
|
Other directorships: |
|
National Cable & Telecommunications Association (NCTA). |
|
|
Director skills and qualifications: |
|
As our chief executive officer since 2000,
Mr. Stanzione provides valuable insight into our industry and company. |
6
|
|
|
|
|
Name: |
|
Doreen A. Toben |
Age: |
|
65 |
Director since: |
|
2013 |
ARRIS Board Committees: |
|
Audit Committee (Chairperson and Audit Committee Financial Expert) |
|
|
Principal occupation and recent business experience: |
|
Prior to her retirement in 2009, Ms. Toben was the Executive Vice President of Verizon Communications, Inc. Ms. Toben also served as Verizons Chief
Financial Officer and was responsible for its finance and strategic planning efforts. Ms. Toben began her career at AT&T Corp. and over the years held various positions of increasing responsibility primarily in treasury, strategic planning
and finance both there and, beginning in 1984, at Bell Atlantic Inc. Her later positions at Bell Atlantic included vice president and chief financial officer, Bell Atlantic-New Jersey in 1993; vice president, finance and controller in 1995; vice
president and chief financial officer Telecom/Network in 1997; and vice president and controller in 1999. |
|
|
Other directorships: |
|
The New York Times Company and Kate Spade & Company. |
|
|
Director skills and qualifications: |
|
Ms. Toben has over 25 years of experience
in the communications industry. Over the years, Ms. Toben held various positions in treasury, strategic planning and finance and brings a wealth of financial expertise to the Board.
|
|
|
|
Name: |
|
Debora J. Wilson |
Age: |
|
57 |
Director since: |
|
2011 |
ARRIS Board Committees: |
|
Compensation Committee (Chairperson) |
|
|
Principal occupation and recent business experience: |
|
Ms. Wilson is the former President and Chief Executive Officer (2004 through 2009) of The Weather Channel Inc., a leading multi-platform media organization. Prior to
becoming the President and Chief Executive Officer of The Weather Channel, Ms. Wilson held other positions including Executive Vice President and Chief Operating Officer from 1994 to 2004. From 1979 through 1994, Ms. Wilson worked for Bell
Atlantic (now Verizon) and held management positions in network operations and new product development. |
|
|
Other directorships: |
|
Markel Corporation and Internap Corporation. |
|
|
Director skills and qualifications: |
|
Ms. Wilson brings more than 30 years of
business experience in the cable television and telecommunications industries, most recently as chief executive officer of The Weather Channel Inc. In addition to her executive management background in the media industry, Ms. Wilson has
extensive sales, marketing and product development experience with new technologies and corporate strategy which provides a useful perspective to the Board from the media and content business point of view.
|
7
|
|
|
|
|
Name: |
|
David A. Woodle |
Age: |
|
59 |
Director since: |
|
2007 |
ARRIS Board Committees: |
|
Audit Committee |
|
|
Principal occupation and recent business experience: |
|
In April 2008, Mr. Woodle became Chairman of the Board and Chief Executive Officer of Nano Horizons Inc., a nanotechnology company that specializes in producing Nano
silver particles for anti-microbial applications. Prior to ARRIS acquisition of C-COR Incorporated in 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. |
|
|
Director skills and qualifications: |
|
Mr. Woodle brings significant experience
in cable industry technology equipment sales and operations to the company including experience as Chairman and CEO of C-COR prior to its acquisition by ARRIS in 2007. Mr. Woodles experience includes the planning and execution of
strategic merger and acquisition transition efforts at both C-COR and Raytheon E-systems/HRB systems. |
Each of the nominees brings a wealth of relevant business experience that qualifies the nominee for service on
the Board. The Board of Directors believes that these nominees provide a good cross-section of skills and experience to the Board of Directors and that the stockholders of the Company would be well-served by these nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
8
PROPOSAL 2
APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF EXECUTIVE
COMPENSATION AS DISCLOSED IN THESE PROXY STATEMENT
The Board of Directors is submitting a Say on Pay proposal for stockholder consideration. The proposal enables our stockholders to
cast an advisory vote to approve the compensation of the Companys named executive officers as disclosed in the Compensation Discussion and Analysis and accompanying compensation tables in this Proxy Statement. Stockholders previously
voted to recommend a proposal that the frequency of these annual advisory votes be annual, and the Board has implemented that recommendation.
As discussed in the Compensation Discussion and Analysis section, the compensation paid to our named executive officers reflects the
following principles of our compensation program:
|
|
|
Competitive pay. Competitive compensation programs are required to attract and retain a high-performing executive team, particularly for a technology focused company. We target the 50th percentile of the Peer Group for our base pay and annual cash compensation. |
|
|
|
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. |
|
|
|
Alignment with stockholders. Our executives interests must be aligned with the interests of our stockholders. Our compensation program should motivate and reward our executives to
grow long-term stockholder value. We target the 75th percentile for our annual long-term equity awards, one-half of which are performance-based. |
At the 2014 Annual Meeting of Stockholders, the advisory vote on executive compensation proposal (the say on pay vote) received
significant stockholder support with approximately 95% of votes cast. The Committee considered these results and, reflecting on the changes previously made as a result of the Motorola Home acquisition, determined not to make any major changes
to compensation plans and programs for fiscal year 2014. The Compensation Committee has decided to follow the same general policies and procedures described above in setting compensation for 2015.
The say-on-pay vote is an advisory vote only, and therefore, not binding on the Company or the Board of Directors. However, the Board and the
Compensation Committee will consider the voting results as appropriate when making future compensation decisions for our named executive officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
9
PROPOSAL 3
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, 2015. This firm has audited the accounts of the Company since 1993. If stockholders do not ratify this appointment, the appointment will be reconsidered by the
Audit Committee and the Audit Committee may consider other independent registered public accounting firms. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered
public accounting firm at any time during the year if the Audit Committee believes that such a change would be in our and our stockholders best interests.
One or more representatives of Ernst & Young LLP are expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they so desire, and will be available to respond to appropriate questions from the stockholders.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR RATIFICTION OF THE APPOINTMENTOF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
10
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth, as of March 16, 2015, 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 named officers set forth in the Summary Compensation Table and by all directors, executive officers and nominees as a group.
|
|
|
|
|
|
|
|
|
|
|
Beneficial Owner(1) |
|
Shares Beneficially Owned(2) |
|
|
Shares that may be acquired within 60 days |
|
|
Total shares percentage of class(3) |
Alex B.
Best |
|
|
77,036 |
|
|
|
934 |
|
|
* |
Harry L. Bosco |
|
|
77,336 |
|
|
|
934 |
|
|
* |
J. Timothy
Bryan(4) |
|
|
1,172 |
|
|
|
|
|
|
* |
James A. Chiddix |
|
|
40,936 |
|
|
|
934 |
|
|
* |
Andrew T.
Heller |
|
|
19,036 |
|
|
|
934 |
|
|
* |
Matthew B. Kearney(5) |
|
|
67,036 |
|
|
|
934 |
|
|
* |
Dr. Jeong H. Kim |
|
|
1,050 |
|
|
|
1,050 |
|
|
* |
Doreen A. Toben |
|
|
7,536 |
|
|
|
934 |
|
|
* |
Debora J.
Wilson |
|
|
33,736 |
|
|
|
934 |
|
|
* |
David A. Woodle |
|
|
63,887 |
|
|
|
934 |
|
|
* |
Robert J.
Stanzione |
|
|
769,837 |
|
|
|
74,712 |
|
|
* |
David B. Potts |
|
|
72,498 |
|
|
|
27,573 |
|
|
* |
Lawrence A.
Margolis |
|
|
428,596 |
|
|
|
27,121 |
|
|
* |
Bruce McClelland |
|
|
126,614 |
|
|
|
26,667 |
|
|
* |
Lawrence Robinson |
|
|
4,376 |
|
|
|
5,439 |
|
|
* |
All directors, nominees and executive officers as a group including the above named persons (16 persons) |
|
|
1,825,137 |
|
|
|
200,331 |
|
|
1.4% |
* |
Percentage of shares beneficially owned does not exceed one percent of the class. |
(1) |
Unless otherwise indicated, each person has sole investment power and sole voting power with respect to the securities beneficially owned by such person. |
(2) |
Includes an aggregate of 265,002 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. |
(4) |
Nominee standing for election for the first time at the Annual Meeting. Shares shown are held by the National Rural Telecommunications Cooperative (NRTC) for which Mr. Bryan may be deemed to beneficially own as a
result of his service as CEO. Mr. Bryan disclaims beneficial ownership of the shares held by NRTC. |
(5) |
Mr. Kearney is not standing for reelection at the Annual Meeting. |
11
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 16, 2015, 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 Securities and Exchange
Commission (SEC) filings by the person.
|
|
|
|
|
|
|
|
|
Beneficial Owner |
|
Amount and Nature of Beneficial Ownership |
|
|
Percent of Class |
|
First Pacific Advisors, LLC(1) |
|
|
11,007,763 |
|
|
|
7.6 |
% |
Google,
Inc.(2) |
|
|
9,703,500 |
|
|
|
6.7% |
|
The Vanguard Group, Inc.(3) |
|
|
9,376,884 |
|
|
|
6.5% |
|
BlackRock,
Inc.(4) |
|
|
9,057,638 |
|
|
|
6.3% |
|
Hotchkis and Wiley Capital Management,
LLC(5) |
|
|
7,899,818 |
|
|
|
5.5% |
|
(1) |
First Pacific Advisors, LLC has shared voting power with respect to 2,434,900 shares and shared dispositive power with respect to 11,007,763 shares. The address for First Pacific Advisors, LLC is 11400 West Olympic
Blvd., Suite 1200, Los Angeles, CA 90064. |
(2) |
The address for Google, Inc. is 1600 Amphitheatre Parkway, Mountain View, California 94043. |
(3) |
The Vanguard Group, Inc. has sole voting power with respect to 85,930 shares, sole dispositive power with respect to 9,300,654 shares, and shared dispositive power with respect to 76,230 shares. The address for The
Vanguard Group, Inc. is 100 Vanguard Blvd, Malvern, PA 19355. |
(4) |
BlackRock, Inc. has sole voting power with respect to 8,693,458 shares and sole dispositive power with respect to 9,057,638 shares. The address for BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022. |
(5) |
Hotchkis and Wiley Capital Management, LLC has sole voting power with respect to 7,368,518 shares and sole dispositive power with respect to 7,899,818 shares. The address for Hotchkis and Wiley Capital Management, LLC
is 725 S. Figueroa Street, 39th Fl, Los Angeles, CA 90017. |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (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, 2014 all Section 16(a) filing requirements applicable to its directors, executive officers and greater-than-ten-percent beneficial owners
were properly filed other than a Form 3 with respect to Dr. Jeong Kims appointment as a director that was not timely filed.
12
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, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category |
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) |
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights(2) |
|
|
Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans
(Excluding Securities Reflected in 1st Column)(3) |
|
Equity compensation plans
approved by security holders |
|
|
8,778,797 |
|
|
$ |
11.97 |
|
|
|
18,081,990 |
|
Equity
compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
8,778,797 |
|
|
$ |
11.97 |
|
|
|
18,081,990 |
|
(1) |
The total number of securities to be issued upon exercise of outstanding options, warrants and rights consists of stock options of 38,000 and, upon vesting, restricted shares of 8,740,797. |
(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) |
Represents securities available for future issuance under current plans. 15,052,781 stock options or 8,049,616 restricted shares are available under for issuance the ARRIS 2011 Stock Incentive Plan. The ARRIS 2011 Stock
Incentive Plan has been designed to allow for flexibility in the form of awards; awards denominated in shares of common stock other than stock options and stock appreciation rights will be counted against the plan limit as 1.87 shares for every one
share covered by such an award. 2,878,114 shares are available for issuance under the 2001 Employee Stock Purchase Plan, which is in compliance with Section 423 of the U.S. Internal Revenue Code. 151,095 shares are available for issuance under
the BigBand Networks, Inc. 2007 Equity Incentive Plan. |
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 Stock Market. It also considers the definitions of independence used in the Internal Revenue
Code and Exchange Act 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
13
Board of Directors determines whether such transactions share any implications to the directors independence. A copy of the director independence standards is available on the
Companys website at www.arris.com under the caption Investor Relations: Corporate Governance. Based upon these standards, the Board of Directors has determined that all of the directors and nominee, other than Robert J.
Stanzione, meet the independence requirements for the committees on which they serve and for the Board. Mr. Stanzione, as the Companys Chief Executive Officer and President, is not considered independent for any purpose.
Compensation of Directors
Cash
Fees. The non-employee directors receive director fees that consist of:
|
|
|
an annual cash retainer of $60,000, paid in equal quarterly installments; |
|
|
|
$1,500 for each committee meeting attended, in person or via teleconference; and |
|
|
|
$1,250 for each board meeting attended in person or via teleconference. |
The Lead Independent
Director was paid an additional annual cash retainer of $20,000. Each member of the Audit Committee was paid an additional annual cash retainer of $10,000, and the respective Chairpersons of our Board committees will continue to be paid the
following additional annual cash retainers:
|
|
|
Audit Committee: $20,000; |
|
|
|
Compensation Committee: $15,000; and |
|
|
|
Nominating and Corporate Governance Committee: $10,000. |
In connection with any ad-hoc
committee formed by the Board from time to time, the compensation paid to the members of the committee is set by the Board and is based on the expected time required by the committee members in carrying out the responsibilities delegated to the ad
hoc committee. In 2014, the Board created an ad hoc technology committee. The fees paid to the members of that committee, which completed its work in 2014, are included in the Director Compensation Table below.
Stock Awards and Minimum Holding Requirement. Each non-employee director also receives annual compensation paid
in the form of stock units. Stock units 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 Companys Common Stock on the trading day
preceding the day of grant 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 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 stock units 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 or she is no longer a director is set forth in the
Director Compensation Table below. In addition, the Companys Stock Ownership guidelines require directors to own three times their annual cash retainer ($60,000). For this purpose, stock units that have vested but not converted are treated as
owned. Directors are given five years to obtain this ownership level initially or if they become non-compliant for example because of a change in stock value. The Compensation Committee reviews compliance with the guideline annually. As of
March 16, 2015, nine of the ten current Board members had already met this guideline and the remaining member was on track to obtain compliance within the five year time period.
For 2014, the stock unit portion of director compensation was $120,000. Over the past several years, the stock unit portion of director
compensation was made in two separate grants. Consistent with that practice, for 2014, $60,000 of the total $120,000 stock unit director compensation was issued as of January 2, 2014. Subsequent to that grant, the Compensation Committee
recommended, and the Board approved, moving to a single annual grant for the stock unit portion of director compensation. To phase in the change to a single annual
14
grant, a grant of stock units in the amount of $90,000 was made on July 1, 2014, vesting $15,000 of value at the end of the third and fourth quarters of 2014 and $30,000 at the end of first
and second quarters of 2015. For 2015, the stock unit portion of director compensation will remain $120,000 and a grant for the full amount is expected to be made in July 2015, which grant will vest over the succeeding four quarters.
Reimbursements. Directors are reimbursed for reasonable expenses (including costs of travel, food and lodging)
incurred in attending Board, committee and stockholder meetings. Directors also are reimbursed for reasonable expenses associated with other business activities related to their Board of Directors service, including participation in director
education programs, attendance of industry functions and memberships in director organizations.
Liability
Insurance. The Company maintains customary directors and officers liability insurance and is obligated under its Bylaws to indemnify its officers and directors under certain circumstances.
Director Compensation Table. The following table sets forth information about the compensation paid to the
non-employee members of the Board of Directors for the last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Director Compensation |
|
Name(1) |
|
Fees Earned or Paid in Cash($) |
|
|
Stock Awards ($)(2) |
|
|
Total Compensation ($) |
|
|
Shares Held Until Board Retirement |
|
Alex B. Best(8) |
|
|
83,750 |
|
|
|
152,298 |
|
|
|
236,048 |
|
|
|
40,086 |
|
Harry L. Bosco(8) |
|
|
124,250 |
|
|
|
152,298 |
|
|
|
276,548 |
|
|
|
70,736 |
|
James A. Chiddix(8) |
|
|
92,250 |
(3) |
|
|
152,298 |
|
|
|
244,548 |
|
|
|
22,468 |
|
Andrew T. Heller(8) |
|
|
140,078 |
(4) |
|
|
152,298 |
|
|
|
292,376 |
|
|
|
9,518 |
|
Matthew B. Kearney(5)(8) |
|
|
110,847 |
|
|
|
152,298 |
|
|
|
263,145 |
|
|
|
49,286 |
|
Dr. Jeong Kim(6) |
|
|
51,662 |
(3) |
|
|
137,172 |
|
|
|
188,834 |
|
|
|
2,100 |
|
Doreen A. Toben(8) |
|
|
98,250 |
|
|
|
152,298 |
|
|
|
250,548 |
|
|
|
7,536 |
|
Debora J.
Wilson(8) |
|
|
91,250 |
|
|
|
152,298 |
|
|
|
243,548 |
|
|
|
13,086 |
|
David A.
Woodle(8) |
|
|
77,346 |
|
|
|
152,298 |
|
|
|
229,644 |
|
|
|
51,236 |
|
(1) |
Mr. Stanzione, as an employee of the Company, receives no additional compensation for his service as a member of the Board. |
(2) |
Each director, other than Dr. Kim who joined the Board in May 2014, was granted 2,500 and 2,800 stock units on January 2, 2014 and July 1, 2014, having grant date fair values of $60,850 and $91,448,
respectively, calculated based on the fair market value of our common stock on the applicable grant date. |
(3) |
Includes $6,000 in board fees paid for service on an ad hoc technology committee formed by the Board in 2014. |
(4) |
Includes $63,750 in fees paid for chairing an ad hoc technology committee formed by the Board in 2014. |
(5) |
Mr. Kearney is not standing for reelection at the Annual Meeting. |
(6) |
Dr. Kim joined the board in May 2014. The number of stock units granted in fiscal year 2014 was 4,200, having an aggregate grant date fair value of $137,172. |
(7) |
The value of perquisites and other personal benefits was less than $10,000 in the aggregate for each non-employee director. |
(8) |
The aggregate number of restricted stock awards outstanding at December 31, 2014 for each of the director are as follows: 41,950 stock units for Mr. Best; 72,600 stock units for Mr. Bosco; 24,332 stock
units for Mr. Chiddix; 11,382 stock units for Mr. Heller; 51,150 stock units for Mr. Kearney; 4,200 stock units for Dr. Kim; 9,400 stock units for Ms. Toben; 14,950 stock units for Ms. Wilson and 53,100 stock units for
Mr. Woodle. |
15
Committees of the Board of Directors
The Board has delegated certain functions to three standing committees: an Audit Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee. Each of the committees has a written charter that is available on the Companys website at www.arris.com. The following is a summary of the principal responsibilities and other information regarding each
of the committees:
|
|
|
Committee |
|
Principal Responsibilities and Other Information |
Audit
Committee |
|
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 Board of Directors has determined 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 Stock Market.
The Board has identified each of Mr. Kearney and Ms. Toben as audit committee
financial expert, as defined by the SEC. |
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.
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 Chief Executive Officer, in which case the entire Board of Directors approves or ratifies all said compensation matters.
|
Nominating and
Corporate Governance
Committee |
|
Identifies individuals qualified to become directors and recommends candidates to the
Board of Directors.
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.
Together with the Board actively review succession issues and plans for both management
and the Board of Directors. |
Committee Composition and Meeting Attendance
The following table shows the current membership of each standing committee and the number of meetings held by each committee during 2014. The
Company will determine the composition and chair positions of the respective committees for 2015 following the Annual Meeting.
|
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|
|
|
|
Director |
|
Audit |
|
Compensation |
|
Nominating and Corporate
Governance |
Alex B. Best |
|
|
|
X |
|
X |
Harry L. Bosco |
|
X |
|
X |
|
|
James A. Chiddix |
|
|
|
|
|
Chair |
Andrew T. Heller |
|
|
|
|
|
X |
Matthew B. Kearney(1) |
|
X |
|
|
|
|
Dr. Jeong Kim |
|
|
|
X |
|
|
Robert J. Stanzione |
|
|
|
|
|
|
Doreen A. Toben |
|
Chair |
|
|
|
|
Debora J. Wilson |
|
|
|
Chair |
|
|
David A. Woodle |
|
X |
|
|
|
|
Total meetings in 2014 |
|
11 |
|
5 |
|
5 |
16
(1) |
Mr. Kearny is not standing for reelection at the Annual Meeting. |
During 2014, the Board
held five meetings and each director attended at least 75% of the aggregate number of meetings of the Board and respective committees on which he or she served while a member thereof.
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. A majority of the Companys directors attended the 2014 annual meeting of stockholders held on May 14, 2014.
Identification and Evaluation of Director Nominees
With respect to the Nominating and Corporate Governance 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:
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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;
|
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whether the candidate is an audit committee financial expert (as defined by the SEC); |
|
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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; |
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contribution to diversity of the Board of Directors; |
|
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integrity and reputation; |
|
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ability to work collegially with others; |
|
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whether the candidate is independent; |
|
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other obligations and time commitments and the ability to attend meetings in person; and |
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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 Committee from time to time also utilizes a recruiting firm to assist in the process.
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:
|
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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 NASDAQ listing standards (a copy of which are available on our website), and (5) has no plans to change or influence the control of the Company; |
17
|
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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); |
|
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personal and professional references, including contact information; and |
|
|
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any other information relating to the candidate required to be disclosed in a Proxy Statement for election of directors under Regulation 14A of the Exchange Act. |
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 2016 annual stockholders meeting, the Corporate Secretary must receive this information by December 15, 2015.
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.
Lead Independent Director
The Companys Governance Guidelines provide 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 stockholder and has various other communications and administrative responsibilities. The Company believes that having the Chief Executive Officer serve as Chairman, and having a separate Lead Director, is
important because it best reflects the Boards intent that the Chief Executive Officer function as the Companys overall leader, while the Lead Director provides independent leadership to the directors and serves as an intermediary
between the independent directors and the Chairman. The resulting structure sends a message to our employees, customers and stockholders that we believe in having strong, unifying leadership at the highest levels of management, but that we also
value the perspective of our independent directors and their many contributions to our Company. Mr. Bosco is the companys Lead Independent Director and has served in that capacity since the Companys 2012 Annual Meeting.
Consideration of Risks Facing the Company
On a periodic basis, the Companys management reviews the primary risks that the Company faces and assesses the adequacy of the means
through which the Company manages those risks. Some risks, such as the focus of the Companys business on the broadband communications industry and its significant sales to the dominant service providers are intrinsic to its business and
are largely unavoidable without a significant change in strategic focus. Others, such as the risk of property damage or business interruption from weather or other causes are managed through maintaining insurance of types and at levels that the
Company believes are reasonable given the nature of its assets and business and through the maintenance of backup storage and processing capability offsite. Still others, such as credit risk, currency risk and country risk, are actively managed
through policies and oversight designed to minimize the Companys ultimate exposure to loss. On an annual basis, the Companys management, as part of its strategic planning process and annual budget process, reviews with the Board of
Directors (and with the Audit Committee with respect to certain financial risks) the risks that it considers the most significant as well as the approaches used to manage or mitigate those risks. In addition, the
18
Board of Directors (and the Audit Committee with respect to financial risks) informally considers risk-related matters on a more frequent basis and also in connection with its consideration of
specific transactions and issues. Similarly, on at least an annual basis, the Companys management, as part of the annual budget process, reviews with the Board of Directors technological developments affecting the industry and the research and
development programs that respond to those developments and risks.
Compensation Committee Interlocks and Insider Participation
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 the year ended December 31, 2014.
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.
19
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Companys financial reporting process on behalf of the Board of Directors. Management has the primary
responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. Ernst & Young LLP, the Companys independent auditor for 2014, is
responsible for expressing opinions on the conformity of the Companys audited financial statements with generally accepted accounting principles and on the Companys internal control over financial reporting.
In this context, the Audit Committee has reviewed and discussed with management and Ernst & Young the audited financial statements
for the year ended December 31, 2014 and Ernst & Youngs evaluation of the Companys internal control over financial reporting. The Committee has discussed with Ernst & Young the matters that are required to be
discussed under Public Company Accounting Oversight Board (PCAOB) standards. Ernst & Young has provided to the Audit Committee the written disclosures and the PCAOB-required letter regarding the independent accountants
communications with the Audit Committee concerning independence, and the Committee has discussed with Ernst & Young that firms independence. The Audit Committee has concluded that Ernst & Youngs provision of audit and
non-audit services to the Company is compatible with Ernst & Youngs independence.
Based on the review and discussions
referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the year ended December 31, 2014 be included in the Company Annual Report on Form 10-K for the year ended December 31,
2014 for filing with the SEC. In addition, we have appointed Ernst & Young as the Companys independent registered public accounting firm for calendar year 2015, subject to stockholder ratification.
This report is provided by the following independent directors, who comprise the Audit Committee:
Doreen A. Toben, Chairperson
Harry L. Bosco
Matthew B. Kearney
David A. Woodle
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.
20
EXECUTIVE COMPENSATION
Highlights
Main-stream targets designed
to align with stockholder interests:
|
|
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50th percentile of peer group for base salary and annual incentives |
|
|
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75th percentile for equity-based compensation (and one half of the awards are performance based) |
Chief Executive Officer:
|
|
|
Base salary is approximately 16% of target compensation |
|
|
|
85% of target compensation is performance based, share-linked, or both |
|
|
|
65% of compensation is deferred over three or four years and is market-based |
Performance-based focus for all NEOs:
|
|
|
All annual incentive payouts and one-half of long-term equity awards are performance-based (which could result in 0 to 200% payout relative to target) |
|
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All annual and long-term incentives have well defined maximum payouts in order to prevent out-sized payouts |
|
|
|
Performance-based equity awards are tied to total stockholder return over a three year period |
Conservative employment agreements:
|
|
|
Maximum termination payout is two years, except for our Chief Executive Officer, for whom it is three years |
Stock ownership:
|
|
|
Meaningful stock ownership guidelines: 6x for the CEO, 2x to 3x for the remaining NEOs and 3x for the directors |
|
|
|
No hedging no pledging policy |
Other practices consistent with best
practices:
|
|
|
No meaningful perquisites |
|
|
|
Robust and long-standing claw-back policy |
|
|
|
No discounted stock awards, reloads or repricing without stockholder approval |
|
|
|
Directors must hold until retirement one-half of the stock units they receive as director compensation |
Recent changes:
|
|
|
Eliminated the MBO (or individually assigned objectives) portion of the annual incentive bonuses, making such bonuses based solely on financial objectives |
|
|
|
Increased the annual target bonus for the NEOs other than Mr. Stanzione to better align with our overall compensation philosophy |
21
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
Overview
This
CD&A describes the major elements of our compensation program for the named executive officers (NEOs). This CD&A also discusses the objectives, philosophy and decisions underlying the compensation of the NEOs. 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. 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 decisions with respect to the Chief Executive Officer are reviewed and approved by the whole Board, without participation by the Chief Executive Officer.
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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|
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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. We target the 50th percentile of the peer group for our base pay and annual cash compensation. |
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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 stockholders. Our executives interests must be aligned with the interests of our stockholders. Our compensation program should motivate and reward our executives to
drive performance which leads to the enhancement of long-term stockholder value. We target the 75th percentile for the annual long-term equity awards, one-half of which are performance based.
|
The principal elements of our executive compensation program are:
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annual, performance-based cash incentives (Bonus); |
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|
annual long-term equity incentives; |
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the use of performance metrics in one-half of our long term equity incentives to align executive compensation with growing long-term stockholder value; |
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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. |
22
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 with an independent compensation consultant for each of the three primary elements of our executive compensation program. Longnecker and Associates, Inc. were engaged for this purpose in connection with the annual compensation
decisions for senior executives for the 2012, 2013 and 2014 years. In setting executive compensation levels, the Compensation Committee reviewed market data from the following sources:
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Peer Group Information. The Compensation Committee considered information from the proxy statements of peer group public companies, which is composed primarily of communications
infrastructure companies. The peer group was selected by the Compensation Committee based on input from Longnecker and Associates, Inc. For 2014, the peer group consisted of: |
|
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Amphenol Corporation |
|
JDS Uniphase Corporation |
Anixter
International Inc. |
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Juniper Networks, Inc. |
Brocade Communications Systems, Inc. |
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NCR Corporation |
Ciena
Corporation |
|
Net App, Inc. |
EchoStar Corp. |
|
Pitney Bowes Inc. |
F5 Networks, Inc. |
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Telephone & Data Systems Inc. |
Frontier
Communications Corp. |
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NW Telecom Inc. |
Harris Corporation |
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Survey Data. Survey data as reviewed by our third party consultants from various sources also were utilized, including the following: |
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Economic Research Institute, 2014 Executive Compensation Assessor |
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Towers Watson 2013/2014 Top Management Compensation |
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Mercer, Inc. 2013 US General Benchmark Survey |
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Kenexa 2014 CompAnalyst |
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World at Work 2013/2014 Total Salary Increase Budget Survey |
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IPAS, Global Technology Survey |
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Information from an independent compensation consultant. Our Compensation Committee also considers the recommendations and market data provided by Longnecker & Associates, the
independent compensation consultant retained by the Compensation Committee. |
The primary use of this data is to inform and
confirm that the compensation and benefit level decisions of the Compensation Committee are consistent with industry levels generally and the Compensation Committee goals described in this Proxy Statement.
Our Financial and Strategic Objectives. Each year our management team develops an annual operating target plan
or budget for the next fiscal year 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 NEOs for the next target year.
23
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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The integration of the Motorola Home acquisition; |
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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. |
Considerations for Other Named Executive Officers. The Compensation Committee considers the same factors in
setting the compensation arrangements for each of the other NEOs as well as:
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Mr. Stanziones assessment and recommendation of the NEOs 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 NEO, 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. |
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 generally allow for tax-deductibility of performance-based stock awards, stock options, and annual cash incentive
awards, 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 regulations on non-qualified deferred compensation under
Section 409A of the Internal Revenue Code. |
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In recent years, the Compensation Committee has determined not to use stock options for long-term equity incentives. Since 2008, all awards have been made in the form of restricted stock with one-half of the awards
granted to senior executives in the form of performance-based restricted shares. Given the increasing trend in favor of using restricted shares instead of stock options, it is anticipated that future long-term equity awards will continue to 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 various forms of equity awards will vary depending on the requirement of
stock-based compensation accounting. The use of these various forms of long-term equity compensation awards for each of our NEOs is discussed in greater detail later in this CD&A. |
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The Company has a long-standing 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. The policy is discussed more fully later in this Proxy Statement. |
24
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 under Board and Committee 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
available on our website at www.arris.com under the caption Investors. Annually, the Compensation Committee reviews the independence of each of its advisors and confirms that any executive compensation consultant used by
the Committee is independent.
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 NEOs as compared to external benchmarks; |
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Market trends, survey data and competitive and best practices in executive compensation; and |
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The specific compensation package for Mr. Stanzione and other NEOs. |
Since 2008, the
Compensation Committee has engaged Longnecker and Associates as its independent executive compensation consultant. In connection with the 2012, 2013 and 2014 compensation decisions for senior executives, Longnecker and Associates was retained to
review base salaries, annual incentives and long-term equity incentives. The selection of Longnecker and Associates was made directly by the Compensation Committee. For 2015, the Compensation Committee does not intend to make significant changes to
the executive compensation strategy and program. Further, with respect to the NEOs, no increases in bases salaries for 2015 have been or are expected to be made. As a result, the Compensation Committee does not expect to utilize the services of
Longnecker and Associates or any other compensation consultants.
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 NEOs. Mr. Margolis, our Executive Vice President of Law and
Administration and Secretary, is responsible for administering our executive compensation program. 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 in executive session without any members of the management team present and may also meet independently with the independent compensation consultant. The Compensation Committee makes the
final determination of the executive compensation package provided to each of our NEOs subject, in the case of Mr. Stanzione, to full Board approval.
Equity awards are granted annually, generally between March and April depending on board meeting schedule, stockholder 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 grants and annual compensation adjustments, and incentive plan performance criteria, generally will be decided simultaneously, although they may be implemented at various times. (For example, base salary increases generally are
effective April 1, while bonuses generally are paid earlier.) The exercise price for options and fair value for restricted stock are the closing price of the Common Stock on the date of grant.
25
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. For 2014, Mr. Stanziones bonus target was 125% of base salary. The remaining senior executives annual bonus targets were 80% of base salary, an increase over the
annual bonus target of 75% used in 2013. The maximum bonus payout for each of the NEOs is 200% of the annual bonus target.
The
Compensation Committee seeks to establish variable pay in the form of annual cash bonus opportunity at approximately the 50th percentile market levels of our peer group based on the analysis
described above. The Compensation Committee believes that the variable pay target should be set at this level and, to strongly align executive pay with the performance of the Company, that the actual payout should range from 0% to 200%. The
Compensation Committee believes based on the analysis and review of its independent compensation consultant that the 2014 bonus targets for the senior executives are, in the aggregate, at approximately the 50th percentile.
Beginning in 2014, 100% of the annual incentives for the NEOs are based on
targeted financial performance objectives developed by management 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 broadband communications industry and the Companys market share and market share growth. For 2014, the MBO (or individually assigned objectives) portion of the bonus was eliminated, and the bonus was based 50% on the budget target for
adjusted direct operating income and 50% on the budget target for revenue. Actual payouts depend on results relative to the established objectives as detailed in the table below with straight-line interpolation between levels.
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Adjusted Direct Operating Income
Component (50% of Total Bonus) |
|
Revenue Component (50% of Total Bonus) |
Percentage of Target
Achieved |
|
Payout Percentage |
|
Percentage of Target Achieved |
|
Payout Percentage |
Below 80% |
|
0% |
|
Below 85% |
|
0% |
80% |
|
25% |
|
85% |
|
25% |
90% |
|
50% |
|
90% |
|
50% |
100% |
|
100% |
|
100% |
|
100% |
120% or greater |
|
200% |
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110% or greater |
|
200% |
The 2014 target for consolidated adjusted direct operating income (50% of the bonus) that would yield 100%
payment of this component of the financial performance portion of the targeted bonus for NEOS was $476 million. Actual adjusted direct operating income performance for 2014 was approximately 132% of the target performance, and, accordingly, this
component of the financial performance portion of the bonus payout was 200%. The target revenue component of the financial performance target (50% of the bonus) for 2014 was based on a revenue target of $4.7 billion. Actual 2014 performance was
approximately $5.3 billion, which was approximately 113% of target and yielded a 200% payout. As a result, the combined financial performance yielded a 200% payout.
In alignment with the Companys strategy to strongly link pay to performance, historical bonus payouts have ranged from 0% to the maximum
based on the Companys performance against the criteria then in effect. In 2012 and 2013, payouts versus target for the financial components of the bonus (which represented 80% of the bonus target prior to the elimination of the MBO portion in
2014) were approximately 92% and 83% of target, respectively. In 2014, the Company achieved outstanding financial results, which resulted in the payment of the maximum bonus amounts. 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.
For 2015, the Compensation Committee has determined that annual bonus should again be based on the financial metrics described above, namely
50% on revenues and 50% on adjusted direct operating income.
26
The dollar amount of annual cash incentive bonus paid in 2014 to each of our NEOs 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. The Committee may consider any of a number of elements such as individual performance, business unit performance, relative performance to competitors, strategic accomplishments, the level of work or sacrifice
required in the relevant year, years of service with the Company and other factors. 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). No adjustments were made by the Compensation Committee to the
bonuses paid to the NEOs in 2014.
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 stockholders through stock awards which have multi-year vesting requirements and which provide a significant incentive for executives to focus on
increasing long-term stockholder 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. |
The long-term
incentive compensation for NEOs in recent years has consisted of grants of restricted stock with time-based vesting and performance-based restricted stock. Previously, long-term incentive compensation consisted predominantly of stock options. The
Company has used restricted stock to reduce the share dilution associated with option grants since restricted stock awards use 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. The Company
has used restricted shares instead of stock options also to maintain retention incentive even in challenging periods when our stock price may has been depressed.
The Compensation Committee establishes 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 dollar value of the aggregate grants as a percentage of the Companys total market capitalization and factors in the advice of its
executive compensation consultant. A value expressed in dollars was allocated to the NEOs 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. The value was awarded in shares of restricted stock. For Mr. Stanzione, the target value for long-term incentives previously ranged from 250% to 350% of base salary, and for the other senior
executives, the value has ranged from approximately 190% to 250% of base salary. The Compensation Committee seeks to establish long-term incentive targets for senior executives, at approximately the
75th percentile levels of the peer group and survey analysis described above to emphasize long term stock appreciation. In connection with its 2013 compensation review, the Compensation Committee
determined, based on its review of survey data, that awards of long-term incentives in 2013 for the NEOs in the aggregate were modestly below the 50th percentile level. As a result, for 2014 the
target value for equity awards to Mr. Stanzione was increased to 450% and for the other NEOs target values were increased to a range of 250% to 275% of base salary, which place these awards in the aggregate at approximately the 75th percentile. For 2015, no increases in the target value of awards were made or are expected.
27
One-half of the restricted stock awarded to the senior executives since 2008 have been in the
form of performance shares. The remaining shares of restricted stock vest equally over a four year period.
The performance criteria for
performance shares is based on the Companys total stockholder return (TSR) as compared to the stockholder return of the NASDAQ composite over a three year period (the TSR measurement) beginning with the calendar year of
grant. The TSR measurement allows for payment from 0% and 200% based on underperforming, meeting or exceeding the NASDAQ composite three year return as set forth in the following table with straight-line interpolation between levels.
|
|
|
Number of Percentage Points by which the
Companys TSR
Outperforms/Underperforms the NASDAQ
Composite Over the Measurement Period |
|
Percentage of Performance Shares
Vested |
More
than 25 pts. below the Composite |
|
0% |
25 pts.
below the Composite |
|
50% |
Equal to
the Composite |
|
100% |
25 pts.
or more above the Composite |
|
200% |
For the performance shares granted in 2012, the TSR measurement period ended on December 31, 2014. Over
that period, the Companys total stockholder return (approximately 109%) outperformed the NASDAQ composite over the same period (approximately 55%) by approximately 44 points, resulting in the 2012 performance share grants vesting at the 200%
level on January 31, 2015. The 2013, 2014 and 2015 performance share grants will vest on January 31, 2016, 2017 and 2018, respectively.
The specific numbers of restricted stock that were granted to each of our NEOs in 2014 are set forth on the table entitled Grants of
Plan-Based Awards in the executive compensation tables found later in this Proxy Statement.
Risk Considerations
The Compensation Committees approach to compensation beyond base salary focuses heavily on company-wide and long-term performance. For
instance, for 2014, 100% of the incentives underlying annual cash bonuses payable to the NEOs were tied to Company performance, in particular consolidated adjusted direct operating income and consolidated revenue. Since this metric has a
company-wide focus, the Compensation Committee does not believe that it generally incentivizes high risk behavior by members of our management team in the same way, or to the extent, that annual bonuses based upon narrowly focused individual
performance might. Similarly, the Companys equity awards consist of restricted stock with four-year time-based vesting and, for senior executives, performance-based restricted stock that vests based upon a three year total stockholder return
measurement. The performance of both compensation elements generally reflects the overall market performance of the Companys stock over a substantial period of time. The Compensation Committee does not believe that this structure of equity
awards incentivizes high risk behavior. Moreover, the level of compensation and awards, although highly competitive, are not believed to be large enough to induce high risk behavior or to distort the application of normal mature business judgment.
Our compensation schemes are designed to be in place over several years and the Committee believes they are designed to reward sustained long term profitable growth of the Company. As a result, the Compensation Committee does not believe that the
Companys compensation programs for senior management are likely to lead to managements taking on more risks than are appropriate from a sound business judgment prospective.
Executive Stock Ownership Guidelines; Prohibition on Hedging and Pledging
The Companys Share Ownership Guidelines require each senior executive to own shares having a value equal to a multiple of the senior
executives annual base salary. The multiple is six times base salary for Mr. Stanzione; three times base salary for Messrs. Margolis and Potts; and two times base salary for Messrs. McClelland and Robinson. Each officer has five years to
meet the guideline, and generally must retain one-half
28
of the restricted shares, after tax, that vest and one-half, after tax, of the shares purchased on exercise of options until the guideline is reached. The five year period to meet the guideline
also applies to changes in the required number of shares due to changes in the share price or applicable base salary. The Compensation Committee reviews compliance with the guideline annually. As of December 31, 2014 all senior executives met
the guideline or were on track to reach compliance within the five year period.
Under the terms of the Companys insider trading
policy, all officers, including the NEOs, and directors are prohibited from (1) hedging any of the Companys equity securities (which include shares of the Companys common stock and options or other securities exercisable for,
convertible into, settled in or measured by reference to, any other equity security) or (2) pledging a significant number of the Companys equity securities. For purposes of the policy, hedging includes any instrument or
transaction, including put options, swaps and forward-sales contracts, through which the officer or director offsets or reduces exposure to the risk of price fluctuations in the corresponding equity security. With respect to the pledging
prohibition, the amount of equity securities that is considered significant is the lesser of 1% of the Companys outstanding shares and 50% of the equity securities held by applicable officer or director.
SUMMARY COMPENSATION TABLE
The summary compensation table below presents the total compensation earned by our NEOs during 2012, 2013 and 2014. 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 benefits that will
not be paid, or begin to be paid, until retirement, and the calculated dollar amounts set forth in the Stock Awards column. The compensation expense included in the Stock Awards column 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 vests, the timing of any sale of shares, and the price of our stock. The actual value realized by our NEOs from stock awards during 2014 is
presented in the Option Exercises and Stock Vested table below. Details about the equity awards granted to our NEOs during 2014 can be found in the Grants of Plan-Based Awards table below.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Base Salary
($) |
|
Bonus ($)(1)
|
|
Equity-based
Incentive Plan Compensation
|
|
Non-Equity Incentive
Plan Compensation
($)(3) |
|
|
Change in Pension
Value and Non- Qualified Deferred Compensation Earnings ($)(4)
|
|
All Other
Compensation
($)(5) |
|
|
Name and
Principal Position |
|
|
|
|
Stock
Awards ($)(2) |
|
Option
Awards ($)(2) |
|
|
|
|
Total
Compensation
($) |
Robert J. Stanzione |
|
2014 |
|
968,750 |
|
|
|
4,499,953 |
|
|
|
|
2,500,000 |
|
|
|
|
13,347 |
|
7,982,050 |
Chief Executive Officer, |
|
2013 |
|
833,292 |
|
|
|
5,249,847 |
|
|
|
|
931,656 |
|
|
|
|
37,695 |
|
7,052,489 |
Chairman of the Board |
|
2012 |
|
770,000 |
|
|
|
1,899,958 |
|
|
|
|
717,640 |
|
|
11,344 |
|
63,854 |
|
3,462,796 |
David B. Potts |
|
2014 |
|
517,501 |
|
|
|
1,399,961 |
|
|
|
|
848,026 |
|
|
216,067 |
|
27,110 |
|
3,008,665 |
Executive Vice President |
|
2013 |
|
458,375 |
|
|
|
1,866,583 |
|
|
|
|
306,648 |
|
|
(32,118) |
|
22,752 |
|
2,622,240 |
and Chief Financial Officer |
|
2012 |
|
411,000 |
|
|
|
750,021 |
|
|
|
|
229,831 |
|
|
136,583 |
|
24,036 |
|
1,551,471 |
Lawrence A. Margolis |
|
2014 |
|
490,001 |
|
|
|
1,300,121 |
|
|
|
|
800,032 |
|
|
830,589 |
|
31,355 |
|
3,452,098 |
Executive Vice President, |
|
2013 |
|
443,333 |
|
|
|
1,513,028 |
|
|
|
|
293,871 |
|
|
162,056 |
|
22,025 |
|
2,434,314 |
Law & Administration, & Secretary |
|
2012 |
|
406,000 |
|
|
|
750,021 |
|
|
|
|
227,035 |
|
|
364,112 |
|
26,230 |
|
1,773,398 |
Bruce McClelland |
|
2014 |
|
475,008 |
|
|
|
1,200,006 |
|
|
|
|
768,016 |
|
|
49,786 |
|
31,578 |
|
2,524,394 |
President, Network & |
|
2013 |
|
441,332 |
|
|
|
1,868,133 |
|
|
|
|
293,871 |
|
|
(12,410) |
|
22,745 |
|
2,613,672 |
Cloud |
|
2012 |
|
389,997 |
|
|
|
750,021 |
|
|
|
|
223,679 |
|
|
41,516 |
|
26,436 |
|
1,431,649 |
Lawrence Robinson(6) |
|
2014 |
|
475,008 |
|
|
|
1,200,006 |
|
|
|
|
768,016 |
|
|
|
|
10,694 |
|
2,453,723 |
President, Customer Premises Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The amounts shown in this column would relate to any discretionary portion of the Annual Incentive Bonus for each NEO that was outside of the amount listed under the Non-Equity Incentive Plan Compensation column.
|
(2) |
The amounts represent the aggregate grant date fair value of awards, computed based on the number of awards granted and the fair value of the awards
on the date of grant. The table reflects an estimated payout |
29
|
of 100% for performance share awards; if the maximum achievement of 200% is attained, additional awards of $949,979, $1,749,948 and $2,249,976 will be granted to Mr. Stanzione, $375,011,
$506,267 and $699,980 to Mr. Potts, $375,011, $440,004 and $650,061 to Mr. Margolis, $375,011, $435,044 and $600,003 to Mr. McClelland, with respect to the 2012, 2013 and 2014 grants, respectively and additional awards of $600,003 to
Mr. Robinson for 2014. The 2012 performance share grant was paid out at the maximum achievement of 200%. The values for awards from prior years were restated to reflect fair value on the grant date. Assumptions used in the fair value
calculation of these awards are included in Note 17 of Notes to Consolidated Financial Statements in our 2014 Form 10-K. |
(3) |
For 2014, the amount reflects annual bonus earned for 2014 performance (paid in 2015). Amount reflects the financial portion of the bonus plan paid at 200%. For 2013, the amount reflects annual bonus earned for 2013
performance (paid in 2014). Amount reflects the financial portion of the bonus plan paid at 118% for the first quarter and 69% for the remainder of the year, while in the aggregate the MBO (or individually assigned objectives) portion was paid at
approximately 100% for the whole year. For 2012, the amount reflects annual bonus earned for 2012 performance (paid partially in 2013). Amount reflects the financial portion of the bonus plan paid at 92% and the personal objective portion paid at
100%. |
(4) |
Changes 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, which were frozen in 1999
and 2013, respectively. The increases for 2014 were impacted by a drop in the discount rate assumption used from 4.50% to 3.75%, which results in a larger present value of the of the accumulated pension benefits. 2014 increases were also
impacted by the adoption of recently completed actuarial studies that reflect longer life expectancies which results in an increase in the total expected benefit payments to the applicable participants. 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. The change in pension value also does not include changes in Mr. Stanziones
supplemental employee retirement plan, which was frozen at age 62. Increases or decreases in value since then have been based upon the investment results of independently managed investment vehicles selected by Mr. Stanzione from a menu of
vehicles made available by the Company without any above market or preferential earnings being provided by the Company. |
(5) |
Included in all other compensation are matching contributions to the 401(k) savings plan and the non-qualified 401(k) wrap plan, and the incremental cost for supplemental life insurance coverage. The matching
contribution to the 401(k) savings plan is $10,400 for each NEO, and the non-qualified 401(k) wrap plan reflects $15,887; $20,955 and $20,355 for Messrs. Potts, Margolis and McClelland respectively. The value of perquisites and other personal
benefits was less than $10,000 in the aggregate for each NEO. |
(6) |
Mr. Robinson became an NEO in 2014. As a result, information for prior years is not provided. |
30
Grants of Plan-Based Awards 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Grant Date(1) |
|
|
Estimated Future Payouts Under Non- Equity Incentive |
|
|
Estimated Future Payouts Under Equity Incentive Plan Awards(3) |
|
|
All Other Stock
Awards: Number of
Shares of Stock or Units (#)(4) |
|
|
Grant Date Fair Value of Award(5) |
|
|
|
Threshold ($) |
|
|
Target ($) |
|
|
Maximum ($) |
|
|
Threshold (#) |
|
|
Target (#) |
|
|
Maximum (#) |
|
|
|
Robert J.
Stanzione |
|
|
|
|
|
$ |
312,500 |
|
|
$ |
1,250,000 |
|
|
$ |
2,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,790 |
|
|
|
81,580 |
|
|
|
163,160 |
|
|
|
81,580 |
|
|
$ |
4,499,953 |
|
David B.
Potts |
|
|
|
|
|
|
106,003 |
|
|
|
424,013 |
|
|
|
848,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,690 |
|
|
|
25,380 |
|
|
|
50,760 |
|
|
|
25,380 |
|
|
|
1,399,961 |
|
Lawrence A.
Margolis |
|
|
|
|
|
|
100,004 |
|
|
|
400,016 |
|
|
|
800,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,785 |
|
|
|
23,570 |
|
|
|
47,140 |
|
|
|
23,570 |
|
|
|
1,300,121 |
|
Bruce
McClelland |
|
|
|
|
|
|
96,002 |
|
|
|
384,008 |
|
|
|
768,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,878 |
|
|
|
21,755 |
|
|
|
43,510 |
|
|
|
21,755 |
|
|
|
1,200,006 |
|
Lawrence
Robinson |
|
|
|
|
|
|
96,002 |
|
|
|
384,008 |
|
|
|
768,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,878 |
|
|
|
21,755 |
|
|
|
43,510 |
|
|
|
21,755 |
|
|
|
1,200,006 |
|
(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 and
revenue levels for the Company in 2014. The plan would pay out $0 if actual results did not reach approximately the minimum threshold level of 80% of the targeted adjusted operating income level and 85% of the targeted revenue level for 2014.
Overall bonus for the NEOs paid out at 200% of target bonuses. Bonus target payout levels are a percent of the 2014 base salary level; for Mr. Stanzione the percent is 125% of base salary and it is 80% of base salary for the other NEOs. The
amounts reflected are duplicative of the amounts reflected in the Summary Compensation Table. For additional discussion of 2014 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 NEOs in 2014 that were performance shares. The awards will be based on the
three-year total stockholder return, and the final payout of these shares can range from 0% to 200% of the target award. These shares will vest on January 31, 2017. The amounts reflected are duplicative of the amounts reflected in the Summary
Compensation Table and the Outstanding Equity Awards at Fiscal Year End table. |
(4) |
The amounts shown under All Other Stock Awards reflect the number of restricted shares granted to the NEOs on the grant date that are not performance shares. These shares vest annually over four years with the first
vesting occurring on March 27, 2015. 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 reflected herein are
duplicative of the amounts reflected in the Summary Compensation Table and the Outstanding Equity Awards at Year End Table. |
31
(5) |
Represents the value at $27.58 of the March 27, 2014 equity awards to the NEOs including the restricted shares described above in footnote four and the performance shares described above in footnote three (at
100%). All of these shares vest over three or four years as described above. The amounts reflected are duplicative of the amounts reflected in the Summary Compensation Table and the Outstanding Equity Awards at Fiscal Year End table.
|
Outstanding Equity Awards at 2014 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
|
Stock awards |
|
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
|
Option Exercise Price ($) |
|
|
Option Expiration Date |
|
|
Number of Shares or Units of Stock Held That Have Not Vested
(#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($) (2) |
|
|
Equity Incentive Plan Awards: Number
of Unearned Shares Or Units of Stock Not Vested (#) |
|
|
Equity Incentive Plan Awards: Market Value
of Unearned Shares Or Units of Stock Not Vested ($) (2) |
|
Robert J. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,580 |
(1)(3) |
|
|
2,462,900 |
|
|
|
163,160 |
(1)(4) |
|
|
4,925,800 |
|
Stanzione |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,963 |
(1)(5) |
|
|
3,651,873 |
|
|
|
96,770 |
(1)(6) |
|
|
2,921,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,680 |
(7) |
|
|
1,318,699 |
|
|
|
116,480 |
(8) |
|
|
3,516,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,101 |
(9) |
|
|
1,301,219 |
|
|
|
172,410 |
(10) |
|
|
5,205,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,205 |
(11) |
|
|
549,609 |
|
|
|
|
|
|
|
|
|
David B. Potts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,380 |
(1)(3) |
|
|
766,222 |
|
|
|
50,760 |
(1)(4) |
|
|
1,532,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,950 |
(1)(5) |
|
|
1,417,421 |
|
|
|
15,000 |
(1)(6) |
|
|
452,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,036 |
(7) |
|
|
514,317 |
|
|
|
45,430 |
(8) |
|
|
1,371,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,014 |
(9) |
|
|
513,653 |
|
|
|
68,060 |
(10) |
|
|
2,054,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,041 |
(11) |
|
|
212,568 |
|
|
|
|
|
|
|
|
|
Lawrence A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,570 |
(1)(3) |
|
|
711,578 |
|
|
|
47,140 |
(1)(4) |
|
|
1,423,157 |
|
Margolis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,048 |
(1)(5) |
|
|
997,719 |
|
|
|
6,450 |
(1)(6) |
|
|
194,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,036 |
(7) |
|
|
514,317 |
|
|
|
45,430 |
(8) |
|
|
1,371,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,014 |
(9) |
|
|
513,653 |
|
|
|
68,060 |
(10) |
|
|
2,054,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,041 |
(11) |
|
|
212,568 |
|
|
|
|
|
|
|
|
|
Bruce |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,755 |
(1)(3) |
|
|
656,783 |
|
|
|
43,510 |
(1)(4) |
|
|
1,313,567 |
|
McClelland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,470 |
(1)(5) |
|
|
1,523,689 |
|
|
|
5,810 |
(1)(6) |
|
|
175,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,036 |
(7) |
|
|
514,317 |
|
|
|
45,430 |
(8) |
|
|
1,371,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,014 |
(9) |
|
|
513,653 |
|
|
|
68,060 |
(10) |
|
|
2,054,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,041 |
(11) |
|
|
212,568 |
|
|
|
|
|
|
|
|
|
Lawrence |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,755 |
(1)(3) |
|
|
656,783 |
|
|
|
43,510 |
(1)(4) |
|
|
1,313,567 |
|
Robinson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,870 |
(1)(5) |
|
|
569,685 |
|
|
|
50,320 |
(1)(6) |
|
|
1,519,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,680 |
(12) |
|
|
896,039 |
|
|
|
|
|
|
|
|
|
(1) |
These shares are duplicative of the shares reflected in the Plan Based Awards Table. |
(2) |
Reflect the value as calculated based on the closing price of the Companys Common Stock on December 31, 2014 of $30.19 per share. |
(3) |
Shares of restricted stock were granted on March 27, 2014 and vest annually over four years with the first vesting occurring on March 27, 2015. |
32
(4) |
Shares of restricted stock that are subject to performance measures were granted on March 27, 2014. These shares are subject to performance measures. The final payout of these shares that are subject to performance
measures can range from 0% to 200% of the target award, and will be based on the three-year TSR. These shares will vest on January 31, 2017. Included in the table above is 200% of the target award |
(5) |
Shares of restricted stock were granted on July 12, 2013 and vest annually over four years with the first vesting occurring on July 12, 2014. These shares represent the additional annual grants made after the
Motorola Home acquisition and a one-time special award made in connection with the freezing of the non-qualified pension plan and the completion of the Motorola Home acquisition. See Footnote 2 of the Summary Compensation Table above for
details. |
(6) |
Shares of restricted stock that are subject to performance measures were granted on July 12, 2013 as part of the performance share portion of the additional annual grant made after the Motorola Home acquisition.
These shares are subject to performance measures. The final payout of these shares that are subject to performance measures can range from 0% to 200% of the target award, and will be based on the three-year TSR. These shares will vest on
January 31, 2016. Included in the table above is 200% of the target award. |
(7) |
Shares of restricted stock were granted on March 29, 2013 and vest annually over four years with the first vesting occurring on March 29, 2014. |
(8) |
Shares of restricted stock that are subject to performance measures were granted on March 29, 2013. These shares are subject to performance measures. The final payout of these shares that are subject to performance
measures can range from 0% to 200% of the target award, and will be based on the three-year TSR. These shares will vest on January 31, 2016. Included in the table above is 200% of the target award |
(9) |
Shares of restricted stock were granted on March 28, 2012 and vest annually over four years with the first vesting occurring on March 28, 2013. |
(10) |
Shares of restricted stock that are subject to performance measures were granted on March 28, 2012. These shares are subject to performance measures. The final payout of these shares that are subject to performance
measures can range from 0% to 200% of the target award, and will be based on the three-year TSR. These shares will vest on January 31, 2015. Included in the table above is 200% of the target award. |
(11) |
Shares of restricted stock were granted on March 31, 2011 and vest annually over four years with the first vesting occurring on March 31, 2012. |
(12) |
Shares of restricted stock were granted on July 12, 2013 in which 100% will vest on the second year anniversary of the grant. These shares represent a one-time grant made in connection with the Motorola
acquisition. |
Option Exercises and Stock Vested 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
Number of Shares Acquired on Exercise (#) |
|
|
Value Realized on Exercise ($) |
|
|
Number of Shares Acquired on Vesting (#) |
|
|
Value Realized On Vesting ($)(1) |
|
Robert J. Stanzione |
|
|
|
|
|
|
|
|
|
|
259,808 |
|
|
$ |
7,063,147 |
|
David B. Potts |
|
|
|
|
|
|
|
|
|
|
100,775 |
|
|
|
2,739,953 |
|
Lawrence A. Margolis |
|
|
|
|
|
|
|
|
|
|
96,142 |
|
|
|
2,594,430 |
|
Bruce McClelland |
|
|
|
|
|
|
|
|
|
|
101,950 |
|
|
|
2,776,860 |
|
Lawrence Robinson |
|
|
|
|
|
|
|
|
|
|
6,290 |
|
|
|
197,569 |
|
(1) |
Amounts shown for each NEO represent the aggregate number of shares of restricted stock granted in the previous years that vested during the calendar year. Vested shares may be 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 for taxes. These amounts are not
reflected in the Summary Compensation Table. |
33
Executive Benefits and Perquisites
Primary Benefits. Our NEOs are eligible to participate in the same employee benefit plans in which all other eligible
U.S. salaried employees participate. These plans include medical, dental, life insurance, disability and a qualified retirement savings plan.
Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Plan Name |
|
Number of Years Credited Service (#) |
|
|
Present Value Of Accumulated Benefit ($) |
|
|
Payments During
Last Fiscal Year ($) |
|
Robert J. Stanzione |
|
Qualified Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan |
|
|
43 |
|
|
|
13,900,382 |
|
|
|
|
|
David B. Potts |
|
Qualified Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan |
|
|
18 |
|
|
|
956,605 |
|
|
|
|
|
Lawrence A. Margolis |
|
Qualified Pension Plan |
|
|
18 |
|
|
|
673,158 |
|
|
|
|
|
|
|
Non Qualified Plan |
|
|
30 |
|
|
|
3,202,861 |
|
|
|
|
|
Bruce McClelland |
|
Qualified Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan |
|
|
6 |
|
|
|
172,365 |
|
|
|
|
|
Lawrence Robinson |
|
Qualified Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Qualified Plan |
|
|
|
|
|
|
|
|
|
|
|
|
The Company maintained qualified and non-qualified defined benefit pension plans. The qualified plan for the
NEOs was frozen on December 31, 1999, the non-qualified defined benefit plan was frozen on June 30, 2013. No further accrual of benefit under the plans has occurred since the plans were frozen. Neither Mr. Potts nor
Mr. McClelland participated in the qualified plan. The non-qualified plan is a mirror image of the qualified plan, but covers only earnings levels and payment levels that are or would be excluded under the qualified plan under applicable
Internal Revenue Service regulations. Benefits under the plans are calculated based on the NEOs 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 NEOs social security covered compensation level, plus (b) 1.3% of the final average salary in excess of the NEOs social security
covered compensation level. The social security covered compensation level is the 35-year average of the taxable wage bases (for Social Security purposes) in effect prior to the participants Social Security normal 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 Potts are 66, 66 and 56 years of age, respectively, and thus could
elect to retire and receive benefits immediately. The discount is calculated to be the actuarial equivalent of an age 65 retirement using an 8% discount factor. An actuarial adjustment under the plan also is made for deferred retirement. There is no
lump sum payment option available, except for Mr. Stanzione (see below). Effective June 30, 2013, the Company froze benefit accruals under the non-qualified defined benefit plan as well as the addition of any new participants.
Participants benefits will continue to be distributed in accordance with the provisions of the plan. A one-time grant of restricted shares was made, in part, to reflect the present value of the lost future accruals under the frozen plan and is
reflected in the Summary Compensation Table for the applicable NEOs.
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 actuarial accrued liability under the non-qualified defined benefit plan as set forth in the
Companys financial
34
statements will be set aside in a Rabbi Trust as 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 in the event of a bankruptcy.
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, Mr. Stanziones non-qualified deferred benefit pension plan has several changes, in particular a normal retirement age of 62, and the 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 fully funded those obligations by the date of
Mr. Stanziones 62nd birthday. Mr. Stanziones defined benefit value at age 62 was frozen. Thereafter such funds are 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 $17,500 during 2014). The NEOs participate in this plan and received the Company match, which could not exceed $10,400 for 2014.
In addition, in 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 NEOs, to contribute amounts in excess of the amounts allowed under applicable tax laws under the 401(k) plan. Tax law disallows contributions on income above $260,000
or contributions of more than $17,500. 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.
The Company previously maintained a non-qualified deferred compensation plan that enabled certain executives, including the NEOs, 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 NEOs account under the Companys Non-Qualified Deferred Compensation
arrangements (both current and frozen) during calendar year 2014. 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.
35
Non-Qualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Executive Contributions in Last FY ($) (1) |
|
|
Registrant Contributions in Last FY ($) (2) |
|
|
Aggregate Earnings in Last FY ($) |
|
|
Aggregate Withdrawals / Distributions ($) |
|
|
Aggregate Balance at Last Fiscal Year End ($) |
|
Robert J.
Stanzione |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
Plan |
|
|
|
|
|
$ |
23,932 |
|
|
$ |
50,634 |
|
|
|
|
|
|
$ |
1,015,593 |
|
David B. Potts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Plan |
|
|
10,350 |
|
|
|
11,607 |
|
|
|
6,681 |
|
|
|
|
|
|
|
142,248 |
|
Lawrence A.
Margolis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan |
|
|
|
|
|
|
|
|
|
|
40,194 |
|
|
|
|
|
|
|
529,765 |
|
Active
Plan |
|
|
23,516 |
|
|
|
11,743 |
|
|
|
16,378 |
|
|
|
|
|
|
|
329,666 |
|
Bruce McClelland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan |
|
|
|
|
|
|
|
|
|
|
8,909 |
|
|
|
|
|
|
|
104,341 |
|
Active Plan |
|
|
23,066 |
|
|
|
11,601 |
|
|
|
19,024 |
|
|
|
|
|
|
|
278,554 |
|
Lawrence
Robinson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes deferral of bonuses paid in 2014 with respect to the 2013 calendar year. |
(2) |
Represents the company match made in 2014 for 2013 employee contributions. |
Other
Perquisites. The Company is unaware of any significant perquisites provided to senior 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 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.arris.com under the caption Investor Relations.
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
The employment agreements with the NEOs 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. Under the agreements, the
outstanding equity awards of executives terminating their employment who are 62 years old or older with ten or more years of experience, will continue to vest and remain outstanding for their original term (notwithstanding such termination) provided
they continue to comply with the non-competition and trade secret protection provisions of the agreements. The agreements also reflect the Rabbi Trust and funding elements described above with respect to the Companys non-qualified
36
defined benefit plan and the SERP of Mr. Stanzione. Since both Mr. Stanzione and Mr. Margolis are 65 and older, their agreements are terminable on 12 months notice. Also,
Mr. Stanziones agreement contains various terms related to his SERP that are described above Pension Benefits.
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, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duration(1) |
|
Salary Benefit |
|
|
Bonus(10) |
|
|
Benefits |
|
|
Accelerate Equity(11) |
|
|
Total |
|
Robert J. Stanzione |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control or
Without Good Cause |
|
3 years |
|
$ |
2,906,250 |
|
|
$ |
2,963,296 |
|
|
$ |
81,936 |
|
|
$ |
35,090,935 |
|
|
$ |
41,042,417 |
|
David B. Potts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death(2) |
|
3 months |
|
|
129,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,375 |
|
Disability(3) |
|
6 months |
|
|
258,751 |
|
|
|
|
|
|
|
9,339 |
|
|
|
|
|
|
|
268,090 |
|
Without Good Cause(4) |
|
2 years |
|
|
1,035,002 |
|
|
|
828,002 |
|
|
|
37,354 |
|
|
|
11,404,842 |
|
|
|
13,605,200 |
|
Change in Control(5) |
|
2 years |
|
|
1,035,002 |
|
|
|
536,479 |
|
|
|
37,354 |
|
|
|
11,404,842 |
|
|
|
13,013,677 |
|
Lawrence A. Margolis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control or
Without Good Cause |
|
2 years |
|
|
980,002 |
|
|
|
1,600,064 |
|
|
|
38,951 |
|
|
|
10,754,987 |
|
|
|
13,374,004 |
|
Bruce McClelland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death(2) |
|
3 months |
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118,752 |
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118,752 |
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Disability(3) |
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6 months |
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237,504 |
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9,467 |
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246,971 |
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Without Good Cause(4) |
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1 year |
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475,008 |
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380,006 |
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18,934 |
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10,298,130 |
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11,172,078 |
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Change in Control(5) |
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1 year |
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475,008 |
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258,775 |
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18,934 |
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10,298,130 |
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11,050,847 |
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Lawrence Robinson |
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Death(2) |
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3 months |
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118,752 |
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118,752 |
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Disability(3) |
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6 months |
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237,504 |
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11,705 |
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249,209 |
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Without Good Cause(4) |
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1 year |
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475,008 |
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380,006 |
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23,410 |
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4,955,236 |
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5,833,660 |
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Change in Control(5) |
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1 year |
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475,008 |
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130,807 |
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23,410 |
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4,955,236 |
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5,584,460 |
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(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 80% of annual base salary. |
(9) |
Average of two prior paid annual bonuses. |
(10) |
Does not include bonus earned in 2014 but not paid until 2015, except for Mr. Margolis. |
(11) |
Applicable tax gross-up provision was triggered under the assumption of a change of control at December 31, 2014, except for Mr. Robinson. The column reflects $9,237,759; $2,569,105; $2,761,007 and $1,961,886 in
estimated gross-up payments for Messrs. Stanzione, Potts, Margolis and McClelland, respectively. |
37
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.
Debora J. Wilson, Chairperson
Alex B. Best
Harry Bosco
Jeong Kim
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.
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 stockholders.
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, $120,000 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. |
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 and any of its subsidiaries and that vendor or partner.
There have been no related party
transactions since the beginning of the 2014 fiscal year nor are there any such transactions proposed other than various post-closing transitional services provided by, or to, Google Inc. as a result of the Motorola Home acquisition.
38
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, 2015, subject to stockholder ratification. Ernst & Young LLP also acted in such capacity during the fiscal year ended December 31, 2014 and 2013. 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 $7,513,415 and $8,167,245 in 2014 and 2013, 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, and audit consultations.
Audit-Related Fees
Fees for
audit-related services totaled $189,453 and $138,562 in 2014 and 2013, 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.
Tax Fees
Fees for tax services, including tax compliance, tax advice and tax planning, totaled $950,180 and $845,899 in 2014 and 2013, respectively.
All Other Fees
Fees for all other
services not included above were $0 for 2014 and $2,807,310 for 2013 that consisted of services in connection with the Motorola Home acquisition.
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.
39
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2016 Annual Meeting of Stockholders must be received by the Company at its principal
executive offices by December 11, 2015, in order to be considered for inclusion in the Companys Proxy Statement and proxy relating to the 2016 Annual Meeting of Stockholders. Additionally, the proxy solicited by the Board of Directors for
the 2016 Annual Meeting of Stockholders will confer discretionary authority to vote on any stockholder proposal presented at that meeting that is not included in the Companys Proxy Statement and proxy relating to the 2016 Annual Meeting of
Stockholders unless the Company is provided written notice of such proposal no later than February
24, 2016.
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.
April 9, 2015
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BY ORDER OF THE BOARD OF DIRECTORS |
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Lawrence A. Margolis, Secretary |
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ANNUAL MEETING OF SHAREHOLDERS OF |
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ARRIS GROUP, INC. |
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May 14, 2015
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PROXY VOTING INSTRUCTIONS |
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INTERNET - Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone.
Have your proxy card available when you access the web page. |
TELEPHONE - Call toll-free
1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM EST the day before the
meeting. |
MAIL - Sign, date and mail your
proxy card in the envelope provided as soon as possible. |
IN PERSON - You may vote your
shares in person by attending the Annual Meeting. |
GO GREEN - e-Consent makes it
easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online
access. |
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COMPANY NUMBER
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ACCOUNT NUMBER |
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of
Meeting, proxy statement and proxy card are available at www.arris.com/proxy |
ê Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.
ê
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n 00033333333333300100 4 |
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051415 |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE x |
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Election of Directors: |
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ABSTAIN |
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Alex B. Best |
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Harry L. Bosco |
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J. Timothy Bryan |
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James A. Chiddix |
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Andrew T. Heller |
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Dr. Jeong H. Kim |
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Robert J. Stanzione |
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Doreen A. Toben |
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Debora J. Wilson |
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David A. Woodle |
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2. |
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Voting, on a non-binding advisory basis, on executive compensation
(Say on Pay) as disclosed in the Proxy Statement; |
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3. |
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Ratifying the retention of Ernst & Young LLP as the independent
registered public accounting firm for the Company for 2015; and |
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4. |
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Transacting such other business as may properly be
brought before the meeting or any adjournment(s) thereof. |
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. ¨ |
To change the address on your account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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Signature of Shareholder |
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Date: |
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Signature of Shareholder |
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Date: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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¨ n
ARRIS GROUP, INC.
3871 Lakefield Drive
Suwanee, GA 30024
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Robert Stanzione, Lawrence Margolis, and David 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 14, 2015 or at any adjournment or postponement thereof, with all powers which
the undersigned would possess if present at the Meeting.
(Continued and to be signed on the reverse side.)
ANNUAL MEETING OF SHAREHOLDERS OF
ARRIS GROUP, INC.
May 14, 2015
GO GREEN
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e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter
and paper waste. Enroll today via www.amstock.com to enjoy online access. |
|
|
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at www.arris.com/proxy
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please detach along perforated line and mail in the envelope provided. ê
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n 00033333333333300100 4 |
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051415 |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE x |
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1. |
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Election of Directors: |
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FOR |
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AGAINST |
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ABSTAIN |
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Alex B. Best |
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Harry L. Bosco |
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J. Timothy Bryan |
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James A. Chiddix |
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Andrew T. Heller |
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Dr. Jeong H. Kim |
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Robert J. Stanzione |
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Doreen A. Toben |
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Debora J. Wilson |
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David A. Woodle |
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2. |
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Voting, on a non-binding advisory basis, on executive compensation
(Say on Pay) as disclosed in the Proxy Statement; |
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3. |
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Ratifying the retention of Ernst & Young LLP as the independent
registered public accounting firm for the Company for 2015; and |
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4. |
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Transacting such other business as may properly be
brought before the meeting or any adjournment(s) thereof. |
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. ¨ |
To change the address on your account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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Signature of Shareholder |
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Date: |
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Signature of Shareholder |
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Date: |
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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