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COMMSCOPE, INC.
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COMMSCOPE, INC.
March 27, 2002
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders (the
"Annual Meeting") of CommScope, Inc., a Delaware corporation (the
"Company"), to be held on May 3, 2002 at 1:30 p.m., local time, at the JP
MorganChase Bank, 270 Park Avenue - 11th Floor, New York, New York 10017.
At the Annual Meeting we will review the Company's activities in 2001,
as well as the outlook for 2002. Details of the business to be conducted
and the matters to be considered at the Annual Meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend personally. You are therefore urged
to complete, sign, date and return the enclosed proxy card promptly in the
accompanying envelope, which requires no postage if mailed in the United
States. This year, if your shares are held in a participating bank or
brokerage account, you may be eligible to vote over the Internet, or by
telephone, as an alternative to mailing the traditional proxy card. Please
see "Voting Electronically via the Internet or Telephone" in the Proxy
Statement for further details.
You are, of course, welcome to attend the Annual Meeting and vote in
person, even if you have previously returned your proxy card or voted by
Internet or telephone.
Sincerely,
/s/ Frank M. Drendel
Frank M. Drendel
Chairman of the Board and
Chief Executive Officer
COMMSCOPE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders (the "Annual Meeting") of
CommScope, Inc. (the "Company") will be held on May 3, 2002, at 1:30 p.m.,
local time, at the JP MorganChase Bank, 270 Park Avenue - 11th Floor, New
York, New York 10017.
The Annual Meeting will be conducted:
1. To consider and act on the following proposals, which are described
in the accompanying Proxy Statement:
Proposal One: To elect two Class II directors for terms
ending at the 2005 Annual Meeting of
Stockholders;
Proposal Two: To approve an amendment and restatement of
the Amended and Restated CommScope, Inc. 1997
Long-Term Incentive Plan to, among other
things, increase the shares reserved for
issuance thereunder by an additional 3
million shares.
Proposal Three: To ratify the appointment by the Board of
Directors of the Company of Deloitte & Touche
LLP as independent auditor for the Company
for the 2002 fiscal year.
2. To transact such other business as may properly come before the
Annual Meeting.
Stockholders of record at the close of business on March 22, 2002
will be entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Frank B. Wyatt, II
Frank B. Wyatt, II
March 27, 2002 Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ACCOMPANYING
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. If you
elected to receive the 2002 Proxy Statement and 2001 Annual Report
electronically over the Internet you will not receive a paper proxy and YOU
should vote online, unless you cancel your enrollment. If your shares are
held in a PARTICIPATING bank or brokerage account and you did not elect to
receive materials through the Internet, you may be eligible to vote your
proxy over the Internet or by telephone. Please SEE "VOTING ELECTRONICALLY
VIA THE INTERNET OR TELEPHONE" IN THE PROXY STATEMENT FOR FURTHER DETAILS.
YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERY TO THE
COMPANY OF A SUBSEQUENTLY EXECUTED PROXY OR A WRITTEN NOTICE OF REVOCATION
OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
COMMSCOPE, INC.
1100 COMMSCOPE PLACE, S.E., P.O. BOX 339
HICKORY, NORTH CAROLINA 28602
---------------------------------
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is being furnished to the
stockholders of CommScope, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of
the Company for use at the Annual Meeting of Stockholders (the "Annual
Meeting") of the Company to be held on May 3, 2002 at 1:30 p.m., local
time, at the JP MorganChase Bank, 270 Park Avenue - 11th Floor, New York,
New York 10017, and any adjournment or postponement thereof.
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following proposals: Proposal One: To elect two Class II directors
for terms ending at the 2005 Annual Meeting of Stockholders; Proposal Two:
To approve an amendment and restatement of the Amended and Restated
CommScope, Inc. 1997 Long-Term Incentive Plan to, among other things,
increase the shares reserved for issuance thereunder by an additional 3
million shares; and Proposal Three: To ratify the appointment by the Board
of Directors of the Company of Deloitte & Touche LLP as independent auditor
for the Company for the 2002 fiscal year.
The Board of Directors of the Company recommends a vote FOR approval
of each of the proposals.
The Board of Directors of the Company has fixed the close of business
on March 22, 2002 (the "Annual Meeting Record Date") as the record date for
determining the holders of outstanding shares of common stock, par value
$0.01 per share (the "Common Stock"), entitled to receive notice of, and to
vote at, the Annual Meeting or any adjournment thereof. On that date, there
were 61,717,159 shares of Common Stock issued and outstanding and entitled
to vote at the Annual Meeting, each entitled to one vote on all matters to
be acted upon. The Notice of Annual Meeting of Stockholders, this Proxy
Statement and the form of proxy are first being mailed or sent
electronically to each stockholder entitled to vote at the Annual Meeting
on or about April 1, 2002.
On July 28, 1997, the Company became an independent public company
when it was spun off (the "Spin-off") from its parent company, General
Instrument Corporation (subsequently renamed General Semiconductor, Inc.).
VOTING AND REVOCATION OF PROXIES
VOTING
Only holders of record of shares of Common Stock as of the close of
business on the Annual Meeting Record Date will be entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof. The presence,
either in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting and to permit action to be taken
by the stockholders at the Annual Meeting.
The affirmative vote of a plurality of the shares of Common Stock
entitled to vote thereon, and present in person or represented by proxy, at
the Annual Meeting is required to elect the directors nominated pursuant to
Proposal One. The affirmative vote of a majority of the votes cast on
Proposal
1
Two is required to approve such proposal, provided that the total votes
cast on such proposal represents a majority of the shares entitled to vote
thereon. The affirmative vote of a majority of the shares of Common Stock
entitled to vote thereon, and present in person or represented by proxy, is
required to approve Proposal Three.
For purposes of determining the number of votes cast with respect to
any voting matter, only those cast "for" or "against" are included;
abstentions and broker non-votes are excluded. For purposes of determining
whether the affirmative vote of the holders of a majority of the shares
entitled to vote on a proposal and present at the Annual Meeting has been
obtained, abstentions will be included in, and broker non-votes will be
excluded from, the number of shares present and entitled to vote.
Accordingly, abstentions will have the effect of a vote "against" the
matter (other than the election of directors) and broker non-votes will
have the effect of reducing the number of affirmative votes required to
achieve the majority vote.
All shares of Common Stock that are represented at the Annual Meeting
by properly executed proxies received prior to or at the Annual Meeting and
not revoked will be voted at the Annual Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated
for a particular proposal on a proxy, such proxy will be voted in
accordance with the Board of Directors' recommendations as set forth herein
with respect to such proposal(s).
In the event that a quorum is not present at the time the Annual
Meeting is convened, or if for any other reason the Company believes that
additional time should be allowed for the solicitation of proxies, the
stockholders entitled to vote at the Annual Meeting, present in person or
represented by proxy, will have the power to adjourn the meeting from time
to time, without notice other than announcement at the meeting. If the
Company proposes to adjourn the Annual Meeting by a vote of the
stockholders, the persons named in the enclosed form of proxy will vote all
shares of Common Stock for which they have voting authority in favor of
such adjournment.
VOTING ELECTRONICALLY VIA THE INTERNET OR TELEPHONE
Stockholders whose shares are registered in the name of a bank or
brokerage and who elected to receive the Company's 2001 Annual Report and
this Proxy Statement over the Internet will be receiving an email on or
about April 1, 2002 with information on how to access stockholder
information and instructions for voting. If your shares are registered in
the name of a participating bank or brokerage firm and you have not elected
to receive the Company's 2001 Annual Report and this Proxy Statement over
the Internet, you may be eligible to vote your shares electronically over
the Internet or by telephone. A number of banks and brokerage firms are
participating in the ADP Shareholder Preference Database program. This
program provides eligible stockholders who receive a paper copy of a
company's annual report and proxy statement the opportunity to vote via the
Internet or by telephone. If your bank or brokerage firm is participating
in ADP's program, your voting form will provide instructions. If your
voting form does not reference Internet or telephone information, please
complete and return the paper proxy card in the self-addressed postage-paid
envelope provided.
REVOCATION
Any stockholder who executes and returns a proxy may revoke it at any
time prior to the voting of the proxies by giving written notice of
revocation to the Secretary of the Company or by executing a later-dated
proxy. In addition, voting by telephone, Internet or mail will not prevent
you from voting in person at the Annual Meeting should you be present and
wish to do so.
2
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of six directors
divided into three classes, Class I, Class II and Class III, with members
of each class holding office for staggered three-year terms and until their
successors have been duly elected and qualified. There are currently: two
Class I Directors, whose terms expire at the 2004 Annual Meeting; two Class
II Directors, whose terms expire at the 2002 Annual Meeting of
Stockholders; and two Class III Directors, whose terms expire at the 2003
Annual Meeting of Stockholders (in all cases subject to the election and
qualification of their successors and to their earlier death, resignation
or removal).
If any one or more of the nominees is unable to serve for any reason
or withdraws from nomination, proxies will be voted for the substitute
nominee or nominees, if any, proposed by the Board of Directors. The Board
of Directors has no knowledge that any nominee will or may be unable to
serve or will or may withdraw from nomination. All of the following
nominees are presently serving as directors of the Company. Information
concerning the nominees for director is set forth below.
NOMINEES FOR TERMS ENDING AT THE 2005 ANNUAL MEETING OF STOCKHOLDERS
EDWARD D. BREEN, age 46, is President and Chief Operating Officer of
Motorola, Inc. ("Motorola"). He was Executive Vice President of Motorola
from January 2001 to January 2002, and President of Motorola's Broadband
Communications sector from January 2000 to January 2001. Prior to joining
Motorola, Mr. Breen was Chairman and Chief Executive Officer of General
Instrument (formerly NextLevel Systems, Inc.) from December 1997 to January
2000, after having served as Acting Chief Executive Officer and President
of General Instrument since October 1997. He was President of General
Instrument Corporation Broadband Networks Group from February 1996 and Vice
President of General Instrument from November 1994 until the spin-off. He
continued in those positions for General Instrument through October 1997.
He was Executive Vice President, Terrestrial Systems of General Instrument
Corporation, from October 1994 to January 1996 and Senior Vice President of
Sales General Instrument Corporation from June 1988 to October 1994. He is
a director of Motorola, McLeod USA, Inc. and VIA NET.WORKS, INC.
JAMES N. WHITSON, age 67, has served and continues to serve as a
director of SEI, a privately owned company engaged in life insurance,
equipment sales and rentals, and bottled water, since 1973, and as
Executive Vice President and Chief Operating Officer of SEI from 1989 until
March 1998, when he retired. He is a director/trustee of the Seligman Group
of Investment Companies and a director of C-SPAN.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH OF
THE FOREGOING NOMINEES AS A DIRECTOR OF THE COMPANY. PROXIES WILL BE VOTED
"FOR" EACH OF THE FOREGOING NOMINEES AS A DIRECTOR OF THE COMPANY, UNLESS
OTHERWISE SPECIFIED IN THE PROXY.
3
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS OF THE COMPANY
The following table sets forth names, in alphabetical order, and
information as to the persons who currently serve as directors of the
Company, each of whom has served since the Spin-off (other than Mr.
Faircloth, who has served since February 11, 1999 and Ms. Travis, who has
served since February 21, 2002).
NAME, AGE AND CURRENT TERM
PRINCIPAL OCCUPATION EXPIRES INFORMATION
--------------------- --------- ------------------------------------
Edward D. Breen, 46 2002 Edward D. Breen is President and
President and Chief Chief Operating Officer of Motorola,
Operating Officer of Inc. ("Motorola"). He was Executive
Motorola, Inc. Vice President of Motorola and
President, Networks Sector from
January 2001 to January 2002. He was
Executive Vice President of
Motorola, and President of
Motorola's Broadband Communications
Sector from January 2000 to January
2001. Prior to joining Motorola, Mr.
Breen was Chairman and Chief
Executive officer of General
Instrument Corporation, formerly
NextLevel Systems, Inc. ("GI"), from
December 1997 to January 2000, after
having served as acting Chief
Executive Officer and President of
GI since October 1997. He was
President of General Instrument
Corporation's Broadband Networks
Group from February 1996 and Vice
President of General Instrument
Corporation from November 1994 until
the Spin-off. He was Executive Vice
President, Terrestrial Systems of
General Instrument Corporation, from
October 1994 to January 1996 and
Senior Vice President of Sales of
General Instrument Corporation from
June 1988 to October 1994. He is a
director of Motorola, McLeod USA,
Inc., and VIA NET.WORKS, INC.
Frank M. Drendel, 57 2003 Frank M. Drendel has been Chairman
Chairman and Chief Executive and Chief Executive Officer of the
Officer of the Company Company since the Spin-off. He
served as a director of GI Delaware,
a subsidiary of General Instrument
Corporation, and its predecessors
from 1987 to 1992. He was a director
of General Instrument Corporation
from 1992 until the Spin-off and
4
GI from the Spin-off until January
5, 2000. He has served as President
and Chairman of CommScope NC,
currently a subsidiary of the
Company, from 1986 to 1997, and
Chief Executive Officer of CommScope
NC since 1976. Prior to that time,
Mr. Drendel has held various
positions with CommScope NC since
1971. He is a director of Nextel
Communications, Inc., Corvis
Corporation, C-SPAN and the National
Cable Television Association.
Duncan M. ("Lauch") 2003 Duncan M. ("Lauch") Faircloth has
Faircloth, 74 spent approximately 50 years, and
Private Investor, continues to spend time, in the
Former U.S. Senator private business sector building
several businesses in agriculture,
construction, real estate and
automobile dealerships. He is also a
long-time private investor. Mr.
Faircloth was a United States
Senator from 1993 through January
1999. He served on the Senate
Appropriations Committee, the
Banking, Housing and Urban Affairs
Committee and the Small Business
Committee. He was the chairman of
two subcommittees - the
Appropriations Subcommittee on the
District of Columbia and the Banking
Subcommittee on Financial
Institutions and Regulatory Relief.
Mr. Faircloth also served as
Chairman of the North Carolina
Highway Commission from 1969 to 1973
and Secretary of the North Carolina
Department of Commerce from 1977 to
1983.
Boyd L. George, 60 2004 Boyd L. George is Chairman of the
Chairman of the Board Board and Chief Executive Officer of
and Chief Executive Alex Lee, Inc. (subsidiaries of Alex
Officer of Alex Lee, Inc. Lee, Inc. include: Merchants
Distributors, a wholesale food
distributor; Institution Food House,
Inc., a foodservice distributor; and
Lowe's Food Stores, Inc., a retail
operation). Mr. George has been
Chairman and Chief Executive Officer
of Alex Lee, Inc. since the company
was founded in 1992 and served as
President from 1992 to 1995. Mr.
George joined a subsidiary of Alex
Lee, Inc. in 1969 and has served,
and continues to serve, in various
positions, including Chairman and
Chief Executive Officer for such
subsidiary as well
5
as for other subsidiaries.
George N. Hutton, Jr., 72 2004 George N. Hutton, Jr. is and has
Private Investor been a private investor for more
than 15 years. He is a former
director of Sprint Corporation and
of M/A Com Inc.
James N. Whitson, 67 2002 James N. Whitson has served and
Director of various continues to serve as a director of
organizations Sammons Enterprises, Inc. ("SEI"), a
privately-owned company engaged in
life insurance, equipment sales and
rentals, and bottled water, since
1973, and as Executive Vice
President and Chief Operating
Officer of SEI from 1989 until March
1998, when he retired. He is a
director/trustee of the Seligman
Group of Investment Companies and a
director of C-SPAN.
June E. Travis, 62 2004 June E. Travis has been Executive
Officer of a non-profit Vice President of the Binning Family
organization and former cable Foundation, a non-profit
television executive organization dedicated to helping
youth develop technology and
leadership skills since mid-2000.
Ms. Travis has served as Executive
Vice President and Chief Operating
Officer of the National Cable
Television Association (NCTA) from
1994 to 1999. Prior to 1994, Ms.
Travis served as the President and
Chief Operating Officer of Rifkin &
Associates, a Denver-based cable
television operator. Ms. Travis
chaired the industry's political
action committee, Cable PAC from
1994 to 1999. Ms. Travis has served
as a director of NCTA, C-SPAN, Cable
in the Classroom, and Women in Cable
(WIC).
COMPENSATION OF DIRECTORS
Employee directors do not receive additional compensation for serving
on the Company's Board of Directors. Nonemployee directors receive an
annual retainer of $25,000, and committee chairmen receive an additional
$5,000 retainer. The nonemployee directors' remuneration is paid quarterly
unless payment is deferred. In addition, each nonemployee director, upon
initial election to the Board of Directors, receives 1,000 shares of Common
Stock that vest immediately and is granted an option to purchase 20,000
shares of Common Stock at an exercise price per share equal to the fair
market value on the date of grant, which option becomes exercisable with
respect to one-third of the underlying shares on each of the first three
anniversaries of the grant date. In February 2002, such awards were made to
one nonemployee director upon initial election to the Board of Directors.
If a director remains in office, a similar option is granted every three
years. In February 2002, the Company made one such grant to one nonemployee
director to purchase 20,000 shares of Common Stock.
6
The Amended and Restated CommScope 1997 Long-Term Incentive Plan (the
"1997 LTIP") provides that nonemployee directors may be granted stock
options under the 1997 LTIP in addition to the automatic grants described
above. No such additional grants of stock options were made to nonemployee
directors in 2001. However, in February 2002, the Company made four such
additional grants of stock options to nonemployee directors to purchase an
aggregate of approximately 20,000 shares of Common Stock.
COMMITTEES OF THE BOARD OF DIRECTORS - BOARD MEETINGS
The Board of Directors of the Company held 7 meetings in 2001. Each
incumbent director attended (i) 75% or more of all meetings of the Board of
Directors and (ii) all meetings of the Board Committees on which they
served, except Mr. Breen did not attend one board meeting and two committee
meetings.
The Company has Audit, Compensation and Executive Committees of the
Board of Directors. Members of the Audit and Compensation Committees are
not employees of the Company. The Company has no nominating or similar
committee.
AUDIT COMMITTEE. The Audit Committee's principal functions are to
review the scope of the annual audit of the Company's consolidated
financial statements by its independent auditors, review the annual
consolidated financial statements of the Company and the related audit
report as prepared by the independent auditors, recommend the selection of
independent auditors each year, review the independence of the independent
auditors, review the adequacy and scope of the internal audit plan, and
review any significant internal audit findings. The members of the Audit
Committee are the following nonemployee directors: Mr. Whitson, Chairman,
Mr. Breen and Mr. George. All members of the Audit Committee are
independent, financially literate, and at least one member has accounting
and financial management expertise. The Audit Committee held 5 meetings in
2001.
COMPENSATION COMMITTEE. The Compensation Committee administers the
stock option and incentive plans of the Company, and in this capacity it
makes or recommends option grants or awards under these plans. In addition,
the Compensation Committee makes recommendations to the Company's Board of
Directors with respect to the compensation of the Chief Executive Officer
and determines the compensation of the other senior executives. The
Compensation Committee also recommends the establishment of policies
dealing with various compensation and employee benefit plans for the
Company. The members of the Compensation Committee are the following
nonemployee directors: Mr. Hutton, Chairman, and Mr. Faircloth. The
Compensation Committee held 3 meetings in 2001.
EXECUTIVE COMMITTEE. The Executive Committee has the authority to
exercise all powers and authority of the Company's Board of Directors that
may be lawfully delegated to it under Delaware law. It meets between
regularly scheduled meetings of the Company's Board of Directors to take
such action as is necessary for the efficient operation of the Company. The
members of the Executive Committee are: Mr. Drendel, Chairman, Mr. Breen
and Mr. George. The Executive Committee held 1 meeting in 2001.
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2001, the Company leased an aircraft and hangar from companies
owned by Frank M. Drendel, Chairman and Chief Executive Officer of the
Company, for an aggregate amount of approximately $147,000. Mr. Drendel is
a director of Nextel Communications, Inc., a leading provider of fully
integrated wireless communication services. In 2001, Nextel Communications,
Inc. and its affiliates purchased products from the Company for an
aggregate amount representing less than 2% of the Company's total sales.
Edward D. Breen, a director of the Company, is President and Chief
Operating Officer of Motorola, Inc. In 2001, Motorola, Inc. purchased
products from the Company for an aggregate amount representing less than 1%
of the Company's total sales.
Boyd L. George, a director of the Company, is Chairman and Chief
Executive Officer of Alex Lee, Inc., the parent of Lowe's Food Stores, Inc.
In 2001, the Company purchased gift certificates for all of its North
Carolina area employees (as an employee benefit) from Lowe's Food Stores,
Inc. for an aggregate payment of approximately $78,000.
On November 16, 2001, Lucent Technologies Inc. ("Lucent") acquired
approximately 16.5% of the Company's then outstanding Common Stock,
excluding the Common Stock acquired by Lucent, in connection with the
Company's acquisition of an approximate 18.4% interest in OFS BrightWave,
LLC ("OFS BrightWave"). The Company and The Furukawa Electric Co. Ltd.
formed OFS BrightWave to acquire certain fiber and cable transmission
assets from Lucent. In 2001, Lucent purchased products from the Company for
an aggregate amount representing less than 1% of the Company's total sales.
The Company believes that the terms of each of the transactions
described above were no less favorable to the Company than the terms which
could be obtained from unrelated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and holders of more
than 10% of the Common Stock to file with the Securities and Exchange
Commission (the "Commission") reports of ownership and changes in ownership
of Common Stock and other equity securities of the Company on Forms 3, 4
and 5. The Company undertakes to make such filings on behalf of its
directors and officers. Based on written representations of reporting
persons and a review of those reports, the Company believes that, during
the year ended December 31, 2001, its officers and directors and holders of
more than 10% of the Common Stock complied with all applicable Section
16(a) filing requirements.
EXECUTIVE OFFICER COMPENSATION
SUMMARY OF COMPENSATION. The table below sets forth a summary of the
compensation paid by the Company for the last three fiscal years to the
Chief Executive Officer of the Company and the four additional most highly
compensated executive officers of the Company.
8
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(a) AWARDS
---------------------- -------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR BASE SALARY BONUS OPTIONS(#)(C) COMPENSATION
--------------------------- ---- ----------- ----- ------------- ------------
Frank M. Drendel.............. 2001 $ 550,957 $ -- $ -- $ 85,107 (d),(e)
Chairman and Chief Executive 2000 525,475 322,158 120,000 15,707
Officer 1999 502,761 424,833 56,300 16,263
Brian D. Garrett.............. 2001 $ 330,567 $ -- $ -- $ 51,848 (d),(e)
President and Chief Operating 2000 315,265 178,415 57,900 15,666
Officer 1999 301,640 259,086 32,650 15,673
Jearld L. Leonhardt........... 2001 $ 271,565 $ -- $ -- $ 42,952 (d),(e)
Executive Vice President and 2000 248,892 140,853 38,700 15,229
Chief Financial Officer 1999 238,135 199,507 22,500 15,510
Gene W. Swithenbank........... 2001 $ 231,977 $ -- $ -- $ 36,894 (d),(e)
Executive Vice President, 2000 221,251 125,210 31,400 15,196
Global Broadband Sales and 1999 211,686 153,629 15,000 15,422
Marketing
Frank B. Wyatt, II............ 2001 $ 189,249 $ 50,000 (b) $ -- $ 83,939 (d),(e)
Senior Vice President, 2000 153,860 48,978 27,700 12,678
General Counsel and Secretary 1999 138,747 58,644 9,600 11,768
(a) Unless otherwise indicated, with respect to any individual named
in the above table, the aggregate amount of perquisites and other
personal benefits, securities or property was less than the lesser
of $50,000 or 10% of the total annual salary and bonus reported
for the named executive officer.
(b) Reflects a one-time bonus that was not paid under the Company's Annual Incentive Plan.
(c) Reflects the number of shares of Common Stock underlying options granted.
(d) Amounts for 2001 reflect (i) the matching contribution under the CommScope, Inc. of North Carolina
Employees Retirement Savings Plan (the "Employees Retirement Savings Plan") in the amount of $3,307,
$3,400, $3,431, $3,366 and $3,096 for 2001 on behalf of Messrs. Drendel, Garrett, Leonhardt, Swithenbank,
and Wyatt, respectively, (ii) the profit sharing allocation of $11,087 to the account of each of Messrs.
Drendel, Garrett, Leonhardt, Swithenbank and of $10,035 to the account of Mr. Wyatt under the Employees
Retirement Savings Plan for 2001, (iii) payment by the Company in 2001 of cash amounts in lieu of profit
sharing allocations to their respective Employees Retirement Savings Plan accounts of $4,335 on behalf of
each of Messrs. Drendel, Garrett, Leonhardt, Swithenbank and Wyatt, (iv) payment by the Company in 2001
of premiums of $734, $441, $364, $309 and $257 for term life insurance on behalf of Messrs. Drendel,
Garrett, Leonhardt, Swithenbank and Wyatt, respectively, (v) the annual credit under the CommScope, Inc.
Supplemental Executive Retirement Plan (the "Restated Plan") in the amount of $65,644, $32,585, $23,735,
and $17,797 for 2001 to the regular accounts thereunder of Messrs. Drendel, Garrett, Leonhardt, and
Swithenbank, respectively and (vi) the annual credit for 2001 to the regular account, and the one time
credit to the special account, of Mr. Wyatt under the Restated Plan in the aggregate amount of $66,216.
9
(e) Effective January 1, 2001, the Restated Plan amended and superceded the terms and conditions of the
CommScope, Inc. of North Carolina Supplemental Executive Retirement Plan (the "Prior Plan"). The Restated
Plan provides for retirement benefits payable over 5, 10 or 15 years (or, upon approval of the plan
administrator and subject to forfeiture of a portion of the participant's account balance, in a lump sum)
out of amounts credited to a participant's special and regular accounts and earnings at a rate of 7% per
year (or other rate that may be established by the plan administrator) credited to undistributed amounts
in those accounts. Pursuant to the Restated Plan, the special account of each of Messrs. Drendel,
Garrett, Leonhardt and Swithenbank was credited with an amount equal to the lump sum actuarial equivalent
of the retirement benefit accrued by that participant under the Prior Plan as of December 31, 2000, and,
because Mr. Wyatt did not participate in the Prior Plan, the special account of Mr. Wyatt was credited
with the one-time credit described in footnote (d) above in accordance with the provisions of the
Restated Plan.
STOCK OPTIONS
GRANT OF OPTIONS. The Company made no grants of options to purchase
Common Stock during the year ended December 31, 2001 to the executives
listed in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE. The following table
sets forth as of and for the year ended December 31, 2001, for each of the
executives listed in the Summary Compensation Table (i) the aggregated
shares acquired upon exercise of stock options during the year; (ii) the
value realized upon exercise of those options; (iii) the total number of
unexercised options for Common Stock (exercisable and unexercisable) held
at fiscal year-end; and (iv) the value of such options which were
in-the-money at fiscal year-end (based on the difference between the
closing price of Common Stock on the last day of the year and the exercise
price of the option on such date).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED STOCK IN-THE-MONEY STOCK
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL
YEAR-END ($)(A)
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ------------ ---------------- ----------- ------------- ----------- -------------
Frank M. Drendel...... _ $ _ 603,319 124,217 $4,474,911 $476,400
Brian D. Garrett...... _ $ _ 203,797 61,994 $1,361,909 $231,264
Jearld L. Leonhardt... _ $ _ 235,382 45,810 $1,809,649 $179,808
Gene W. Swithenbank... _ $ _ 135,885 32,709 $984,794 $125,364
Frank B. Wyatt, II.... _ $ _ 66,931 26,667 $451,223 $104,650
(a) Based on the difference between the closing price of $21.27 per
share at December 31, 2001, as reported on the NYSE Composite Tape
and the exercise prices of the in-the-money, unexercised options
on such date.
EMPLOYMENT AGREEMENTS
In November 1988, Frank M. Drendel entered into an employment
agreement (the "Agreement") with GI Delaware and CommScope NC, providing
for his employment as President and Chief Executive Officer of CommScope NC
for an initial term ending on November 28, 1991. The Agreement provides for
a minimum salary, which is less than Mr. Drendel's current salary, and
provides that Mr. Drendel will participate in any management incentive
compensation plan for executive officers that CommScope NC maintains.
Commencing on November 29, 1989, subject to early termination by reason of
death or disability or for cause (as defined in the Agreement), the
Agreement extends automatically so that the remaining term is always two
years, unless either party gives notice of termination, in which case the
Agreement will terminate two years from the date of such notice. As of the
date of this Proxy Statement,
10
neither party has given notice of termination. Pursuant to the Agreement,
Mr. Drendel is eligible to participate in all benefit plans available to
other CommScope NC senior executives. The Agreement prohibits Mr. Drendel,
for a period of five years following the term of the Agreement, from
engaging in any business in competition with the business of CommScope NC,
in any country where CommScope NC then conducts business. Effective as of
the Spin-off, GI Delaware ceased to be a party to the Agreement.
SEVERANCE PROTECTION AND SEPARATION AGREEMENTS
The Company has entered into severance protection agreements with its
Chief Executive Officer and its other executive officers. These agreements
continue in effect for a period of two years from January 1 of a given year
and are automatically extended for one year on January 1 of each year
unless notification is given to either the Company or the executive, except
that the term may not expire prior to 24 months following a Change in
Control (as defined in the agreement).
The agreements provide severance pay and other benefits in the event
of a termination of employment within 24 months of a Change in Control of
the Company if such termination is (i) by the Company for any reason other
than for cause or disability or (ii) by the executive for Good Reason (as
defined in the agreement). Such severance pay will be in an amount equal to
two times the sum of the executive's base salary and the target annual
bonus payable to the executive under the Company's annual incentive plan
for the fiscal year immediately preceding the fiscal year of termination in
the case of the Chief Executive Officer and one and one-half times such sum
in the case of all other executive officers. In addition, the Company will
pay the executive all accrued but unpaid compensation and a pro rata bonus
(calculated up to the executive's termination date). The executive's
benefits will be continued for either 24 months, in the case of the Chief
Executive Officer, or 18 months in the case of all other executive officers
(in each case, a "Continuation Period"). If, at the end of the Continuation
Period, the executive is not employed by another employer (including
self-employment), the executive will receive for up to six months, an
amount equal to one-twelfth (1/12) of the sum of the executive's base
amount and the executive's bonus amount. The executive will also receive
limited reimbursement for outplacement, tax and financial planning
assistance and reimbursement for relocation under certain circumstances.
The severance pay and benefits provided for under the severance protection
agreements shall be in lieu of any other severance pay to which the
executive may be entitled under any other plan, agreement or arrangement of
the Company or any of its affiliates. If the executive's employment is
terminated without cause (i) within six months prior to a Change in Control
or (ii) at any time prior to the date of a Change in Control but (A) at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a
Change in Control or (B) otherwise in connection with, or in anticipation
of, a threatened Change in Control which actually occurs, such termination
shall be deemed to have occurred after the Change in Control.
If the executive's employment is terminated by the Company for cause
or disability, by reason of the executive's death or by the executive other
than for Good Reason, the Company shall pay to the executive his accrued
compensation. In addition, in the case of a termination by the Company for
disability or due to the executive's death, the executive will receive a
pro rata bonus in addition to accrued compensation.
The agreements provide for a gross-up payment by the Company in the
event that the total payments the executive receives under the agreement or
otherwise are subject to the excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended. In such an event, the Company will pay an
additional amount so that the executive is made whole on an after-tax basis
from the effect of the excise tax.
11
OTHER CHANGE IN CONTROL ARRANGEMENTS
Following is a brief description of the change in control provisions
included in each of the Company's employee compensation plans and
arrangements.
ANNUAL INCENTIVE PLAN. The CommScope, Inc. Annual Incentive Plan (the
"Annual Incentive Plan") is the Company's annual cash bonus incentive plan
for the Chief Executive Officer and certain other key employees. In the
event of a change in control of the Company (as defined in the Annual
Incentive Plan), within 60 days thereafter, the Company will pay to each
participant in the Annual Incentive Plan immediately prior to such change
in control (regardless of whether such participant remains in the employ of
the Company following the change in control) a pro rata portion of his or
her bonus award assuming that all performance percentages are 100%.
DEFERRED COMPENSATION PLAN. The CommScope, Inc. of North Carolina
Deferred Compensation Plan (the "Deferred Compensation Plan") allows a
select group of management or highly compensated employees to defer a
percentage of compensation or a specified dollar amount each year up to 50%
of base salary and 100% of any bonuses earned under the Company's annual
management incentive plan for that year. Amounts deferred are payable in a
lump sum or in annual installments pursuant to the terms of an irrevocable
election made by the participant or earlier upon the occurrence of certain
events, including specified terminations of the participant's employment.
Upon a change in control of the Company (as defined in the Deferred
Compensation Plan), the Deferred Compensation Plan will terminate and each
participant will be paid his or her entire deferred compensation account
balance in a single lump sum.
1997 LTIP. The 1997 LTIP provides for the granting of stock options,
restricted stock, performance units, performance shares and phantom stock
to employees and officers of the Company and its subsidiaries and the
granting of stock and stock options to the Company's nonemployee directors.
The Compensation Committee selects those individuals to whom options and
awards will be granted, and determines the type, size and other terms and
conditions of such options and awards, including the vesting provisions
and/or restrictions relating to such awards. Pursuant to the terms of the
1997 LTIP and subject to an optionee's rights under his or her option or
award agreement, in the event of a change in control of the Company (as
defined in the 1997 LTIP), all stock options granted pursuant to the 1997
LTIP will become immediately and fully exercisable.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The CommScope, Inc.
Supplemental Executive Retirement Plan is an unfunded nonqualified plan
maintained for the benefit of a select group of management and/or highly
compensated employees of the Company and its subsidiaries that, in general,
provides for retirement benefits payable over 5, 10 or 15 years (or, upon
approval of the plan administrator and subject to forfeiture of a portion
of the participant's account balance, in a lump sum) out of amounts
credited to a participant's accounts and earnings credited thereon.
Pursuant to the terms of that plan, in the event of a change in control (as
defined therein), each participant who is employed by the Company
immediately prior to that change in control will be eligible to receive the
full value of his or her account balance in a single lump sum following his
or her termination other than for cause occurring within 2 years after the
date of such change in control.
12
COMPENSATION COMMITTEE REPORT ON
COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors is comprised
entirely of nonemployee directors. The Compensation Committee considers and
recommends to the Board of Directors the base salary to be paid to the
Chief Executive Officer, determines the base salary for all other executive
officers, makes recommendations to the Board of Directors with respect to
the Company's overall compensation policies, administers and grants awards
under the 1997 LTIP and administers the Annual Incentive Plan with respect
to executive officers and performs such duties as the Board of Directors
may from time to time request.
In establishing and administering the Company's compensation policies
and programs, the Compensation Committee considered the compensation plans
and arrangements of a peer group of companies with which the Company
competes for customers and executive talent, including the levels of
individual compensation for similarly situated executives of the peer
group, as well as factors specifically relevant to the Company. The basic
objective of the Compensation Committee is to formulate compensation
policies and programs intended to attract, retain, and motivate highly
qualified key employees, including executive officers. Compensation of
executive officers and other key employees, including the Chief Executive
Officer, is comprised of three principal elements: (i) stock ownership,
(ii) base salary and (iii) annual bonus.
STOCK OWNERSHIP
The Compensation Committee believes that executive officers and other
significant employees, who are in a position to make a substantial
contribution to the long-term success of the Company and to build
stockholder value, should have a significant stake in the Company's
on-going success. This focuses attention on managing the Company as an
owner with an equity position in the business and seeks to align these
employees' interests with the long-term interests of stockholders.
Accordingly, one of the Company's principal methods to motivate executive
officers and other significant employees is through a broad and deep stock
option program.
Ordinarily the Company has awarded options annually under the 1997
LTIP in December of a given year. However, in December 2001, the Company
did not award any options under the 1997 LTIP because the Company was
considering changing the timing of option grants from an annual basis to a
different basis and evaluating the impact of a recent acquisition on its
stock option plans. In February, 2002, the Company awarded options under
the 1997 LTIP to purchase an aggregate of approximately 177,000 shares of
Common Stock to the executive officers named in the Summary Compensation
Table other than the Chief Executive Officer whose grant is described
below. Such option awards were consistent with those that would have been
made in December of 2001. The exercise price of each of these options as of
the date of grant was the closing market price per share of Common Stock on
the date of grant.
Management recommends to the Compensation Committee those executive
officers and other significant employees to whom options should be granted
and the number of options to be granted to them. The recommendations are
based on a review of each employee's individual performance, position and
level of responsibility in the Company, long-term potential contribution to
the Company and the number of options previously granted to the employee.
Neither management nor the Compensation Committee assigned specific weights
to these factors, although the executive's position and a subjective
evaluation of his performance were considered most important. Generally,
the number of options granted to an executive reflects his or her level of
responsibility and position in the Company. To encourage key
13
employees to remain in the employ of the Company, options generally vest
and become exercisable over a three- or four-year period and normally are
not exercisable until one year after the date of grant.
BASE SALARY
The Compensation Committee believes that it is important to pay
reasonable and competitive salaries. Salaries paid to executive officers
are based on the Chief Executive Officer's recommendations to the
Compensation Committee, which is responsible for reviewing and approving or
disapproving those recommendations. Generally, an executive's base salary
reflects his level of responsibility and position in the Company.
During 2001, each of the executive officers named in the Summary
Compensation Table received base salary increases. These increases were
based upon each officer's individual services rendered, level and scope of
responsibility and experience. Also taken into account was the relationship
of the compensation of such officers to the compensation of officers
occupying comparable positions in other organizations.
ANNUAL INCENTIVE BONUS
The Annual Incentive Plan is intended to provide a means of annually
rewarding certain key employees, including the executives listed in the
Summary Compensation Table, based on the performance of the Company. In
addition, awards for each officer (other than the Chief Executive Officer)
may be adjusted based on the officer's achievement of a personal
performance percentage. This approach allows management to focus on key
business objectives in the short-term, and to support the long-term
performance orientation of stock ownership. Under the Annual Incentive
Plan, in 2001 management recommended, and the Compensation Committee
established, for each executive officer a bonus target percentage of that
officer's salary. That percentage was based on the officer's position in
the Company and was the percentage of the officer's salary that would be
paid if the performance targets were met. The target award percentage for
executive officers named in the Summary Compensation Table (other than the
Chief Executive Officer) for 2001 ranged from 35% to 60%. The target award
percentage for the Chief Executive Officer was 75%. Because the Company's
performance target for 2001 basic earnings per share was not achieved, in
2001 no target awards were paid with respect to performance in 2001 (see
"Summary Compensation Table - Bonus").
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 2001, the Company amended and restated the terms
and conditions of the CommScope, Inc. of North Carolina Supplemental
Executive Retirement Plan to change the plan from a defined benefit type
plan to a defined contribution plan. The amendment and restatement does not
apply with respect to participants who were retired as of December 31,
2000. The amended and restated plan is named the CommScope, Inc.
Supplemental Executive Retirement Plan and provides for retirement benefits
payable over 5, 10 or 15 years (or, upon approval of the plan administrator
and subject to forfeiture of a portion of the participant's account
balance, in a lump sum) out of amounts credited to a participant's special
and regular accounts and earnings at a rate of 7% per year (or other rate
that may be established by the plan administrator).
CHIEF EXECUTIVE OFFICER COMPENSATION
Frank M. Drendel has served as Chairman and Chief Executive Officer of
the Company since July 1997. In 2001, the Compensation Committee
recommended and the Board of Directors of the Company approved the increase
of Mr. Drendel's annual salary rate from $528,000 to $555,000, effective
March 1, 2001, and the increase of his target bonus percentage under the
Annual Incentive Plan
14
from 65% to 75%. The Compensation Committee recommended and on February 21,
2002, Mr. Drendel was granted an option to purchase 155,000 shares of
Common Stock with a per share exercise price of $16.20, the closing market
price of the Common Stock on the date of the grant. The increase in Mr.
Drendel's salary and target bonus percentage was determined based on
factors such as the Company's overall performance, Mr. Drendel's individual
performance, and the compensation of similarly situated executives at
comparable corporations.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which was enacted in 1993, generally disallows a federal income
tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive officer or
any of the four other most highly compensated executive officers who are
employed by the Company on the last day of the taxable year. Section
162(m), however, does not disallow a federal income tax deduction for
qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders.
The Compensation Committee has considered the tax deductibility of
compensation awarded under the 1997 LTIP and the Annual Incentive Plan in
light of Section 162(m). The Company structured and intends to administer
the stock option, performance unit and performance share portions of the
1997 LTIP with the intention that the resulting compensation payable
thereafter qualify as "performance-based compensation" and be deductible.
The Company has structured the Annual Incentive Plan with the intention
that awards payable thereafter to the Chief Executive Officer qualify as
"performance-based" compensation and, if so qualified, be deductible. No
executive officer's compensation in 2001 was non-deductible by reason of
the application of Section 162(m) and it is not expected that any executive
officer's compensation will be non-deductible in 2002 by reason of the
application of Section 162(m).
Respectfully submitted,
COMPENSATION COMMITTEE
GEORGE N. HUTTON, JR., CHAIRMAN
DUNCAN M. FAIRCLOTH
15
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is providing this report
to enable stockholders to understand how it monitors and oversees the
Company's financial reporting process. The Audit Committee operates
pursuant to an Audit Committee Charter that is reviewed annually by the
Audit Committee and updated as appropriate. A copy of the Audit Committee
Charter is included as Annex A to this Proxy Statement.
This report confirms that the Audit Committee has: (i) reviewed and
discussed the audited financial statements for the year ended December 31,
2001 with management and the Company's independent public accountants; (ii)
discussed with the Company's independent public accountants the matters
required to be reviewed pursuant to the Statement on Auditing Standards No.
61 (Communications with Audit Committees); (iii) reviewed the written
disclosures letter from the Company's independent public accountants as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees); and (iv) discussed with the Company's
independent public accountants their independence from the Company.
The Audit Committee of the Board of Directors has considered whether
the provision of non-audit professional services rendered by Deloitte &
Touche LLP, as discussed above and disclosed elsewhere in this proxy
statement, is compatible with maintaining their independence.
Based upon the above review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements
for the year ended December 31, 2001 be included in the Company's Annual
Report on Form 10-K for filing with the Securities and Exchange Commission.
Respectfully submitted,
AUDIT COMMITTEE
JAMES N. WHITSON, CHAIRMAN
EDWARD D. BREEN
BOYD L. GEORGE
16
PERFORMANCE GRAPH
The following graph compares cumulative total return on $100 invested
on July 28, 1997, the first day the Common Stock began trading after the
Spin-off, in each of the Common Stock, the Standard & Poor's 500 Stock
Index ("S&P 500") and the Standard & Poor's MidCap 400 Telecommunications
Equipment Index ("Telecommunications Equip-Mid") (formerly the Standard &
Poor's MidCap 400 Communications Equipment Index). The return of the
Standard & Poor's indices is calculated assuming reinvestment of dividends.
The Company has not paid any dividends. The stock price performance shown
on the graph below does not include "when-issued" trading prior to the
Spin-off and is not necessarily indicative of future price performance.
[OBJECT OMITTED]
COMPANY/ INDEX 28 JUL 97 DEC 97 DEC 98 DEC 99 DEC 00 DEC 01
COMMSCOPE INC 100 88.62 109.35 262.20 107.72 138.34
S&P 500 INDEX 100 104.38 134.12 162.45 147.66 130.11
TELECOMMUNICATIONS EQUIP-MID 100 114.21 92.36 442.22 188.56 312.85
*$100 invested on July 28, 1997 including reinvestment of dividends.
17
BENEFICIAL OWNERSHIP OF COMMON STOCK
The table below sets forth information as to the beneficial ownership
of Common Stock as of March 22, 2002 (except as otherwise specified) by all
directors and the persons listed in the Summary Compensation Table as well
as by directors and executive officers of the Company as a group and, to
the best knowledge of the Company's management, beneficial owners of 5% or
more of the outstanding Common Stock.
Shares of Common % of Shares Outstanding
Name Stock Beneficially Owned(1) Beneficially Owned
-------------------------------------- ------------------------- ------------------------
Lucent Technologies Inc. (2) 10,200,000 16.5
Edward D. Breen (3) 27,666 *
Frank M. Drendel (4)(13) 983,124 1.6
Duncan M. Faircloth (5) 21,000 *
Brian D. Garrett (6)(13) 285,699 *
Boyd L. George (7) 36,666 *
George N. Hutton, Jr. (8) 27,999 *
Jearld L. Leonhardt (9)(13) 270,411 *
Gene W. Swithenbank (10)(13) 145,356 *
June E. Travis 1,000 *
James N. Whitson (11) 27,666 *
Frank B. Wyatt, II (12)(13) 79,017 *
All current directors and executive officers
of the Company as a group (15 persons)(14) 2,264,759 3.7
* The percentage of shares of the Common Stock beneficially owned
does not exceed one percent of the shares of Common Stock
outstanding.
(1) For purposes of this table, a person or group of persons is deemed
to have "beneficial ownership" of any shares of Common Stock which
such person has the right to acquire within 60 days following
March 22, 2002. For purposes of computing the percentage of
outstanding shares of Common Stock held by each person or group of
persons named above, any security which such person or persons has
or have the right to acquire within 60 days following March 22,
2002 is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership
of any other person. The table does not include shares of Common
Stock subject to options to be awarded in the future under the
1997 LTIP.
(2) This information is obtained from a Schedule 13G, dated November
26, 2001, filed with the Commission by Lucent Technologies Inc.
("Lucent"). Lucent reports that it has sole voting power and sole
dispositive power over 10,200,000 shares.
(3) Includes 26,666 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(4) Includes 630,319 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
Also includes 100 shares held by the spouse of Frank M. Drendel.
18
(5) Includes 20,000 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(6) Includes 203,797 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(7) Includes 26,666 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
Also includes 2,000 shares of Common Stock held by the children of
Boyd L. George, as to which shares Boyd L. George disclaims
beneficial ownership.
(8) Includes 26,666 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(9) Includes 235,382 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
Also includes 1,000 shares held by the spouse of Jearld L.
Leonhardt.
(10) Includes 135,885 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(11) Includes 26,666 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(12) Includes 66,931 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
(13) Includes the number of shares of Common Stock which were held by
the trustee of the Employees Retirement Savings Plan and were
allocated to the individual's respective account under the
Employees Retirement Savings Plan as of February 28, 2002 as
follows: Frank M. Drendel, 955 shares; Brian D. Garrett, 883
shares; Jearld L. Leonhardt, 1,580 shares; Frank B. Wyatt, II,
5,671 shares; and Gene W. Swithenbank, 4,705 shares.
(14) Includes 1,713,019 shares subject to options which are exercisable
for Common Stock currently or within 60 days of March 22, 2002.
Includes an aggregate of 18,790 shares of Common Stock which were
held by the trustees of the Employees Retirement Savings Plan and
were allocated to the current officers' respective accounts under
the Employees Retirement Savings Plan as of February 28, 2002.
PROPOSAL TWO: APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE AMENDED AND RESTATED COMMSCOPE, INC. 1997 LONG-
TERM INCENTIVE PLAN
GENERAL
The CommScope, Inc. 1997 Long-Term Incentive Plan was approved by the
Company's Board of Directors and GI Delaware, as sole stockholder of the
Company, prior to the Spin-off. The Board of Directors of the Company
approved an amendment and restatement of this plan, the Amended and
Restated CommScope, Inc. 1997 Long-Term Incentive Plan (the "1997 LTIP"),
on February 12, 1998. Stockholders of the Company approved the 1997 LTIP at
the Annual Meeting on May 1, 1998 and subsequently approved an amendment to
the 1997 LTIP at the 2000 Annual Meeting. The Board of Directors of the
Company approved the amendment and restatement of the 1997 LTIP (the "2002
Amendment and Restatement") on March 21, 2002, subject to stockholder
approval at the 2002 Annual Meeting. The 2002 Amendment and Restatement,
among other things, increases the number of shares of Common Stock
available for future grants of Awards under the plan by 3 million shares
(the "Additional Shares"). As of March 22, 2002, only approximately 895,000
shares of Common Stock were available
19
for future grant. The Company believes that it is in the best interests of
the Company to increase the maximum number of shares that may be made
subject to Awards under the 1997 LTIP in order (i) to continue to attract
and retain key employees and (ii) to provide additional incentive and
reward opportunities to current employees to encourage them to enhance the
profitable growth of the Company.
The 1997 LTIP provides for the granting of stock options, restricted
stock, performance units, performance shares, and phantom stock to
employees of the Company and its Subsidiaries and the granting of stock
options and stock awards to certain nonemployee directors (collectively or
individually, "Awards").
The Company now submits the 2002 Amendment and Restatement for
stockholder approval. If such stockholder approval is not obtained, no
Awards will be granted in respect of Additional Shares.
The principal provisions of the 1997 LTIP, as amended and restated,
are summarized below. This summary, however, does not purport to be
complete and is qualified in its entirety by the terms of the 1997 LTIP, as
amended and restated, included as Appendix B to this Proxy Statement. All
capitalized terms used below and not defined herein have the meaning set
forth in the 1997 LTIP, unless otherwise indicated.
PURPOSE OF THE 1997 LTIP
The Company's Board of Directors believes that Awards will provide a
means by which employees and directors of the Company and its Subsidiaries
can acquire and maintain stock ownership, thereby strengthening their
commitment to the success of the Company and its Subsidiaries and their
desire to remain employed by the Company and its Subsidiaries, focusing
their attention on managing the Company as equity owners, and aligning
their interest with those of the Company's stockholders. The 1997 LTIP is
also intended to attract and retain employees and to provide those
employees with additional incentive and reward opportunities designed to
encourage them to enhance the profitable growth of the Company and its
Subsidiaries.
DESCRIPTION OF THE 1997 LTIP
The 1997 LTIP must be administered by a committee (the "Committee")
consisting of at least two directors of the Company who are "nonemployee
directors" within the meaning of Rule 16b-3 promulgated under Section 16(b)
of the Exchange Act, and to the extent necessary for any Award intended to
qualify as "performance-based compensation" for purposes of Section 162(m)
of the Code to so qualify, each member of the Committee must be an "outside
director" within the meaning of Section 162(m). If one or more members of
the Committee is not a "non-employee director" within the meaning of Rule
16(b)-3 and an "outside director" within the meaning of Section 162(m) but
recuses himself or herself or abstains from voting with respect to a
particular action taken by the Committee, than the Committee, with respect
to that action, shall be deemed to consist only of the members of the
Committee who have not recused themselves or abstained from voting. The
1997 LTIP is currently administered by the Compensation Committee. Except
to the extent necessary for any Award intended to qualify as
performance-based compensation to so qualify, the authority of the
Committee may be exercised by the full Board or, with respect to Awards to
be granted to participants who are not subject to Section 16 of the
Exchange Act, by a committee, consisting of at least one director,
appointed by the Board. The Committee will (i) select those employees to
whom Awards will be granted, and (ii) determine the type, size and the
terms and conditions of Awards, including the per share purchase price of
restricted stock and Options, and the restrictions or performance criteria
relating to restricted stock, phantom stock, performance units and
performance shares. The Committee will also construe and interpret the 1997
20
LTIP. The Committee will have the authority to cancel outstanding Awards
and make adjustments to outstanding Awards with the consent of the Grantee
and to accelerate the exercisability of Awards or to waive the restrictions
and conditions applicable to Awards. However, except in the case of a
Change in Capitalization, the exercise price of outstanding Options may not
be decreased and Awards may not by cancelled of forfeited and re-granted to
effect the same result.
The maximum number of shares of Common Stock that may be made the
subject of Awards granted under the 1997 LTIP is 9,600,000 million (in
addition to the Substitute and Spin-off Options that, as described below,
were issued pursuant to the 1997 LTIP in connection with the Spin-off);
provided, however, that in the aggregate, not more than 200,000 shares of
Common Stock may be made the subject of Awards other than Options. The
maximum number of Shares with respect to which Options (other than
Substitute and Spin-off Options) and Awards may be granted to any
individual in any three calendar year period is 750,000. The maximum dollar
amount of cash or the Fair Market Value of shares of Common Stock that may
be granted to any individual in any calendar year with respect to
Performance Units denominated in dollars may not exceed $1 million. In the
event of a Change in Capitalization, however, the Committee may adjust the
maximum number and class of shares which are subject to outstanding Awards
and the purchase price therefor. In addition, if any Award (including the
Substitute and Spin-off Options) is canceled or expires or terminates or is
settled in cash (including the settlement of tax withholding obligations
using shares of Common Stock) without having been exercised, the shares of
Common Stock subject to that Award again become available for granting
under the 1997 LTIP. If any Option is exercised by tendering shares of
Common Stock, either actually or by attestation, to the Company as full or
partial payment of the exercise price, the maximum number of Shares
available under the 1997 LTIP will be increased by the number of shares so
tendered.
ELIGIBILITY
Any of the Company's and its Subsidiaries' approximately 3,100
employees and any of the Company's nonemployee directors are eligible to
participate in the 1997 LTIP.
OPTIONS
Pursuant to the 1997 LTIP, the Committee will grant to each
nonemployee director of the Company Nonqualified Stock Options to purchase
20,000 shares of Common Stock in connection with his or her initial
election to the Board and an additional Option in respect of 20,000 shares
of Common Stock on each third anniversary of each nonemployee director's
first appointment to the Board, if such nonemployee director is still
serving on the Board ("Formula Director Options"). The per share exercise
price of the Formula Director Options is equal to 100% of the Fair Market
Value on the Grant Date. Each Formula Director Option will have a ten year
term and will become exercisable with respect to one-third of the
underlying shares on each of the first, second and third anniversaries of
the Grant Date. If a nonemployee director ceases to serve as a director of
the Company for any reason, his or her Formula Director Options will be
exercisable, during their remaining terms, to the extent that they were
exercisable on the date the director ceased to serve as a director. The
Committee may also make discretionary Nonqualifed Stock Option grants to
nonemployee directors to acquire unrestricted or restricted stock from time
to time.
In addition, the Committee may grant Nonqualified Stock Options and
Incentive Stock Options to any eligible employee of the Company or its
Subsidiaries. The per share exercise price of the Options is fixed by the
Committee when the Options are granted and must be at least, and in the
case of Options granted to nonemployee directors will be, 100% of the Fair
Market Value of the Common Stock on the Option Grant Date (110% in the case
of an Incentive Stock Option granted to a 10% owner).
21
Each Option (other than Formula Director Options) will be exercisable
at the times and in the installments determined by the Committee,
commencing not earlier than the first anniversary of the Option Grant Date.
All outstanding Options will become fully vested and exercisable upon a
Change in Control. A "Change of Control" under the 1997 LTIP means,
generally: (i) the acquisition by any Person of beneficial ownership of
voting securities resulting in such Person beneficially owning 33% or more
of the combined voting power of the Company's then outstanding voting
securities; (ii) the individuals who, as of July 23, 1997, the date the
1997 LTIP was adopted, are members of the Board (the "Incumbent Board")
cease for any reason to constitute at least two-thirds of the Board; or
(iii) consummation of: (A) a merger, consolidation or reorganization
involving the Company unless: (1) the stockholders of the Company,
immediately before such merger, consolidation etc. own, following such
merger, consolidation or reorganization at least a majority of the combined
voting power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization in
substantially the same proportion as before the merger, consolidation or
reorganization; and (2) the members of the Incumbent Board immediately
prior to the merger, consolidation or reorganization constitute at least a
majority of the Board of the Surviving Corporation; and (3) no Person has
beneficial ownership of 33% or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities; (B) a complete
liquidation or dissolution of the Company; or (C) the disposition of all or
substantially all of the assets of the Company.
In addition, the Committee reserves the authority to accelerate the
exercisability of any Option (other than Formula Director Options). Each
Option (other than Formula Director Options) terminates at the time
determined by the Committee, except that the term of each Option may not
exceed ten years (five years in the case of an Incentive Stock Option
granted to a 10% owner). Options are not transferable by the Grantee except
by will or the laws of descent and distribution or, other than in the case
of an Incentive Stock Option, pursuant to a domestic relations order
(within the meaning of Rule 16a-12 promulgated under the Exchange Act) and
may be exercised during the Grantee's lifetime only by the Grantee or the
Grantee's guardian or legal representative or, except as would cause an
Incentive Stock Option to lose its status as such, by a bankruptcy trustee;
provided, however, that the Committee may set forth in the Award Agreement
evidencing an Award (other than an Incentive Stock Option) at the time of
the grant or thereafter, that the Award may be transferred to members of
the Grantee's immediate family, to trusts solely for the benefit of such
immediate family members and to partnerships in which such family members
and/or trusts are the only partners. In the discretion of the Committee,
the purchase price for shares acquired pursuant to the exercise of an
option may be paid (i) in cash, (ii) by transferring shares of unrestricted
Common Stock to the Company, (iii) through simultaneous sale through a
broker of shares of unrestricted stock acquired on exercise or (iv) by a
combination of the foregoing.
RESTRICTED STOCK
The Committee will determine when each restricted stock Award is made,
the terms of the restricted stock Award, including the price, if any, to be
paid by the Grantee for the restricted stock, the restrictions placed on
the shares and the time or times when the restrictions will lapse,
provided, however, that, except in the case of shares of restricted stock
issued in full or partial settlement of another Award or other earned
compensation, or in the event of the Grantee's termination of employment,
as determined by the Committee and set forth in an Award Agreement, such
restrictions shall not lapse prior to the third anniversary of the Grant
Date. In addition, when restricted stock is granted under the 1997 LTIP,
the Committee may, in its discretion, decide: (i) whether dividends paid on
the restricted stock will be remitted to the Grantee or deferred until the
restrictions on the restricted stock Award lapse; (ii) whether any deferred
dividends will be invested in additional shares of the Common Stock; (iii)
whether interest will be accrued on any dividends not reinvested in
additional shares of restricted stock; (iv) whether any stock dividends
paid on the restricted stock Award will be subject to the restrictions
applicable to the
22
restricted stock Award; and (v) whether, and to what extent, the
restrictions on the restricted stock shall lapse upon a Change in Control.
PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee may grant performance units or performance shares to any
eligible individual. Before the grant of any performance unit or
performance share, the Committee will (i) designate a Measuring Period, of
not less than one year nor more than five years, for the measurement of the
extent to which performance goals are attained; (ii) determine performance
goals applicable to such grant; and (iii) assign a Performance Percentage
to each level of attainment of performance goals during the Measuring
Period. The performance goals applicable to performance units or
performance shares shall, in the discretion of the Committee, be based on
earnings per share, operating income, return on equity or assets, cash
flow, EBITDA or any combination of the foregoing. Such performance goals
may be absolute or relative (to prior performance or to the performance of
one or more other entities or external indices) and may be expressed in
terms of a progression within a specified range. At the time of grant or at
any time thereafter, in either case to the extent permitted under Section
162(m) of the Code and the regulations thereunder without adversely
affecting the treatment of the performance unit or performance share as
Performance-Based Compensation, the Committee may provide for the manner in
which performance will be measured against the performance goals (or may
adjust the performance goals) to reflect the impact of specified corporate
transactions, special charges, foreign currency effects, accounting or tax
law changes and other extraordinary or nonrecurring events. Prior to the
vesting, payment, settlement or lapsing of any restrictions with respect to
any performance unit or performance share that is intended to constitute
Performance-Based Compensation made to a Grantee who is subject to Section
162(m) of the Code, the Committee shall certify in writing that the
applicable performance goals have been satisfied. The agreements evidencing
Awards of performance units and performance shares will set forth the terms
and conditions of Awards, including those applicable in the event of the
Grantee's Termination of Employment or a Change of Control. Performance
units may be denominated in dollars or in shares of Common Stock, and
payments in respect of vested performance units will be made in cash,
shares of Common Stock or any combination of the foregoing, as determined
by the Committee. Performance shares are initially denominated in shares of
Common Stock, but the Committee may ultimately settle performance share
Awards in cash, shares of Common Stock or a combination thereof, at its
discretion.
PHANTOM STOCK
The Committee may grant phantom stock to any eligible employee,
subject to the terms and conditions established by the Committee. Upon the
vesting of a phantom stock Award, the Grantee will be entitled to receive a
cash payment in respect of each share of phantom stock equal to the Fair
Market Value of a share of Common Stock as of the date the phantom stock
Award was granted or such other date as determined by the Committee when
the phantom stock Award was granted. The Committee may, when a phantom
stock Award is granted, provide a limitation on the amount payable in
respect of each share of phantom stock.
TANDEM AWARDS
The 1997 LTIP provides that the Committee may grant any Award in
tandem with another Award. Unless otherwise provided by the Committee, upon
the exercise, payment or forfeiture of one tandem Award, the related tandem
Award will be canceled to the extent of the number of shares as to which
the tandem Award is so exercised, paid or forfeited.
23
AMENDMENT AND TERMINATION
The 1997 LTIP will terminate on July 23, 2007, the tenth anniversary
of its adoption. However, the Board of Directors may sooner terminate or
amend the 1997 LTIP at any time without stockholder approval, except where
stockholder approval is required to retain the favorable tax treatment of
Incentive Stock Options under the Code, to qualify the shares offered under
the 1997 LTIP for listing on any securities exchange, or to permit
transactions pursuant to the plan to be exempt from potential liability
under Section 16(b) of the 1934 Act. The termination of the 1997 LTIP will
not affect then outstanding Awards.
SUBSTITUTE OPTIONS AND SPIN-OFF OPTIONS
On August 1, 1997, Substitute Options were issued under the 1997 LTIP
to officers, key employees and certain nonemployee directors of the Company
and Spin-off Options were issued to certain former directors of General
Instrument Corporation to replace options awarded under the General
Instrument Corporation 1993 Long-Term Incentive Plan. The terms and
conditions of each Substitute and Spin-off Option issued under the 1997
LTIP, including, without limitation, the time or times when, and the manner
in which, each shall be exercisable, the duration of the exercise period,
the permitted method of exercise, settlement and payment, and the rules
that shall apply in the event of termination of employment, were the same
as those of the surrendered award it replaced.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO AWARDS UNDER THE 1997 LTIP
Incentive Stock Option ("ISO"). In general, a Grantee will not
recognize taxable income upon the grant or exercise of an ISO, and the
Company and its Subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. (However, upon
the exercise of an ISO, the excess of the Fair Market Value on the date of
exercise of the shares received over the exercise price of the option will
be treated as an adjustment to alternative minimum taxable income.) In
order for the exercise of an ISO to qualify as an ISO, a Grantee generally
must be an employee of the Company or a subsidiary (within the meaning of
Section 422 of the Code) from the date the ISO is granted through the date
three months before the date of exercise (one year preceding the date of
exercise in the case of an Grantee whose employment is terminated due to
disability). The employment requirement does not apply where a Grantee's
employment is terminated due to his or her death.
If a Grantee has held the shares acquired upon exercise of an ISO for
at least two years after the date of grant and for at least one year after
the date of exercise, when the Grantee disposes of the shares, the
difference, if any, between the sales price of the shares and the exercise
price of the option will be treated as long-term capital gain or loss
subject to reduced rates of tax, provided that any gain will be subject to
further reduced rates of tax if shares are held for more than eighteen
months after the date of exercise. If a Grantee disposes of the shares
prior to satisfying these holding period requirements (a "Disqualifying
Disposition"), the Grantee will recognize ordinary income (treated as
compensation) at the time of the Disqualifying Disposition, generally in an
amount equal to the excess of the Fair Market Value of the shares at the
time the option was exercised over the exercise price of the option. The
balance of the gain realized, if any, will generally be capital gain. If
the Grantee sells the shares in a Disqualifying Disposition at a price
below the Fair Market Value of the shares at the time the option was
exercised, the amount of ordinary income (treated as compensation) will be
limited to the amount realized on the sale over the exercise price of the
option. In general, if the Company and its Subsidiaries comply with
applicable income reporting requirements, the Company and its Subsidiaries
will be allowed a business expense deduction to the extent a Grantee
recognizes ordinary income.
24
Nonqualified Stock Option. In general, a Grantee who receives a
Nonqualified Stock Option will recognize no income at the time of the grant
of the option. In general, upon exercise of a Nonqualified Stock Option, a
Grantee will recognize ordinary income (treated as compensation) in an
amount equal to the excess of the Fair Market Value of the shares on the
date of exercise over the exercise price of the option. The basis in shares
acquired upon exercise of a Nonqualified Stock Option will equal the Fair
Market Value of such shares at the time of exercise, and the holding period
of the shares (for capital gain purposes) will begin on the date of
exercise. In general, if the Company and its Subsidiaries comply with
applicable income reporting requirements, they will be entitled to a
business expense deduction in the same amount and at the same time as the
Grantee recognizes ordinary income. In the event of a sale of the shares
received upon the exercise of a Nonqualified Stock Option, any appreciation
or depreciation after the exercise date generally will be taxed as capital
gain or loss, provided that any gain will be subject to reduced rates of
tax if the shares were held for more than twelve months. Special rules may
apply with respect to persons who may be subject to Section 16(b) of the
Exchange Act.
Excise Taxes. Under certain circumstances, the accelerated vesting or
exercise of options in connection with a Change in Control might be deemed
an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered,
a Grantee may be subject to a 20% excise tax and the Company and its
Subsidiaries may be denied a tax deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess
of $1 million in any taxable year to the chief executive officer or any of
the four other most highly compensated executive officers who are employed
by the Company on the last day of the taxable year, but does not disallow a
deduction for qualified "performance-based compensation," the material
terms of which are disclosed to and approved by stockholders. The Company
has structured the 1997 LTIP with the intention that compensation resulting
from the exercise of Options, and from performance shares and performance
units, qualify as "performance-based compensation" and, if so qualified, be
deductible.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO, THE
AMENDMENT AND RESTATEMENT OF THE 1997 LTIP TO, AMONG OTHER THINGS, INCREASE
THE SHARES RESERVED FOR ISSUANCE THEREUNDER BY AN ADDITIONAL 3 MILLION
SHARES. PROXIES WILL BE VOTED "FOR" APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE 1997 LTIP UNLESS OTHERWISE SPECIFIED IN THE PROXY.
25
2001 AND 2002 AWARDS MADE UNDER THE 1997 LTIP
Awards under the 1997 LTIP are made at the discretion of the
Compensation Committee, and, accordingly, future awards under the 1997 LTIP
are not yet determinable. The following table sets forth information
concerning awards made under the 1997 LTIP during the year ended December
31, 2001 and in February and March of 2002. Such awards are not necessarily
indicative of awards that may be made in the future.
NEW PLAN BENEFITS
SHARES SUBJECT TO AWARDS
UNDER
NAME AND POSITION THE 1997 LTIP (#) (A)
----------------- ---------------------------
Frank M. Drendel
Chairman and Chief Executive Officer 155,000
Brian D. Garrett
President and Chief Operating Officer 75,000
Jearld L. Leonhardt
Executive Vice President and Chief Financial Officer 50,000
Gene W. Swithenbank
Executive Vice President, Global Broadband Sales & Marketing 32,000
Frank B. Wyatt, II
Senior Vice President, General Counsel and Secretary 20,000
All current executive officers as a group (9 persons
including those named above) 444,000
All current directors (including nominees for director) who
are not executive officers as a group (6 persons) 61,000 (b)
All employees (other than current executive officers and
directors who are not executive officers) as a group who were
granted awards under the 1997 LTIP (528 persons) 971,756
---------------------------
(a) Except as indicated below in footnote (b), represents options granted
under the 1997 LTIP during the year ended December 31, 2001 and in
February and March of 2002. Ordinarily the Company has awarded options
annually under the 1997 LTIP in December of a given year. However, in
December 2001, the Company did not award any options under the 1997
LTIP because the Company was considering changing the timing of option
grants from an annual basis to a different basis and evaluating the
impact of a recent acquisition on its stock option plans. In February
2002, the Company made option grants that were consistent with those
that would have been made in December 2001.
26
(b) Includes an award of 1,000 shares of stock pursuant to the 1997 LTIP.
The per share closing price of the Common Stock on March 18, 2002, as
reported on the New York Stock Exchange Composite Tape, was $18.15.
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF AUDITOR
The Board of Directors, based on the recommendation of the Audit
Committee, appointed the firm of Deloitte & Touche LLP as independent
auditor to examine the books of account and other records of the Company
and its consolidated subsidiaries for the 2002 fiscal year. The Board of
Directors is asking the stockholders to ratify and approve this action.
Deloitte & Touche LLP has been the Company's independent auditor since July
1997. Representatives of the auditing firm will be present at the Annual
Meeting and will be afforded the opportunity, if they so desire, to make a
statement or respond to appropriate questions that may come before the
Annual Meeting.
Although such ratification is not required by law, the Board of
Directors believes that stockholders should be given the opportunity to
express their views on the subject. While not binding on the Board of
Directors, the failure of the stockholders to ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditor would be
considered by the Board of Directors in determining whether to continue
with the services of Deloitte & Touche LLP.
INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees and expenses billed by Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective affiliates
("Deloitte") for professional services rendered for the audit of the
Company's annual consolidated financial statements for the year ended
December 31, 2001 and the reviews of the consolidated financial statements
included in the Company's Quarterly Reports on Form 10-Q for that year
amounted to $691,282.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees and expenses billed by Deloitte for professional
information technology services rendered to the Company relating to
financial information systems design and implementation for the year ended
December 31, 2001 amounted to $183,818.
ALL OTHER FEES
The aggregate fees and expenses billed by Deloitte for professional
services rendered to the Company relating to services other than those
described above under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees" for the year ended December 31, 2001
amounted to $1,290,237. This amount includes $1,078,600 of tax-related fees
and $211,637 of audit-related fees.
The Audit Committee of the Company's Board of Directors has considered
whether the provision of non-audit professional services rendered by
Deloitte, as discussed above, is compatible with maintaining their
independence.
27
STOCKHOLDER PROPOSALS FOR THE COMPANY'S 2003 ANNUAL MEETING
Stockholders who intend to present proposals at the 2003 Annual
Meeting of Stockholders, and who wish to have such proposals included in
the proxy statement for such meeting, must submit such proposals in writing
by notice delivered or mailed by first-class United States mail, postage
prepaid, to the Secretary, CommScope, Inc., 1100 CommScope Place, S.E.,
P.O. Box 339, Hickory, North Carolina 28602, and such notice must be
received no later than November 30, 2002. Such proposals must meet the
requirements set forth in the rules and regulations of the Commission in
order to be eligible for inclusion in the Company's proxy statement for its
2003 Annual Meeting of Stockholders.
In addition, under the Company's By-laws, stockholders must comply
with specified procedures to nominate directors or introduce an item of
business at the Annual Meeting. Nominations or an item of business to be
introduced at an annual meeting must be submitted in writing and received
by the Company generally not less than 60 days nor more than 90 days in
advance of an annual meeting. To be in proper written form, a stockholder's
notice must contain the specific information required by the Company's
By-laws. A copy of the Company's By-laws, which describes the advance
notice procedures, can be obtained from the Secretary of the Company.
SOLICITATION OF PROXIES
Proxies will be solicited electronically, by mail, telephone, or other
means of communication. Solicitation of proxies also may be made by
directors, officers and regular employees of the Company. The Company has
retained Morrow & Co., Inc. to assist in the solicitation of proxies from
stockholders. Morrow & Co., Inc. will receive a fee of $5,000 plus
reimbursement of certain out-of-pocket expenses. The Company will reimburse
brokerage firms, custodians, nominees and fiduciaries in accordance with
the rules of the NYSE, for reasonable expenses incurred by them in
forwarding materials to the beneficial owners of shares. The entire cost of
solicitations will be borne by the Company.
OTHER MATTERS
The Company knows of no other matter to be brought before the Annual
Meeting. If any other matter requiring a vote of the stockholders should
come before the Annual Meeting, it is the intention of the persons named in
the proxy to vote with respect to any such matter in accordance with their
best judgment.
The Company will furnish, without charge, to each person whose
proxy is being solicited upon written request, a copy of its Annual Report
on Form 10-K for the fiscal year ended December 31, 2001, as filed with the
Commission (excluding exhibits). Copies of any exhibits thereto also will
be furnished upon the payment of a reasonable duplicating charge. Requests
in writing for copies of any such materials should be directed to
CommScope, Inc., 1100 CommScope Place, S.E., P.O. Box 339, Hickory, North
Carolina 28602, Attention: Investor Relations.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Frank B. Wyatt, II
Frank B. Wyatt, II
Secretary
Dated: March 27, 2002
Hickory, North Carolina
28
APPENDIX A
COMMSCOPE, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors of CommScope, Inc. (the "Company") has established
an Audit Committee (the "Committee") with general responsibility and
specific duties as described below.
COMPOSITION:
-----------
The Committee shall be comprised of not less than three Directors who shall
meet the requirements of the New York Stock Exchange. Committee membership
shall be approved by the Board of Directors.
RESPONSIBILITY:
--------------
The Committee's responsibility is to assist the Board of Directors in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Company. The Committee is empowered to retain
persons having special competence as necessary to assist the Committee in
fulfilling its responsibility. While the Committee has the responsibilities
and powers set forth in this Charter, it is not the duty of the Committee
to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of Management
and the Independent Accountant. The Independent Accountant is ultimately
accountable to the Board of Directors and the Committee.
ATTENDANCE:
----------
Members of the Committee should endeavor to be present, in person or by
telephone, at all meetings; however, two Committee members shall constitute
a quorum. As necessary, the Chairperson may request members of Management,
the Internal Audit Manager, and representatives of the Independent
Accountant to be present at meetings.
MINUTES OF MEETINGS:
-------------------
Minutes of each meeting shall be prepared and sent to Committee members and
presented to Company Directors who are not members of the Committee.
SPECIFIC DUTIES:
---------------
The Committee is to:
1. Review, at least annually, with the Company's Management, the
Independent Accountant, and the Internal Audit Manager, the Company's
policies and procedures, as appropriate, to reasonably assess the
adequacy of internal accounting and financial reporting controls.
2. Review the Committee's Charter annually, and update as appropriate.
3. Recommend to the Board of Directors the Independent Accountant to be
selected (subject to ratification by the stockholders), evaluate the
Independent Accountant, approve the
A-1
compensation of the Independent Accountant, and review and approve any
discharge of the Independent Accountant.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the Internal Audit Manager.
5. Receive periodic written statements, at least annually, from the
Independent Accountant regarding its independence and delineating all
relationships between it and the Company, discuss such reports with
the Independent Accountant, and if so determined by the Committee,
recommend that the Board take appropriate action.
6. Become familiar with the accounting and reporting principles and
practices applied by the Company in preparing its financial statements
and discuss with the Independent Accountant and Management judgments
about the quality, not just the acceptability, of the Company's
accounting principles, to include their clarity, consistency and
completeness.
7. Review, at least annually, with Management and the Internal Audit
Manager the adequacy and the scope of the annual internal audit plan,
and any significant audit findings.
8. Review, prior to the annual audit, the scope and general extent of the
Independent Accountant's audit examinations.
9. Review with Management and the Independent Accountant, upon completion
of their audit, financial statements for the year prior to their
filing with the Securities and Exchange Commission. Discuss with the
Independent Accountant the matters required to be discussed by the
Statement on Auditing Standards No. 61, as amended by Statement on
Auditing Standards No. 89, relating to the conduct of the year-end
audit.
10. Discuss, at least annually, with the Independent Accountant the
quality of the Company's financial accounting personnel, and any
relevant recommendations that the Independent Accountant may have.
11. Review, at least annually, with Management and the Independent
Accountant any related party transactions of the Company which would
be subject to disclosure in the Company's annual proxy statement
pursuant to the rules of the Securities and Exchange Commission and
any material off-balance sheet financings being used by the Company.
12. Report Committee actions to the Board of Directors with such
recommendations, as the Committee may deem appropriate.
13. Prepare the audit committee report required by the rules of the
Securities and Exchange Commission to be included in the Company's
annual proxy statement, commencing with the proxy statement for the
2001 annual meeting.
14. Perform such other functions as may be required by law, the Company's
Certificate of Incorporation or By-Laws of the Board.
A-2
APPENDIX B
AMENDED AND RESTATED
COMMSCOPE, INC.
1997 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED MAY 3, 2002)
TABLE OF CONTENTS
Page
1. Establishment, Purpose and Effective Date...........................B-1
(a) Establishment.......................................................B-1
(b) Purpose.............................................................B-1
(c) Effective Date......................................................B-1
2. Definitions.........................................................B-1
3. Scope of the Plan...................................................B-6
(a) Number of Shares Available Under the Plan...........................B-6
(b) Reduction in the Available Shares in Connection with Award Grants...B-6
(c) Effect of the Expiration or Termination of Awards...................B-7
4. Administration......................................................B-7
(a) Committee Administration............................................B-7
(b) Board Reservation and Delegation....................................B-7
(c) Committee Authority.................................................B-8
(d) Committee Determinations Final......................................B-9
5. Eligibility.........................................................B-9
6. Conditions to Grants................................................B-9
(a) General Conditions..................................................B-9
(b) Grant of Options and Option Price..................................B-10
(c) Grant of Incentive Stock Options...................................B-11
(d) Grant of Shares of Restricted Stock................................B-11
(e) Grant of Performance Units and Performance Shares..................B-14
(f) Grant of Phantom Stock.............................................B-15
(g) Grant of Director's Shares.........................................B-15
(h) Tandem Awards......................................................B-15
7. Non-transferability................................................B-15
8. Exercise...........................................................B-16
(a) Exercise of Options................................................B-16
(b) Exercise of Performance Units......................................B-17
(c) Payment of Performance Shares......................................B-18
(d) Payment of Phantom Stock Awards....................................B-18
(e) Exercise, Cancellation, Expiration or Forfeiture of Tandem Awards..B-18
9. Spin-off and Substitute Options....................................B-18
10. Effect of Certain Transactions................................B-19
11. Mandatory Withholding Taxes...................................B-19
1
12. Termination of Employment.....................................B-19
13. Securities Law Matters........................................B-20
14. No Funding Required...........................................B-20
15. No Employment Rights..........................................B-20
16. Rights as a Stockholder.......................................B-20
17. Nature of Payments............................................B-21
18. Non-Uniform Determinations....................................B-21
19. Adjustments...................................................B-21
20. Amendment of the Plan.........................................B-22
21. Termination of the Plan.......................................B-22
22. No Illegal Transactions.......................................B-22
23. Governing Law.................................................B-22
24. Severability..................................................B-22
25. Translations..................................................B-23
1
1. Establishment, Purpose and Effective Date.
(a) Establishment. The Company hereby establishes the Amended and
Restated CommScope, Inc. 1997 Long-Term Incentive Plan (as set forth herein
and from time to time amended, the "Plan").
(b) Purpose. The primary purpose of the Plan is to provide a
means by which key employees and directors of the Company and its
Subsidiaries can acquire and maintain stock ownership, thereby
strengthening their commitment to the success of the Company and its
Subsidiaries and their desire to remain employed by the Company and its
Subsidiaries, focusing their attention on managing the Company as an equity
owner, and aligning their interests with those of the Company's
stockholders. The Plan also is intended to attract and retain key employees
and to provide such employees with additional incentive and reward
opportunities designed to encourage them to enhance the profitable growth
of the Company and its Subsidiaries.
(c) Effective Date. The Plan shall become effective upon its
adoption by the Board.
2. Definitions.
As used in the Plan, terms defined parenthetically immediately after
their use shall have the respective meanings provided by such definitions
and the terms set forth below shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
(a) "Award" means Options, shares of restricted Stock,
performance units, performance shares or Director's
Shares granted under the Plan.
(b) "Award Agreement" means the written agreement by which
an Award is evidenced.
(c) "Beneficial Owner," "Beneficially Owned" and
"Beneficially Owning" shall have the meanings
applicable under Rule 13d-3 promulgated under the 1934
Act.
(d) "Board" means the board of directors of the Company.
(e) "Change in Capitalization" means any increase or
reduction in the number of shares of Stock, or any
change in the shares of Stock or exchange of shares of
Stock for a different number or kind of shares or other
securities by reason of a stock dividend, extraordinary
dividend, stock split, reverse stock split, share
combination, reclassification, recapitalization,
merger, consolidation, spin-off, split-up,
reorganization, issuance of warrants or rights,
liquidation, exchange of shares, repurchase of shares,
change in corporate structure, or similar event, of or
by the Company.
(f) "Change of Control" means, any of the following:
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(i) the acquisition by any Person of Beneficial
Ownership of Voting Securities which, when added to the
Voting Securities then Beneficially Owned by such Person,
would result in such Person Beneficially Owning 33% or more
of the combined Voting Power of the Company's then
outstanding Voting Securities; provided, however, that for
purposes of this paragraph (i), a Person shall not be deemed
to have made an acquisition of Voting Securities if such
Person: (1) acquires Voting Securities as a result of a
stock split, stock dividend or other corporate restructuring
in which all stockholders of the class of such Voting
Securities are treated on a pro rata basis; (2) acquires the
Voting Securities directly from the Company; (3) becomes the
Beneficial Owner of 33% or more of the combined Voting Power
of the Company's then outstanding Voting Securities solely
as a result of the acquisition of Voting Securities by the
Company or any Subsidiary which, by reducing the number of
Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Person, provided
that if (x) a Person would own at least such percentage as a
result of the acquisition by the Company or any Subsidiary
and (y) after such acquisition by the Company or any
Subsidiary, such Person acquires Voting Securities, then an
acquisition of Voting Securities shall have occurred; (4) is
the Company or any corporation or other Person of which a
majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the
Company (a "Controlled Entity"); or (5) acquires Voting
Securities in connection with a "Non-Control Transaction"
(as defined in paragraph (iii) below); or
(ii) the individuals who, as of the Effective Date, are
members of the Board (the "Incumbent Board") cease for any
reason to constitute at least two-thirds of the Board;
provided, however, that if either the election of any new
director or the nomination for election of any new director
by the Company's stockholders was approved by a vote of at
least two-thirds of the Incumbent Board prior to such
election or nomination, such new director shall be
considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated
under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) consummation of:
(A) a merger, consolidation or reorganization
involving the Company (a "Business Combination"),
unless
(1) the stockholders of the Company,
immediately before the Business Combination, own,
directly or indirectly immediately following the
Business Combination, at least a
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majority of the combined voting power of the
outstanding voting securities of the corporation
resulting from the Business Combination (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before the Business Combination, and
(2) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for the Business Combination
constitute at least a majority of the members of the
Board of Directors of the Surviving Corporation, and
(3) no Person (other than the Company or any
Controlled Entity, a trustee or other fiduciary holding
securities under one or more employee benefit plans or
arrangements (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or
any Controlled Entity, or any Person who, immediately
prior to the Business Combination, had Beneficial
Ownership of 33% or more of the then outstanding Voting
Securities) has Beneficial Ownership of 33% or more of
the combined voting power of the Surviving
Corporation's then outstanding voting securities (a
Business Combination satisfying the conditions of
clauses (1), (2) and (3) of this subparagraph (A) shall
be referred to as a "Non-Control Transaction");
(B) a complete liquidation or dissolution of the
Company; or
(C) the sale or other disposition of all or
substantially all of the assets of the Company (other than a
transfer to a Controlled Entity).
Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because 33% or more of the then outstanding Voting
Securities is Beneficially Owned by (x) a trustee or other fiduciary
holding securities under one or more employee benefit plans or arrangements
(or any trust forming a part thereof) maintained by the Company or any
Controlled Entity or (y) any corporation which, immediately prior to its
acquisition of such interest, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of
stock in the Company immediately prior to such acquisition.
(g) "Committee" means the committee of the Board appointed
pursuant to Article 4.
(h) "Company" means CommScope, Inc., a Delaware corporation.
(i) "Director's Shares" means the shares of Stock awarded
to a nonemployee director of the Company pursuant to
Article 6(g).
(j) "Disability" means a mental or physical condition
which, in the opinion of the Committee, renders a
Grantee unable or incompetent to carry out the job
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responsibilities which such Grantee held or the duties
to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be
permanent or for an indefinite duration.
(k) "Effective Date" means the date that the Plan is
adopted by the Board.
(l) "Fair Market Value" of any security of the Company or
any other issuer means, as of any applicable date:
(i) if the security is listed for trading on the New
York Stock Exchange, the closing price at the close of the
primary trading session of the security on such date on the
New York Stock Exchange, or if there has been no such
closing price of the security on such date, on the next
preceding date on which there was such a closing price, or
(ii) if the security is not so listed, but is listed on
another national securities exchange, the closing price at
the close of the primary trading session of the security on
such date on such exchange, or if there has been no such
closing price of the security on such date, on the next
preceding date on which there was such a closing price, or
(iii) if the security is not listed for trading on the
New York Stock Exchange or on another national securities
exchange, the last sale price at the end of normal market
hours of the security on such date as quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or, if no such price shall have been so quoted
for such date, on the next preceding date for which such
price was so quoted, or
(iv) if the security is not listed for trading on a
national securities exchange or is not authorized for
quotation on NASDAQ, the fair market value of the security
as determined in good faith by the Committee, and in the
case of Incentive Stock Options, in accordance with Section
422 of the Internal Revenue Code.
(m) "Grant Date" means the date of grant of an Award
determined in accordance with Article 6.
(n) "Grantee" means an individual who has been granted an
Award.
(o) "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Internal Revenue
Code and designated by the Committee as an Incentive
Stock Option.
(p) "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, and regulations and rulings
thereunder. References to a particular Section of the
Internal Revenue Code shall include references to
successor provisions.
(q) "Measuring Period" has the meaning specified in Article
6(f)(ii)(B).
B-4
(r) "Minimum Consideration" means the $.0l par value per
share of Stock or such larger amount determined
pursuant to resolution of the Board to be capital
within the meaning of Section 154 of the Delaware
General Corporation Law.
(s) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(t) "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option or other type of
statutory stock option under the Internal Revenue Code.
(u) "Option" means an option to purchase Stock granted or
issued under the Plan, including Substitute and
Spin-off Options.
(v) "Option Price" means the per share purchase price of
(i) Stock subject to an Option or (ii) restricted Stock
subject to an Option.
(w) "Performance-Based Compensation" means any Option or
Award that is intended to constitute "performance based
compensation" within the meaning of Section
162(m)(4)(C) of the Internal Revenue Code and the
regulations promulgated thereunder.
(x) "Performance Percentage" has the meaning specified in
Article 6(f)(ii)(C).
(y) "Person" means a person within the meaning of Sections
13(d) and 14(d) of the 1934 Act.
(z) "Plan" has the meaning set forth in Article 1(a).
(aa) "SEC" means the Securities and Exchange Commission.
(bb) "Section 16 Grantee" means a person subject to
potential liability with respect to equity securities
of the Company under Section 16(b) of the 1934 Act.
(cc) "Spin-off Option" means an Option that has been issued
under this Plan to certain named persons pursuant to
the Employee Benefits Allocation Agreement between
General Semiconductor, Inc. ("GS"), CommScope, Inc. and
the Company, dated June 25, 1997, as amended, modified,
or otherwise supplemented (the "Benefits Agreement").
(dd) "Stock" means common stock, par value $.01 per share,
of the Company.
(ee) "Subsidiary" means (i) except as provided in subsection
(ii) below, any corporation which is a subsidiary
corporation within the meaning of Section 424(f) of the
Internal Revenue Code with respect to the Company, and
(ii) in relation to the eligibility to receive Options
or Awards other than Incentive Stock Options, any
entity, whether or not incorporated, in which the
Company directly or indirectly owns either (A) Voting
Securities possessing at least 50% of the Voting Power
of such entity, or (B) if such entity does not issue
Voting Securities, at least 50% of the ownership
interests in such entity.
B-5
(ff) "Substitute Option" means an Option that has been
issued under this Plan to certain persons pursuant to
the Benefits Agreement.
(gg) "10% Owner" means a person who owns stock (including
stock treated as owned under Section 424(d) of the
Internal Revenue Code) possessing more than 10% of the
Voting Power of the Company.
(hh) "Termination of Employment" occurs the first day on
which an individual is for any reason no longer
employed by the Company or any of its Subsidiaries, or
with respect to an individual who is an employee of a
Subsidiary, the first day on which the Company no
longer owns Voting Securities possessing at least 50%
of the Voting Power of such Subsidiary.
(ii) "Voting Power" means the combined voting power of the
then outstanding Voting Securities.
(jj) "Voting Securities" means, with respect to the Company
or any Subsidiary, any securities issued by the Company
or such Subsidiary, respectively, which generally
entitle the holder thereof to vote for the election of
directors of the Company.
3. Scope of the Plan.
(a) Number of Shares Available Under the Plan. The maximum number
of shares of Stock that may be made the subject of Awards granted under the
Plan is 9,600,000 plus the number of shares of Stock that are covered by
Substitute Options and Spin-off Options (or the number and kind of shares
of Stock or other securities to which such shares of Stock are adjusted
upon a Change in Capitalization pursuant to Article 18); provided, however,
that in the aggregate, not more than 200,000 shares of Stock may be made
the subject of Awards other than Options. The maximum number of shares of
Stock that may be the subject of Options (other than Substitute Options and
Spin-off Options) and Awards granted to any individual pursuant to the Plan
in any three (3) calendar year period may not exceed 750,000. The maximum
dollar amount of cash or the Fair Market Value of Stock that any individual
may receive in any calendar year in respect of performance units
denominated in dollars may not exceed $1,000,000. The Company shall reserve
for the purpose of the Plan, out of its authorized but unissued shares of
Stock or out of shares held in the Company's treasury, or partly out of
each, such number of shares as shall be determined by the Board. The Board
shall have the authority to cause the Company to purchase from time to time
shares of Stock to be held as treasury shares and used for or in connection
with Awards. The issuance of Substitute Options and Spin-off Options shall
not reduce the shares available for grants under the Plan or to a Grantee
in any calendar year.
(b) Reduction in the Available Shares in Connection with Award
Grants. Upon the grant of an Award, the number of shares of Stock available
under Article 3(a) for the granting of further Awards shall be reduced as
follows:
(i) Performance Units Denominated in Dollars. In
connection with the granting of each performance unit denominated
in dollars, the number of
B-6
shares of Stock available under Article 3(a) for the granting of
further Awards shall be reduced by the quotient of (x) the dollar
amount represented by the performance unit divided by (y) the
Fair Market Value of a share of Stock on the date immediately
preceding the Grant Date of the performance unit.
(ii) Other Awards. In connection with the granting of
each Award, other than a performance unit denominated in dollars,
the number of shares of Stock available under Article 3(a) for
the granting of further Awards shall be reduced by a number of
shares equal to the number of shares of Stock in respect of which
the Award is granted or denominated; provided, however, that if
any Award is exercised by tendering shares of Stock, either
actually or by attestation, to the Company as full or partial
payment of the exercise price, the maximum number of shares of
Stock available under Section 3(a) shall be increased by the
number of shares of Stock so tendered.
Notwithstanding the foregoing, where two or more Awards are granted
with respect to the same shares of Stock, such shares shall be taken into
account only once for purposes of this Article 3(b).
(c) Effect of the Expiration or Termination of Awards. If and to
the extent an Option or Award (including a Substitute Option or a Spin-off
Option) expires, terminates or is canceled, settled in cash (including the
settlement of tax withholding obligations using shares of Stock) or
forfeited for any reason without having been exercised in full (including,
without limitation, a cancellation of an Option pursuant to Article
4(c)(vi)), the shares of Stock associated with the expired, terminated,
canceled, settled or forfeited portion of the Award (to the extent the
number of shares available for the granting of Awards was reduced pursuant
to Article 3(b)) shall again become available for Awards under the Plan.
4. Administration.
(a) Committee Administration. The Plan shall be administered by
the Committee, which shall consist of not less than two "non-employee
directors" within the meaning of Rule 16b-3, and to the extent necessary
for any Award intended to qualify as Performance-Based Compensation to so
qualify, each member of the Committee shall be an "outside director" within
the meaning of Section 162(m) of the Internal Revenue Code. For purposes of
the preceding sentence, if one or more members of the Committee is not a
"non-employee director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code
but recuses himself or herself or abstains from voting with respect to a
particular action taken by the Committee, then the Committee, with respect
to that action, shall be deemed to consist only of the members of the
Committee who have not recused themselves or abstained from voting.
(b) Board Reservation and Delegation. Except to the extent
necessary for any Award intended to qualify as Performance-Based
Compensation to so qualify, the Board may, in
B-7
its discretion, reserve to itself or exercise any or all of the authority
and responsibility of the Committee hereunder and may also delegate to
another committee of the Board any or all of the authority and
responsibility of the Committee with respect to Awards to Grantees who are
not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of one or
more directors who may, but need not be, officers or employees of the
Company or of any of its Subsidiaries. To the extent that the Board has
reserved to itself, or exercised the authority and responsibility of the
Committee, or delegated the authority and responsibility of the Committee
to such other committee, all references to the Committee in the Plan shall
be to the Board or to such other committee.
(c) Committee Authority. The Committee shall have full and final
authority, in its discretion, but subject to the express provisions of the
Plan, as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted, and
(B) whether or not specific Awards shall be identified with other
specific Awards, and if so, whether they shall be exercisable
cumulatively with, or alternatively to, such other specific
Awards,
(iii) to issue Substitute Options and Spin-off Options,
(iv) to interpret the Plan and to make all
determinations necessary or advisable for the administration of
the Plan,
(v) to prescribe, amend, and rescind rules and
regulations relating to the Plan, including, without limitation,
rules with respect to the exercisability and nonforfeitability of
Awards upon the Termination of Employment of a Grantee,
(vi) to determine the terms and provisions of the Award
Agreements, which need not be identical and, with the consent of
the Grantee, to modify any such Award Agreement at any time,
(vii) to cancel, with the consent of the Grantee,
outstanding Awards,
(viii) except with respect to Nonqualified Stock
Options granted to nonemployee directors pursuant to Section
6(b)(ii)(A) hereof, to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions
applicable to, any Award,
(ix) to authorize any action of or make any
determination by the Company as the Committee shall deem
necessary or advisable for carrying out the purposes of the Plan,
and
(x) to impose such additional conditions, restrictions,
and limitations upon the grant, exercise or retention of Awards
as the Committee may, before or
B-8
concurrently with the grant thereof, deem appropriate, including,
without limitation, requiring simultaneous exercise of related
identified Awards, and limiting the percentage of Awards which
may from time to time be exercised by a Grantee.
Notwithstanding anything herein to the contrary, the exercise price of
outstanding Options may not be decreased (except pursuant to Section 19 of
the Plan) and Options may not be cancelled or forfeited and re-granted to
effect the same result. Notwithstanding anything herein to the contrary,
with respect to Grantees working outside the United States, the Committee
may determine the terms and provisions of the Award Agreements and make
such adjustments or modifications to Awards as are necessary and advisable
to fulfill the purposes of the Plan.
(d) Committee Determinations Final. The determination of the
Committee on all matters relating to the Plan or any Award Agreement shall
be conclusive and final. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Award.
5. Eligibility.
Awards may be granted to any employee of the Company or any of its
Subsidiaries, and Nonqualified Stock Options may be granted to nonemployee
directors of the Company pursuant to Article 6(b)(ii)(B). In selecting the
individuals to whom Awards may be granted, as well as in determining the
number of shares of Stock subject to, and the other terms and conditions
applicable to, each Award, the Committee shall take into consideration such
factors as it deems relevant in promoting the purposes of the Plan. In
addition, Nonqualified Stock Options will be automatically granted to
nonemployee directors of the Company, as set forth in Article 6(b)(ii)(A),
and Director's Shares will be automatically issued to nonemployee directors
of the Company pursuant to Article 6(g).
6. Conditions to Grants.
(a) General Conditions.
(i) The Grant Date of an Award shall be the date on
which the Committee grants the Award or such later date as
specified in advance by the Committee.
(ii) The term of each Award (subject to Article 6(c)
with respect to Incentive Stock Options) shall be a period
of not more than ten years from the Grant Date and shall be
subject to earlier termination as provided herein or in the
applicable Award Agreement; provided, however, that the
Committee may provide that an Option (other than an
Incentive Stock Option) may, upon the death of the Grantee,
be exercised for up to one year following the date of the
B-9
Grantee's death even if such period extends beyond ten years
from the date the Option is granted.
(iii) A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
(iv) The Committee may grant Awards with terms and
conditions which differ among the Grantees thereof. To the
extent not set forth in the Plan, the terms and conditions
of each Award shall be set forth in an Award Agreement.
(b) Grant of Options and Option Price. The Committee may, in
its discretion, and shall as provided in Article 6(b)(ii), grant Options as
follows:
(i) Employee Options. Options to acquire unrestricted
Stock or restricted Stock may be granted to any employee
eligible under Article 5 to receive Awards. No later than
the Grant Date of any Option, the Committee shall determine
the Option Price which shall not be less than 100% of the
Fair Market Value of the Stock on the Grant Date.
(ii) Nonemployee Director Options.
(A). Automatic Grants. Nonqualified Stock Options
with respect to 20,000 shares of unrestricted Stock
shall be granted to each nonemployee director of
the Company upon his or her initial election to the
Board and every three years thereafter on the
anniversary of such nonemployee director's initial
election to the Board as long as such nonemployee
director is then still serving on the Board.
(B). Discretionary Grants. Nonqualified Stock
Options to acquire unrestricted or restricted stock
may be granted to nonemployee directors of the
Company from time to time.
(C). Terms Applicable to all Nonemployee Director
Options. Each Nonqualified Stock Option granted to
a nonemployee director will be granted at an Option
Price equal to 100% of the Fair Market Value of the
Stock on the Grant Date, will become exercisable
with respect to one-third of the underlying shares
on each of the first, second and third
anniversaries of the Grant Date, and will have a
term of ten years. If a nonemployee director ceases
to serve as a director of the Company for any
reason, any Nonqualified Stock Option granted to
such nonemployee director shall be exercisable
during its remaining term, to the extent that such
Nonqualified Stock Option was exercisable on the
date such nonemployee director ceased to be a
director.
B-10
(c) Grant of Incentive Stock Options. At the time of the
grant of any Option, the Committee may designate that such Option shall be
an Incentive Stock Option. Any Option designated as an Incentive Stock
Option:
(i) shall have an Option Price of (A) not less than
100% of the Fair Market Value of the Stock on the Grant Date
or (B) in the case of a 10% Owner, not less than 110% of the
Fair Market Value of the Stock on the Grant Date;
(ii) shall have a term of not more than ten years (five
years, in the case of a 10% Owner) from the Grant Date, and
shall be subject to earlier termination as provided herein
or in the applicable Award Agreement;
(iii) shall, if, with respect to any grant, the
aggregate Fair Market Value of Stock (determined on the
Grant Date) of all Incentive Stock Options granted under the
Plan and "incentive stock options" (within the meaning of
Section 422 of the Internal Revenue Code) granted under any
other stock option plan of the Grantee's employer or any
parent or subsidiary thereof (in either case determined
without regard to this Article 6(c)) are exercisable for the
first time during any calendar year exceeds $100,000, be
treated as Nonqualified Stock Options. For purposes of the
foregoing sentence, Incentive Stock Options shall be treated
as Nonqualified Stock Options according to the order in
which they were granted such that the most recently granted
Incentive Stock Options are first treated as Nonqualified
Stock Options.
(iv) shall be granted within ten years from the earlier
of the date the Plan is adopted by the Board or the date the
Plan is approved by the stockholders of the Company; and
(v) shall require the Grantee to notify the Committee
of any disposition of any Stock issued pursuant to the
exercise of the Incentive Stock Option under the
circumstances described in Section 421(b) of the Internal
Revenue Code (relating to certain disqualifying
dispositions), within ten days of such disposition.
(d) Grant of Shares of Restricted Stock.
(i) The Committee may, in its discretion, grant shares
of restricted Stock to any employee eligible under Article 5
to receive Awards.
(ii) Before the grant of any shares of restricted
Stock, the Committee shall determine, in its discretion:
(A) whether the certificates for such shares shall
be delivered to the Grantee or held (together with a
stock power executed in blank by the Grantee) in escrow
by the Secretary of the Company until such shares
become nonforfeitable or are forfeited;
B-11
(B) the per share purchase price of such shares,
which may be zero; provided, however, that the per
share purchase price of all such shares (other than
treasury shares) shall not be less than the Minimum
Consideration for each such share;
(C) the restrictions applicable to such grant and
the time or times upon which any applicable
restrictions on the restricted Stock shall lapse;
provided, however, that except in the case of shares of
restricted Stock issued in full or partial settlement
of another Award or other earned compensation, or in
the event of the Grantee's termination of employment,
as determined by the Committee and set forth in an
Award Agreement, such restrictions shall not lapse
prior to the third anniversary of the Grant Date of the
restricted Stock; and
(D) whether the payment to the Grantee of
dividends, or a specified portion thereof, declared or
paid on such shares by the Company shall be deferred
until the lapsing of the restrictions imposed upon such
shares and shall be held by the Company for the account
of the Grantee, whether such dividends shall be
reinvested in additional shares of restricted Stock (to
the extent shares are available under Article 3)
subject to the same restrictions and other terms as
apply to the shares with respect to which such
dividends are issued or otherwise reinvested in Stock
or held in escrow, whether interest will be credited to
the account of the Grantee with respect to any
dividends which are not reinvested in restricted or
unrestricted Stock, and whether any Stock dividends
issued with respect to the restricted Stock to be
granted shall be treated as additional shares of
restricted Stock.
(iii) Payment of the purchase price (if greater than
zero) for shares of restricted Stock shall be made in full
by the Grantee before the delivery of such shares and, in
any event, no later than ten days after the Grant Date for
such shares. Such payment may be made, as determined by the
Committee in its discretion, in any one or any combination
of the following:
(A) cash; or
(B) with the prior approval of the Committee,
shares of restricted or unrestricted Stock owned by the
Grantee prior to such grant and valued at its Fair
Market Value on the business day immediately preceding
the date of payment;
provided, however, that, in the case of payment in shares of
restricted or unrestricted Stock, if the purchase price for
restricted Stock ("New Restricted Stock") is paid with
shares of restricted Stock ("Old Restricted Stock"), the
restrictions applicable to the New Restricted Stock shall be
the same as if the Grantee had paid for the New Restricted
Stock in cash unless, in the judgment of
B-12
the Committee, the Old Restricted Stock was subject to a
greater risk of forfeiture, in which case a number of shares
of New Restricted Stock equal to the number of shares of Old
Restricted Stock tendered in payment for New Restricted
Stock shall be subject to the same restrictions as the Old
Restricted Stock, determined immediately before such
payment.
(iv) The Committee may, but need not, provide that all
or any portion of a Grantee's Award of restricted Stock
shall be forfeited:
(A) except as otherwise specified in the Award
Agreement, upon the Grantee's Termination of Employment
within a specified time period after the Grant Date; or
(B) if the Company or the Grantee does not achieve
specified performance goals within a specified time
period after the Grant Date and before the Grantee's
Termination of Employment; or
(C) upon failure to satisfy such other
restrictions as the Committee may specify in the Award
Agreement.
(v) If a share of restricted Stock is forfeited, then:
(A) the Grantee shall be deemed to have resold
such share of restricted Stock to the Company at the
lesser of (1) the purchase price paid by the Grantee
(such purchase price shall be deemed to be zero dollars
($0) if no purchase price was paid) or (2) the Fair
Market Value of a share of Stock on the date of such
forfeiture;
(B) the Company shall pay to the Grantee the
amount determined under clause (A) of this sentence, if
not zero, as soon as is administratively practicable,
but in any case within 90 days after forfeiture; and
(C) such share of restricted Stock shall cease to
be outstanding, and shall no longer confer on the
Grantee thereof any rights as a stockholder of the
Company, from and after the date of the Company's
tender of the payment specified in clause (B) of this
sentence, whether or not such tender is accepted by the
Grantee, or the date the restricted Stock is forfeited
if no purchase price was paid for the restricted Stock.
(vi) Any share of restricted Stock shall bear an
appropriate legend specifying that such share is
non-transferable and subject to the restrictions set forth
in the Plan and the Award Agreement. If any shares of
restricted Stock become nonforfeitable, the Company shall
cause certificates for such shares to be issued or reissued
without such legend and delivered to the Grantee or, at the
B-13
request of the Grantee, shall cause such shares to be
credited to a brokerage account specified by the Grantee.
(e) Grant of Performance Units and Performance Shares.
(i) The Committee may, in its discretion, grant
performance units or performance shares to any employee
eligible under Article 5 to receive Awards.
(ii) Before the grant of any performance unit or
performance share, the Committee shall:
(A) designate a period, of not less than one year
nor more than five years, for the measurement of the
extent to which performance goals are attained (the
"Measuring Period");
(B) determine performance goals applicable to such
grant; provided, however, that the performance goals
with respect to a Measuring Period shall be established
in writing by the Committee by the earlier of (x) the
date on which a quarter of the Measuring Period has
elapsed or (y) the date which is ninety (90) days after
the commencement of the Measuring Period, and in any
event while the performance relating to the performance
goals remain substantially uncertain; and
(C) assign a "Performance Percentage" to each
level of attainment of performance goals during the
Measuring Period, with the percentage applicable to
minimum attainment being zero percent (0%) and the
percentage applicable to optimum attainment to be
determined by the Committee from time to time.
(iii) The performance goals applicable to performance
units or performance shares shall, in the discretion of the
Committee, be based on stock price, earnings per share,
operating income, return on equity or assets, cash flow,
EBITDA or any combination of the foregoing. Such performance
goals may be absolute or relative (to prior performance or
to the performance of one or more other entities or external
indices) and may be expressed in terms of a progression
within a specified range. At the time of the granting of
performance units or performance shares, or at any time
thereafter, in either case to the extent permitted under
Section 162(m) of the Internal Revenue Code and the
regulations thereunder without adversely affecting the
treatment of the performance unit or performance share as
Performance-Based Compensation, the Committee may provide
for the manner in which performance will be measured against
the performance goals (or may adjust the performance goals)
to reflect the impact of specified corporate transactions,
special charges, foreign currency effects, accounting or tax
law changes and other extraordinary or nonrecurring events.
B-14
(iv) Prior to the vesting, payment, settlement or
lapsing of any restrictions with respect to any performance
unit or performance share that is intended to constitute
Performance-Based Compensation made to a Grantee who is
subject to Section 162(m) of the Internal Revenue Code, the
Committee shall certify in writing that the applicable
performance goals have been satisfied.
(v) Unless otherwise expressly stated in the relevant
Award Agreement, each performance unit and performance share
granted under the Plan is intended to be Performance-Based
Compensation and the Committee shall interpret and
administer the applicable provisions of the Plan in a manner
consistent therewith. Any provisions inconsistent with such
treatment shall be inoperative and shall not adversely
affect the treatment of performance units or performance
shares granted hereunder as Performance-Based Compensation.
The Committee shall not be entitled to exercise any
discretion otherwise authorized hereunder with respect to
such performance unit or performance share if the ability to
exercise such discretion or the exercise of such discretion
itself would cause the compensation attributable to such
performance unit or performance share to fail to qualify as
Performance-Based Compensation.
(f) Grant of Phantom Stock. The Committee may, in its
discretion, grant shares of phantom stock to any employee who is eligible
under Article 5 to receive Awards. Such phantom stock shall be subject to
the terms and conditions established by the Committee and set forth in the
applicable Award Agreement.
(g) Grant of Director's Shares. There shall be granted
Director's Shares with respect to 1,000 shares of Stock to each nonemployee
director of the Company upon his or her initial election to the Board.
Director's Shares shall be fully vested and transferable upon issuance.
(h) Tandem Awards. The Committee may grant and identify any
Award with any other Award granted under the Plan ("Tandem Award"), other
than a Substitute Option or a Spin-off Option, on terms and conditions
determined by the Committee.
7. Non-transferability.
Unless set forth in the applicable Award Agreement with respect to
Awards other than Incentive Stock Options, no Award (other than an Award of
restricted Stock) granted hereunder shall by its terms be assignable or
transferable except by will or the laws of descent and distribution or, in
the case of an Option other than an Incentive Stock Option, pursuant to a
domestic relations order (within the meaning of Rule 16a-12 promulgated
under the Exchange Act). An Option may be exercised during the lifetime of
a Grantee only by the Grantee or his or her guardian or legal
representatives or, except as would cause an Incentive Stock Option to lose
its status as such, by a bankruptcy trustee. Notwithstanding the foregoing,
the Committee may set forth in the Award Agreement evidencing an Award
(other than an Incentive Stock Option) at
B-15
the time of grant or thereafter, that the Award may be transferred to
members of the Grantee's immediate family, to trusts solely for the benefit
of such immediate family members and to partnerships in which such family
members and/or trusts are the only partners, and for purposes of this Plan,
a transferee of an Award shall be deemed to be the Grantee. For this
purpose, immediate family means the Grantee's spouse, parents, children,
stepchildren and grandchildren and the spouses of such parents, children,
stepchildren and grandchildren. The terms of an Award shall be final,
binding and conclusive upon the beneficiaries, executors, administrators,
heirs and successors of the Grantee. Each share of restricted Stock shall
be non-transferable until such share becomes nonforfeitable.
8. Exercise.
(a) Exercise of Options. Subject to Articles 4(c)(vii), 12 and 13 and
such terms and conditions as the Committee may impose, each Option shall be
exercisable in one or more installments commencing not earlier than the
first anniversary of the Grant Date of such Option; provided, however, that
all Options held by each Grantee shall become fully (100%) vested and
exercisable upon the occurrence of a Change of Control regardless of
whether the acceleration of the exercisability of such Options would cause
such Options to lose their eligibility for treatment as Incentive Stock
Options. Notwithstanding the foregoing, Options may not be exercised by a
Grantee for such period of time following a hardship distribution to the
Grantee, to the extent such exercise is prohibited under the applicable
provisions of the Internal Revenue Code and any authority thereunder. Each
Option shall be exercised by delivery to the Company of written notice of
intent to purchase a specific number of shares of Stock subject to the
Option. The Option Price of any shares of Stock as to which an Option shall
be exercised shall be paid in full at the time of the exercise. Payment may
be made, as determined by the Committee in its discretion with respect to
Options granted to eligible employees and in all cases with respect to
Options granted to nonemployee directors pursuant to Article 6(b)(ii), in
any one or any combination of the following:
(i) cash,
(ii) shares of unrestricted Stock held by the Grantee
for at least six months (or such lesser period as may be
permitted by the Committee) prior to the exercise of the
Option, and valued at its Fair Market Value on the last
business day immediately preceding the date of exercise, or
(iii) through simultaneous sale through a broker of
shares of unrestricted Stock acquired on exercise, as
permitted under Regulation T of the Federal Reserve Board.
Shares of unrestricted Stock acquired by a Grantee on exercise of an
Option shall be delivered to the Grantee or, at the request of the Grantee,
shall be credited directly to a brokerage account specified by the Grantee.
B-16
(b) Exercise of Performance Units.
(i) Subject to Articles 4(c)(vii), 12 and 13 and such terms
and conditions as the Committee may impose, and unless otherwise
provided in the applicable Award Agreement, if, with respect to
any performance unit, the Committee has determined in accordance
with Article 6(f)(iv) that the minimum performance goals have
been achieved during the applicable Measuring Period, then such
performance unit shall be deemed exercised on the date on which
it first becomes exercisable.
(ii) The benefit for each performance unit exercised shall
be an amount equal to the product of
(A) the Unit Value (as defined below), multiplied by
(B) the Performance Percentage attained during the
Measuring Period for such performance unit.
(iii) The Unit Value shall be, as specified by the
Committee,
(A) a dollar amount,
(B) an amount equal to the Fair Market Value of a share
of Stock on the Grant Date,
(C) an amount equal to the Fair Market Value of a share
of Stock on the exercise date of the performance unit, plus,
if so provided in the Award Agreement, an amount ("Dividend
Equivalent Amount") equal to the Fair Market Value of the
number of shares of Stock that would have been purchased if
each dividend paid on a share of Stock on or after the Grant
Date and on or before the exercise date were invested in
shares of Stock at a purchase price equal to its Fair Market
Value on the respective dividend payment date, or
(D) an amount equal to the Fair Market Value of a share
of Stock on the exercise date of the performance unit (plus,
if so specified in the Award Agreement, a Dividend
Equivalent Amount), reduced by the Fair Market Value of a
share of Stock on the Grant Date of the performance unit.
(iv) The benefit upon the exercise of a performance unit
shall be payable as soon as is administratively practicable (but
in any event within 90 days) after the later of (A) the date the
Grantee is deemed to exercise such performance unit, or (B) the
date (or dates in the event of installment payments) as provided
in the applicable Award Agreement. Such benefit shall be payable
in cash, except that the Committee, with respect to any
particular exercise, may, in
B-17
its discretion, pay benefits wholly or partly in Stock delivered
to the Grantee or credited to a brokerage account specified by
the Grantee. The number of shares of Stock payable in lieu of
cash shall be determined by valuing the Stock at its Fair Market
Value on the business day next preceding the date such benefit is
to be paid.
(c) Payment of Performance Shares. Subject to Articles 4(c)(vii),
12 and 13 and such terms and conditions as the Committee may impose, and
unless otherwise provided in the applicable Award Agreement, if the
Committee has determined in accordance with Article 6(f)(iv) that the
minimum performance goals with respect to an Award of performance shares
have been achieved during the applicable Measuring Period, then the Company
shall pay to the Grantee of such Award (or, at the request of the Grantee,
deliver to a brokerage account specified by the Grantee) shares of Stock
equal in number to the product of the number of performance shares
specified in the applicable Award Agreement multiplied by the Performance
Percentage achieved during such Measuring Period, except to the extent that
the Committee in its discretion determines that cash be paid in lieu of
some or all of such shares of Stock. The amount of cash payable in lieu of
a share of Stock shall be determined by valuing such share at its Fair
Market Value on the business day next preceding the date such cash is to be
paid. Payments pursuant to this Article 8(d) shall be made as soon as
administratively practicable (but in any event within 90 days) after the
end of the applicable Measuring Period. Any performance shares with respect
to which the performance goals have not been achieved by the end of the
applicable Measuring Period shall expire.
(d) Payment of Phantom Stock Awards. Upon the vesting of a
phantom stock Award, the Grantee shall be entitled to receive a cash
payment in respect of each share of phantom stock which shall be equal to
the Fair Market Value of a share of Stock as of the date the phantom stock
Award was granted, or such other date as determined by the Committee at the
time the phantom stock Award was granted. The Committee may, at the time a
phantom stock Award is granted, provide a limitation on the amount payable
in respect of each share of phantom stock. In lieu of a cash payment, the
Committee may settle phantom stock Awards with shares of Stock having a
Fair Market Value equal to the cash payment to which the Grantee has become
entitled.
(e) Exercise, Cancellation, Expiration or Forfeiture of Tandem
Awards. Upon the exercise, cancellation, expiration, forfeiture or payment
in respect of any Award which is identified with any Tandem Award pursuant
to Article 6(i), the Tandem Award shall automatically terminate to the
extent of the number of shares in respect of which the Award is so
exercised, cancelled, expired, forfeited or paid, unless otherwise provided
by the Committee at the time of grant of the Tandem Award or thereafter.
9. Spin-off and Substitute Options.
Spin-off Options and Substitute Options shall be issued under this
Plan pursuant to and in accordance with the terms of the Benefits
Agreement. Spin-off Options and Substitute Options
B-18
shall be governed by the terms of the Plan to the extent that the terms of
the Plan do not conflict with the terms of the agreements evidencing the
Spin-off Options and Substitute Options.
10. Effect of Certain Transactions.
With respect to any Award which relates to Stock, in the event of (i)
the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Plan and the Awards
issued hereunder shall continue in effect in accordance with their
respective terms, except that following a Transaction either (i) each
outstanding Award shall be treated as provided for in the agreement entered
into in connection with the Transaction (the "Transaction Agreement") or
(ii) if not so provided in the Transaction Agreement, each Grantee shall be
entitled to receive in respect of each share of Stock subject to any
outstanding Awards, upon the vesting, payment or exercise of the Award (as
the case may be), the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share of Stock was
entitled to receive in the Transaction in respect of a share of Stock.
11. Mandatory Withholding Taxes.
The Company shall have the right to deduct from any distribution of
cash to any Grantee an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any Award. If a Grantee is to
experience a taxable event in connection with (i) the receipt of an Award,
(ii) the receipt of shares pursuant to an Option exercise, (iii) the
vesting or payment of another type of Award or (iv) any other event in
connection with the Plan (a "Taxable Event"), the Grantee shall pay the
Withholding Taxes to the Company prior to the issuance, or release from
escrow, of such Award or shares or vesting or payment of such Award or
occurrence of such event, as applicable. Payment of the applicable
Withholding Taxes may be made, as determined by the Committee in its
discretion, in any one or any combination of (i) cash, (ii) shares of
restricted or unrestricted Stock owned by the Grantee prior to the Taxable
Event and valued at its Fair Market Value on the business day immediately
preceding the date of exercise, or (iii) by making a Tax Election (as
described below). For purposes of this Article 11, the Committee may
provide in the Award Agreement at the time of grant, or at any time
thereafter, that the Grantee, in satisfaction of the obligation to pay
Withholding Taxes to the Company, may elect to have withheld a portion of
the shares then issuable to him or her having an aggregate Fair Market
Value equal to the Withholding Taxes.
12. Termination of Employment.
The Award Agreement pertaining to each Award shall set forth the terms
and conditions applicable to such Award upon a Termination of Employment of
the Grantee by the Company, a Subsidiary or an operating division or unit,
which, except for Options granted to nonemployee directors pursuant to
Article 6(b)(ii), shall be as the Committee may, in its discretion,
determine at the time the Award is granted or thereafter.
B-19
13. Securities Law Matters.
(a) If the Committee deems it necessary to comply with the
Securities Act of 1933, the Committee may require a written investment
intent representation by the Grantee and may require that a restrictive
legend be affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision
of (i) federal or state securities law, (ii) the listing requirements of
any national securities exchange on which are listed any of the Company's
equity securities or (iii) any other law or regulation, then the Committee
may postpone any such exercise, nonforfeitability or delivery, as the case
may be, but the Company shall use its best efforts, if applicable, to cause
such exercise, nonforfeitability or delivery to comply with all such
provisions at the earliest practicable date.
(c) Notwithstanding any provision of the Plan or any Award
Agreement to the contrary, no shares of Stock shall be issued to any
Grantee in respect of any Award prior to the time a registration statement
under the Securities Act of 1933 is effective with respect to such shares.
14. No Funding Required.
Benefits payable under the Plan to any person shall be paid directly
by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, benefits under the Plan.
15. No Employment Rights.
Neither the establishment of the Plan, nor the granting of any Award
shall be construed to (a) give any Grantee the right to remain employed by
the Company or any of its Subsidiaries or to any benefits not specifically
provided by the Plan or (b) in any manner modify the right of the Company
or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.
16. Rights as a Stockholder.
A Grantee shall not, by reason of any Award (other than restricted
Stock), have any right as a stockholder of the Company with respect to the
shares of Stock which may be deliverable upon exercise or payment of such
Award until such shares have been delivered to him. Shares of restricted
Stock held by a Grantee or held in escrow by the Secretary of the Company
shall confer on the Grantee all rights of a stockholder of the Company,
except as otherwise provided in the Plan.
B-20
17. Nature of Payments.
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries or (b) any agreement between the Company
or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
18. Non-Uniform Determinations.
Neither the Committee's nor the Board's determinations under the Plan
need be uniform and may be made by the Committee or the Board selectively
among persons who receive, or are eligible to receive, Awards (whether or
not such persons are similarly situated). Without limiting the generality
of the foregoing, the Committee shall be entitled, among other things, to
make non-uniform and selective determinations, to enter into non-uniform
and selective Award Agreements as to (a) the identity of the Grantees, (b)
the terms and provisions of Awards, and (c) the treatment of Terminations
of Employment.
19. Adjustments.
In the event of Change in Capitalization, the Committee shall, in its
sole discretion, make equitable adjustment of
(a) the aggregate number and class of shares of Stock or
other stock or securities available under Article 3,
(b) the number and class of shares of Stock or other stock
or securities covered by an Award and to be covered by
Options granted to nonemployee directors pursuant to
Article 6(b)(ii),
(c) the Option Price applicable to outstanding Options,
(d) the terms of performance unit and performance share
grants (to the extent permitted under Section 162(m))
of the Internal Revenue Code and the regulations
thereunder without adversely affecting the treatment of
the performance unit or performance share as
Performance-Based Compensation,
(e) the Fair Market Value of Stock to be used to determine
the amount of the benefit payable upon exercise of
performance units, performance shares or phantom stock,
(f) the maximum number and class of shares of Stock or
other securities with respect to which Awards may be
granted to any individual in any three calendar year
period, and
B-21
(g) the number and class of shares of Stock or other
securities with respect to which Director Shares are to
be granted under Article 6(h).
20. Amendment of the Plan.
The Board may from time to time in its discretion amend or modify the
Plan without the approval of the stockholders of the Company, except as
such stockholder approval may be required (a) to retain Incentive Stock
Option treatment under Section 422 of the Internal Revenue Code, (b) to
permit transactions in Stock pursuant to the Plan to be exempt from
potential liability under Section 16(b) of the 1934 Act or (c) under the
listing requirements of any securities exchange on which any of the
Company's equity securities are listed.
21. Termination of the Plan.
The Plan shall terminate on the tenth (10th) anniversary of the
Effective Date or at such earlier time as the Board may determine. Any
termination, whether in whole or in part, shall not affect any Award then
outstanding under the Plan.
22. No Illegal Transactions.
The Plan and all Awards granted pursuant to it are subject to all laws
and regulations of any governmental authority which may be applicable
thereto; and notwithstanding any provision of the Plan or any Award,
Grantees shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any Stock or pay
any benefits to a Grantee if such exercise, delivery, receipt or payment of
benefits would constitute a violation by the Grantee or the Company of any
provision of any such law or regulation or applicable court order.
23. Governing Law.
Except where preempted by federal law, the law of the State of
Delaware shall be controlling in all matters relating to the Plan, without
giving effect to the conflicts of law principles thereof.
24. Severability.
If all or any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not
declared to be unlawful or invalid. Any Article or part of an Article so
declared to be unlawful or invalid shall, if possible, be construed in a
manner which will give effect to the terms of such Article or part of an
Article to the fullest extent possible while remaining lawful and valid.
B-22
25. Translations.
Any inconsistency between the terms of the Plan or any Award Agreement
and the corresponding translation thereof into a language other than
English shall be resolved by reference, solely, to the English language
document.
B-23
COMMSCOPE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2002
The undersigned hereby appoints Frank B. Wyatt, II and Jearld L.
Leonhardt and each or either of them his/her attorneys and agents, with
full power of substitution to vote as Proxy for the undersigned as herein
stated at the Annual Meeting of Stockholders of CommScope, Inc. (the
"Company") to be held at the JP MorganChase Bank, 270 Park Avenue, 11th
Floor, New York, New York 10017 on Friday, May 3, 2002 at 1:30 p.m., local
time, and at any adjournment thereof, according to the number of votes the
undersigned would be entitled to vote if personally present, on the
proposals set forth on the reverse hereof and in accordance with their
discretion on any other matters that may properly come before the meeting
or any adjournments thereof. The undersigned hereby acknowledges receipt of
the Notice and Proxy Statement, dated March 27, 2002. If this proxy is
returned without direction being given, this proxy will be voted "FOR"
Proposals One, Two, and Three.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
The Board of Directors recommends that stockholders vote "FOR" Proposals
One, Two, and Three.
PROPOSAL ONE: To elect two Class II directors for terms ending at the 2005
Annual Meeting of Stockholders.
FOR all nominees listed below /___ / WITHHOLD AUTHORITY /___ /
(except as marked to the contrary) to vote for all nominees
listed below
Nominees: Edward D. Breen and James N. Whitson
INSTRUCTION: To withhold your vote for any individual nominee, strike a
line through the nominee's name.
PROPOSAL TWO: To approve an amendment and restatement of the Amended and
Restated CommScope, Inc. 1997 Long-Term Incentive Plan to,
among other things, increase the shares reserved for
issuance thereunder by an additional 3 million shares.
FOR /___ / AGAINST /___ / ABSTAIN /___ /
PROPOSAL THREE: To ratify the appointment by the Board of Directors of the
Company of Deloitte & Touche LLP as independent auditor
for the Company for the 2002 fiscal year.
FOR /___ / AGAINST /___ / ABSTAIN /___ /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If
acting as attorney, executor, administrator,
trustee, guardian, etc., you should so
indicate when signing. If a corporation,
please sign the full corporate name by
President or other duly authorized officer.
If a partnership, please sign in full
partnership name by authorized person. If
shares are held jointly, both parties must
sign and date.
Signature(s): _________________________ Date: _________________________
Signature(s): _________________________ Date: _________________________
2
COMMSCOPE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2002
The undersigned hereby authorizes and directs Vanguard Fiduciary Trust
Company, as trustee (the "Trustee") of the CommScope, Inc. of North
Carolina Employees Retirement Savings Plan, to vote as Proxy for the
undersigned as herein stated at the Annual Meeting of Stockholders of
CommScope, Inc. (the "Company") to be held at the JP MorganChase Bank, 270
Park Avenue, 11th Floor, New York, New York 10017, on Friday, May 3, 2002
at 1:30 p.m., local time, and at any adjournment thereof, all shares of
Common Stock of CommScope, Inc. allocated to the account of the undersigned
under such Plan, on the proposals set forth on the reverse hereof and in
accordance with the Trustee's discretion on any other matters that may
properly come before the meeting or any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice and Proxy Statement,
dated March 27, 2002.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED BY THE TRUSTEE IN ITS SOLE
DISCRETION IN THE BEST INTEREST OF THE PLAN PARTICIPANTS AND BENEFICIARIES.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
The Board of Directors recommends that stockholders vote "FOR" Proposals
One, Two, and Three.
PROPOSAL ONE: To elect two Class II directors for terms ending at the
2005 Annual Meeting of Stockholders.
FOR all nominees listed below /___ / WITHHOLD AUTHORITY /___ /
(except as marked to the contrary) to vote for all nominees
listed below
Nominees: Edward D. Breen and James N. Whitson
INSTRUCTION: To withhold your vote for any individual nominee, strike a
line through the nominee's name.
PROPOSAL TWO: To approve an amendment and restatement of the Amended and
Restated CommScope, Inc. 1997 Long-Term Incentive Plan to,
among other things, increase the shares reserved for
issuance thereunder by an additional 3 million shares.
FOR /___ / AGAINST /___ / ABSTAIN /___ /
PROPOSAL THREE: To ratify the appointment by the Board of Directors of the
Company of Deloitte & Touche LLP as independent auditor
for the Company for the 2002 fiscal year.
FOR /___ / AGAINST /___ / ABSTAIN /___ /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If
acting as attorney, executor, administrator,
trustee, guardian, etc., you should so
indicate when signing. If a corporation,
please sign the full corporate name by
President or other duly authorized officer.
If a partnership, please sign in full
partnership name by authorized person. If
shares are held jointly, both parties must
sign and date.
Signature(s): _________________________ Date: _________________________
Signature(s): _________________________ Date: _________________________
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