ARRIS GROUP, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No.
)
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
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o Preliminary
Proxy Statement |
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o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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Arris Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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(1) |
Title of each class of securities to which
transaction applies:
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(2) |
Aggregate number of securities to which
transaction applies:
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(3) |
Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) |
Proposed maximum aggregate value of transaction:
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o |
Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1) |
Amount Previously Paid:
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(2) |
Form, Schedule or Registration Statement No.:
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ARRIS GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 24, 2006
To the Stockholders of ARRIS Group, Inc.:
The Annual Meeting of Stockholders of ARRIS Group, Inc. will be
held at the Companys corporate headquarters, located at
3871 Lakefield Drive, Suwanee, Georgia, on Wednesday,
May 24, 2006 at 10:00 a.m. local time, for the
purposes of:
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(a) |
electing seven directors, |
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(b) |
approving performance goals with respect to the Companys
(i) 2001 Stock Incentive Plan, (ii) 2004 Stock
Incentive Plan, and (iii) Management Incentive Plan, |
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(c) |
approving the retention of Ernst & Young LLP as the
independent registered public accounting firm for ARRIS Group,
Inc. for 2006, and |
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(d) |
transacting such other business as may be brought before the
meeting or any adjournment(s) thereof. |
It is important that your shares be represented at the meeting.
Whether or not you plan to attend in person, you are requested
to vote, sign, date, and promptly return the enclosed proxy in
the envelope provided.
The Board of Directors has fixed the close of business on
April 7, 2006, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment(s) thereof. A complete list of the
stockholders entitled to vote at the meeting will be open for
examination at the Companys corporate headquarters by any
stockholder for any purpose germane to the meeting during
ordinary business hours for ten days prior to the meeting and at
the meeting.
A copy of ARRIS Group, Inc.s Annual Report to Stockholders
for the fiscal year ended December 31, 2005, is enclosed.
Additional copies of this report may be obtained without charge
by writing the Secretary of ARRIS Group, Inc., 3871 Lakefield
Drive, Suwanee, Georgia 30024.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Lawrence A. Margolis, |
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Secretary |
Suwanee, Georgia
April 17, 2006
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OF ARRIS GROUP, INC.
To Be Held May 24, 2006
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of ARRIS
Group, Inc., a Delaware corporation. The Companys
corporate headquarters is located at 3871 Lakefield Drive,
Suwanee, Georgia 30024 (telephone 770-622-8400). This proxy
statement and form of proxy are first being mailed to
stockholders on or about April 21, 2006. Proxies solicited
by the Board of Directors of the Company are to be voted at the
Annual Meeting of Stockholders of the Company to be held on
May 24, 2006 at 10:00 a.m. local time at the
Companys corporate headquarters, 3871 Lakefield Drive,
Suwanee, Georgia and any adjournment(s) thereof.
This solicitation is being made by mail, although directors,
officers and regular employees of the Company may solicit
proxies from stockholders personally or by telephone or letter.
The costs of this solicitation will be borne by the Company. The
Company may request brokerage houses, nominees or fiduciaries
and other custodians to forward proxy materials to their
customers and will reimburse them for their reasonable expenses
in so doing. In addition, the Company has retained
Morrow & Co., Inc. to assist in the solicitation for a
fee of $6,000 plus expenses.
VOTING
Shares of Common Stock of the Company represented by proxies in
the accompanying form, which are properly executed and returned
to the Company (and which are not effectively revoked), will be
voted at the meeting in accordance with the stockholders
instructions contained therein. In the absence of contrary
instructions, shares represented by such proxies will be voted
IN FAVOR OF the election as directors of the nominees
listed herein, IN FAVOR OFapproving the performance goals
under the Companys 2001 Stock Incentive Plan, IN FAVOR
OF approving the performance goals under the Companys
2004 Stock Incentive Plan, IN FAVOR OF approving the
performance goals under the Companys Management Incentive
Plan, IN FAVOR OF approving the retention of
Ernst & Young LLP as the independent registered public
accounting firm for the Company for 2006, and in the discretion
of the appointed proxies, upon such other business as may
properly be brought before the meeting. The performance goals
for each plan will be voted upon separately.
Each stockholder has the power to revoke his or her proxy at any
time before it is voted by (1) delivering to the Company,
prior to or at the meeting, written notice of revocation or a
later dated proxy or (2) attending the meeting and voting
his or her shares in person.
The Board of Directors has fixed the close of business on
April 7, 2006, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment(s) thereof. As of that date,
106,689,653 shares of Common Stock were outstanding. Each
holder of Common Stock is entitled to one vote per share.
A quorum, which is a majority of the outstanding shares of
Common Stock as of the record date, must be present in order to
hold the meeting. Your shares will be counted as being present
at the meeting if you appear in person at the meeting or if you
submit a properly executed proxy.
In the absence of controlling precedent to the contrary, the
Company intends to treat broker non-votes in the following
manner. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have the
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker
non-votes are not deemed to be entitled to vote for
purposes of determining whether stockholder approval of that
matter has been obtained. As a result, broker
non-votes are not included in the tabulation of the
voting results on the election of directors or issues requiring
the approval of a majority of the shares of Common Stock present
or
1
represented by proxy and entitled to vote. Proxies which contain
a broker non-vote are counted towards a quorum and voted on the
matters indicated.
If a quorum is present, the votes required to approve the
various matters presented to stockholders at the meeting shall
be as follows:
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Election of Directors Election requires a
plurality of the votes of the shares represented at the meeting.
Abstentions and broker non-votes will not be counted as votes
cast and will have no effect on the result of the vote, although
they will count toward the presence of a quorum. |
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Approval of performance goals for the Companys 2001
Stock Incentive Plan, 2004 Stock Incentive Plan and Management
Incentive Plan Approval of the performance goals
for each of these plans requires the affirmative vote of holders
of a majority of the shares present or represented by proxy and
entitled to vote at the meeting. Abstentions and broker
non-votes will have no effect on the outcome of this proposal,
although they will count toward the presence of a quorum. |
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Approval of Retention of Ernst & Young LLP as the
Independent Registered Public Accounting Firm
Approval of the retention of Ernst & Young LLP as the
independent registered public accounting firm for the Company
for 2006 requires the affirmative vote of holders of a majority
of the shares present or represented by proxy and entitled to
vote at the meeting. Abstentions and broker non-votes will have
no effect on the outcome of this proposal, although they will
count toward the presence of a quorum. |
ELECTION OF DIRECTORS
In the absence of contrary instructions, the proxies received
will be voted for the election as directors of the nominees
listed below, all of whom presently serve on the Board of
Directors, to hold office until the next annual meeting of
stockholders or until their successors are elected and
qualified. Although the Board of Directors does not contemplate
that any nominee will decline or be unable to serve as director,
in either such event the proxies will be voted for another
person selected by the Board of Directors, unless the Board acts
to reduce the size of the Board of Directors in accordance with
the provisions of ARRIS by-laws. The current number of
Directors has been set by the Board at seven. Upon his
re-election at this years Annual Meeting,
Mr. Stanzione will serve as Chairman of the Board.
NOMINEES TO SERVE FOR A ONE-YEAR TERM EXPIRING IN 2007
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Name: |
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Alex B. Best |
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Age: |
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65 |
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Director since: |
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2003 |
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ARRIS Board Committee: |
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Compensation Committee and Nominating Committee |
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Principal occupation and recent business experience: |
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Prior to his retirement in 2000, Mr. Best was the Executive
Vice President of Cox Communications, Inc. From 1986 through
1999, he served as the Vice President of Engineering of Cox.
Since 2000, Mr. Best has continued to consult for Cox on a
part- time basis. From 1966 through 1986, Mr. Best worked
for Scientific Atlanta and was involved in nearly every aspect
of its cable television product development and business
applications. Mr. Best served as Chairman of the National
Cable Television Associations Engineering Advisory
Committee from 1995 until 2000. |
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Other directorships: |
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Concurrent Computer Corporation |
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2
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Name: |
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Harry L. Bosco |
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Age: |
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60 |
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Director since: |
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2002 |
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ARRIS Board Committee: |
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Audit Committee and Nominating Committee |
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Principal occupation and recent business experience: |
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Since 2000, Mr. Bosco has served as the Chief Executive
Officer, President and a Director of OpNext, Inc., an optical
component company privately owned by Hitachi Ltd. and Clarity
Partners. From 1965 to 2000, Mr. Bosco held numerous senior
management positions within Lucent Technologies, formerly Bell
Labs. |
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Name: |
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John Anderson Craig |
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Age: |
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63 |
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Director since |
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1998 |
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ARRIS Board Committee: |
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Audit Committee and Compensation Committee |
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Principal occupation and recent business experience: |
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Mr. Craig is a business consultant. From 1999 through 2000,
Mr. Craig was Chief Marketing Officer of Nortel Networks,
Inc. From 1981 to 1999, he held numerous senior management
positions within Northern Telecom Inc., now known as Nortel
Networks Inc. |
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Other directorships: |
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Bell Canada International and CAE, Inc. |
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Name: |
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Matthew B. Kearney |
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Age: |
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66 |
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Director since: |
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2003 |
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ARRIS Board Committee: |
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Audit Committee |
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Principal occupation and recent business experience: |
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Prior to his retirement in 1997, Mr. Kearney was the Chief
Financial Officer of Griffin Gaming & Entertainment,
Inc. (formerly Resorts International, Inc.). Mr. Kearney
also served as President of Griffin Gaming &
Entertainment, Inc. from 1993 through 1995. Prior to joining
Resorts International, Inc., Mr. Kearney worked in public
accounting for Price Waterhouse & Co. Mr. Kearney
is a CPA (inactive) in New York and Florida. |
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Name: |
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William H. Lambert |
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Age: |
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69 |
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Director since: |
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1997 |
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ARRIS Board Committee: |
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Compensation Committee (Chair) and Nominating Committee |
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Principal occupation and recent business experience: |
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Mr. Lambert is retired. From 1988 to 1997, Mr. Lambert
served as the Chairman, President and Chief Executive Officer of
TSX Corporation, which was acquired by ARRIS in 1997.
Mr. Lambert has been a private investor since 1998. |
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3
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Name: |
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John R. Petty |
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Age: |
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75 |
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Director since: |
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1993 |
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ARRIS Board Committee: |
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Audit Committee (Chair) and Nominating Committee. Mr. Petty
is also the lead independent director. |
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Principal occupation and recent business experience: |
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Mr. Petty is the Chairman and CEO of TECSEC Incorporated, a data
security company. Mr. Petty also serves as the Chairman of
Federal National Payables, Inc., Federal National Commercial,
Inc., and Federal National Services, Inc., since 1992.
Mr. Petty has been a private investor since 1988. |
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Name: |
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Robert J. Stanzione |
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Age: |
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58 |
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Director since: |
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1998 |
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ARRIS Board Committee |
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None |
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Principal occupation and recent business experience: |
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Mr. Stanzione has been Chief Executive Officer of the Company
since 2000. From 1998 through 1999, Mr. Stanzione was
President and Chief Operating Officer of the Company.
Mr. Stanzione has been Chairman of the Board of Directors
since 2003. From 1995 to 1997, he was President and Chief
Executive Officer of Arris Interactive L.L.C. From 1969 to 1995,
he held various positions with AT&T Corporation. |
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Other directorships: |
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National Cable & Telecommunications Association (NCTA)
and Symmetricom, Inc |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ITS
NOMINEES LISTED AS DIRECTORS.
APPROVAL OF PERFORMANCE GOALS
The Board of Directors is asking the Companys stockholders
to approve the performance goals with respect to three of the
Companys benefit plans. Under Section 162(m) of the
Internal Revenue Code, the Companys tax deduction for
compensation paid to designated executives is limited to
$1 million per executive (Limit). These
executives include the Chief Executive Officer and the next four
highest compensated officers of the Company listed in this proxy
statement. In general, the Limit applies to all forms of
compensation unless the compensation qualifies for an exception
for performance-based compensation. In order to
qualify as performance-based, compensation other than stock
options, stock appreciation rights and similar items must
satisfy certain conditions, those being: (i) the
compensation must be paid solely because the executive has
attained one or more performance goals; (ii) an independent
compensation committee must set the performance goals before
commencement of the executive services providing the basis for
the award (or within 90 days of such commencement), e.g.,
performance goals for a fiscal year would need to be established
within 90 days after the beginning of the year;
(iii) before the compensation is paid, shareholders must
approve the material terms of the performance goals (but not the
actual quantitative or other goals themselves, sometimes called
performance criteria); and (iv) before the
compensation is paid, the compensation committee must certify
that the performance goals were met. In addition, the
performance goals must be re-approved by the Companys
stockholders at least once every five years.
4
2001 Stock Incentive Plan
In 2001 the Company and its stockholders approved the 2001 Stock
Incentive Plan. Under the Plan, the Compensation Committee of
the Companys Board of Directors can issue stock options
(including incentive stock options), stock grants, stock units,
restricted stock, stock appreciation rights, performance shares
and units, and dividend equivalent rights, and reload options to
purchase additional shares if shares are delivered in payment of
any other option. When the Company sought stockholder approval
of the 2001 Stock Incentive Plan, it did not seek approval for
the performance goals because, at that time, its compensation
practice was to use options which do not need
shareholder approved performance criteria rather
than restricted stock as incentive compensation. Key employees,
active consultants and directors of the Company are eligible to
receive awards pursuant to the 2001 Stock Incentive Plan, and
there are approximately 0.7 million shares eligible for
future grants, subject to increase as the result of forfeitures
and shares withheld for the payment of withholding taxes. A copy
of the 2001 Stock Incentive Plan is attached to this proxy
statement as Appendix A.
In making grants under the 2001 Stock Incentive Plan, the
Compensation Committee may condition awards based upon the
attainment of one or more of the following performance goals:
(i) revenue; (ii) earnings before interest, taxes,
depreciation, and amortization; (iii) cash earnings;
(iv) operating income; (v) pre- or after-tax income;
(vi) earnings per share; (vii) net cash flow;
(viii) net cash flow per share; (ix) return on equity;
(x) return on total capital; (xi) return on sales;
(xii) return on net assets employed; (xiii) return on
assets; economic value added (or an equivalent metric);
(xiv) share price performance; (xv) total shareholder
return; (xvi) improvement in or attainment of expense
levels; and (xvii) improvement in or attainment of working
capital levels. Performance criteria may be related to a
specific customer, a group of customers or a geographic region.
Performance goals may be measured solely on a corporate,
subsidiary or division basis, or a combination thereof.
Performance criteria may reflect absolute entity performance or
a relative comparison of entity performance to the performance
of a peer group of entities or other external measure of the
selected performance criteria. Profit, earnings and revenues
used for any performance goal measurement may exclude any
extraordinary, nonrecurring items. In each case, the
Compensation Committee would select one or more performance
goals and then determine the appropriate financial or other
objective that should apply to the performance goal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE
PERFORMANCE GOALS UNDER THE 2001 STOCK INCENTIVE PLAN.
2004 Stock Incentive Plan
In 2004 the Company and its stockholders approved the 2004 Stock
Incentive Plan. Under the 2004 Stock Incentive Plan, the Company
can issue stock options (including incentive stock options),
stock grants, stock units, restricted stock, stock appreciation
rights, performance shares and units, and dividend equivalent
rights, and reload options to purchase additional shares if
shares are delivered in payment of any other option. When the
Company sought stockholder approval of the 2004 Stock Incentive
Plan, it did not seek approval for the performance goals
because, at that time, its compensation practice was to use
options which do not need shareholder approved
performance criteria rather than restricted stock
as incentive compensation. Key employees, active consultants and
directors of the Company are eligible to receive awards pursuant
to the 2001 Stock Incentive Plan, and there are approximately
4.5 million shares eligible for future grants, subject to
increase as the result of forfeitures and shares withheld for
the payment of withholding taxes. A copy of the Companys
2004 Stock Incentive Plan is attached to this proxy statement as
Appendix B.
The performance goals for the 2004 Stock Incentive Plan are
identical to the performance goals of the 2001 Stock Incentive
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE
PERFORMANCE GOALS UNDER THE 2004 STOCK INCENTIVE PLAN.
5
Management Incentive Plan
In 2001 the Companys predecessor, Broadband Parent
Corporation, and the stockholders of ANTEC Corporation approved
the Management Incentive Plan and the performance goals that it
contains. Pursuant to Section 162(m) of the Internal
Revenue Code, those goals must be reapproved every five years.
Executive officers and executives who report to the Chief
Executive Officer are eligible to receive awards pursuant to the
Management Incentive Plan. A copy of the Management Incentive
Plan is attached to this proxy statement as Appendix C.
In granting awards under the Management Incentive Plan, the
Compensation Committee assigns a target expressed as a
percentage of salary for the period selected by the Committee.
The targets may be as high as 200% and as low as 20% of salary.
At least 51% of the target must be dependent on the achievement
of one or more of the following financial objectives
(i) operating, pretax, or net earnings of the Company, a
subsidiary, a business unit thereof, or another entity where
there is a significant investment by the Company and opportunity
to influence the performance of that entity; (ii) earnings
per share of the Company; (iii) cash flow of any of these
entities; (iv) return on capital, tangible or total,
employed by any of these entities as measured by any of these
earnings; (v) achievement of specified revenues or proceeds
from specified activities, in or out of the ordinary course of
business; or (vi) other similar financial objectives that
the Committee determines to be in the interest of the Company.
Up to 49% of the target of a participant may be dependent on the
subjective determination of the Committee (or in the case of
participants other than the Chief Executive Officer and the
Chairman, of an executive officer) of the achievement of
qualitative goals. The actual awards may range from zero to 200%
of the assigned targets depending on the achievement of the
objectives established by the Committee (or in the case of
qualitative goals of participants, other than the Chief
Executive Officer or the Chairman, by an executive officer)
during the first quarter of the period. An award that is not
based upon the goals described in Items (i) through
(iv) above or is not approved by the Compensation Committee
would not qualify as performance-based for purposes
of Section 162(m) of the Internal Revenue Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE
PERFORMANCE GOALS UNDER THE MANAGEMENT INCENTIVE PLAN.
APPROVAL OF THE RETENTION OF ERNST & YOUNG LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the
firm of Ernst & Young LLP to serve as the independent
registered public accounting firm of Arris Group, Inc. for the
fiscal year ending December 31, 2006, subject to
stockholder approval. This firm has audited the accounts of the
Company since 1993. If stockholders do not approve this
appointment, the Committee will consider other independent
registered public accounting firms. One or more members of
Ernst & Young LLP are expected to be present at the
Annual Meeting, will be able to make a statement if they so
desire, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE RETENTION
OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 7, 2006,
certain information with respect to the Common Stock of the
Company that may be deemed beneficially owned by each director
or nominee for director of the Company, the officers named in
the Summary Compensation Table and by all directors, officers
and nominees as a group.
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Shares | |
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Shares That | |
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Total Shares | |
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Beneficially | |
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May Be Acquired | |
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Percentage of | |
Name of Beneficial Owner(1) |
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Owned(2) | |
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Within 60 Days | |
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Class if> 1%(3) | |
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Alex B. Best
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19,150 |
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1,450 |
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20,600 |
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* |
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Harry L. Bosco
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19,450 |
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1,450 |
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20,900 |
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* |
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J. A. Ian Craig
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39,150 |
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11,450 |
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50,600 |
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* |
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Matthew B. Kearney
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19,150 |
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1,450 |
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20,600 |
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* |
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William H. Lambert
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37,400 |
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11,450 |
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48,850 |
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* |
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John R. Petty
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38,750 |
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18,950 |
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57,700 |
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* |
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Robert J. Stanzione
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90,226 |
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1,463,853 |
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1,554,079 |
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1.5 |
% |
Lawrence A. Margolis
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69,789 |
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390,988 |
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460,777 |
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* |
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James D. Lakin
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54,738 |
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190,288 |
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245,026 |
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* |
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David B. Potts
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48,786 |
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195,258 |
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244,044 |
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* |
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Ron Coppock
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13,630 |
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175,865 |
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189,495 |
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* |
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All directors, nominees and executive officers as a group
including the above named persons
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498,717 |
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2,933,875 |
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3,432,592 |
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3.2 |
% |
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* |
Percentage of shares beneficially owned does not exceed one
percent of the class. |
|
|
(1) |
Unless otherwise indicated, each person has sole investment
power and sole voting power with respect to the securities
beneficially owned by such person. |
|
(2) |
Includes 133,550 stock units awarded to directors that convert
on a one-for-one basis into shares of Common Stock at a time
predetermined at the time of issuance. |
|
(3) |
The shares underlying all currently exercisable options and
options that may be exercised within 60 days are deemed to
be beneficially owned by the person or persons for whom the
calculation is being made and are deemed to have been exercised
for the purpose of calculating this percentage. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers and persons who
own more than ten percent of a registered class of the
Companys equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of the
Companys Common Stock and other equity securities. To the
Companys knowledge, based solely on review of the copies
of such reports furnished to the Company or filed with the SEC
and written representations that no other reports were required,
for the fiscal year ended December 31, 2005, all
Section 16(a) filing requirements applicable to its
directors, executive officers and greater-than-ten-percent
beneficial owners were properly filed, with the exception of one
late report for a single Section 16(a) reporting
transaction for James D. Lakin.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
To the Companys knowledge, no person is the beneficial
owner of more than 5% of the outstanding shares of Common Stock.
7
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning Common
Stock that may be issued upon exercise of options, warrants and
rights under all equity compensation plans as of
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
Remaining Available for | |
|
|
|
|
|
|
Future Issuance Under | |
|
|
Number of Securities to be | |
|
Weighted-Average | |
|
Equity Compensation | |
|
|
Issued Upon Exercise of | |
|
Exercise Price of | |
|
Plans (Excluding | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
Securities Reflected in | |
Plan Category |
|
Warrants and Rights | |
|
Warrants and Rights(1) | |
|
1st Column)(2) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders
|
|
|
9,954,258 |
|
|
$ |
9.10 |
|
|
|
5,972,322 |
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,954,258 |
|
|
$ |
9.10 |
|
|
|
5,972,322 |
|
|
|
(1) |
The weighted-average exercise price is calculated on the
outstanding options and does not include restricted stock or
rights with no exercise price. |
|
(2) |
Includes securities available for future issuance under
ARRIS 2004 Stock Incentive Plan (4,509,770), 2002 Stock
Incentive Plan (70,471), 2001 Stock Incentive Plan (707,960),
and 2001 Employee Stock Purchase Plan (684,121). |
BOARD AND COMMITTEE MATTERS
COMPENSATION OF DIRECTORS
The following tables set forth information about the
compensation paid to the non-employee Board of Directors and
Committee Members for the last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 1, 2004 | |
|
As of July 1, 2005 | |
|
Paid in 2005 | |
|
|
| |
|
| |
|
| |
Annual Retainer non-employee Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
23,000 |
|
|
$ |
30,000 |
|
|
$ |
26,500 |
|
|
Stock Units(1)
|
|
|
23,000 |
|
|
|
50,000 |
|
|
|
36,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Retainer
|
|
$ |
46,000 |
|
|
$ |
80,000 |
|
|
$ |
63,000 |
|
Annual Retainer Committees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Committee Chair
|
|
$ |
10,000 |
|
|
$ |
10,000 |
|
|
$ |
10,000 |
|
|
Audit Committee Member
|
|
|
2,500 |
|
|
|
5,000 |
|
|
|
3,750 |
|
|
Compensation Committee Chair
|
|
|
2,500 |
|
|
|
7,500 |
|
|
|
5,000 |
|
|
Nominating Committee Chair
|
|
|
2,500 |
|
|
|
5,000 |
|
|
|
3,750 |
|
8
|
|
|
|
|
|
|
|
|
|
|
|
As of July 1, 2004 | |
|
As of July 1, 2005 | |
|
|
| |
|
| |
Meeting Fees non-employee Board of Directors
|
|
|
|
|
|
|
|
|
|
Board Meeting in person
|
|
$ |
2,000 |
|
|
$ |
2,000 |
|
|
Board Meeting by phone
|
|
|
1,000 |
|
|
|
2,000 |
|
|
Board Meeting scheduled in person but member elects
participation via teleconference
|
|
|
500 |
|
|
|
1,000 |
|
Meeting Fees Committees
|
|
|
|
|
|
|
|
|
|
Committee Meeting in person
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Committee Meeting by phone
|
|
|
500 |
|
|
|
1,000 |
|
|
Committee Meeting scheduled in person but member elects
participation via teleconference
|
|
|
500 |
|
|
|
500 |
|
|
|
(1) |
This dollar amount represents the value of the underlying shares
on the date of grant. |
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING
ATTENDANCE
The Board of Directors has Compensation, Audit, and Nominating
Committees. Each member of the Compensation, Audit, and
Nominating Committees is independent as defined by
Rule 4200(a)(15) of the National Association of Securities
Dealers listing standards and as may be required by the
relevant committees charters.
The Board of Directors held six meetings in 2005. During 2005,
each of the directors attended 75% or more of the total of all
meetings held by the Board and the committees on which the
director served.
The Company has not adopted a formal policy on Board
members attendance at annual meetings of stockholders;
however, all directors are encouraged to attend the meetings.
All of the Companys seven directors attended the 2005
annual meeting of stockholders on May 25, 2005.
Audit Committee
The Audit Committee in 2005 consisted of Messrs. Petty
(Chairperson), Bosco, Craig, and Kearney. Information regarding
the functions performed by the Committee is set forth in the
Report of the Audit Committee, included in this
proxy statement. The Audit Committee is governed by a written
charter approved by the Board of Directors on December 12,
2003, which is available on the Companys website at
www.arrisi.com. The Board of Directors believes that each
of its Audit Committee members is financially literate as
defined by the current listing standards of the NASD. The Board
has identified John Petty and Matthew Kearney as audit committee
financial experts, as defined by the SEC rules adopted pursuant
to the Sarbanes-Oxley Act of 2002.
Compensation
Committee
The Compensation Committee in 2005 consisted of
Messrs. Lambert (Chairperson), Best and Craig. No member of
the Compensation Committee is currently or has served as an
executive officer or employee of the Company. The Compensation
Committee is governed by a written charter, which is available
on the Companys website at www.arrisi.com. The
Compensation Committee generally exercises all powers of the
Board of Directors in connection with compensation matters,
including incentive compensation, benefit plans and stock
grants, except as relates to the Chairman and CEO, in which case
the entire Board of Directors determines all said compensation
matters. The Compensation Committee held six meetings in 2005.
|
|
|
Nominating and Corporate Governance Committee |
The Nominating and Corporate Governance Committee in 2005
consisted of Messrs. Bosco (Chairperson), Best, Lambert,
and Petty. The Nominating and Corporate Governance
Committees operations are governed by a written charter,
which is available on the Companys website at
www.arrisi.com. The charter provides, among other things,
that (i) the Committee consist of members who are
independent in
9
accordance with the definitions of independence
adopted by the NASD; and (ii) the Committee identify
individuals qualified to become directors and recommend
candidates to the Board of Directors. The Nominating and
Corporate Governance Committee held one meeting in 2005.
With respect to the Committees evaluation of director
nominee candidates, the Committee has no formal requirements or
minimum standards for the individuals that it nominates. Rather,
the Committee considers each candidate on his or her own merits.
However, in evaluating candidates, there are a number of
criteria that the Committee generally views as relevant and is
likely to consider. Some of these factors include the
candidates:
|
|
|
|
|
career experience, particularly experience that is germane to
the Companys business, such as telecommunications products
and services, legal, human resources, finance, marketing, and
regulatory experience; |
|
|
|
whether the candidate is an audit committee financial
expert (as defined by the SEC); |
|
|
|
experience in serving on other boards of directors or in the
senior management of companies that have faced issues generally
of the level of sophistication that the Company faces; |
|
|
|
contribution to diversity of the Board of Directors; |
|
|
|
integrity and reputation; |
|
|
|
ability to work collegially with others; |
|
|
|
whether the candidate is independent; |
|
|
|
other obligations and time commitments and the ability to attend
meetings in person; and |
|
|
|
current membership on the Board the Board values
continuity (but not entrenchment). |
The Committee does not assign a particular weight to the
individual factors. Similarly, the Committee does not expect to
see all (or even more than a few) of these factors in any
individual candidate. Rather, the Committee looks for a mix of
factors that, when considered along with the experience and
credentials of the other candidates and existing Board members,
will provide stockholders with a diverse and experienced Board
of Directors.
With respect to the identification of nominee candidates, the
Committee has not developed a formalized process. Instead, its
members and the Companys senior management generally
recommend candidates whom they are aware of personally or by
reputation. The Company historically has not utilized a
recruiting firm to assist in the process but could do so in the
future.
The Committee welcomes recommendations from stockholders. The
Committee evaluates a candidate for director who was recommended
by a stockholder in the same manner that the Committee evaluates
a candidate recommended by other means. In order to make a
recommendation, the Committee asks that a stockholder send the
Committee:
|
|
|
|
|
a resume for the candidate detailing the candidates work
experience and credentials; |
|
|
|
written confirmation from the candidate that he or she
(1) would like to be considered as a candidate and would
serve if nominated and elected, (2) consents to the
disclosure of his or her name, (3) has read the
Companys Policy on Business Ethics and Conduct and that
during the prior three years has not engaged in any conduct
that, had he or she been a director, would have violated the
Policy or required a waiver, (4) is, or is not,
independent as that term is defined in the
Committees charter, and (5) has no plans to change or
influence the control of the Company; |
|
|
|
the name of the recommending stockholder as it appears in the
Companys books, the number of shares of Common Stock that
are owned by the stockholder and written confirmation that the
stockholder consents to the disclosure of his or her name. (If
the recommending person is not a stockholder of record, he or
she should provide proof of share ownership); |
10
|
|
|
|
|
personal and professional references, including contact
information; and |
|
|
|
any other information relating to the candidate required to be
disclosed in a proxy statement for election of directors under
Regulation 14A of the Securities Exchange Act of 1934 (the
Exchange Act). |
This information should be sent to the Nominating and Corporate
Governance Committee, c/o Corporate Secretary, Arris Group,
Inc., 3871 Lakefield Drive, Suwanee, GA 30024, who will forward
it to the chairperson of the Committee. The Committee does not
necessarily respond to recommendations. The nomination must be
accompanied by the name and address of the nominating
stockholder and must state the number and class of shares held.
It must include information regarding each nominee that would be
required to be included in a proxy statement. For potential
nominees to be considered at the 2007 annual stockholders
meeting, the Corporate Secretary must receive this information
by December 15, 2006.
In addition to the procedures described above for recommending
prospective nominees for consideration by the Committee,
stockholders may directly nominate directors for consideration
at any annual meeting of stockholders.
Each of the nominees for election as a director at the Annual
Meeting was nominated by the Board of Directors. Each of the
nominees currently is a director.
Communication with the Board
Mr. Petty is the lead independent director and presides
over meetings of the independent directors. Stockholders may
communicate with the Board of Directors, including the lead
independent director, by sending a letter to the ARRIS Group,
Inc. Board of Directors, c/o Corporate Secretary, ARRIS
Group, Inc., 3871 Lakefield Drive, Suwanee, GA 30024. The
Corporate Secretary will submit the correspondence to the
Chairman of the Board or to any specific director to whom the
correspondence is directed.
REPORT OF AUDIT COMMITTEE
Pursuant to its written charter, the Audit Committee oversees
the Companys financial reporting process on behalf of the
Board of Directors. Our responsibility is to monitor and review
these processes. It is not our duty or our responsibility to
conduct auditing or accounting reviews or procedures. We are not
employees of the Company and we do not represent ourselves to
be, or to serve as, accountants or auditors by profession.
Therefore, we have relied, without independent verification, on
managements representation that the consolidated financial
statements have been prepared with integrity and objectivity and
in conformity with U.S. generally accepted accounting
principles and on the representations of the independent
registered public accounting firm included in their report on
the Companys consolidated financial statements. Our
oversight does not provide us with an independent basis to
determine that management has maintained appropriate accounting
and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Furthermore, our considerations and discussions with management
and the independent registered public accounting firm do not
assure that the Companys consolidated financial statements
are presented in accordance with U.S. generally accepted
accounting principles, that the audit of our Companys
consolidated financial statements has been carried out in
accordance with the standards of the Public Company Accounting
Oversight Board (United States) or that our Companys
independent registered public accounting firm is in fact
independent.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal controls. In fulfilling our oversight responsibilities,
we reviewed the audited financial statements in the Annual
Report with management, including a discussion of the quality,
not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the disclosures in
the financial statements.
11
We reviewed with the independent registered public accounting
firm, who is responsible for expressing an opinion on the
conformity of those audited financial statements with
U.S. generally accepted accounting principles, its
judgments as to the quality, not just the acceptability of the
Companys accounting principles required by Statement on
Auditing Standards No. 61, as amended by Statement of
Auditing Standards No. 90, and such other matters as are
required to be discussed with the Committee under the standards
of the Public Company Accounting Oversight Board (United
States). In addition, we discussed with the independent
registered public accounting firm their independence from
management and the Company, including the matters in the written
disclosures required by the Independence Standards Board
Standard No. 1, and considered the compatibility of
nonaudit services provided by the independent registered public
accounting firm to the Company with their independence.
We discussed with the Companys internal auditors and
independent registered public accounting firm the overall scope
and plans for their respective audits. We met with the internal
auditors and the independent registered public accounting firm,
with and, as deemed advisable, without management present, to
discuss the results of their examinations, their evaluations of
the Companys internal controls and the overall quality of
the Companys financial reporting. We reviewed proposed
interim financial statements with management and the independent
registered public accounting firm. We oversaw the Companys
compliance with Section 404 of the Sarbanes-Oxley Act of
2002.
In 2005, we had 16 meetings. In reliance on the reviews and
discussions referred to above, we recommended to the Board of
Directors (and the Board of Directors has accepted that
recommendation) that the audited financial statements be
included in the Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005 for filing with the
Securities and Exchange Commission. In addition, we have
selected the Companys independent registered public
accounting firm.
The Company maintains a corporate governance hotline system in
which employees may directly contact the members of the Audit
Committee concerning potential failures to meet corporate
standards of conduct, including questionable accounting or
auditing matters. These calls are completely confidential and
anonymous.
John R. Petty, Audit Committee Chairman
Harry L. Bosco, Audit Committee Member
John A. Craig, Audit Committee Member
Matthew B. Kearney, Audit Committee Member
12
EXECUTIVE COMPENSATION
The following tables set forth information about the
compensation paid to the Companys Chief Executive Officer
and the four most highly compensated Company executive officers
for the last fiscal year.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Compensation Awards | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Annual Compensation | |
|
Restricted | |
|
Securities | |
|
|
|
|
Name and |
|
|
|
| |
|
Stock | |
|
Underlying | |
|
LTIP | |
|
All Other | |
Principal Position |
|
Year | |
|
Salary($) | |
|
Bonus($) | |
|
Awards($)(2)(3) | |
|
Awards(#) | |
|
Payouts($) | |
|
Compensation($)(1) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert J. Stanzione
|
|
|
2005 |
|
|
|
600,000 |
|
|
|
1,200,000 |
|
|
|
664,299 |
|
|
|
106,182 |
|
|
|
|
|
|
|
6,398 |
|
|
Chief Executive Officer
|
|
|
2004 |
|
|
|
585,000 |
|
|
|
600,000 |
|
|
|
|
|
|
|
220,000 |
|
|
|
|
|
|
|
4,898 |
|
|
|
|
2003 |
|
|
|
585,000 |
|
|
|
|
|
|
|
|
|
|
|
375,000 |
|
|
|
|
|
|
|
45,488 |
|
Lawrence A. Margolis
|
|
|
2005 |
|
|
|
346,750 |
|
|
|
418,800 |
|
|
|
233,511 |
|
|
|
37,325 |
|
|
|
|
|
|
|
4,700 |
|
|
Executive Vice President
|
|
|
2004 |
|
|
|
331,500 |
|
|
|
204,000 |
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
1,200 |
|
|
of Strategic Planning,
|
|
|
2003 |
|
|
|
331,500 |
|
|
|
|
|
|
|
|
|
|
|
170,000 |
|
|
|
|
|
|
|
19,081 |
|
|
Administration, and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James D. Lakin
|
|
|
2005 |
|
|
|
289,923 |
|
|
|
234,400 |
|
|
|
233,511 |
|
|
|
37,325 |
|
|
|
|
|
|
|
5,597 |
|
|
President, Broadband
|
|
|
2004 |
|
|
|
273,675 |
|
|
|
150,000 |
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
1,961 |
|
|
|
|
2003 |
|
|
|
273,675 |
|
|
|
|
|
|
|
|
|
|
|
160,000 |
|
|
|
|
|
|
|
15,800 |
|
David B. Potts
|
|
|
2005 |
|
|
|
289,750 |
|
|
|
219,750 |
|
|
|
233,511 |
|
|
|
37,325 |
|
|
|
|
|
|
|
5,588 |
|
|
Executive Vice President,
|
|
|
2004 |
|
|
|
260,071 |
|
|
|
174,500 |
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
1,706 |
|
|
Chief Financial Officer,
|
|
|
2003 |
|
|
|
246,461 |
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
78,200 |
|
|
|
13,829 |
|
|
Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald M. Coppock
|
|
|
2005 |
|
|
|
248,250 |
|
|
|
200,800 |
|
|
|
209,352 |
|
|
|
33,463 |
|
|
|
|
|
|
|
1,200 |
|
|
President, Worldwide Sales
|
|
|
2004 |
|
|
|
231,300 |
|
|
|
154,500 |
|
|
|
|
|
|
|
90,000 |
|
|
|
|
|
|
|
1,200 |
|
|
|
|
|
2003 |
|
|
|
210,600 |
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
13,162 |
|
|
|
(1) |
Represents contributions by the Company to a supplemental
savings plan and a life insurance plan. |
|
(2) |
The restricted shares vest in equal thirds annually commencing
with the first anniversary of the grant. All of the restricted
shares remained outstanding and unvested at year end and
represent all of the unvested restricted shares of the named
individuals. The number of shares granted during 2005 and
remaining unvested at year end which correspond to the values
set forth in the table are 103,152 shares for
Mr. Stanzione, 36,260 shares each for
Mr. Margolis, Mr. Lakin and Mr. Potts, and
32,508 shares for Mr. Coppock. |
|
(3) |
The restricted shares are performance-based and were subject to
reduction to zero based upon the 2005 achievement of annual
revenue at or above predetermined varying goals. During 2005,
the Companys revenues were $680.4 million, a 39%
improvement over the previous year. This level of revenue
exceeded the relevant performance goals and allowed the
restricted shares to earn out at the maximum levels
shown above without reduction. The maximum level achieved was
150% of the target level of shares. |
Option Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Realizable | |
|
|
Individual Grants | |
|
Value at Assumed | |
|
|
| |
|
Annual Rates of | |
|
|
Number of | |
|
% of Total | |
|
|
|
Stock Price | |
|
|
Securities | |
|
Options | |
|
|
|
Appreciation | |
|
|
Underlying | |
|
Granted to | |
|
Exercise or | |
|
|
|
for Option Term(2) | |
|
|
Options | |
|
Employees in | |
|
Base Price | |
|
Date Of | |
|
| |
Name |
|
Granted(#) | |
|
Fiscal Year | |
|
($/sh) | |
|
Expiration | |
|
5%($) | |
|
10%($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert J. Stanzione
|
|
|
106,182 |
(1) |
|
|
10.2 |
% |
|
$ |
6.44 |
|
|
|
4/18/2012 |
|
|
$ |
281,368 |
|
|
$ |
652,883 |
|
Lawrence A. Margolis
|
|
|
37,325 |
(1) |
|
|
3.6 |
% |
|
$ |
6.44 |
|
|
|
4/18/2012 |
|
|
|
98,906 |
|
|
|
229,501 |
|
James D. Lakin
|
|
|
37,325 |
(1) |
|
|
3.6 |
% |
|
$ |
6.44 |
|
|
|
4/18/2012 |
|
|
|
98,906 |
|
|
|
229,501 |
|
David B. Potts
|
|
|
37,325 |
(1) |
|
|
3.6 |
% |
|
$ |
6.44 |
|
|
|
4/18/2012 |
|
|
|
98,906 |
|
|
|
229,501 |
|
Ronald M. Coppock
|
|
|
33,463 |
(1) |
|
|
3.2 |
% |
|
$ |
6.44 |
|
|
|
4/18/2012 |
|
|
|
88,673 |
|
|
|
205,754 |
|
13
|
|
(1) |
The options vest in fourths beginning on the anniversary of the
date of grant. |
|
(2) |
The potential realizable value is calculated based on the term
of the option at its time of grant, which is seven years,
assuming the fair market price of the Common Stock on the date
of grant (the average of the high and low on the date of grant)
appreciates at the indicated annual rate compounded annually for
the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock
price. These numbers are for presentation purposes only and are
not predictions of future stock prices. |
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year-End Option Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised | |
|
In-the-Money | |
|
|
Shares Acquired | |
|
Value | |
|
Options at FY-End(#) | |
|
Options at FY-End($) | |
|
|
on Exercise(#) | |
|
Realized($) | |
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable(1) | |
|
|
| |
|
| |
|
| |
|
| |
Robert J. Stanzione
|
|
|
443,333 |
|
|
|
2,751,110 |
|
|
|
1,455,015/417,834 |
|
|
$ |
1,446,524/$1,640,235 |
|
Lawrence A. Margolis
|
|
|
146,000 |
|
|
|
1,194,568 |
|
|
|
408,740/177,585 |
|
|
$ |
908,174/$709,417 |
|
James D. Lakin
|
|
|
170,000 |
|
|
|
1,007,906 |
|
|
|
184,290/168,035 |
|
|
$ |
156,121/$685,256 |
|
David B. Potts
|
|
|
156,663 |
|
|
|
918,451 |
|
|
|
142,177/163,485 |
|
|
$ |
127,100/$668,095 |
|
Ronald M. Coppock
|
|
|
131,101 |
|
|
|
819,922 |
|
|
|
116,667/143,057 |
|
|
$ |
102,800/$579,170 |
|
|
|
(1) |
The value of the unexercised options was calculated using the
difference between the option exercise price and the fiscal
year-end fair market value (the average of the high and the low
stock price on December 30, 2005) of $9.52 per share,
multiplied by the number of shares underlying the option. |
14
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
To assure the continued services of its key officers, the
Company has entered into employment agreements with certain
executive officers, including Messrs. Stanzione, Margolis,
Lakin, and Potts. The salaries and bonus opportunities specified
in these agreements (see Employment Contracts and
Termination of Employment and Change-In-Control
Arrangements,) were initially determined after reviewing
publicly available information on the compensation practices of
manufacturers of sophisticated electronic products. (No attempt
was made to limit these companies to the companies in the
published industry index used in the Performance
Graph.) However, because of the differences in size and
business between these companies and ARRIS, the salaries and
bonus opportunities specified in the employment agreements were
subjectively determined by the Committee to be within the
Committees goal of salaries within the median of the range
paid by others for comparable positions and bonus opportunities
within the high end of the range provided by others for
comparable positions. Prior to July 1, 2004, salaries for
all executive officers had been frozen since their last salary
adjustment in mid-2001, and in July 2003, all executive officers
took a 5% reduction in their salaries. As of July 1, 2004,
salaries for all executive officers were reinstated at the
levels following the mid-2001 salary adjustment; however, two
executive officers received additional salary increases as a
result of changes in their respective job titles and their
related increased responsibilities. In April 2005 executive base
salaries were increased in varying amounts from 3% to 5% with
the exception of Mr. Stanzione whose salary remained
unchanged.
Annual bonus targets are set as a percentage of base salary
compensation. In 2005, this percentage was 100% for
Mr. Stanzione, and 50% to 60% for the other named officers.
Actual bonuses can range from zero to 150% (200% for
Messrs. Stanzione and Margolis) of target, dependent upon
the achievement of performance goals set at the beginning of the
year. No bonuses were paid with respect to the calendar year
2003. Bonuses were paid, as shown in the compensation table,
with respect to the calendar years 2004 and 2005. The bonus
plans for 2004 and 2005 were based upon the achievement of
defined earnings target levels in each respective year excluding
certain items (a non GAAP measure). In 2005, net income was
$51 million or $0.52 per diluted share, as compared to
a net loss of ($28.4) million or ($0.33) per diluted share
in 2004. Correspondingly, the net income excluding certain
highlighted items (a non-GAAP measure) was approximately
$63.2 million or $0.64 per diluted share in 2005, as
compared to approximately $14.5 million or $0.17 per
diluted share in 2004. This performance was well in excess of
the performance goal for the maximum bonus payouts with respect
to 2005. In calculating bonus targets for 2004 and 2005, the
Company established earnings targets after making adjustments
for certain items (a non-GAAP measure) because of their nature.
A reconciliation of our GAAP to our non-GAAP earnings per share
can be found on our website. In addition to the improvement in
earnings, revenues were up approximately 39% year over year, the
Companys cash, cash equivalents, and short term
investments position at the end of the year was
$130 million (up $26 million), and the year ended with
substantial backlog and a
book-to-bill ratio of
1.13 for 2005. In light of these substantial financial
improvements and performance achieved under the bonus plans, the
Committee believes the bonuses were earned and properly paid.
The Compensation Committee reviewed Mr. Stanziones
compensation in March 2005. The Committee concluded, as it had
in prior years, that the basic compensation and benefit
structure provided for in Mr. Stanziones employment
agreement remained appropriate. As discussed in the Summary
Compensation Table, Mr. Stanziones bonus target is
provided for in his employment agreement, and the performance
goals for his bonus target were the same as for the other
members of the Companys executive management team. During
2005 Mr. Stanzione was granted options to
purchase 106,182 shares of common stock with an
exercise price equal to the fair market value of the stock on
the date of grant and 103,152 shares of restricted
performance based stock. These shares were subject to reduction
to zero depending on the achievement of revenue goals in 2005.
As indicated in the Summary Compensation Table, revenue achieved
exceeded performance goals and allowed the restricted shares to
earn out at 150% of the target number of shares.
This compares to a 2004 grant of options to
purchase 220,000 shares of stock and no shares of
performance based restricted stock. The Committee chose the
number of options and shares of restricted stock that it granted
15
based upon the advice of its independent compensation
consultants and its objective to align Mr. Stanziones
compensation with the performance of the Company
The Compensation Committee has the authority to and does
regularly retain outside consultants to assist in its analysis
of the Companys compensation policies and actions.
The components of executive officer compensation related to the
performance of the Company are the portions of the annual bonus
awards based on financial performance and the ultimate value of
long-term incentive awards as determined by the stock market.
It is the policy of the Company to structure its compensation in
a manner which will avoid the limitations imposed by the Omnibus
Budget Reconciliation Act of 1993 on the deductibility of
executive compensation under Section 162 (m) of the
Internal Revenue Code to the extent it can reasonably do so
consistent with its goal of retaining and motivating its
executives in a cost effective manner.
William H. Lambert, Compensation Committee Chairman
Alex B. Best, Compensation Committee Member
John A. Craig, Compensation Committee Member
Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of Service | |
|
|
| |
Remuneration |
|
10 | |
|
15 | |
|
20 | |
|
25 | |
|
30 | |
|
35 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$200,000
|
|
$ |
390 |
|
|
$ |
585 |
|
|
$ |
780 |
|
|
$ |
975 |
|
|
$ |
1,170 |
|
|
$ |
1,170 |
|
$250,000
|
|
$ |
6,890 |
|
|
$ |
10,335 |
|
|
$ |
13,780 |
|
|
$ |
17,225 |
|
|
$ |
20,670 |
|
|
$ |
20,670 |
|
$300,000
|
|
$ |
13,390 |
|
|
$ |
20,085 |
|
|
$ |
26,780 |
|
|
$ |
33,475 |
|
|
$ |
40,170 |
|
|
$ |
40,170 |
|
$350,000
|
|
$ |
19,890 |
|
|
$ |
29,835 |
|
|
$ |
39,780 |
|
|
$ |
49,725 |
|
|
$ |
59,670 |
|
|
$ |
59,670 |
|
$400,000
|
|
$ |
26,390 |
|
|
$ |
39,585 |
|
|
$ |
52,780 |
|
|
$ |
65,975 |
|
|
$ |
79,170 |
|
|
$ |
79,170 |
|
$450,000
|
|
$ |
32,890 |
|
|
$ |
49,335 |
|
|
$ |
65,780 |
|
|
$ |
82,225 |
|
|
$ |
98,670 |
|
|
$ |
98,670 |
|
$500,000
|
|
$ |
39,390 |
|
|
$ |
59,085 |
|
|
$ |
78,780 |
|
|
$ |
98,475 |
|
|
$ |
118,170 |
|
|
$ |
118,170 |
|
$550,000
|
|
$ |
45,890 |
|
|
$ |
68,835 |
|
|
$ |
91,780 |
|
|
$ |
114,725 |
|
|
$ |
137,670 |
|
|
$ |
137,670 |
|
$600,000
|
|
$ |
52,390 |
|
|
$ |
78,585 |
|
|
$ |
104,780 |
|
|
$ |
130,975 |
|
|
$ |
157,170 |
|
|
$ |
157,170 |
|
$650,000
|
|
$ |
58,890 |
|
|
$ |
88,335 |
|
|
$ |
117,780 |
|
|
$ |
147,225 |
|
|
$ |
176,670 |
|
|
$ |
176,670 |
|
$700,000
|
|
$ |
65,390 |
|
|
$ |
98,085 |
|
|
$ |
130,780 |
|
|
$ |
163,475 |
|
|
$ |
196,170 |
|
|
$ |
196,170 |
|
$750,000
|
|
$ |
71,890 |
|
|
$ |
107,835 |
|
|
$ |
143,780 |
|
|
$ |
179,725 |
|
|
$ |
215,670 |
|
|
$ |
215,670 |
|
The amounts in the table above illustrate annual straight-line
annuity amounts (which are not reduced for Social Security
benefits) which would be payable upon retirement at age 65
in 2005 under the Companys unfunded supplementary defined
benefit pension plan. The benefits are determined by the average
of the five highest consecutive years of salary and bonus during
an employees last ten years of service. Bonus is
attributable to the year in which it is paid not the year for
which it is accrued. Thus, the covered remuneration for 2005 was
the salary for 2005 and the bonus accrued for 2004 in the
Summary Compensation Table. In 1999, the Company
adopted changes in its retirement plans that enabled
participants to elect to freeze their benefits in the previous
funded pension plan as of December 31, 1999, in exchange
for better matching contributions in the future by the Company
under its 401(k) savings plan and supplemental savings plan;
however, the Company suspended 401(k) and deferred compensation
matching contributions in 2003. In 2004 and 2005, the Company
reinstated a partial matching contribution to the 401(k) savings
plan. The defined benefit plan was frozen for all participants
in 2003. Messrs. Stanzione, Margolis, and Coppock elected
to freeze their benefits in the funded pension plan and upon
retirement at age sixty-five would be entitled to an annual
benefit of $8,013, $36,242, and $6,327, respectively. As of
December 31, 2005, Messrs. Stanzione, Margolis, Lakin,
Potts and Coppock have approximately 30 (actual service tripled
pursuant to employment agreement), 23, 9, 10 and
9 years of service, respectively. Messrs. Stanzione,
Margolis, Lakin, Potts and Coppock, continue to participate in
the Companys unfunded supplementary pension plan that
provides benefits based on the remuneration that is in excess of
the remuneration that the federal tax rules permit to be
16
considered in determining benefits under the funded pension
plan, which was $210,000 in 2005. For a discussion of additional
retirement agreements with Mr. Stanzione, see
Employment Contracts and Termination of Employment and
Change in Control Arrangements.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Employment contracts. The Company has entered into
employment agreements with Messrs. Stanzione, Margolis,
Lakin, and Potts. The employment agreements obligate these
officers to continue to serve the Company and for the Company to
continue to employ these officers until the employment
agreements are terminated by the required prior notice or for
cause or good reason as defined in the employment agreements or
until the employment agreements expire in the case of
Messrs. Stanzione and Margolis when they reach the ages of
62 and 65 respectively, and in the case of Messrs. Lakin
and Potts in 2006. The employment agreements provide for minimum
salaries equal to current salaries (and for minimum annual
increases for Messrs. Stanzione and Margolis, which, in the
case of both individuals, were waived in 2002, 2003, and 2004,
and also waived in 2005 for Mr. Stanzione) and for the
Company to determine annual bonus opportunities targeted at 100%
of salary for Mr. Stanzione, and 50% or 60% of salary for
the other officers.
Termination of employment. If the employment agreements
are terminated without cause by the Company or with good reason
by the executive, the employment agreements provide for the
vesting of options to purchase shares of Common Stock and for
the continuation of employment benefits (including salaries and
bonuses) for three years in the case of Mr. Stanzione, two
years in the case of Mr. Margolis, and one year in the case
of Messrs. Lakin, and Potts. The employment agreements
prohibit each officer from working for a competitor while
receiving these benefits from the Company. Mr. Stanzione
has agreed to serve as a consultant to the Company during the
period he is receiving these benefits.
Change of control. Good reason for termination of the
employment agreement includes in the case of
Messrs. Margolis, Lakin, and Potts, a change of control,
and in addition in the case of Mr. Stanzione, no longer
being a chief executive of a significant public company or
otherwise having his position materially diminished after a
change of control. A change of control occurs, subject to
certain exceptions, if any person becomes, directly or
indirectly, the beneficial owner of securities representing more
than 25% to 30% of the combined voting power of the
Companys then outstanding voting securities, or if
substantially all the Companys assets are sold or a
comparable transaction occurs, or if certain changes in
composition of the Companys Board of Directors occurs.
Special retirement provisions. The Company has agreed to
establish a supplemental retirement plan for Mr. Stanzione
that, together with the Companys other pension plans will
provide Mr. Stanzione at age 62 a monthly single life
annuity of approximately 50% of his final average compensation.
His final average compensation is defined as one-twelfth of his
then annual salary plus one-twelfth of his then typical annual
bonus. His then typical annual bonus shall be the annual average
of the three highest full year bonuses for the five full years
(or such lesser number of years) after 2001. If
Mr. Stanzione terminates his employment prior to
age 62 because of a change of control, he is guaranteed
that his total pension benefits from the Company will not be
less than $33,333 a month.
17
STOCK PERFORMANCE GRAPH
Below is a graph comparing total stockholder return on the
Companys stock from December 31, 2000 through
December 31, 2005, with the Standard & Poors
500 and the Index of NASDAQ U.S. Stocks of entities in the
industry of electronics and electrical equipment and components,
exclusive of computer equipment, (SIC 3600-3699), prepared by
the Research Data Group, Inc.. The stock performance graph
assumes the investment of $100 on December 31, 2000 and
reinvestment of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ARRIS GROUP INC., THE S&P 500 INDEX
AND A PEER GROUP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
|
|
|
|
|
|
Cumulative Total Return |
|
|
|
|
|
|
|
|
|
|
|
12/00 |
|
|
12/01 |
|
|
12/02 |
|
|
12/03 | |
|
12/04 | |
|
|
12/05 |
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
ARRIS GROUP, INC
|
|
|
|
100.00 |
|
|
|
|
123.45 |
|
|
|
|
45.15 |
|
|
|
|
91.57 |
|
|
|
89.04 |
|
|
|
|
119.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
|
|
|
|
100.00 |
|
|
|
|
88.12 |
|
|
|
|
68.64 |
|
|
|
|
88.33 |
|
|
|
97.94 |
|
|
|
|
102.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peer Group
|
|
|
|
100.00 |
|
|
|
|
74.08 |
|
|
|
|
36.82 |
|
|
|
|
66.90 |
|
|
|
63.39 |
|
|
|
|
66.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Notwithstanding anything to the contrary set forth in any other
of the Companys filings under the Securities Act of 1933,
or the Exchange Act that might incorporate future filings,
including this Proxy Statement, in whole or in part, the
Compensation Committee Report on Executive Compensation, the
Audit Committee Report and the Performance Graph presented above
shall not be incorporated by reference into any such filings.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP as
the independent registered public accounting firm of the Company
for the fiscal year ended December 31, 2006.
Ernst & Young LLP also acted in such capacity during
the fiscal year ended December 31, 2005. Representatives of
Ernst & Young LLP, who are expected to be present at
the meeting, will be given an opportunity to make a statement if
they so desire and to respond to appropriate questions asked by
stockholders. The fees billed by Ernst & Young LLP for
the last two Company fiscal years were as follows:
Audit Fees
Fees for audit services totaled $3,100,000 and $2,628,000 in
2005 and 2004, respectively, and include fees associated with
the annual audits, the Sarbanes-Oxley Section 404
attestation, the reviews of the Companys quarterly reports
on Form 10-Q,
other SEC filings, and audit consultations.
Audit-Related Fees
Fees for audit-related services totaled $149,000 and $58,000 in
2005 and 2004, respectively. Audit-related services include due
diligence in connection with acquisitions, consultation on
accounting and internal control matters, audits in connection
with benefit plans, and audits in connection with consummated
acquisitions.
Tax Fees
Fees for tax services including tax compliance, tax advice and
tax planning totaled $77,000 and $134,000 in 2005 and 2004,
respectively.
All Other Fees
Fees for all other services not included above were $0 for both
2005 and 2004.
Audit Committee Pre-Approval Policy
The Audit Committee has adopted a policy that requires advance
approval of all audit, audit-related, tax services, and other
permissible non-audit services performed by the independent
registered public accounting firm. Prior to engagement, the
Audit Committee pre-approves independent registered public
accounting firm services and fee amounts or ranges within each
category. Either the independent registered public accounting
firm or the Companys Chief Financial Officer (or his
designee) must submit to the Audit Committee requests for
services to be provided by the independent registered public
accounting firm. The Audit Committee may delegate pre-approval
authority to one of its members. The member to whom such
authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its
next meeting.
The Audit Committee requires the Companys Internal Audit
Director to report to the Audit Committee on a periodic basis
the results of the Internal Audit Directors monitoring of
the independent registered public accounting firms
performance of all services to the Company and whether the
performance of those services was in compliance with the Audit
Committees pre-approval policy. Both the Internal Audit
Director and management are required to report immediately to
the Audit Committee any breaches by the independent registered
public accounting firm of the policy.
19
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2007
Annual Meeting of Stockholders must be received by the Company
at its principal offices by December 15, 2006, in order to
be considered for inclusion in the Companys proxy
statement and proxy relating to the 2007 Annual Meeting of
Stockholders.
CONCLUSION
The Board of Directors knows of no other matters to be presented
for stockholder action at the meeting. However, if other matters
do properly come before the meeting, it is intended that the
persons named in the proxies will vote upon them in accordance
with their best judgment.
|
|
|
BY ORDER OF THE BOARD OF DIRECTORS |
|
|
|
|
Lawrence A. Margolis, Secretary |
April 17, 2006
20
APPENDIX A
BROADBAND PARENT CORPORATION
(Now Known as ARRIS Group, Inc.)
2001 STOCK INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. Broadband Parent
Corporation (the Company) has established this 2001
Stock Incentive Plan (the Plan) to facilitate the
retention and continued motivation of key employees, consultants
and directors and to align more closely their interests with
those of the Company and its stockholders. The effective date of
the Plan shall be the date it is approved by the stockholders of
ANTEC Corporation at a special meeting at which the
reorganization of ANTEC Corporation as a wholly owned subsidiary
of the Company is also approved.
2. ADMINISTRATION. The Plan shall be administered by
the Board of Directors, or the Compensation Committee of the
Companys Board of Directors or such other Board committee
as the Board may designate (the Committee). The
Committee has the authority and responsibility for the
interpretation, administration and application of the provisions
of the Plan, and the Committees interpretations of the
Plan, and all actions taken by it and determinations made by it
shall be binding on all persons. No Board or Committee member
shall be liable for any determination, decision or action made
in good faith with respect to the Plan.
3. SHARES SUBJECT TO PLAN. A total of
9,580,000 shares of Common Stock of the Company
(Shares) may be issued pursuant to the Plan. The
Shares may be authorized but unissued Shares or Shares
reacquired by the Company and held in its treasury. Grants of
incentive awards under the Plan will reduce the number of Shares
available thereunder by the maximum number of Shares obtainable
under such grants. If all or any portion of the Shares otherwise
subject to any grant under the Plan are not delivered for any
reason including, but not limited to, the cancellation,
expiration or termination of any option right or unit, the
settlement of any award in cash, the forfeiture of any
restricted stock, or the repurchase of any Shares by the Company
from a participant for the cost of the participants
investment in the Shares, such number of Shares shall be
available again for issuance under the Plan. The number of
Shares covered by or specified in the Plan and the number of
Shares and the purchase price for Shares under any outstanding
awards, may be adjusted proportionately by the Committee for any
increase or decrease in the number of issued Shares or any
change in the value of the Shares resulting from a subdivision
or consolidation of Shares, reorganization, recapitalization,
spin-off, payment of stock dividends on the Shares, any other
increase or decrease in the number of issued Shares made without
receipt of consideration by the Company, or the payment of an
extraordinary cash dividend.
4. ELIGIBILITY. All key employees, active
consultants and directors of the Company and its subsidiaries
are eligible to be selected to receive a grant under the Plan by
the Committee. The Committee may condition eligibility under the
Plan or participation under the Plan, and any grant or exercise
of an incentive award under the Plan on such conditions,
limitations or restrictions as the Committee determines to be
appropriate for any reason. No person may be granted in any
period of two consecutive calendar years, awards covering more
than 750,000 Shares.
5. AWARDS. The Committee may grant awards under the
Plan to eligible persons in the form of stock options (including
incentive stock options within the meaning of section 422
of the Code), stock grants, stock units, restricted stock, stock
appreciation rights, performance shares and units and dividend
equivalent rights, and reload options to purchase additional
Shares if Shares are delivered in payment of any other options,
and shall establish the number of Shares subject to each such
grant and the terms thereof, including any adjustments for
reorganizations and dividends, subject to the following:
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(a) All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions
not inconsistent with the Plan as the Committee shall prescribe. |
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(b) The exercise price of any option or stock appreciation
right shall not be less than the fair market value of a
corresponding number of Shares as of the date of grant, except
(i) options or stock appreciation |
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rights being granted to replace options or rights not initially
granted by the Company or ANTEC Corporation may be granted with
exercise prices that in the judgment of the Committee result in
options or rights having comparable value to the options or
rights being replaced, and (ii) up to 10% of the Shares may
be granted pursuant to options or stock appreciation rights that
have exercise prices of not less than 85% of the fair market
value of a corresponding number of Shares as of the date of
grant. |
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(c) No more than 25% of the Shares may be awarded in a form
other than options or stock appreciation rights. |
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(d) No option may be repriced by amendment, substitution or
cancellation and regrant, unless authorized by the stockholders.
Adjustments pursuant to Section 3 above shall not be
considered repricing. |
6. AMENDMENT OF THE PLAN. The Board of Directors or
the Committee may from time to time suspend, terminate, revise
or amend the Plan or the terms of any grant in any respect
whatsoever, provided that, without the approval of the
stockholders of the Company, no such revision or amendment may
increase the number of Shares subject to the Plan, change the
provisions of Section 5 above, or expand those eligible for
grants under the Plan.
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APPENDIX B
ARRIS GROUP, INC.
2004 STOCK INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. ARRIS Group, Inc.
(the Company) has established this 2004 Stock
Incentive Plan (the Plan) to facilitate the
retention and continued motivation of key employees, consultants
and directors and to align more closely their interests with
those of the Company and its stockholders. The effective date of
the 2004 Incentive Plan shall be the date it is approved by the
stockholders of the Company. This plan shall expire in its
entirety ten (10) years from the date the plan is approved
by stock holders (the Effective Date). This Plan
will serve as the successor to the Companys existing Stock
Incentive Plans (the Predecessor Plans). All shares
available for grant under the Predecessor Plans shall be
cancelled on the Effective Date. Only those shares subject to
outstanding stock awards under the Predecessor Plans that are
forfeited, cancelled, or expire unexercised; shares tendered
(either actually or through attestation) to pay the option
exercise price of such outstanding awards; and shares withheld
for the payment of withholding taxes associated with such
outstanding awards return to the share reserve of the
Predecessor Plan and shall be available again for issuance under
the Predecessor Plan. All outstanding awards under the
Predecessor Plans as of the Effective Date will remain
outstanding awards under the applicable Predecessor Plan. Each
such outstanding award will continue to be governed by the
express terms and conditions of the agreements evidencing such
award. No provision of this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of
such awards under Predecessor Plans with respect to their
acquisition of shares of the Companys common stock
(Common Stock) thereunder.
2. ADMINISTRATION. The Plan shall be administered by
the Board of Directors, or the Compensation Committee of the
Companys Board of Directors or such other Board committee
as the Board may designate (the Committee). The
Committee has the authority and responsibility for the
interpretation, administration and application of the provisions
of the 2004 Incentive Plan, and the Committees
interpretations of the 2004 Incentive Plan, and all actions
taken by it and determinations made by it shall be binding on
all persons. No Board or Committee member shall be liable for
any determination, decision or action made in good faith with
respect to the 2004 Incentive Plan.
3. SHARES SUBJECT TO PLAN. A total of
6,000,000 shares of Common Stock of the Company
(Shares) may be issued pursuant to the 2004
Incentive Plan. The Shares may be authorized but unissued Shares
or Shares reacquired by the Company and held in its treasury.
Grants of incentive awards under the 2004 Incentive Plan will
reduce the number of Shares available thereunder by the maximum
number of Shares obtainable under such grants. If all or any
portion of the Shares otherwise subject to any grant under the
2004 Incentive Plan are not delivered for any reason including,
but not limited to, the cancellation, expiration or termination
of any option right or unit, the settlement of any award in
cash, the forfeiture of any restricted stock, or the repurchase
of any Shares by the Company from a participant for the cost of
the participants investment in the Shares, such number of
Shares shall be available again for issuance under the 2004
Incentive Plan. Shares tendered (either actually or through
attestation) to pay the option exercise price and shares
withheld for the payment of withholding taxes return to the
share reserve and shares issued in connection with awards that
are assumed, converted or substituted pursuant to a merger or an
acquisition do not reduce the share reserve. Shares subject to
outstanding option grants under the Predecessor Plans that are
forfeited, cancelled, or expire unexercised; shares tendered
(either actually or through attestation) to pay the option
exercise price of such outstanding awards; and shares withheld
for the payment of withholding taxes associated with such
outstanding awards return to the share reserve of the
Predecessor Plan and shall be available again for issuance under
the Predecessor Plan. The number of Shares covered by or
specified in the 2004 Incentive Plan and the number of Shares
and the purchase price for Shares under any outstanding awards,
may be adjusted proportionately by the Committee for any
increase or decrease in the number of issued Shares or any
change in the value of the Shares resulting from a subdivision
or consolidation of Shares, reorganization, recapitalization,
spin-off, payment of stock dividends on the Shares, any other
increase or decrease in the number of issued Shares made without
receipt of consideration by the Company, or the payment of an
extraordinary cash dividend.
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4. ELIGIBILITY. All key employees, active
consultants and directors of the Company and its subsidiaries
are eligible to be selected to receive a grant under the 2004
Incentive Plan by the Committee. The Committee may condition
eligibility under the 2004 Incentive Plan or participation under
the 2004 Incentive Plan, and any grant or exercise of an
incentive award under the 2004 Incentive Plan on such
conditions, limitations or restrictions as the Committee
determines to be appropriate for any reason. No person may be
granted in any period of two consecutive calendar years, awards
covering more than 1,500,000 Shares. The maximum amount to
be paid to any one person pursuant to performance units, in any
calendar year, shall not exceed $2,000,000.
5. AWARDS. The Committee may grant awards under the
2004 Incentive Plan to eligible persons in the form of stock
options (including incentive stock options within the meaning of
section 422 of the Code), stock grants, stock units,
restricted stock, stock appreciation rights, performance shares
and units and dividend equivalent rights, and shall establish
the number of Shares subject to each such grant and the terms
thereof, including any adjustments for reorganizations and
dividends, subject to the following:
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(a) All awards granted under the 2004 Incentive Plan shall
be evidenced by agreements in such form and containing such
terms and conditions not inconsistent with the 2004 Incentive
Plan as the Committee shall prescribe. |
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(b) The exercise price of any option or stock appreciation
right shall not be less than the fair market value of a
corresponding number of Shares as of the date of grant, except
(i) options or stock appreciation rights being granted to
replace options or rights not initially granted by the Company
or its predecessors may be granted with exercise prices that in
the judgment of the Committee result in options or rights having
comparable value to the options or rights being replaced. The
maximum term on options and stock appreciation rights shall not
exceed ten (10) years. |
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(c) No more than 2,000,000 of the Shares may be awarded in
a form other than options or stock appreciation rights. The
aggregate number of Shares with respect to which incentive stock
options may be issued under the Plan shall not exceed 4,000,000. |
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(d) No option may be repriced by amendment, substitution or
cancellation and regrant, unless authorized by the stockholders.
Adjustments pursuant to Section 3 above shall not be
considered repricing. |
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(e) When issuing performance shares or units performance
measures may include: revenue; earnings before interest, taxes,
depreciation and amortization (EBITDA); cash earnings (earnings
before amortization of intangibles); operating income; pre- or
after-tax income; earnings per share, net cash flow; net cash
flow per share; net earnings; return on equity; return on total
capital; return on sales, return on net assets employed, return
on assets; economic value added (or an equivalent metric); share
price performance; total shareholder return; improvement in or
attainment of expense levels; improvement in or attainment of
working capital levels. Performance criteria may be related to a
specific customer or group of customers or geographic region.
Performance goals may be measured solely on a corporate,
subsidiary or division basis, or a combination thereof.
Performance criteria may reflect absolute entity performance or
a relative comparison of entity performance to the performance
of a peer group of entities or other external measure of the
selected performance criteria. Profit, earnings and revenues
used for any performance goal measurement may exclude any
extraordinary nonrecurring items. |
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(f) All awards may be settled in cash, shares or deferred
delivery. |
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(g) Shares granted from the plan may be used as form of
payment for compensation, grants or rights earned or due under
other Company plans or arrangements. |
6. AMENDMENT OF THE PLAN. The Board of Directors or
the Committee may from time to time suspend, terminate, revise
or amend the 2004 Incentive Plan or the terms of any grant in
any respect whatsoever, provided that, without the approval of
the stockholders of the Company, no such revision or amendment
may increase the number of Shares subject to the 2004 Incentive
Plan, change the provisions of Section 5 above, or expand
those eligible for grants under the 2004 Incentive Plan.
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APPENDIX C
BROADBAND PARENT CORPORATION
(Now Known as ARRIS Group, Inc.)
MANAGEMENT INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. Broadband Parent Corporation
(the Company) has established this Management
Incentive Plan (the Plan) to provide awards to the
executives of the Company for the achievement of goals of the
Company for a specified period. The effective date of the Plan
shall be the date it is approved by the Stockholders of ANTEC
Corporation at a special meeting at which the reorganization of
ANTEC Corporation as a wholly owned subsidiary of the Company is
also approved.
2. ADMINISTRATION. The Plan shall be administered by the
Board of Directors, or the Compensation Committee of the
Companys Board of Directors or such other Board committee
as the Board may designate (the Committee). The
Committee has the authority and responsibility for the
interpretation, administration and application of the provisions
of the Plan, and the Committees interpretations of the
Plan, and all actions taken by it and determinations made by it
shall be binding on all persons. No Board or Committee member
shall be liable for any determination, decision or action made
in good faith with respect to the Plan.
3. AWARDS UNDER THE PLAN. The Committee shall assign a
target expressed as a percentage of salary for the period
selected by the Committee. The targets may be as high as 200%
and as low as 20% of salary.
At least 51% of the target shall be dependent on the achievement
of financial objectives such as (i) operating, pretax, or
net earnings of the Company, a subsidiary, a business unit
thereof, or an other entity where there is a significant
investment by the Company and opportunity to influence the
performance of that entity; (ii) earnings per share of the
Company; (iii) cash flow of any of these entities;
(iv) return on capital, tangible or total, employed by any
of these entities as measured by any of these earnings;
(v) achievement of specified revenues or proceeds from
specified activities, in or out of the ordinary course of
business; or (vi) other similar financial objectives that
the Committee determines to be in the interest of the Company.
Up to 49% of the target of a participant may be dependent on the
subjective determination of the Committee (or in the case of
participants other than the Chief Executive Officer and the
Chairman, of an executive officer) of the achievement of
qualitative goals. In the case of John Egan, his target shall be
dependent on goals that are in accordance with his employment
agreement.
The actual awards may range from zero to 200% of the assigned
targets depending on the achievement of the objectives
established by the Committee (or in the case of qualitative
goals of participants, other than the Chief Executive Officer or
the Chairman, by an executive officer) during the first quarter
of the period.
4. ELIGIBILITY. All executive officers of the Company and
the other executives of the Company and its subsidiaries, who
report directly to the Chief Executive Officer of the Company
are eligible to be selected to receive an award under the Plan
by the Committee. The Committee may condition eligibility under
the Plan or participation under the Plan, and any award under
the Plan on such conditions, limitations or restrictions as the
Committee determines to be appropriate for any reason and
consistent with the terms of the Plan. No person may be awarded,
for any one year, more than $2,000,000, as this amount is
adjusted for inflation in the Consumer Price Index after
December 31, 2001.
5. PAYMENT OF AWARDS. Amounts earned under the Plan shall
be determined and be paid as soon as practical after the end of
each year or if based on multiple years, the end of the last
year of that period. The Committee, in establishing the targets
and goals for a year, may determine that all or a portion of an
award payable under the Plan to certain participants shall or
may be paid in stock or phantom stock of the Company that may or
may not be restricted. The computation of the amount of stock
may be based on the average market price of the stock over a
period, up to one year, selected by the Committee, or based on a
percentage, not to be less than 75%, of the market price of the
stock at the end of the year for which the award was earned or
during a period during the last month of that year selected by
the Committee.
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6. AMENDMENT OF THE PLAN. The Committee may amend or
terminate the Plan at any time, provided however, that in no
event can the Committee, after the period for establishing the
objectives for a year, adjust for that year any targets,
objectives, or the percentage of target earned by levels of
achievement of each objective in a manner that would increase
the amount of compensation that would be payable under the Plan
without such adjustment.
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▼ DETACH PROXY CARD HERE ▼
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Mark, Sign, Date and Return
the Proxy Card Promptly
Using the Enclosed Envelope.
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x
Votes must be indicated
(x) in Black or Blue ink. |
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1. Election of the following nominees as directors: |
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FOR ALL NOMINEES
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WITHHOLD AUTHORITY
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*EXCEPTIONS
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Nominees: |
Alex B. Best, Harry L. Bosco, John Anderson Craig, Matthew B. Kearney, William H. Lambert, John R. Petty, Robert J. Stanzione. |
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(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the Exceptions box and write that
nominees name in the space provided below.) |
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*Exceptions |
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FOR
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AGAINST
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ABSTAIN |
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2.
Approval of performance goals with respect to the
2001 Stock Incentive Plan. |
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AGAINST
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ABSTAIN |
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3.
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Approval of performance goals with respect to the
2004 Stock Incentive Plan.
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4.
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Approval of performance goals with respect to the
Management Incentive Plan.
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5.
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Approval of the retention of Ernst & Young as independent registered public accounting firm.
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6.
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In their discretion, such other matters as may properly come before
the meeting or at any adjournments thereof.
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NOTE: Please sign exactly as name appears hereon. When shares are held by joint owners, both
should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such.
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Date Share Owner sign here
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Co-Owner sign here |
ARRIS GROUP, INC.
PROXY SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Stanzione, Lawrence A. Margolis and David B. Potts,
and each of them (with full power of substitution in each) proxies of
the undersigned to vote at the annual meeting of ARRIS Group, Inc. to be held at 9:00 a.m., eastern time, May 24, 2006, at the
Companys corporate headquarters, 3871 Lakefield Drive, Suwanee, Georgia, and at any adjournments thereof, all of the shares of Common Stock of ARRIS Group, Inc. in the name of the undersigned on the record date.
This proxy when properly executed will be voted in the manner directed by the undersigned stockholder. THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND IN FAVOR OF PROPOSALS 2,
3, 4 and 5 as set forth on the reverse side of this proxy.
(Continued and to be dated and signed on the reverse side.)
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PLEASE CHECK BOX IF YOU INTEND TO BE PRESENT AT MEETING
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COMMENT/ADDRESS CHANGE
Please mark this box if you have written a comment/address change
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ARRIS GROUP, INC.
P.O. BOX 11340
NEW YORK, N.Y. 10203-0340
COMMENTS / ADDRESS CHANGE:
PLEASE MARK COMMENT / ADDRESS BOX