SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMSCOPE, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
COMMSCOPE, INC.
March 27, 2003
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders (the
"Annual Meeting") of CommScope, Inc., a Delaware corporation (the
"Company"), to be held on May 2, 2003 at 1:30 p.m., local time, at the JP
MorganChase Bank, 270 Park Avenue - 11th Floor, New York, New York 10017.
At the Annual Meeting we will review the Company's activities in 2002,
as well as the outlook for 2003. Details of the business to be conducted
and the matters to be considered at the Annual Meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend personally. You are therefore urged
to complete, sign, date and return the enclosed proxy card promptly in the
accompanying envelope, which requires no postage if mailed in the United
States. This year, if your shares of stock are held in a participating bank
or brokerage account, you may be eligible to vote over the Internet, or by
telephone, as an alternative to mailing the traditional proxy card. Please
see "Voting Electronically via the Internet or Telephone" in the Proxy
Statement for further details.
You are, of course, welcome to attend the Annual Meeting and vote in
person, even if you have previously returned your proxy card or voted by
Internet or telephone.
Sincerely,
/s/ Frank M. Drendel
Frank M. Drendel
Chairman of the Board and
Chief Executive Officer
COMMSCOPE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders (the "Annual Meeting") of
CommScope, Inc. (the "Company") will be held on May 2, 2003, at 1:30 p.m.,
local time, at the JP MorganChase Bank, 270 Park Avenue - 11th Floor, New
York, New York 10017.
The Annual Meeting will be conducted:
1. To consider and act on the following proposals, which are described in
the accompanying Proxy Statement:
Proposal One: To elect two Class III directors for terms ending at
the 2006 Annual Meeting of Stockholders.
Proposal Two: To ratify the appointment by the Board of Directors of
the Company of Deloitte & Touche LLP as independent
auditor for the Company for the 2003 fiscal year.
2. To transact such other business as may properly come before the Annual
Meeting.
Stockholders of record at the close of business on March 21, 2003 will
be entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Sincerely,
/s/ Frank B. Wyatt, II
Frank B. Wyatt, II
March 27, 2003 Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ACCOMPANYING
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ELECTED TO RECEIVE THE 2003 PROXY STATEMENT AND 2002 ANNUAL REPORT
ELECTRONICALLY OVER THE INTERNET YOU WILL NOT RECEIVE A PAPER PROXY AND YOU
SHOULD VOTE ONLINE, UNLESS YOU CANCEL YOUR ENROLLMENT. IF YOUR SHARES ARE
HELD IN A PARTICIPATING BANK OR BROKERAGE ACCOUNT AND YOU DID NOT ELECT TO
RECEIVE MATERIALS THROUGH THE INTERNET, YOU MAY BE ELIGIBLE TO VOTE YOUR
PROXY OVER THE INTERNET OR BY TELEPHONE. PLEASE SEE "VOTING ELECTRONICALLY
VIA THE INTERNET OR TELEPHONE" IN THE PROXY STATEMENT FOR FURTHER DETAILS.
YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERY TO THE
COMPANY OF A SUBSEQUENTLY EXECUTED PROXY OR A WRITTEN NOTICE OF REVOCATION
OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
COMMSCOPE, INC.
1100 COMMSCOPE PLACE, S.E., P.O. BOX 339
HICKORY, NORTH CAROLINA 28602
_______________________
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is being furnished to the
stockholders of CommScope, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of
the Company for use at the Annual Meeting of Stockholders (the "Annual
Meeting") of the Company to be held on May 2, 2003 at 1:30 p.m., local
time, at the JP MorganChase Bank, 270 Park Avenue - 11th Floor, New York,
New York 10017, and any adjournment or postponement thereof.
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following proposals: Proposal One: To elect two Class III
directors for terms ending at the 2006 Annual Meeting of Stockholders and
Proposal Two: To ratify the appointment by the Board of Directors of the
Company of Deloitte & Touche LLP as independent auditor for the Company for
the 2003 fiscal year.
The Board of Directors of the Company recommends a vote FOR approval
of each of the proposals.
The Board of Directors of the Company has fixed the close of business
on March 21, 2003 (the "Annual Meeting Record Date") as the record date for
determining the holders of outstanding shares of common stock, par value
$0.01 per share (the "Common Stock"), entitled to receive notice of, and to
vote at, the Annual Meeting or any adjournment thereof. On that date, there
were 59,219,567 shares of Common Stock issued and outstanding and entitled
to vote at the Annual Meeting, each entitled to one vote on all matters to
be acted upon. The Notice of Annual Meeting of Stockholders, this Proxy
Statement and the form of proxy are first being mailed or sent
electronically on or about March 27, 2003 to each stockholder entitled to
vote at the Annual Meeting.
On July 28, 1997, the Company became an independent public company
when it was spun off (the "Spin-off") from its parent company, General
Instrument Corporation (subsequently renamed General Semiconductor, Inc.).
VOTING AND REVOCATION OF PROXIES
VOTING
Only holders of record of shares of Common Stock as of the close of
business on the Annual Meeting Record Date will be entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof. The presence,
either in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting and to permit action to be taken
by the stockholders at the Annual Meeting.
The affirmative vote of a plurality of the shares of Common Stock
entitled to vote thereon, and present in person or represented by proxy, at
the Annual Meeting is required to elect the directors nominated pursuant to
Proposal One. The affirmative vote of a majority of the shares of Common
Stock entitled to vote thereon, and present in person or represented by
proxy, is required to approve Proposal Two.
For purposes of determining the number of votes cast with respect to
any voting matter, only those cast "for" or "against" are included;
abstentions and broker non-votes are excluded. For purposes of determining
1
whether the affirmative vote of the holders of a majority of the shares
entitled to vote on a proposal and present at the Annual Meeting has been
obtained, abstentions will be included in, and broker non-votes will be
excluded from, the number of shares present and entitled to vote.
Accordingly, abstentions will have the effect of a vote "against" the
matter (other than the election of directors) and broker non-votes will
have the effect of reducing the number of affirmative votes required to
achieve the majority vote.
All shares of Common Stock that are represented at the Annual Meeting
by properly executed proxies received prior to or at the Annual Meeting and
not revoked will be voted at the Annual Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated
for a particular proposal on a proxy, such proxy will be voted in
accordance with the Board of Directors' recommendations as set forth herein
with respect to such proposal(s).
In the event that a quorum is not present at the time the Annual
Meeting is convened, or if for any other reason the Company believes that
additional time should be allowed for the solicitation of proxies, the
stockholders entitled to vote at the Annual Meeting, present in person or
represented by proxy, will have the power to adjourn the meeting from time
to time, without notice other than announcement at the meeting. If the
Company proposes to adjourn the Annual Meeting by a vote of the
stockholders, the persons named in the enclosed form of proxy will vote all
shares of Common Stock for which they have voting authority in favor of
such adjournment.
VOTING ELECTRONICALLY VIA THE INTERNET OR TELEPHONE
Stockholders whose shares are registered in the name of a bank or
brokerage and who elected to receive the Company's 2002 Annual Report and
this Proxy Statement over the Internet will be receiving an email on or
about March 27, 2003 with information on how to access stockholder
information and instructions for voting. If your shares are registered in
the name of a participating bank or brokerage firm and you have not elected
to receive the Company's 2002 Annual Report and this Proxy Statement over
the Internet, you may be eligible to vote your shares electronically over
the Internet or by telephone. A number of banks and brokerage firms are
participating in the ADP Shareholder Preference Database program. This
program provides eligible stockholders who receive a paper copy of a
company's annual report and proxy statement the opportunity to vote via the
Internet or by telephone. If your bank or brokerage firm is participating
in ADP's program, your voting form will provide instructions. If your
voting form does not reference Internet or telephone information, please
complete and return the paper proxy card in the self-addressed postage-paid
envelope provided.
REVOCATION
Any stockholder who executes and returns a proxy may revoke it at any
time prior to the voting of the proxies by giving written notice of
revocation to the Secretary of the Company or by executing a later-dated
proxy. In addition, voting by telephone, Internet or mail will not prevent
you from voting in person at the Annual Meeting should you be present and
wish to do so.
2
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of six directors
divided into three classes, Class I, Class II and Class III, with members
of each class holding office for staggered three-year terms and until their
successors have been duly elected and qualified. There are currently: two
Class I Directors, whose terms expire at the 2004 Annual Meeting; two Class
II Directors, whose terms expire at the 2005 Annual Meeting of
Stockholders; and two Class III Directors, whose terms expire at the 2003
Annual Meeting of Stockholders (in all cases subject to the election and
qualification of their successors and to their earlier death, resignation
or removal).
If any one or more of the nominees is unable to serve for any reason
or withdraws from nomination, proxies will be voted for the substitute
nominee or nominees, if any, proposed by the Board of Directors. The Board
of Directors has no knowledge that any nominee will or may be unable to
serve or will or may withdraw from nomination. All of the following
nominees are presently serving as directors of the Company. Information
concerning the nominees for director is set forth below.
NOMINEES FOR TERMS ENDING AT THE 2006 ANNUAL MEETING OF STOCKHOLDERS
FRANK M. DRENDEL, age 58, is Chairman and Chief Executive Officer of
the Company. He has been Chairman and Chief Executive Officer of the
Company since the Spin-off. Mr. Drendel served as a director of GI
Delaware, a subsidiary of General Instrument Corporation, and its
predecessors from 1987 to 1992. He was a director of General Instrument
Corporation from 1992 until the Spin-off and NextLevel Systems, Inc. (which
was renamed General Instrument Corporation "GI") from the Spin-off until
January 5, 2000. He has served as President and Chairman of CommScope, Inc.
of North Carolina ("CommScope NC"), currently a subsidiary of the Company,
from 1986 to 1997, and Chief Executive Officer of CommScope NC since 1976.
Prior to that time, Mr. Drendel has held various positions with CommScope
NC since 1971. He is a director of Nextel Communications, Inc., C-SPAN and
the National Cable Television Association. Mr. Drendel was also recently
inducted into the Cable Television Hall of Fame.
DUNCAN M. ("LAUCH") FAIRCLOTH, age 75, is a private investor and
former U.S. Senator. Mr. Faircloth has spent approximately 50 years, and
continues to spend time in the private business sector building several
businesses in agriculture, construction, real estate and automobile
dealerships. He is also a long-time private investor. Mr. Faircloth was a
United States Senator from 1993 through January 1999. He served on the
Senate Appropriations Committee, the Banking, Housing and Urban Affairs
Committee and the Small Business Committee. He was the chairman of two
subcommittees - the Appropriations Subcommittee on the District of Columbia
and the Banking Subcommittee on Financial Institutions and Regulatory
Relief. Mr. Faircloth also served as Chairman of the North Carolina Highway
Commission from 1969 to 1973 and Secretary of the North Carolina Department
of Commerce from 1977 to 1983.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH OF
THE FOREGOING NOMINEES AS A DIRECTOR OF THE COMPANY. PROXIES WILL BE VOTED
"FOR" EACH OF THE FOREGOING NOMINEES AS A DIRECTOR OF THE COMPANY, UNLESS
OTHERWISE SPECIFIED IN THE PROXY.
3
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS OF THE COMPANY
The following table sets forth names, in alphabetical order, and
information as to the persons who currently serve as directors of the
Company, each of whom has served since the Spin-off (other than Mr.
Faircloth, who has served since February 11, 1999 and Ms. Travis, who has
served since February 21, 2002).
NAME, AGE AND CURRENT TERM
PRINCIPAL OCCUPATION EXPIRES INFORMATION
------------------------------------- ----------- ------------------------------------------------
Frank M. Drendel, 58 2003 Frank M. Drendel has been Chairman and Chief
Chairman and Executive Officer of the Company since the
Chief Executive Officer Spin-off. He served as a director of GI
of the Company Delaware, a subsidiary of General Instrument
Corporation, and its predecessors from 1987 to
1992. He was a director of General Instrument
Corporation from 1992 until the Spin-off and GI
from the Spin-off until January 5, 2000. He has
served as President and Chairman of CommScope
NC, currently a subsidiary of the Company, from
1986 to 1997, and Chief Executive Officer of
CommScope NC since 1976. Prior to that time, Mr.
Drendel has held various positions with
CommScope NC since 1971. He is a director of
Nextel Communications, Inc., C-SPAN and the
National CableTelevision Association. Mr.
Drendel was also recently inducted into the
Cable Television Hall of Fame.
Duncan M. ("Lauch") Faircloth, 75 2003 Duncan M. ("Lauch") Faircloth has spent
Private Investor, approximately 50 years, and continues to spend
Former U.S. Senator time, in the private business sector building
several businesses in agriculture, construction,
real estate and automobile dealerships. He is
also a long-time private investor. Mr. Faircloth
was a U.S. Senator from 1993 through January
1999. He served on the Senate Appropriations
Committee, the Banking, Housing and Urban
Affairs Committee and the Small Business
Committee. He was the chairman of two
subcommittees - the Appropriations Subcommittee
on the District of Columbia and the Banking
Subcommittee on Financial Institutions and
Regulatory Relief. Mr. Faircloth also served as
Chairman of the North Carolina Highway
Commission from 1969 to 1973 and Secretary of
the North Carolina Department of Commerce from
1977 to 1983.
4
NAME, AGE AND CURRENT TERM
PRINCIPAL OCCUPATION EXPIRES INFORMATION
------------------------------------- ----------- ------------------------------------------------
Boyd L. George, 61 2004 Boyd L. George is Chairman of the Board and
Chairman of the Board Chief Executive Officer of Alex Lee, Inc.
and Chief Executive Officer (subsidiaries of Alex Lee, Inc. include:
of Alex Lee, Inc. Merchants Distributors, Inc., a wholesale food
distributor; Institution Food House, Inc., a
foodservice distributor; and Lowe's Food Stores,
Inc., a retail operation). Mr. George has been
Chairman and Chief Executive Officer of Alex
Lee, Inc. since the company was founded in 1992
and served as President from 1992 to 1995. Mr.
George joined a subsidiary of Alex Lee, Inc. in
1969 and has served, and continues to serve, in
various positions, including Chairman and Chief
Executive Officer for such subsidiary as well as
for other subsidiaries.
George N. Hutton, Jr., 73 2004 George N. Hutton, Jr. is and has been a private
Private Investor investor for more than 15 years.
June E. Travis, 63 2005 June E. Travis has been Executive Vice President
Officer of a non-profit of the Binning Family Foundation, a non-profit
organization and former organization dedicated to helping youth develop
cable television executive technology and leadership skills since 2000. Ms.
Travis has served as Executive Vice President
and Chief Operating Officer of the National
Cable Television Association (NCTA) from 1994 to
1999. Prior to 1994, Ms. Travis served as the
President and Chief Operating Officer of Rifkin
& Associates, a Denver-based cable television
operator. Ms. Travis chaired the industry's
political action committee, Cable PAC from 1994
to 1999. Ms. Travis has served as a director of
NCTA, C-SPAN, Cable in the Classroom, and Women
in Cable (WIC). Additionally, Ms. Travis serves
on a number of non-profit Boards.
James N. Whitson, 68 2005 James N. Whitson has served and continues to
Director of various serve as a director of Sammons Enterprises, Inc.
organizations ("SEI"), a privately-owned company engaged in
life insurance, equipment sales and rentals, and
bottled water, since 1973, and as Executive Vice
President and Chief Operating Officer of SEI
from 1989 until 1998, when he retired. He is a
director/trustee of the Seligman Group of
Investment Companies and a director of C-SPAN.
5
COMPENSATION OF DIRECTORS
Employee directors do not receive additional compensation for serving
on the Company's Board of Directors. Nonemployee directors receive an
annual retainer of $30,000, and committee chairpersons receive an
additional $5,000 retainer. The nonemployee directors' remuneration is paid
quarterly unless payment is deferred. The Company has adopted a deferred
compensation program by which directors may elect to defer the receipt of
retainers that would otherwise be payable for services performed as a
director of the Company. Directors are immediately and fully vested in any
such deferred compensation and any income and gain attributable thereto
under the program. Distributions are made either in the form of a single
lump sum or annual installments over a period elected by the director up to
ten years. In the event of a change in control of the Company, the deferred
compensation will be distributed to the directors.
In addition, each nonemployee director, upon initial election to the
Board of Directors, receives 1,000 shares of Common Stock that vest
immediately and is granted an option to purchase 20,000 shares of Common
Stock at an exercise price per share equal to the fair market value on the
date of grant, which option becomes exercisable with respect to one-third
of the underlying shares on each of the first three anniversaries of the
grant date. In February 2002, such awards were made to one nonemployee
director upon initial election to the Board of Directors. If a director
remains in office, a similar option is granted every three years. In
February 2002, the Company made one such grant to one nonemployee director
to purchase 20,000 shares of Common Stock.
The Amended and Restated CommScope 1997 Long-Term Incentive Plan (the
"1997 LTIP") provides that nonemployee directors may be granted stock
options under the 1997 LTIP in addition to the automatic grants described
above. In February 2002, the Company made four such additional grants of
stock options to nonemployee directors to purchase an aggregate of 20,000
shares of Common Stock. On March 5, 2003, the Company made two additional
grants of stock options to nonemployee directors to purchase an aggregate
of 10,000 shares of Common Stock.
COMMITTEES OF THE BOARD OF DIRECTORS - BOARD MEETINGS
The Board of Directors of the Company held eight meetings in 2002.
Each incumbent director attended (i) all meetings of the Board of Directors
and (ii) all meetings of the Board Committees on which they served.
The Company has Audit, Compensation, Nominating and Governance and
Executive Committees of the Board of Directors. Members of the Audit,
Compensation and Nominating and Governance Committees are not employees of
the Company.
AUDIT COMMITTEE. The Audit Committee's principal functions are to
review the scope of the annual audit of the Company's consolidated
financial statements by its independent auditors, review the annual
consolidated financial statements of the Company and the related audit
report as prepared by the independent auditors, pre-approve all audit and
non-audit services of the independent auditors, recommend the selection and
compensation of the independent auditors, review the qualifications,
performance and independence of the independent auditors, review the
adequacy and scope of the internal audit plan, and review any significant
internal audit findings. The members of the Audit Committee are all of the
nonemployee directors. All members of the Audit Committee are independent
and financially literate. The Audit Committee held nine meetings in 2002.
6
COMPENSATION COMMITTEE. The Compensation Committee administers the
stock option and incentive plans of the Company, and in this capacity it
makes or recommends option grants or awards under these plans. In addition,
the Compensation Committee makes recommendations to the Company's Board of
Directors with respect to the compensation of the Chief Executive Officer
and determines the compensation of the other senior executives. The
Compensation Committee also recommends the establishment of policies
dealing with various compensation and employee benefit plans for the
Company. The members of the Compensation Committee are all of the
nonemployee directors. The Compensation Committee held four meetings in
2002.
NOMINATING AND GOVERNANCE COMMITTEE. The Nominating and Governance
Committee's principal functions are to review and make recommendations to
the Board of Directors regarding nominees for directors, monitor and review
the Company's corporate governance practices and compliance with corporate
governance rules and regulations and to conduct reviews of Board
effectiveness and performance. The members of the Nominating and Governance
Committee are all of the nonemployee directors. The Nominating and
Governance Committee did not meet in 2002 since it was formed in November
2002.
EXECUTIVE COMMITTEE. The Executive Committee has the authority to
exercise all powers and authority of the Company's Board of Directors that
may be lawfully delegated to it under Delaware law. It meets between
regularly scheduled meetings of the Company's Board of Directors to take
such action as is necessary for the efficient operation of the Company. The
members of the Executive Committee are: Messrs. Drendel, Chairman, Whitson
and George. The Executive Committee held no meetings in 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2002, the Company leased an aircraft and hangar from companies
owned by Frank M. Drendel, Chairman and Chief Executive Officer of the
Company, for an aggregate amount of approximately $74,000. Mr. Drendel is a
director of Nextel Communications, Inc., a leading provider of fully
integrated wireless communication services. In 2002, Nextel Communications,
Inc. and its affiliates purchased products from the Company for an
aggregate amount representing less than 1% of the Company's total sales.
Boyd L. George, a director of the Company, is Chairman and Chief
Executive Officer of Alex Lee, Inc., the parent of Lowe's Food Stores, Inc.
In 2002, the Company purchased gift certificates for all of its North
Carolina area employees (as an employee benefit) from Lowe's Food Stores,
Inc. for an aggregate amount of approximately $63,000.
In November 2001, Lucent Technologies Inc. ("Lucent") acquired 10.2
million shares of the Company's Common Stock, representing approximately
16.5% of the Company's then outstanding Common Stock, excluding the Common
Stock acquired by Lucent, in connection with the Company's acquisition of
an approximate 18.4% interest in OFS BrightWave, LLC ("OFS BrightWave").
The Company and The Furukawa Electric Co., Ltd. ("Furukawa") formed OFS
BrightWave to operate certain fiber optic cable and transmission fiber
assets acquired from Lucent. In October 2002, the Company and Furukawa
purchased 10.2 million shares of the Company's Common Stock from Lucent for
approximately $53 million ($5.20 per share). Of the total 10.2 million
shares purchased from Lucent, Furukawa purchased 7.7 million shares for
approximately $39.8 million and the Company purchased 2.5 million shares
for approximately $13.2 million. In conjunction with this stock purchase,
the Company also entered into agreements with Furukawa which outline
various investment terms, including resale restrictions, registration
rights, standstill provisions, as well as call and limited put rights
related to the Company's Common Stock held by Furukawa. Additionally, the
Company agreed with Furukawa to change from 2004 to 2006 the date when the
Company could first exercise its contractual right to sell its investment
7
in OFS BrightWave to Furukawa for a cash payment equal to its original
investment in and advances to OFS BrightWave. The Company also agreed that
if it does sell such interest back to Furukawa in 2006, Furukawa would at
that time have the right to sell its shares of the Company's Common Stock
back to the Company for $45.8 million.
In 2002, the Company recognized interest income from OFS BrightWave in
the amount of approximately $935,000 on a $30,000,000 revolving note, which
was fully drawn as of December 31, 2002. The Company purchased cable
products from OFS BrightWave in 2002 for an aggregate amount representing
less than 1% of the Company's consolidated operating costs and expenses. In
addition, in 2002, the Company purchased optical fiber products from OFS
Fitel LLC (a wholly-owned indirect subsidiary of Furukawa) for an aggregate
amount representing less than 5% of the Company's consolidated operating
costs and expenses.
The Company believes that the terms of each of the transactions
described above were no less favorable to the Company than the terms which
could be obtained from unrelated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and holders of more
than 10% of the Common Stock to file with the Securities and Exchange
Commission (the "Commission") and The New York Stock Exchange reports of
ownership and changes in ownership of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5 and to provide the Company
with copies of such reports. The Company undertakes to make such filings on
Forms 3, 4 and 5 on behalf of its directors and officers. Based solely on a
review of the reports filed by the Company on behalf of its directors and
officers, the reports provided to the Company and on written
representations of certain reporting persons that no Form 5 report was
required to be filed by them, the Company believes that, during the year
ended December 31, 2002, its officers and directors and holders of more
than 10% of the Common Stock complied with all applicable Section 16(a)
filing requirements with the exception of the following filings: as a
result of an administrative error, each of Randall W. Crenshaw, Frank M.
Drendel, Brian D. Garrett, William R. Gooden, Edward A. Hally, Jearld L.
Leonhardt, Christopher A. Story, Gene W. Swithenbank and Frank B. Wyatt, II
failed to file on a timely basis one Form 4 to report a grant of stock
options on December 19, 2002; all such reports were filed on January 16,
2003.
8
EXECUTIVE OFFICER COMPENSATION
SUMMARY OF COMPENSATION. The table below sets forth a summary of the
compensation paid by the Company for the last three fiscal years to the
Chief Executive Officer of the Company and the four additional most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(a) AWARDS
------------------------------------- -----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR BASE SALARY BONUS OPTIONS (#)(b) COMPENSATION
---------------------------------- -------- ----------- ------------- ----------------- -----------------
Frank M. Drendel................. 2002 $ 555,022 $ -- 427,000 $ 85,199 (c)
Chairman and Chief Executive 2001 550,957 -- -- 85,107
Officer 2000 525,475 322,158 120,000 15,707
Brian D. Garrett................. 2002 $ 333,008 $ -- 205,000 $ 49,530 (c)
President and Chief Operating 2001 330,567 -- -- 51,848
Officer 2000 315,265 178,415 57,900 15,666
Jearld L. Leonhardt.............. 2002 $ 275,418 $ -- 136,000 $ 40,233 (c)
Executive Vice President and 2001 271,565 -- -- 42,952
Chief Financial Officer 2000 248,892 140,853 38,700 15,229
Gene W. Swithenbank.............. 2002 $ 236,911 $ -- 87,000 $ 35,329 (c)
Executive Vice President, 2001 231,977 -- -- 36,894
Global Broadband Products 2000 221,251 125,210 31,400 15,196
Group, Sales and Marketing
Christopher A. Story............. 2002 $ 222,935 $ -- 98,000 $ 30,727 (c)
Executive Vice President, 2001 216,800 -- -- 34,602
Global Broadband Products 2000 186,412 91,340 41,400 15,132
Group, Operations
---------
(a) Unless otherwise indicated, with respect to any individual named in
the above table, the aggregate amount of perquisites and other
personal benefits, securities or property was less than the lesser of
$50,000 or 10% of the total annual salary and bonus reported for the
named executive officer.
(b) Reflects the number of shares of Common Stock underlying options
granted.
(c) Amounts for 2002 reflect (i) the matching contribution under the
CommScope, Inc. of North Carolina Employees Retirement Savings Plan
(the "Employees Retirement Savings Plan") in the amount of $3,769,
$4,000, $3,836, $3,817 and $3,586 for 2002 on behalf of Messrs.
Drendel, Garrett, Leonhardt, Swithenbank and Story, respectively, (ii)
the profit sharing allocation of $9,505 to the account of each of
Messrs. Drendel, Garrett, Leonhardt, Swithenbank and Story under the
Employees Retirement Savings Plan for 2002, (iii) payment by the
Company in 2002 of the cash portion of the profit sharing allocations
to their respective Employees Retirement Savings Plan accounts of
$3,600 on behalf of each of Messrs. Drendel, Garrett, Leonhardt,
Swithenbank and Story, (iv) payment by the Company in 2002 of premiums
of $733, $440, $364, $310 and $290 for term life insurance on behalf
of Messrs. Drendel, Garrett, Leonhardt, Swithenbank and Story,
respectively, (v) the annual credit under the CommScope, Inc.
Supplemental Executive Retirement Plan (the "Restated Plan") in the
amount of $63,253, $29,951, $21,313, $15,537 and $13,440 for 2002 to
the regular accounts thereunder of Messrs. Drendel, Garrett,
Leonhardt, Swithenbank and Story, respectively and (vi) the
above-market portion of the annual interest credit under the Restated
Plan in the amount of $4,339, $2,034, $1,615, $2,560 and $306 for 2002
to the accounts thereunder of Messrs. Drendel, Garrett, Leonhardt,
Swithenbank and Story, respectively. The Restated Plan provides for
retirement benefits payable over 5, 10 or 15 years (or, upon approval
of the plan administrator and subject to forfeiture of a portion of
the participant's account balance, in a lump sum) out of amounts
credited to a participant's special and regular accounts and earnings
at a rate of 7% per year (or other rate that may be established by the
plan administrator) credited to undistributed amounts in those
accounts.
9
STOCK OPTIONS
GRANT OF OPTIONS. The table below sets forth information with respect
to grants of options to purchase Common Stock during the year ended
December 31, 2002 to the executives listed in the Summary Compensation
Table. Because the Company did not make any option grants to the executives
during the year-ended December 31, 2001, the Company granted these
executives two sets of options in 2002.
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------------------------- -------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRESENT
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE VALUE ($)(3)
----------------------- ------------------ ---------------- ------------ --------------- -------------
Frank M. Drendel 155,000 (1) 4.2 $16.20 2/21/2012 $1,295,800
272,000 (2) 7.3 $ 7.93 12/19/2012 $1,112,480
Brian D. Garrett 75,000 (1) 2.0 $16.20 2/21/2012 $ 627,000
130,000 (2) 3.5 $ 7.93 12/19/2012 $ 531,700
Jearld L. Leonhardt 50,000 (1) 1.3 $16.20 2/21/2012 $ 418,000
86,000 (2) 2.3 $ 7.93 12/19/2012 $ 351,740
Gene W. Swithenbank 32,000 (1) 0.9 $16.20 2/21/2012 $ 267,520
55,000 (2) 1.5 $ 7.93 12/19/2012 $ 224,950
Christopher A. Story 32,000 (1) 0.9 $16.20 2/21/2012 $ 267,520
66,000 (2) 1.8 $ 7.93 12/19/2012 $ 269,940
---------
(1) These options become exercisable with respect to one-third of the
shares covered thereby on February 21, 2003, February 21, 2004 and
February 21, 2005. In the event of a change in control of the Company,
all such options shall become immediately and fully exercisable.
(2) These options become exercisable with respect to one-third of the
shares covered thereby on December 19, 2003, December 19, 2004 and
December 19, 2005. In the event of a change in control of the Company,
all such options shall become immediately and fully exercisable.
(3) The assumptions used to develop the grant date present value under the
Black-Scholes option pricing model were as follows:
(a) Expected option term: 4.0 years
(b) Expected volatility: 66.0%
(c) Expected dividend yield: 0.0%
(d) Risk-free interest rate: 2.5%
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE. The following table
sets forth as of and for the year ended December 31, 2002, for each of the
executives listed in the Summary Compensation Table (i) the aggregated
shares acquired upon exercise of stock options during the year; (ii) the
value realized upon exercise of those options; (iii) the total number of
unexercised options for Common Stock (exercisable and unexercisable) held
at fiscal year-end; and (iv) the value of such options which were
in-the-money at fiscal year-end (based on the difference between the
closing price of Common Stock on the last day of the year and the exercise
price of the option on such date).
10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY STOCK
UNDERLYING UNEXERCISED STOCK OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR-END (#) YEAR-END ($)(a)
------------------------------ -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ----------- ----------- ----------- ------------- ----------- -------------
Frank M. Drendel...... -- $ -- 687,536 467,000 $ -- $ --
Brian D. Garrett...... -- $ -- 246,491 224,300 $ -- $ --
Jearld L. Leonhardt... -- $ -- 268,292 148,900 $ -- $ --
Gene W. Swithenbank... -- $ -- 135,885 119,709 $ -- $ --
Christopher A. Story.. -- $ -- 89,631 134,343 $ -- $ --
---------
(a) Based on the difference between the closing price of $7.90 per share
at December 31, 2002, as reported on the NYSE Composite Tape and the
exercise prices of the in-the-money, unexercised options on such date.
EMPLOYMENT AGREEMENTS
In November 1988, Frank M. Drendel entered into an employment
agreement (the "Agreement") with GI Delaware and CommScope NC, providing
for his employment as President and Chief Executive Officer of CommScope NC
for an initial term ending on November 28, 1991. The Agreement provides for
a minimum salary, which is less than Mr. Drendel's current salary, and
provides that Mr. Drendel will participate in any management incentive
compensation plan for executive officers that CommScope NC maintains.
Commencing on November 29, 1989, subject to early termination by reason of
death or disability or for cause (as defined in the Agreement), the
Agreement extends automatically so that the remaining term is always two
years, unless either party gives notice of termination, in which case the
Agreement will terminate two years from the date of such notice. As of the
date of this Proxy Statement, neither party has given notice of
termination. Pursuant to the Agreement, Mr. Drendel is eligible to
participate in all benefit plans available to other CommScope NC senior
executives. The Agreement prohibits Mr. Drendel, for a period of five years
following the term of the Agreement, from engaging in any business in
competition with the business of CommScope NC, in any country where
CommScope NC then conducts business. Effective as of the Spin-off, GI
Delaware ceased to be a party to the Agreement.
SEVERANCE PROTECTION AND SEPARATION AGREEMENTS
The Company has entered into severance protection agreements with its
Chief Executive Officer and its other executive officers. These agreements
continue in effect for a period of two years from January 1 of a given year
and are automatically extended for one year on January 1 of each year
unless notification is given to either the Company or the executive, except
that the term may not expire prior to 24 months following a Change in
Control (as defined in the agreement).
The agreements provide severance pay and other benefits in the event
of a termination of employment within 24 months of a Change in Control of
the Company if such termination is (i) by the Company for any reason other
than for cause or disability or (ii) by the executive for Good Reason (as
defined in the agreement). Such severance pay will be in an amount equal to
two times the sum of the executive's base salary and the target annual
bonus payable to the executive under the Company's annual incentive plan
for the fiscal year immediately preceding the fiscal year of termination in
the case of the Chief Executive Officer and one and one-half times such sum
in the case of all other executive officers. In addition, the Company will
pay the executive all accrued but unpaid compensation and a pro rata bonus
(calculated up to the executive's termination date). The executive's
benefits will be continued for either 24 months, in the case of the Chief
Executive Officer, or 18 months in the case of all other executive officers
11
(in each case, a "Continuation Period"). If, at the end of the Continuation
Period, the executive is not employed by another employer (including
self-employment), the executive will receive for up to six months, an
amount equal to one-twelfth (1/12) of the sum of the executive's base
amount and the executive's bonus amount. The executive will also receive
limited reimbursement for outplacement, tax and financial planning
assistance and reimbursement for relocation under certain circumstances.
The severance pay and benefits provided for under the severance protection
agreements shall be in lieu of any other severance pay to which the
executive may be entitled under any other plan, agreement or arrangement of
the Company or any of its affiliates. If the executive's employment is
terminated without cause (i) within six months prior to a Change in Control
or (ii) at any time prior to the date of a Change in Control but (A) at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a
Change in Control or (B) otherwise in connection with, or in anticipation
of, a threatened Change in Control which actually occurs, such termination
shall be deemed to have occurred after the Change in Control.
If the executive's employment is terminated by the Company for cause
or disability, by reason of the executive's death or by the executive other
than for Good Reason, the Company shall pay to the executive his accrued
compensation. In addition, in the case of a termination by the Company for
disability or due to the executive's death, the executive will receive a
pro rata bonus in addition to accrued compensation.
The agreements provide for a gross-up payment by the Company in the
event that the total payments the executive receives under the agreement or
otherwise are subject to the excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended. In such an event, the Company will pay an
additional amount so that the executive is made whole on an after-tax basis
from the effect of the excise tax.
OTHER CHANGE IN CONTROL ARRANGEMENTS
Following is a brief description of the change in control provisions
included in each of the Company's employee compensation plans and
arrangements.
ANNUAL INCENTIVE PLAN. The CommScope, Inc. Annual Incentive Plan (the
"Annual Incentive Plan") is the Company's annual cash bonus incentive plan
for the Chief Executive Officer and certain other key employees. In the
event of a change in control of the Company (as defined in the Annual
Incentive Plan), within 60 days thereafter, the Company will pay to each
participant in the Annual Incentive Plan immediately prior to such change
in control (regardless of whether such participant remains in the employ of
the Company following the change in control) a pro rata portion of his or
her bonus award assuming that all performance percentages are 100%.
DEFERRED COMPENSATION PLAN. The CommScope, Inc. of North Carolina
Deferred Compensation Plan (the "Deferred Compensation Plan") allows a
select group of management or highly compensated employees to defer a
percentage of compensation or a specified dollar amount each year up to 50%
of base salary and 100% of any bonuses earned under the Company's annual
management incentive plan for that year. Amounts deferred are payable in a
lump sum or in annual installments pursuant to the terms of an irrevocable
election made by the participant or earlier upon the occurrence of certain
events, including specified terminations of the participant's employment.
Upon a change in control of the Company (as defined in the Deferred
Compensation Plan), the Deferred Compensation Plan will terminate and each
participant will be paid his or her entire deferred compensation account
balance in a single lump sum.
12
1997 LTIP. The 1997 LTIP provides for the granting of stock options,
restricted stock, performance units, performance shares and phantom stock
to employees and officers of the Company and its subsidiaries and the
granting of stock and stock options to the Company's nonemployee directors.
The Compensation Committee selects those individuals to whom options and
awards will be granted, and determines the type, size and other terms and
conditions of such options and awards, including the vesting provisions
and/or restrictions relating to such awards. Pursuant to the terms of the
1997 LTIP and subject to an optionee's rights under his or her option or
award agreement, in the event of a change in control of the Company (as
defined in the 1997 LTIP), all stock options granted pursuant to the 1997
LTIP will become immediately and fully exercisable.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The CommScope, Inc.
Supplemental Executive Retirement Plan is an unfunded nonqualified plan
maintained for the benefit of a select group of management and/or highly
compensated employees of the Company and its subsidiaries that, in general,
provides for retirement benefits payable over 5, 10 or 15 years (or, upon
approval of the plan administrator and subject to forfeiture of a portion
of the participant's account balance, in a lump sum) out of amounts
credited to a participant's accounts and earnings credited thereon.
Pursuant to the terms of that plan, in the event of a Change in Control (as
defined therein), each participant who is employed by the Company
immediately prior to that change in control will be eligible to receive the
full value of his or her account balance in a single lump sum following his
or her termination other than for cause occurring within 2 years after the
date of such change in control.
13
COMPENSATION COMMITTEE REPORT ON
COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors is comprised
entirely of nonemployee directors. The Compensation Committee considers and
recommends to the Board of Directors the base salary to be paid to the
Chief Executive Officer, determines the base salary for all other executive
officers, makes recommendations to the Board of Directors with respect to
the Company's overall compensation policies, administers and grants awards
under the 1997 LTIP and administers the Annual Incentive Plan with respect
to executive officers and performs such duties as the Board of Directors
may from time to time request.
In establishing and administering the Company's compensation policies
and programs, the Compensation Committee considered the compensation plans
and arrangements of a peer group of companies with which the Company
competes for customers and executive talent, including the levels of
individual compensation for similarly situated executives of the peer
group, as well as factors specifically relevant to the Company. The basic
objective of the Compensation Committee is to formulate compensation
policies and programs intended to attract, retain, and motivate highly
qualified key employees, including executive officers. Compensation of
executive officers and other key employees, including the Chief Executive
Officer, is comprised of three principal elements: (i) stock ownership,
(ii) base salary and (iii) annual bonus.
STOCK OWNERSHIP
The Compensation Committee believes that executive officers and other
significant employees, who are in a position to make a substantial
contribution to the long-term success of the Company and to build
stockholder value, should have a significant stake in the Company's
on-going success. This focuses attention on managing the Company as an
owner with an equity position in the business and seeks to align these
employees' interests with the long-term interests of stockholders.
Accordingly, one of the Company's principal methods to motivate executive
officers and other significant employees is through a broad and deep stock
option program.
Ordinarily the Company has awarded options annually under the 1997
LTIP in December of a given year. However, in December 2001, the Company
did not award any options under the 1997 LTIP because the Company was
considering changing the timing of option grants from an annual basis to a
different basis and evaluating the impact of a recent acquisition on its
stock option plans. On February 21, 2002, the Company awarded options under
the 1997 LTIP to purchase an aggregate of approximately 189,000 shares of
Common Stock to the executive officers named in the Summary Compensation
Table (other than the Chief Executive Officer whose grants are described
below). Such option awards were consistent with those that would have been
made in December of 2001. The exercise price of each of these options as of
the date of grant was the closing market price per share of Common Stock on
the date of grant.
In addition, on December 19, 2002, the Company granted options under
the 1997 LTIP to purchase an aggregate of approximately 337,000 shares of
Common Stock to the executive officers named in the Summary Compensation
Table (other than the Chief Executive Officer whose grants are described
below). In doing so, the Company returned to its historical practice of
making annual option grants in December. The exercise price of each of
these options was the closing market price per share of Common Stock on the
date of grant.
Management recommends to the Compensation Committee those executive
officers and other significant employees to whom options should be granted
and the number of options to be granted to them. The recommendations are
based on a review of each employee's individual performance, position and
14
level of responsibility in the Company, long-term potential contribution to
the Company and the number of options previously granted to the employee.
Neither management nor the Compensation Committee assigned specific weights
to these factors, although the executive's position and a subjective
evaluation of his performance were considered most important. Generally,
the number of options granted to an executive reflects his or her level of
responsibility and position in the Company. To encourage key employees to
remain in the employ of the Company, options generally vest and become
exercisable over a three- or four-year period and normally are not
exercisable until one year after the date of grant.
BASE SALARY
The Compensation Committee believes that it is important to pay
reasonable and competitive salaries. Salaries paid to executive officers
are based on the Chief Executive Officer's recommendations to the
Compensation Committee, which is responsible for reviewing and approving or
disapproving those recommendations. Generally, an executive's base salary
reflects his level of responsibility and position in the Company.
During 2002, only Messrs. Switherbank and Story, two executive
officers named in the Summary Compensation Table, received base salary
increases. These increases were based upon each officer's individual
services rendered, level and scope of responsibility and experience. Also
taken into account was the relationship of the compensation of such
officers to the compensation of officers occupying comparable positions in
other organizations.
ANNUAL INCENTIVE BONUS
The Annual Incentive Plan is intended to provide a means of annually
rewarding certain key employees, including the executives listed in the
Summary Compensation Table, based on the performance of the Company. In
addition, awards for each officer (other than the Chief Executive Officer)
may be adjusted based on the officer's achievement of a personal
performance percentage. This approach allows management to focus on key
business objectives in the short-term, and to support the long-term
performance orientation of stock ownership. Under the Annual Incentive
Plan, in 2002 management recommended, and the Compensation Committee
established, for each executive officer a bonus target percentage of that
officer's salary. That percentage was based on the officer's position in
the Company and was the percentage of the officer's salary that would be
paid if the performance targets were met. The target award percentage for
executive officers named in the Summary Compensation Table (other than the
Chief Executive Officer) for 2002 ranged from 50% to 60%. The target award
percentage for the Chief Executive Officer was 75%. Because the Company's
performance target for 2002 basic earnings per share was not achieved, in
2002 no target awards were paid with respect to performance in 2002 (see
"Summary Compensation Table - Bonus").
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 2001, the Company amended and restated the terms
and conditions of the CommScope, Inc. of North Carolina Supplemental
Executive Retirement Plan to change the plan from a defined benefit type
plan to a defined contribution plan. The amendment and restatement does not
apply with respect to participants who were retired as of December 31,
2000. The amended and restated plan is named the CommScope, Inc.
Supplemental Executive Retirement Plan and provides for retirement benefits
payable over 5, 10 or 15 years (or, upon approval of the plan administrator
and subject to forfeiture of a portion of the participant's account
balance, in a lump sum) out of amounts credited to a participant's special
and regular accounts and earnings at a rate of 7% per year (or other rate
that may be established by the plan administrator).
15
CHIEF EXECUTIVE OFFICER COMPENSATION
Frank M. Drendel has served as Chairman and Chief Executive Officer of
the Company since July 1997. In 2002, the Compensation Committee
recommended and the Board of Directors of the Company approved of Mr.
Drendel's annual salary rate being kept at $555,000 (no increase),
effective March 1, 2002, and his target bonus percentage under the Annual
Incentive Plan remained at 75%. Mr. Drendel's salary and target bonus
percentage was determined based on factors such as the Company's overall
performance, Mr. Drendel's individual performance, and the compensation of
similarly situated executives at comparable corporations.
The Compensation Committee recommended and on February 21, 2002, Mr.
Drendel was granted an option to purchase 155,000 shares of Common Stock
with a per share exercise price of $16.20, the closing market price of the
Common Stock on the date of the grant. In addition, on December 19, 2002,
the Company granted Mr. Drendel an option to purchase 272,000 shares of
Common Stock with a per share exercise price of $7.93, the closing market
price of the Common Stock on the date of grant. In each case, the options
vest over a period of 3 years at a rate of 33 1/3% per year. The options
would become immediately and fully exercisable in the event of a Change in
Control of the Company.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which was enacted in 1993, generally disallows a federal income
tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive officer or
any of the four other most highly compensated executive officers who are
employed by the Company on the last day of the taxable year. Section
162(m), however, does not disallow a federal income tax deduction for
qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders.
The Compensation Committee has considered the tax deductibility of
compensation awarded under the 1997 LTIP and the Annual Incentive Plan in
light of Section 162(m). The Company structured and intends to administer
the stock option, performance unit and performance share portions of the
1997 LTIP with the intention that the resulting compensation payable
thereafter qualify as "performance-based compensation" and be deductible.
The Company has structured the Annual Incentive Plan with the intention
that awards payable thereafter to the Chief Executive Officer qualify as
"performance-based" compensation and, if so qualified, be deductible. No
executive officer's compensation in 2002 was non-deductible by reason of
the application of Section 162(m) and it is not expected that any executive
officer's compensation will be non-deductible in 2003 by reason of the
application of Section 162(m).
Respectfully submitted,
COMPENSATION COMMITTEE
GEORGE N. HUTTON, JR., CHAIRMAN
DUNCAN M. FAIRCLOTH
BOYD L. GEORGE
JAMES N. WHITSON
JUNE E. TRAVIS
16
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors, is providing this
report to enable stockholders to understand how it monitors and oversees
the Company's financial reporting process. The Audit Committee consists of
five directors, all of whom are independent within the meaning of The New
York Stock Exchange rules, and operates pursuant to an Audit Committee
Charter that is reviewed annually by the Audit Committee and updated as
appropriate.
This report confirms that the Audit Committee has: (i) reviewed and
discussed the audited financial statements for the year ended December 31,
2002 with management and the Company's independent public accountants; (ii)
discussed with the Company's independent public accountants the matters
required to be reviewed pursuant to the Statement on Auditing Standards No.
61 (Communications with Audit Committees); (iii) reviewed the written
disclosures letter from the Company's independent public accountants as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees); and (iv) discussed with the Company's
independent public accountants their independence from the Company.
The Audit Committee of the Board of Directors has considered whether
the provision of non-audit professional services rendered by Deloitte &
Touche LLP, as discussed above and disclosed elsewhere in this proxy
statement, is compatible with maintaining their independence.
Based upon the above review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements
for the year ended December 31, 2002 be included in the Company's Annual
Report on Form 10-K for filing with the Securities and Exchange Commission.
Respectfully submitted,
AUDIT COMMITTEE
JAMES N. WHITSON, CHAIRMAN
DUNCAN M. FAIRCLOTH
BOYD L. GEORGE
GEORGE N. HUTTON, JR.
JUNE E. TRAVIS
17
PERFORMANCE GRAPH
The following graph compares cumulative total return on $100 invested
on July 28, 1997, the first day the Common Stock began trading after the
Spin-off, in each of the Common Stock, the Standard & Poor's 500 Stock
Index ("S&P 500") and the Standard & Poor's MidCap 400 Telecommunications
Equipment Index ("Telecommunications Equip-Mid") (formerly the Standard &
Poor's MidCap 400 Communications Equipment Index). The return of the
Standard & Poor's indices is calculated assuming reinvestment of dividends.
The Company has not paid any dividends. The stock price performance shown
on the graph below does not include "when-issued" trading prior to the
Spin-off and is not necessarily indicative of future price performance.
[graph]
INDEXED RETURNS
----------------------------------------------------------
YEARS ENDING
BASE PERIOD ----------------------------------------------------------
COMPANY / INDEX DEC97 DEC98 DEC99 DEC00 DEC01 DEC02
---------------------------- ------------ --------- ---------- ---------- ---------- ---------
CommScope, Inc. 100 123.39 295.87 121.56 156.11 57.98
S&P 500 Index 100 128.58 155.63 141.46 124.65 97.10
S&P 400 Telecommunications 100 80.88 387.22 165.11 273.94 164.50
Equipment
18
BENEFICIAL OWNERSHIP OF COMMON STOCK
The table below sets forth information as to the beneficial ownership
of Common Stock as of March 21, 2003 (except as otherwise specified) by all
directors and the persons listed in the Summary Compensation Table as well
as by directors and executive officers of the Company as a group and, to
the best knowledge of the Company's management, beneficial owners of 5% or
more of the outstanding Common Stock. In the table below, unless otherwise
noted, the address of the person is in care of the Company.
SHARES OF COMMON % OF SHARES OUTSTANDING
NAME STOCK BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
---------------------------------------- --------------------------- -----------------------
Furukawa (2) 7,656,900 12.9%
Barclays Bank Plc(3) 4,475,810 7.6%
Frank M. Drendel (4)(14) 1,174,433 2.0%
Duncan M. Faircloth (5) 27,666 *
Brian D. Garrett (6)(14) 353,753 *
Boyd L. George (7) 44,999 *
George N. Hutton, Jr. (8) 36,332 *
Jearld L. Leonhardt (9)(14) 320,335 *
Christopher A. Story (10)(14) 105,394 *
Gene W. Swithenbank (11)(14) 178,639 *
June E. Travis (12) 7,666 *
James N. Whitson (13) 35,999 *
All current directors and executive
officers of the Company as a group
(14 persons)(15) 2,679,723 4.5%
---------
* The percentage of shares of the Common Stock beneficially owned does
not exceed one percent of the shares of Common Stock outstanding.
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares of Common Stock which such
person has the right to acquire within 60 days following March 21,
2003. For purposes of computing the percentage of outstanding shares
of Common Stock held by each person or group of persons named above,
any security which such person or persons has or have the right to
acquire within 60 days following March 21, 2003 is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The table does
not include shares of Common Stock subject to options to be awarded in
the future under the 1997 LTIP.
(2) Based on the Schedule 13G, dated October 21, 2002, filed with the
Commission, Furukawa has sole voting power and sole dispositive power
with respect to all shares shown above. The business address of
Furukawa, as reported on its Schedule 13G is The Furukawa Electric
Co., Ltd., 6-1, Marunouchi 2-Chome, Chiyoda-Ku, Tokyo, Japan,
100-8322.
(3) Based on the Schedule 13G, dated February 10, 2003, filed with the
Commission, Barclays Bank Plc and other affiliated entities shares
voting power and dispositive power with respect to all shares shown
above and holds such shares in trust accounts for the economic benefit
of the beneficiaries of those accounts. The business address of
Barclays Bank Plc, as reported on its Schedule 13G, is 54 Lombard
Street, London, England EC3P 3AH.
(4) Includes 739,202 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003. Also
includes 100 shares held by the spouse of Frank M. Drendel.
(5) Includes 26,666 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(6) Includes 271,491 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
19
(7) Includes 34,999 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003. Also
includes 2,000 shares of Common Stock held by the children of Boyd L.
George, as to which shares Boyd L. George disclaims beneficial
ownership.
(8) Includes 34,999 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(9) Includes 284,958 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003. Also
includes 1,000 shares held by the spouse of Jearld L. Leonhardt.
(10) Includes 101,135 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(11) Includes 168,793 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(12) Includes 6,666 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(13) Includes 34,999 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003.
(14) Includes the number of shares of Common Stock which were held by the
trustee of the Employees Retirement Savings Plan and were allocated to
the individual's respective account under the Employees Retirement
Savings Plan as of February 28, 2003 as follows: Frank M. Drendel,
1,281 shares; Brian D. Garrett, 1,243 shares; Jearld L. Leonhardt,
1,928 shares; Christopher A. Story, 1,259 shares; and Gene W.
Swithenbank, 5,080 shares.
(15) Includes 2,072,143 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 21, 2003. Includes
an aggregate of 21,398 shares of Common Stock which were held by the
trustees of the Employees Retirement Savings Plan and were allocated
to the current officers' respective accounts under the Employees
Retirement Savings Plan as of February 28, 2003.
20
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF AUDITOR
The Board of Directors, based on the recommendation of the Audit
Committee, appointed the firm of Deloitte & Touche LLP as independent
auditor to examine the books of account and other records of the Company
and its consolidated subsidiaries for the 2003 fiscal year. The Board of
Directors is asking the stockholders to ratify and approve this action.
Deloitte & Touche LLP has been the Company's independent auditor since July
1997. Representatives of the auditing firm will be present at the Annual
Meeting and will be afforded the opportunity, if they so desire, to make a
statement or respond to appropriate questions that may come before the
Annual Meeting.
Although such ratification is not required by law, the Board of
Directors believes that stockholders should be given the opportunity to
express their views on the subject. While not binding on the Board of
Directors, the failure of the stockholders to ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditor would be
considered by the Board of Directors in determining whether to continue
with the services of Deloitte & Touche LLP.
INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees and expenses billed by Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective worldwide
affiliates ("Deloitte") for professional services rendered for the audit of
the Company's annual consolidated financial statements for the year ended
December 31, 2002 and the reviews of the consolidated financial statements
included in the Company's Quarterly Reports on Form 10-Q for that year
amounted to $317,525.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees and expenses billed by Deloitte for professional
information technology services rendered to the Company relating to
financial information systems design and implementation for the year ended
December 31, 2002 amounted to $5,000.
ALL OTHER FEES
The aggregate fees and expenses billed by Deloitte for professional
services rendered to the Company relating to services other than those
described above under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees" for the year ended December 31, 2002
amounted to $345,645. This amount includes $263,599 of tax-related fees and
$82,046 of audit-related fees.
The Audit Committee of the Company's Board of Directors has considered
whether the provision of non-audit professional services rendered by
Deloitte, as discussed above, is compatible with maintaining their
independence.
21
STOCKHOLDER PROPOSALS FOR THE COMPANY'S 2004 ANNUAL MEETING
Stockholders who intend to present proposals at the 2004 Annual
Meeting of Stockholders, and who wish to have such proposals included in
the proxy statement for such meeting, must submit such proposals in writing
by notice delivered or mailed by first-class United States mail, postage
prepaid, to the Secretary, CommScope, Inc., 1100 CommScope Place, S.E.,
P.O. Box 339, Hickory, North Carolina 28602, and such notice must be
received no later than November 30, 2003. Such proposals must meet the
requirements set forth in the rules and regulations of the Commission in
order to be eligible for inclusion in the Company's proxy statement for its
2004 Annual Meeting of Stockholders.
In addition, under the Company's By-laws, stockholders must comply
with specified procedures to nominate directors or introduce an item of
business at the Annual Meeting. Nominations or an item of business to be
introduced at an annual meeting must be submitted in writing and received
by the Company generally not less than 60 days nor more than 90 days in
advance of an annual meeting. To be in proper written form, a stockholder's
notice must contain the specific information required by the Company's
By-laws. A copy of the Company's By-laws, which describes the advance
notice procedures, can be obtained from the Secretary of the Company.
SOLICITATION OF PROXIES
Proxies will be solicited electronically, by mail, telephone, or other
means of communication. Solicitation of proxies also may be made by
directors, officers and regular employees of the Company. The Company has
retained Morrow & Co., Inc. to assist in the solicitation of proxies from
stockholders. Morrow & Co., Inc. will receive a fee of $5,500 plus
reimbursement of certain out-of-pocket expenses. The Company will reimburse
brokerage firms, custodians, nominees and fiduciaries in accordance with
the rules of the NYSE, for reasonable expenses incurred by them in
forwarding materials to the beneficial owners of shares. The entire cost of
solicitations will be borne by the Company.
OTHER MATTERS
The Company knows of no other matter to be brought before the Annual
Meeting. If any other matter requiring a vote of the stockholders should
come before the Annual Meeting, it is the intention of the persons named in
the proxy to vote with respect to any such matter in accordance with their
best judgment.
The Company will furnish, without charge, to each person whose proxy
is being solicited upon written request, a copy of its Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, as filed with the
Commission (excluding exhibits). Copies of any exhibits thereto also will
be furnished upon the payment of a reasonable duplicating charge. Requests
in writing for copies of any such materials should be directed to
CommScope, Inc., 1100 CommScope Place, S.E., P.O. Box 339, Hickory, North
Carolina 28602, Attention: Investor Relations.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Frank B. Wyatt, II
Frank B. Wyatt, II
Secretary
Dated: March 27, 2003
Hickory, North Carolina
22
COMMSCOPE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 2, 2003
The undersigned hereby appoints Frank B. Wyatt, II and Jearld L. Leonhardt
and each or either of them his/her attorneys and agents, with full power of
substitution to vote as Proxy for the undersigned as herein stated at the
Annual Meeting of Stockholders of CommScope, Inc. (the "Company") to be
held at the JP MorganChase Bank, 270 Park Avenue, 11th Floor, New York, New
York 10017 on Friday, May 2, 2003 at 1:30 p.m., local time, and at any
adjournment thereof, according to the number of votes the undersigned would
be entitled to vote if personally present, on the proposals set forth on
the reverse hereof and in accordance with their discretion on any other
matters that may properly come before the meeting or any adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice and
Proxy Statement, dated March 27, 2003. IF THIS PROXY IS RETURNED WITHOUT
DIRECTION BEING GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSALS ONE AND
TWO.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
The Board of Directors recommends that stockholders vote "FOR" Proposals
One and Two.
PROPOSAL ONE: To elect two Class III directors for terms ending at the
2006 Annual Meeting of Stockholders.
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as marked to the contrary) to vote for all nominees
listed below
Nominees: Frank M. Drendel and Duncan M. ("Lauch") Faircloth
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME.
PROPOSAL TWO: To ratify the appointment by the Board of Directors of the
Company of Deloitte & Touche LLP as independent auditor for
the Company for the 2003 fiscal year.
FOR / / AGAINST / / ABSTAIN / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If
acting as attorney, executor, administrator,
trustee, guardian, etc., you should so
indicate when signing. If a corporation,
please sign the full corporate name by
President or other duly authorized officer.
If a partnership, please sign in full
partnership name by authorized person. If
shares are held jointly, both parties must
sign and date.
Signature(s): Date:
----------------------------- -------------------------
Signature(s): Date:
----------------------------- -------------------------
COMMSCOPE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 2, 2003
The undersigned hereby authorizes and directs Vanguard Fiduciary Trust
Company, as trustee (the "Trustee") of the CommScope, Inc. of North
Carolina Employees Retirement Savings Plan, to vote as Proxy for the
undersigned as herein stated at the Annual Meeting of Stockholders of
CommScope, Inc. (the "Company") to be held at the JP MorganChase Bank, 270
Park Avenue, 11th Floor, New York, New York 10017, on Friday, May 2, 2003
at 1:30 p.m., local time, and at any adjournment thereof, all shares of
Common Stock of CommScope, Inc. allocated to the account of the undersigned
under such Plan, on the proposals set forth on the reverse hereof and in
accordance with the Trustee's discretion on any other matters that may
properly come before the meeting or any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice and Proxy Statement,
dated March 27, 2003.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED BY THE TRUSTEE IN ITS SOLE
DISCRETION IN THE BEST INTEREST OF THE PLAN PARTICIPANTS AND BENEFICIARIES.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
The Board of Directors recommends that stockholders vote "FOR" Proposals
One and Two.
PROPOSAL ONE:To elect two Class III directors for terms ending at the
2006 Annual Meeting of Stockholders.
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as marked to the contrary) to vote for all nominees
listed below
Nominees: Frank M. Drendel and Duncan M. ("Lauch") Faircloth
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME.
PROPOSAL TWO: To ratify the appointment by the Board of Directors of the
Company of Deloitte & Touche LLP as independent auditor for
the Company for the 2003 fiscal year.
FOR / / AGAINST / / ABSTAIN / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If
acting as attorney, executor, administrator,
trustee, guardian, etc., you should so
indicate when signing. If a corporation,
please sign the full corporate name by
President or other duly authorized officer.
If a partnership, please sign in full
partnership name by authorized person. If
shares are held jointly, both parties must
sign and date.
Signature(s): Date:
----------------------------- -------------------------
Signature(s): Date:
----------------------------- -------------------------