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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ 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)) | |
| ☐ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 | |
COMMSCOPE HOLDING COMPANY, 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):
| ☒ | No fee required. | |||
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PRELIMINARY PROXY STATEMENT - SUBJECT TO COMPLETION
[●], 2021
Dear CommScope Stockholders,
2020 was a tumultuous year for most of us: we suffered many things, achieved many things, and learned many things. One of the things that 2020 has brought home is that, in a time of physical distancing, connectivity in every other form has become essential. It will remain essential as populations grow and spread out and as connectivity becomes more critical to our livelihoods as well as our humanity. We are one of the leading providers of that connectivity. Indeed, we are built both to help others thrive in changing and difficult times, and to do so ourselves. We are providers of the technologies that enable and deliver the broadband connectivity that is essential to our digital society.
2020 also highlighted the importance of safety and risk management in a world that often prefers to focus only on hope and potential instead. That has been one of our defining strengths for some time: we are not a company that has to bet its future on one digital evolution or another—we are built to be directionally agnostic on some of the cross-currents within our industry as we can serve so many forms of communication and network operators and customers. In a sector like ours where sudden changes in technology can wipe out entire subsectors quickly, we believe this is a major competitive advantage and the epitome of real risk management.
2020 was also a year in which we took significant environmentally and socially positive steps, each of which also enhances our financial sustainability, including reductions in GHG, water usage, waste generation and non-recyclable plastics use. For our people, we implemented coronavirus (COVID-19) pandemic management procedures, enhanced our diversity, equity and inclusion programs, increased our employee feedback practices, maintained our strong employee training and development opportunities and continued our significant benefits programs for employees and their families.
2021 is a year of opportunity for us. The need for network infrastructure to support connectivity and mobility is only going to increase in a work-from-and-be-entertained-from-anywhere era. Our customers will need to spend significantly to finish the move to a wireless world, to cover “the last mile” in all its forms, and to balance the need for data privacy and security with convenience and the efficiency of the cloud and to harness high frequency 5G. We are positioned to help with all of these.
We ask for your support on the voting items described in this proxy statement so we can seize these opportunities and help make the world a better place in the process. Thank you for your investment in us; we work to deserve your capital and your trust every day.
| Sincerely, |
|
| Charles L. Treadway |
| President and Chief Executive Officer |
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COMMSCOPE HOLDING COMPANY, INC.
1100 CommScope Place, SE
Hickory, North Carolina 28602
NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and accompanying proxy (Proxy Statement) are being furnished to the stockholders of CommScope Holding Company, Inc., a Delaware corporation (Company or CommScope), in connection with the solicitation of proxies by the Board of Directors of the Company (Board or Board of Directors) for use at the Annual Meeting of Stockholders, and at any adjournment or postponement thereof (Annual Meeting), for the purposes set forth in this Notice of 2021 Annual Meeting of Stockholders.
Time and Date: 1:00 p.m., Eastern Time, on Friday, May 7, 2021,
Access to the Virtual Meeting: The meeting will be hosted at https://web.lumiagm.com/285972254. The meeting will begin promptly at 1:00 p.m., Eastern Time, and online access will open 15 minutes prior to allow time to log-in. The log-in password is: commscope2021. You will also need your voter control number, which, if you are a stockholder of record, you can find on your original proxy card or Notice of Internet Availability of Proxy Materials.
If you hold your shares in “street name” through an intermediary, such as a bank or broker, you must register in advance in order to ask questions or vote your shares at the Annual Meeting. In order to register, you must first obtain proof of your proxy power (legal proxy) reflecting the number of shares of CommScope Holding Company, Inc. common stock you held as of the record date, along with your name and email address. You then must submit a request for registration to American Stock Transfer & Trust Company, LLC (AST): (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Requests for registration must be labeled as “Legal Proxy,” must include the e-mail from your broker, bank or other nominee or an image of your legal proxy, and be received by AST no later than 5:00 p.m., Eastern Time, on May 3, 2021. You will receive a confirmation email from AST of your registration, which will include your voter control number.
Who Can Vote: Only holders of our common stock, par value $0.01 per share (common stock), and shares of Series A Convertible Preferred Stock, liquidation preference $1,000 per share (Series A Convertible Preferred Stock) at the close of business on [●], 2021 will be entitled to receive notice of, and to vote at, the Annual Meeting.
Proxy Voting: Your Vote is Important. Please vote your shares at your earliest convenience. This will ensure the presence of a quorum at the meeting. Promptly voting your shares via the Internet, by telephone, or, if you request printed copies of the proxy materials by mail, by signing, dating and returning the enclosed proxy card or voting instruction form will save the expenses and extra work of solicitation. If you request printed copies of the proxy materials by mail and you wish to vote by mail, we have enclosed an envelope, postage prepaid if mailed in the United States. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your option. You may revoke your proxy at any time before it is voted by delivering to the Company a subsequently executed proxy or a written notice of revocation or by voting at the Annual Meeting by following the instructions above under “Access to Virtual Meeting.”
Items of Business:
The holders of shares of Series A Convertible Preferred Stock will be asked:
| • | To elect one director designated by The Carlyle Group (Carlyle) for a term ending at the 2022 Annual Meeting of Stockholders or until his successor is elected and qualified to serve. |
The holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class, will be asked:
| • | To consider and vote upon an amendment to the Company’s Amended and Restated Certificate of Incorporation to eliminate the classified structure of the Board of Directors of CommScope; |
| • | To elect four directors to the Board of Directors of CommScope; |
| • | To approve, on a non-binding advisory basis, the compensation of our named executive officers (NEOs), as described in this Proxy Statement; |
| • | To approve additional shares under our 2019 Long Term Incentive Plan; |
| • | To approve the termination of executive performance options and grant of selective performance-based retention equity awards; |
| • | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021; and |
| • | To transact any other business that may properly come before the Annual Meeting. |
Proxy Statement and Annual Report: A Notice of Internet Availability of Proxy Materials (Notice) or this Proxy Statement are first being mailed on or about [●], 2021. Our 2020 Annual Report to Stockholders accompanies but is not part of these proxy materials.
BY ORDER OF THE BOARD OF DIRECTORS,
Sincerely,
Frank B. Wyatt, II
Secretary
[●], 2021
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We provide the below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and CommScope 2020 Annual Report before you vote.
The Annual Meeting
| Date and Time: |
Friday, May 7, 2021 1:00 p.m., Eastern Time | |
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Virtual Meeting Site: |
https://web.lumiagm.com/285972254 | |
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Log-In Password: |
commscope2021 | |
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Record Date: |
[●], 2021 | |
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Attendance Information for Stockholders of Record: |
If you were a holder of record of common stock of CommScope at the close of business on the Record Date (i.e. your shares are held in your own name in the records of CommScope’s transfer agent, American Stock Transfer & Trust Company, LLC (AST)), you can attend the meeting by visiting the Virtual Meeting Site and entering the Log-In Password provided above and the 11-digit control number previously provided to you in your proxy materials. If you are a stockholder of record and you have misplaced your 11-digit control number, please call AST at (800) 937-5449 or (718) 921-8124. |
| Attendance Information for “Beneficial” and “Street Name” Holders: |
If you were a beneficial owner of common stock of CommScope at the close of business on the Record Date (i.e. you hold your shares in “street name” through an intermediary, such as a bank, broker or other nominee), you must register in advance in order to ask questions or vote your shares at the meeting. To register, please obtain a legal proxy from the bank, broker or other nominee that is the record holder of your shares and then submit the legal proxy, along with your name and email address, to AST to receive an 11-digit control number that may be used to access the Virtual Meeting Site provided above. Any control number that was previously provided with your proxy materials (likely a 16-digit number) will not provide access to the Virtual Meeting Site. Requests for registration and submission of legal proxies should be labeled as “Legal Proxy” and must be received by AST no later than 5:00 p.m., Eastern Time, on May 3, 2021. All such requests should be submitted (1) by email to proxy@astfinancial.com, (2) by facsimile to (718) 765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Once you have obtained your 11-digit control number from AST, please follow the steps set forth above for stockholders of record to attend the meeting. |
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PROXY SUMMARY
Proposals Up for Vote
The following proposals will be voted on at the Annual Meeting of Stockholders.
| Board’s Recommendation
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Page Reference (for more detail)
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| Item 1. | To approve a proposal to amend the Company’s amended and restated certificate of incorporation (our Certificate of Incorporation) to declassify the Company’s Board of Directors
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✓
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FOR
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20
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| Item 2. | To elect one director designated by Carlyle for a term ending at the 2022 Annual Meeting of Stockholders or until his successor is elected and qualified to serve
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✓
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FOR the
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23
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| Item 3. | To elect four directors to the Board of Directors of CommScope
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✓
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FOR each nominee
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23
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| Item 4. | To approve, on a non-binding advisory basis, the compensation of our NEOs, as described in this Proxy Statement
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✓
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FOR
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49
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| Item 5. | To approve additional shares under our 2019 Long Term Incentive Plan
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✓
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FOR
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86
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| Item 6. | To approve the termination of executive performance options and grant of selective performance-based retention equity awards
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✓
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FOR
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95
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| Item 7. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021
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✓
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FOR
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100
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PROXY SUMMARY
How to Cast Your Vote
Your vote is important! Please cast your vote and play a part in the future of CommScope.
Stockholders of record, who hold shares registered in their names, can vote by:
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| Internet at | calling 1-800-PROXIES | |||
| www.voteproxy.com | toll-free from the | return the signed | ||
| United States or Canada | proxy card | |||
The deadline for voting online or by telephone is 11:59 p.m., Eastern Time, on May 3, 2021. If you vote by mail, your proxy card must be received before the Annual Meeting.
Beneficial owners, who own shares through a bank, brokerage firm or other financial institution, can vote by returning the voting instruction form or by following the instructions for voting via telephone or the Internet provided by their bank, broker or other organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.
If you are a stockholder of record or a beneficial owner who has a legal proxy to vote the shares and has registered in advance with AST and received a control number to attend the virtual Annual Meeting, you may choose to vote at the virtual Annual Meeting. Even if you plan to attend our virtual Annual Meeting, please cast your vote as soon as possible.
See the “Questions and Answers About the Annual Meeting and Voting” section for more details.
Board Nominees (page 24)
CommScope’s Board of Directors currently has twelve members, eleven of whom are currently divided into three classes with staggered three-year terms and one of whom is a designee of Carlyle under the terms of the Investment Agreement with Carlyle dated November 8, 2018 (Investment Agreement) and serves a one-year term. There is also currently one vacancy, which is to be filled by Carlyle in accordance with the terms of the Investment Agreement. The following table provides summary information about each director including the nominees standing for re-election to the Board of Directors.
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Committees | |||||||||||||
| Age
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Tenure
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Independent
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Audit
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Compensation
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Nominating and Corporate Governance
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Other Public Company Boards
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| Carlyle Nominee |
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| Patrick R. McCarter |
46 | 2020 | ✓ | ✓ | ✓ | 1 | ||||||||
| Class II Nominees |
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| Mary S. Chan |
58 | 2020 | ✓ | ✓ | 2 | |||||||||
| Stephen C. Gray |
62 | 2011 | ✓ | C | 0 | |||||||||
| L. William Krause |
78 | 2011 | ✓ | ✓ | ✓ | 0 | ||||||||
| Class III Nominee |
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| Derrick A. Roman |
57 | 2021 | ✓ | ✓ | 0 | |||||||||
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Committees | |||||||||||||
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Age
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Tenure
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Independent
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Audit
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Compensation
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Nominating and Corporate Governance
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Other Public Company Boards
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| Continuing |
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| Claudius E. Watts IV, Chairman |
59 | 2011 | 0 | |||||||||||
| Frank M. Drendel |
76 | 2011 | 0 | |||||||||||
| Joanne M. Maguire |
67 | 2016 | ✓ | C | 2 | |||||||||
| Thomas J. Manning |
65 | 2014 | ✓ | ✓ | 2 | |||||||||
| Charles L. Treadway |
55 | 2020 | 0 | |||||||||||
| Timothy T. Yates |
73 | 2013 | L | C | 0 | |||||||||
| Non-Continuing |
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| Austin A. Adams(1) |
77 |
2014 |
✓ |
✓ |
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0 | |||||||
L Lead Independent Director
C Chair
(1) Mr. Adams’ current term expires at the Annual Meeting and he will not be standing for re-election.
Stockholder Outreach Highlights (page 54)
The CommScope management team regularly meets with investors to discuss a variety of business, industry and competitive dynamics. During the course of these discussions, the Company gathers feedback on its executive compensation programs to ensure that interests are aligned with stockholders. In 2020, the Company conducted stockholder outreach that included members from various parts of the organization, including Investor Relations, the General Counsel’s office, Human Resources, and Sustainability. Our outreach in 2020 included 8 of our top 11 stockholders, representing over 60% of the outstanding common stock, and we had discussions with stockholders that collectively own about 53% of the outstanding common stock.
Our Response to COVID-19
From the onset of the COVID-19 pandemic, our Board and management team have maintained regular communications and our management team has communicated regularly with all employees to ensure both the Company and our employees navigated the pandemic successfully.
| • | Protecting and Caring for our Employees is a Top Priority: CommScope was deemed an essential business in our employment jurisdictions around the world due to the importance of the critical infrastructure solutions we design and deliver. We’re grateful to our employees for their dedication and resilience during this challenging period. For our employees working on the front-line in our labs, factories and distribution centers, we implemented new and rigorous health and safety protocols at all of our facilities worldwide. We also have thousands of employees working remotely from home. The Company has provided an abundance of new tools, resources and benefits to our employees to help them successfully navigate our new world. They range from a new COVID-19 paid leave offering (up to 10 days, with supplemental paid leave available, as needed), robust wellness resources and new technologies and work approaches to regular communications from leaders and team members to ensure support was always available. We’re gratified by our most recent employee pulse survey results (October 2020) which magnify the high levels of engagement, trust and pride that is prevalent throughout CommScope. |
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PROXY SUMMARY
| • | Supporting our Communities is part of our Mission: We recognized the importance of providing a variety of resources and approaches to support the many community needs resulting from the pandemic. From providing resources for pop-up Wi-Fi centers for emergency health care delivery and equipping school buses with outdoor Wi-Fi access points for distance learning, to donating wireless systems and face shields to hospitals around the globe, CommScope proudly lived its values. In addition, our employees were encouraged to use their new special paid leave offering to support community outreach efforts of their choosing. From producing face masks and face shields to working at local food banks and conducting outreach calls to our retirees, our employees rose to the occasion in support of their local communities. Lastly, our global hunger relief campaign resulted in significant funding for several organizations as a result of the donations provided by our employees and CommScope. |
| • | Helping our Customers and Partners is Why We’re Here: Throughout the COVID-19 pandemic, the strength and reliability of networks has been paramount. CommScope was built for times like these, always pushing the boundaries of technology to create the world’s most advanced networks. And never have those networks been so tested -- and so critical to global connectivity. We’re proud to have provided communications equipment and skills to support critical industries, offering our customers free training on network infrastructure, and extending contracts to ensure our customers had the support they needed during the pandemic, to name a few. We have many valued partners that we’re closely connected with to help support everyone’s success during this unprecedented time. |
Financial Performance Highlights (page 53)
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| (1) | See reconciliation of Non-GAAP financial measures included in Appendix A. |
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PROXY SUMMARY
Executive Compensation Program Highlights (page 53)
Our executive compensation approach is straightforward and supports our pay-for-performance philosophy:
| • | Significant portion of executive pay is at risk |
| • | Equity awards with multi-year vesting, allocated between performance and time-based awards |
| • | Regular stockholder engagement in connection with the annual say-on-pay vote |
| • | A compensation approach that does not create incentives for excessive risk taking |
| • | Policy prohibiting hedging and pledging of Company shares |
| • | “Clawback” policy to recover cash and equity award payments from executives in the event of a restatement of our financial statements |
The principal objectives of our NEO pay include:
| • | Competitive pay – allows us to attract top talent and to retain those employees by providing substantial pay for performance opportunity |
| • | Pay for performance – by rewarding outstanding results that will enhance near-term performance and drive long-term sustainable returns |
| • | Alignment with stockholders – through performance goals and by setting meaningful equity ownership guidelines |
Elements of our Executive Compensation Program (page 54)
The following table summarizes the primary elements of our executive compensation program for 2020. Please see our Compensation Discussion and Analysis beginning on page 50.
| Compensation Element
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Purpose
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2020 Pay Outcome
| ||
| Base Salary |
Recognize performance of job responsibilities as well as attract and retain individuals with superior talent.
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NEO base salaries were not increased in 2020, other than for Mr. Kurk.
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| Annual Incentive Plan (AIP) Bonus Awards |
Provide short-term incentives linked directly to achievement of financial objectives. • 60% Adjusted EBITDA • 30% Adjusted Free Cash Flow • 10% Corporate Revenue
|
We achieved above target performance for the Adjusted Free Cash Flow metric and above threshold performance for the Adjusted EBITDA metric, but did not achieve threshold performance for the Corporate Revenue metric for 2020, resulting in an 82.6% payout.
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| Equity Incentive Awards |
Directly link senior management’s and stockholders’ interests by tying long-term incentive to stock price appreciation.
Awards granted to Mr. Treadway, Mr. Carlson and Mr. White included restricted stock units (RSUs) that
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None of the average stock price hurdles for Mr. Treadway’s and Mr. Carlson’s PSUs were met in 2020.
For our NEOs who received EPOP options in 2019, the exercise price of the EPOP options was higher than | ||
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PROXY SUMMARY
| Compensation Element
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Purpose
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2020 Pay Outcome
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| vest over three years, conditioned on continued service. Mr. White’s RSUs became fully vested upon his death in August 2020.
Mr. White also received performance share units (PSUs) with performance conditions based on cumulative consolidated revenue for 2021-2022. Mr. White’s PSUs were forfeited upon his death in August 2020.
Mr. Treadway and Mr. Carlson also received PSUs that may be earned upon the achievement of certain hurdles relating to our stock price (ranging from a low of $15 to a high of $40) and their continued service over a four-year period.
Other NEOs were not granted equity incentive awards in 2020. Stock options granted to these other NEOs in 2019. pursuant to our Executive Performance Option Program (EPOP) are intended to replace their equity awards for 2019, 2020 and 2021.
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the stock price as of December 31, 2020, and we did not meet the Adjusted EBITDA threshold for 2019 or 2020. This resulted in no performance-vesting options earned in 2020. | |||
| • 50% of the stock options are time- based and vest in five equal installments beginning on the first anniversary of the grant date (time-vesting options) • 50% of the stock options are performance-based and vest over five years based on pre-established annual Adjusted EBITDA goals set at the inception of the program in 2019, and include a cumulative vesting feature (performance-vesting options) • Potential vesting in connection with qualifying retirement • 10-year term
If Proposal No. 6 is approved at the Annual Meeting, the performance-based EPOP options will be terminated and certain executives and senior officers will receive a grant of performance-based retention equity awards in 2021.
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PROXY SUMMARY
Corporate Governance Highlights (page 20)
We are committed to strong corporate governance, which we believe is important to the success of our business. Our corporate governance practices are described in greater detail in the “Corporate Governance Matters and Committees of the Board of Directors” section. Highlights include:
| • | Strong, independent Board with a Lead Independent Director |
| • | Risk oversight provided by both the appropriate committees and the full Board |
| • | Regular Board and committee self-evaluations |
| • | Majority voting in uncontested director elections |
| • | Company proposal to declassify our Board submitted for stockholder approval |
Corporate Responsibility and Sustainability Highlights
At CommScope, we believe that corporate responsibility and sustainability means making decisions that have a positive long-term impact on our people, planet, and bottom line. Our company-wide sustainability mission is to enable faster, smarter, and more sustainable solutions while demonstrating the utmost respect for our human and natural resources. We are accomplishing this mission by utilizing innovative technology, intelligent engineering, and energy efficient design to build sustainable networks that make our customers more agile, while at the same time preserving the natural ecosystems in which we operate and from which we source our raw materials.
At CommScope, we understand how important it is to consider the larger impact of our actions beyond the balance sheet. The current COVID-19 pandemic has highlighted the correlation between good sustainability performance and business resilience while also stressing how fundamental connectivity is to global societies and economies. Through our products and services, CommScope’s relentless focus on creating the worlds most advanced networks has ensured the operation of emergency services, enabled families and friends to stay connected and supported workforces to continue working productively.
We believe that acting with integrity includes creating a culture that values the unique perspectives and contributions of all employees. Diversity, equity and inclusion have become essential and mainstream parts of CommScope’s business model and success. Through programs like our Diversity & Inclusion Business Network (DIBN) we seek to embrace and leverage our diverse employee base to create a more engaged workforce and ultimately deliver business success.
We are proud of CommScope’s significant standing in one of the world’s most vital and dynamic industries. We push ourselves and our thinking for the purpose of creating a better and sustainable tomorrow. For the sake of our current and future generations, we will continue to grow as a sustainable, environmentally conscious business that benefits the whole planet.
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PROXY SUMMARY
Corporate Responsibility and Sustainability Management and Oversight Structure
As a global company, CommScope is exposed to risks at many levels. CommScope’s Board of Directors has ultimate responsibility for Environmental, Social, and Governance (ESG) policies and practices but has delegated specific oversight of these risk areas to various Board committees. For example, the Audit Committee has oversight of our ethics and compliance program, and the Nominating and Governance Committee has responsibility for our environmental and social responsibility program. CommScope’s Corporate Ethics and Compliance Officer provides regular updates to the Audit Committee and Board on the Company’s activities in these areas. In addition, management-led teams create, direct and implement our sustainability strategy and maintain a thorough system of checks and balances designed to minimize social, environmental, physical and ethical risks.
For additional information, see our Corporate Responsibility & Sustainability pages on the CommScope website:
https://www.commscope.com/About-Us/Corporate-Responsibility-and-Sustainability/ .
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PROXY SUMMARY
Corporate Responsibility and Sustainability Key Achievements
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ENVIRONMENT
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SOCIAL
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ETHICS & GOVERNANCE
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Priorities
• Reduce the environmental impact of our operations and facilities. • Develop solutions that meet our customers current and future sustainability requirements. |
Priorities
• Leverage a collaborative, enabled and agile workforce to deliver business innovation. • Provide a safe work culture and environment for all employees. |
Priorities
• Improve our ESG transparency and reporting. • Strengthen our ethics & compliance program. • Source responsibly and minimize supply chain risks.
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| Achievements
• Achieved 8.58% reduction in location-based Greenhouse Gas (GHG) emissions for compared to 2019. • Achieved 9.26% reduction in water withdrawal compared to 2019. • Diverted 85.3% of non-hazardous waste from landfill. • More than 96.7% of applicable Home Network business unit product shipments complied with the relevant US, Canadian or EU Set-top boxes (STB) or Small Network Equipment (SNE) energy efficiency voluntary agreement—exceeding the 90% target. • Aligned our objectives with the Society of Cable Telecommunication Engineers (SCTE) Energy 2020 goals in order to help our Access Network and Edge Facility products achieve greater energy reductions. • Continued to utilize life cycle thinking approach in our product development processes. • Continued to ensure our products meet global regulations including RoHS, WEEE and REACH regulations. • Completed a review of our operations to identify options that deliver significant reductions in our greenhouse gas (GHG) emissions, including, the use of renewable energy. • Continued focus on eliminating single-use plastics (SUP) in our Home Networks and Venue and Campus Networks businesses.
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Achievements
• Implemented procedures for managing the COVID-19 pandemic to protect the safety, health and welfare of our employees and to keep critical business operations functioning. • Achieved a global injury rate of 0.38, 68.3% below the United States Occupational Safety & Health Administration (OSHA) industry rate of 1.2. • Launched our new Diversity & Inclusion Business Network to foster a more diverse and inclusive workplace. • Conducted the Global Employee Pulse Survey, to better understand how employees feel about the Company, their work, and our progress. • Enrolled 763 employees, and graduated 144, from uLEAD, a multi-faceted, self-service learning program for employees interested in developing their business and leadership skills. • Continued our well-being program with GuidanceResources, the Company’s global wellness resource program available to all employees and their families worldwide. • Launched the Frank M. Drendel Community Service Excellence Awards to recognize and support the most significant community service efforts made by our employees. • Partnered with United Way to support local charitable causes using an employer match program in the United States and supported charitable organizations worldwide.
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Achievements
• Reported climate-related risks and opportunities using the CDP platform which is committed to aligning with the Task Force on Climate-Related Disclosures (TCFD) recommendations. • 100% of non-production employees completed the annual Ethics and Compliance training. • Achieved zero “major nonconformances” in third-party certification audits. • Expanded the ISO14001:2015 (environmental management system) and ISO45001:2018 (health and safety management system) standards certification program scope which now covers 90% of our manufacturing facilities • Ensured our operations and supply chain align with global modern slavery and human rights standards. • Completed 20 CSR assessments in our manufacturing facilities, utilizing the Responsible Business Association tool (RBA ONLINE). • Conducted 263 sustainability assessments and audits in our supply chain. These include review of compliance and evaluation of established labor, ethics, environmental, health and safety practices and business continuity.
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| Recognition
• Awarded a score of A- in the 2020 CDP Climate Change scorecard, which puts CommScope at a Leadership Level for the first time. |
Recognition
• Recognized by the Government of Goa, India for being a ‘Role Model in the field of Corporate Social Responsibility’ • Winner of a Silver Stevie® Award in the Employer of the Year - Telecommunications category in the fifth annual Stevie Awards for Great Employers. |
Recognition
• Recognized in Newsweek’s 2020 list of America’s most Responsible Companies. • Achieved a “Low Risk” rating in Yahoo Finance’s sustainability scorecard. • Achieved a Gold level Corporate Social Responsibility (CSR) rating from EcoVadis, a global leader in monitoring, benchmarking and enabling sustainability in global supply chains.
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Annual Meeting of Stockholders
May 7, 2021
This Proxy Statement is being furnished to the stockholders of the Company in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of 2021 Annual Meeting of Stockholders. The Annual Meeting will be held on May 7, 2021 at 1:00 p.m., Eastern Time. Due to the public health impact of the COVID-19 pandemic, to support the health and well-being of our stockholders, and to provide expanded access to our Annual Meeting to stockholders who would not otherwise be able to attend, the 2021 Annual Meeting will be held solely on the Internet by virtual means. Information regarding how to access and vote at or participate in the virtual Annual Meeting is provided herein and in the accompanying Notice of 2021 Annual Meeting of Stockholders.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive a Notice of Internet Availability of Proxy Materials?
You are receiving this Proxy Statement because you owned shares of CommScope common stock or Series A Convertible Preferred Stock at the close of business on [●], 2021 (Record Date), and that entitles you to vote at the Annual Meeting. By use of a proxy, you can vote whether or not you attend the Annual Meeting.
We are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about [●], 2021, we mailed a Notice to our stockholders. The Notice contains instructions about how to access our proxy materials and vote via the Internet or telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you previously chose to receive our proxy materials electronically, you will continue to receive access to these materials via e-mail unless you elect otherwise.
Who is entitled to vote at the Annual Meeting?
Holders of our common stock and/or our Series A Convertible Preferred Stock outstanding at the close of business on the Record Date are entitled to vote their shares at the Annual Meeting. As of the Record Date, [●] shares of our common stock were issued and outstanding. Each share of our common stock is entitled to one vote on each matter properly brought before the Annual Meeting and on which holders of common stock are entitled to vote.
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Each record holder of Series A Convertible Preferred Stock will have a number of votes equal to the largest number of whole shares of common stock into which such shares are convertible on the Record Date on each matter that is properly brought before the Annual Meeting and on which holders of Series A Convertible Preferred Stock are entitled to vote together with common stock as a single class. In addition, each holder of record of Series A Convertible Preferred Stock will have one vote for each share of Series A Convertible Preferred Stock on each matter that is properly brought before the Annual Meeting and on which holders of Series A Convertible Preferred Stock are entitled to vote separately, as a class. As of the Record Date, there were [●] shares of Series A Convertible Preferred Stock outstanding, which were convertible into [●] shares of common stock.
The presence at the Annual Meeting in person or by proxy of the holders of record of a majority in voting power of the shares entitled to vote at the Annual Meeting will constitute a quorum for the transaction of business at the Annual Meeting.
What will I be voting on at the Annual Meeting and how does the Board recommend that I vote?
The holders of shares of Series A Convertible Preferred Stock are being asked to vote on:
| • | Proposal No. 2—Election of one director designated by Carlyle to serve until the 2022 Annual Meeting of Stockholders or until his successor is elected and qualified to serve; |
The holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class, are being asked to consider and vote on the following items:
| • | Proposal No. 1—To approve a proposal to amend the Company’s Certificate of Incorporation to declassify the Company’s Board of Directors; |
| • | Proposal No. 3—Election of four directors to serve on the Company’s Board of Directors; |
| • | Proposal No. 4—Advisory vote to approve the compensation of our NEOs as set forth in this Proxy Statement; |
| • | Proposal No. 5—Approval of additional shares under our 2019 Long Term Incentive Plan; |
| • | Proposal No. 6—Approval of the termination of executive performance options and grant of selective performance-based retention equity awards; and |
| • | Proposal No. 7—Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021. |
The Board recommends that you vote:
| • | Proposal No. 1—FOR approval of a proposal to amend the Company’s Certificate of Incorporation to declassify the Company’s Board of Directors; |
| • | Proposal No. 2—FOR the election of the nominee designated by Carlyle to the Board; |
| • | Proposal No. 3—FOR the election of each of the four director nominees to the Board; |
| • | Proposal No. 4—FOR the advisory vote to approve the compensation of our NEOs as set forth in this Proxy Statement; |
| • | Proposal No. 5—FOR the approval of additional shares under our 2019 Long Term Incentive Plan; |
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| • | Proposal No. 6—FOR the approval of the termination of executive performance options and grant of selective performance-based retention equity awards; and |
| • | Proposal No. 7—FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021. |
Each of Alexander W. Pease and Frank B. Wyatt, II has been selected by our Board to serve as a proxy holder for the Annual Meeting. All shares of our common stock and Series A Convertible Preferred Stock represented by properly delivered proxies received in time for the Annual Meeting will be voted at the Annual Meeting by the proxy holders in the manner specified in the proxy by the stockholder. If you sign and return a proxy card without indicating how you want your shares to be voted, the persons named as proxies will vote your shares in accordance with the recommendations of the Board.
Why are the common stockholders being asked to vote on the election of only four Directors?
Due to the classified structure of our Board, only one-third of our Board (excluding those directors designated by Carlyle pursuant to the Investment Agreement) is elected each year to serve for a three-year term. In addition, the Company’s Corporate Governance Guidelines provide that any director who is appointed to fill a vacancy on the Board between annual meetings stands for election at the following annual meeting, regardless of class into which such director was appointed. As a result, the holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class, are being asked to vote for the three Class II director nominees and one Class III director nominee that was appointed to the Board in 2021.
At this Annual Meeting, stockholders will be asked to vote on a proposal to eliminate the classified structure of our Board (Proposal No. 1, or the Declassification Proposal). If the Declassification Proposal is approved by stockholders at this Annual Meeting, then the Class II directors elected at this Annual Meeting will serve a one-year term ending at the 2022 annual meeting of stockholders and until their successors are duly elected and qualified. If the Declassification Proposal is not approved by stockholders at this Annual Meeting, then our Board will remain classified, and the Class II directors elected at this Annual Meeting will serve a three-year term ending at the 2024 annual meeting of stockholders and until their successors are duly elected and qualified.
Are there any requirements on how the holders of the Series A Convertible Preferred Stock must vote?
Under the Investment Agreement, at the Annual meeting, Carlyle is required to vote its shares of Series A Convertible Preferred Stock in favor of each of the director nominees who are also being voted on by holders of common stock, in favor of the Say-On-Pay proposal, and for ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021, as described in these proxy materials. Carlyle is entitled to vote at its discretion on the other proposals described in this Proxy Statement.
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with our transfer agent, AST, you are considered, with respect to those shares, the “stockholder of record.” The Proxy Statement has been or will be sent directly to you. If you are a “stockholder of record,” you can find your voter control number on your original proxy card or Notice of Internet Availability of Proxy Materials. This voter control number will allow you to access, participate in, and vote at our virtual Annual Meeting.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of those shares held in street name. The Proxy Statement has been or will be sent to you by your broker, bank or other holder of record who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote the shares in your account. If you are a “beneficial owner” and you wish to participate in or vote at our virtual Annual Meeting, you will need to obtain a legal proxy from your broker, bank or other holder of record and register for the virtual Annual Meeting in advance with AST. For more information about the registration process, see “How do I vote?” below.
How do I vote?
Stockholder of Record. If you are a stockholder of record, you may vote by using any of the following methods:
| • | Through the Internet. You may vote by proxy through the Internet by following the instructions in this Proxy Statement or the instructions on the proxy card. |
| • | By Telephone. You may vote by proxy by calling the toll-free telephone number shown on the proxy card and following the recorded instructions. |
| • | By Mail. You may vote by proxy by completing, signing and dating the proxy card and sending it back to the Company in the envelope provided. |
| • | Virtually at the Annual Meeting. The meeting will be hosted at https://web.lumiagm.com/285972254. The meeting will begin promptly at 1:00 p.m., Eastern Time, and online access will open 15 minutes prior to allow time to log-in. The log-in password is: commscope2021. You will also need your voter control number, which, if you are a stockholder of record, you can find on your original proxy card or Notice of Internet Availability of Proxy Materials. If you attend the virtual Annual Meeting, you may vote your shares virtually on the virtual meeting platform. However, we encourage you to vote in advance through the Internet, by telephone or by mailing us your proxy card even if you plan to attend the virtual Annual Meeting so that your shares will be voted in the event you later decide not to attend. |
Beneficial Owners. If you are a beneficial owner of shares, you may vote by using any of the following methods:
| • | Through the Internet. You may vote by proxy through the Internet by following the instructions provided in this Proxy Statement and the voting instruction form provided by your broker, bank or other holder of record. |
| • | By Telephone. You may vote by proxy by calling the toll-free number found on the voting instruction form and following the recorded instructions. |
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| • | By Mail. You may vote by proxy by completing, signing and dating the voting instruction form and sending it back to the record holder in the envelope provided. |
| • | Virtually at the Annual Meeting. If you are a beneficial owner of shares held in street name and you wish to vote at the virtual Annual Meeting, you must (i) obtain a legal proxy from your broker, bank or other holder of record and (ii) register in advance with AST and receive an 11-digit control number. Please contact your broker, bank or other holder of record for instructions regarding obtaining a legal proxy. Once obtained, you must submit your legal proxy, along with your name and e-mail address to AST and request registration. Requests for registration and submission of legal proxies should be labeled as “Legal Proxy” and must be received by AST no later than 5 p.m., Eastern Time, on May 3, 2021. All such requests should be submitted (1) by email to proxy@astfinancial.com, (2) by facsimile to (718) 765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Once you have obtained your 11-digit control number from AST, please follow the steps set forth above for stockholders of record to vote virtually at the Annual Meeting. |
If you hold both common stock and Series A Convertible Preferred Stock, you will need to vote, or authorize a proxy to vote, each class of stock separately. Please be sure to vote or authorize a proxy to vote for each class of stock separately so that all your votes can be counted. For more information, see “What if I hold both common stock and Series A Convertible Preferred Stock” below.
What if I hold both common stock and Series A Convertible Preferred Stock?
Some of our stockholders may hold both common stock and Series A Convertible Preferred Stock. If you are a holder of both common stock and Series A Convertible Preferred Stock, you can expect to receive separate sets of printed proxy materials.
You will need to vote, or authorize a proxy to vote, each class of stock separately in accordance with the instructions set forth herein and on the applicable proxy cards or voting instruction forms. Voting, or authorizing a proxy to vote, only your common stock will not also cause your shares of Series A Convertible Preferred Stock to be voted, and vice versa.
If you hold both common stock and Series A Convertible Preferred Stock, please be sure to vote or authorize a proxy to vote for each class of stock separately so that all your votes can be counted.
What does it mean if I receive more than one Notice, proxy card or voting instruction form?
If you received more than one Notice, proxy card or voting instruction form, your shares are registered in more than one name or are registered in different accounts. Please follow the voting instructions included in each Notice, proxy card and voting instruction form to ensure that all your shares are voted.
May I change my vote after I have submitted a proxy?
If you are a stockholder of record, you have the power to revoke your proxy at any time by:
| • | delivering to our Corporate Secretary written revocation of your proxy; |
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| • | delivering a new proxy, through the Internet, by telephone or by mail, dated after the date of the proxy being revoked; or |
| • | attending the Annual Meeting and voting virtually at the Annual Meeting using the virtual meeting platform (attendance without casting a ballot will not, by itself, constitute revocation of a proxy). |
If you are a beneficial owner of shares, you may submit new voting instructions by contacting your broker, bank or other holder of record.
Who will serve as the proxy tabulator and inspector of election?
A representative from AST, will serve as the independent inspector of election and will tabulate votes cast by proxy or in person at the Annual Meeting. We will report the results in a Form 8-K filed with the Securities and Exchange Commission (Commission) within four business days of the Annual Meeting.
How will abstentions and “broker non-votes” be counted?
The shares of a stockholder whose ballot on any or all proposals is marked as “abstain” will be included in the number of shares present at the Annual Meeting to determine whether a quorum is present. If you are a beneficial owner of shares and do not provide the record holder of your shares with specific voting instructions, your record holder may vote your shares on the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021 (Proposal No. 7). However, your record holder cannot vote your shares without specific instructions on the Declassification Proposal (Proposal No. 1), election of directors (Proposals No. 2 and No. 3), the advisory vote on the compensation of our NEOs (Proposal No. 4), the vote to approve additional shares under our 2019 Long Term Incentive Plan (Proposal No. 5), or the vote to approve the termination of executive performance options and grant of selective performance-based retention equity awards (Proposal No. 6). If your record holder does not receive instructions from you on how to vote your shares on Proposals 1, 2, 3, 4, 5 or 6, your record holder will inform the inspector of election that it does not have the authority to vote on that proposal with respect to your shares. This is generally referred to as a “broker non-vote.” Broker non-votes will be counted as present for purposes of determining whether a quorum is present, but they will not be counted in determining the outcome of the vote on Proposals 2, 3, 4, 5, or 6. Since the Declassification Proposal requires the affirmative vote of the holders of at least three-quarters of the voting power of all of our outstanding shares entitled to vote generally in the election of directors, voting together as a single class, broker non-votes will have the same effect as a vote “against” Proposal No. 1.
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What vote is required to approve each proposal?
The following table summarizes the votes required for passage of each proposal and the effect of abstentions and broker non-votes.
| Proposal | Vote Required | Impact of Abstentions and
Broker Non-Votes, if any | ||
| No. 1—To approve a proposal to amend the Company’s Certificate of Incorporation to declassify the Company’s Board of Directors |
Approval by the affirmative vote of the holders of at least three-quarters of the voting power of all of our outstanding shares entitled to vote generally in the election of directors, voting together as a single class.
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Abstentions and broker non-votes will have the same effect as a vote “against” this proposal. | ||
| No. 2—Election of the director designated by Carlyle |
The director designated by Carlyle will be elected by a majority of the votes cast by holders of our Series A Convertible Preferred Stock voting with respect to that director, meaning the number of shares voted “for” a director must exceed the number of votes cast “against” that director.
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Abstentions and broker non-votes will not affect the outcome of the vote. | ||
| No. 3—Election of directors nominated by the Board |
Each director will be elected by a majority of the votes cast by holders of our common stock and Series A Convertible Preferred Stock voting together as a single class with respect to that director, meaning the number of shares voted “for” a director must exceed the number of votes cast “against” that director.
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Abstentions and broker non-votes will not affect the outcome of the vote. | ||
| No. 4—Advisory vote to approve compensation of our NEOs, as described in this Proxy Statement |
Approval by a majority of the voting power of the shares entitled to vote and represented in person or by proxy.
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Abstentions will count as votes against the proposal; broker non-votes will not affect the outcome of the vote. | ||
| No. 5—Vote to approve additional shares under our 2019 Long Term Incentive Plan |
Approval by a majority of the voting power of the shares entitled to vote and represented in person or by proxy.
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Abstentions will have the same effect as votes against the proposal; broker non-votes will not affect the outcome of the vote. |
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| Proposal | Vote Required | Impact of Abstentions and
Broker Non-Votes, if any | ||
| No. 6—Vote to the termination of executive performance options and grant of selective performance-based retention equity awards
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Approval by a majority of the voting power of the shares entitled to vote and represented in person or by proxy.
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Abstentions will have the same effect as votes against the proposal; broker non-votes will not affect the outcome of the vote. | ||
| No. 7—Ratification of appointment of independent registered public accounting firm |
Approval by a majority of the voting power of the shares entitled to vote and represented in person or by proxy.
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Abstentions will have the same effect as votes against the proposal. |
Who is paying for the cost of this proxy solicitation?
Our Board is soliciting the proxy accompanying this Proxy Statement. We will pay all proxy solicitation costs. Proxies may be solicited by our officers, directors and employees, none of whom will receive any additional compensation for their services. These solicitations may be made personally or by mail, facsimile, telephone, messenger, email or the Internet. We will pay brokers, banks and certain other holders of record holding shares of common stock in their names or in the names of nominees, but not owning such shares beneficially, for the expense of forwarding solicitation materials to the beneficial owners. The Company has retained Morrow Sodali LLC, 470 West Avenue, Stamford, Connecticut 06902, to assist in the solicitation of proxies from stockholders. Morrow Sodali LLC will receive a solicitation fee of approximately $10,000, plus reimbursement of certain out-of-pocket expenses.
What do I need to do to attend the meeting?
Due to the public health impact of the COVID-19 pandemic, to support the health and well-being of our stockholders, and to provide expanded access to the Annual Meeting for stockholders who would not otherwise be able to attend, the Annual Meeting will be held solely on the internet by virtual means. Stockholders will not be able to attend the Annual Meeting in person.
In order to participate in and vote at the virtual Annual Meeting, stockholders of record as of the Record Date can visit the Virtual Meeting Site (https://web.lumiagm.com/285972254) and enter the Log-In Password (commscope2021) and the 11-digit control number previously provided to stockholders of record on the original proxy card or Notice of Internet Availability of Proxy Materials. Stockholders of record that have misplaced their 11-digit control number should call AST at (800) 937-5449 or (718) 921-8124 in advance on the Annual Meeting to obtain their control number.
Beneficial owners, who own shares beneficially through a broker, bank or other nominee, must provide a legal proxy from such broker, bank or other nominee during registration and will be assigned a control number in order to vote their shares virtually and ask questions at the Annual Meeting. Beneficial owners who are unable to obtain a legal proxy to vote their shares will still be able to attend and listen to the virtual Annual Meeting live via the Virtual Meeting Site (https://web.lumiagm.com/285972254) as a guest, but will not be able to vote their shares or ask any questions. Instructions on how to connect and attend as a guest, as well as how to demonstrate proof of share ownership and participate live via the Internet, may be requested by e-mailing proxy@astfinancial.com.
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Will I be able to ask questions at the Annual Meeting?
Yes. We expect that our directors and executive officers, as well as representatives of our independent registered public accounting firm, will attend the virtual Annual Meeting and be available to answer questions. We will provide our stockholders who register in advance in accordance with the instructions provided herein (see “What do I need to do to attend the meeting?” above) the opportunity to ask questions and make statements about a proposal during the formal business of the meeting. Questions and comments of a general nature will be held until after the conclusion of the formal business of the Annual Meeting. Instructions for submitting questions and making statements will be posted on the virtual meeting website. This question and answer session will be conducted in accordance with certain Rules of Conduct. These Rules of Conduct will be posted on the virtual meeting website, and may include certain procedural requirements, such as limiting repetitive or follow-up questions, so that more stockholders will have an opportunity to ask questions.
Is there a list of stockholders entitled to vote at the Annual Meeting?
A list of stockholders entitled to vote at the Annual Meeting will be available to any stockholder attending the meeting and for ten days prior to the meeting, between the hours of 8:00 a.m. and 4:00 p.m. Eastern Time, at our offices at 1100 CommScope Place, SE, Hickory, North Carolina 28602. If you would like to view the stockholder list, please contact our Corporate Secretary to schedule an appointment.
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
To reduce costs and reduce the environmental impact of our Annual Meeting, we have adopted a procedure approved by the Commission called “householding.” Under this procedure, stockholders of record who have the same address and last name will receive only a single copy of our Proxy Statement and 2020 Annual Report, unless we have received contrary instructions from such stockholder. Stockholders who participate in householding will continue to receive separate proxy cards and Notices.
We will promptly deliver, upon written or oral request, individual copies of the proxy materials to any stockholder that received a household mailing. If you are a stockholder of record and would like an additional copy of the Proxy Statement or 2020 Annual Report, please contact our Corporate Secretary by mail at 1100 CommScope Place, SE, Hickory, North Carolina 28602 or by phone at (828) 324-2200. If you are a beneficial owner, you may contact the broker or bank where you hold the account.
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our Proxy Statement and Annual Report, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please contact our Corporate Secretary by mail at 1100 CommScope Place, SE, Hickory, North Carolina 28602 or by phone at (828) 324-2200.
Could other matters be decided at the Annual Meeting?
As of the date of this Proxy Statement, our Board is not aware of any matters, other than those described in this Proxy Statement, which are to be voted on at the Annual Meeting. If any other matters are properly raised at the Annual Meeting, however, the persons named as proxy holders intend to vote the shares represented by your proxy in accordance with their judgment on such matters.
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AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION TO ELIMINATE THE CLASSIFICATION OF THE BOARD OF DIRECTORS
Background of Proposal
Our Board has declared advisable and approved, and recommends that our stockholders adopt, amendments to our Certificate of Incorporation (the Declassification Amendments), to declassify our Board and to make certain other related changes.
This proposal is being submitted as a result of the Board’s ongoing review of corporate governance matters and in recognition that in more recent years, stockholders of public companies are increasingly supportive of shifting from classified boards to the annual election of directors. While the Board continues to believe that a classified Board promotes the creation of long-term sustainable value for the Company’s stockholders, the Board has also been actively engaging with the Company’s stockholders and has received feedback from several stockholders that shifting to a declassified Board may be desirable because, in these stockholders’ view, declassifying the Board would increase director accountability to our stockholders by requiring all directors to be elected or re-elected by stockholders on an annual basis.
Therefore, following careful consideration, the Board has determined that the Declassification Amendments are advisable and in the best interests of the Company and its stockholders. By submitting this proposal to the Company’s stockholders, the Board is demonstrating that it is responsive and accountable to stockholders and committed to strong corporate governance.
Description of the Proposal
Pursuant to Article Seventh of our Certificate of Incorporation, our Board is divided into three classes, denominated Class I, Class II and Class III. Members of each class hold office for staggered three-year terms and until their respective successors are duly elected and qualified, and only one class is up for election at each annual meeting. The directors who are classified as Class II Directors have terms expiring at this Annual Meeting; the directors classified as Class III Directors have terms expiring at the 2022 annual meeting of stockholders; and the directors classified as Class I Directors have terms expiring at the 2023 annual meeting of stockholders. Additionally, pursuant to our Corporate Governance Guidelines, directors who are appointed by the Board between annual meetings will stand for election at the next annual meeting after they were appointed, regardless of the class into which they were appointed.
If this proposal is approved by our stockholders, Article Seventh of our Certificate of Incorporation would be amended to provide for the phased elimination of the classified structure of the Board over three annual meetings. As discussed in connection with Proposal 3, if the Declassification Amendments are approved by our stockholders, the directors who are elected at this Annual Meeting will be elected to one-year terms. However, the Declassification Amendments would not
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change the terms of the directors whose terms do not expire at the 2021 Annual Meeting. If this proposal is approved by our stockholders by the requisite vote at the Annual Meeting, then the amendment will become effective upon the filing of a certificate of amendment setting forth the Declassification Amendments (the Certificate of Amendment) with the office of the Secretary of State of the State of Delaware. If this proposal is approved by our stockholders, we intend to file the Certificate of Amendment during the Annual Meeting, immediately after the requisite vote for this Proposal 1 is obtained and prior to the vote on the election of directors.
As mentioned above, if the Declassification Amendments are adopted by the Company’s stockholders, the Company’s classified Board structure will be phased out over three annual meetings of stockholders commencing with this 2021 Annual Meeting, such that:
| • | at the 2021 Annual Meeting, each of the director nominees elected by our stockholders will be elected to hold office for a term of one year, and until their successors are duly elected and qualified; |
| • | at the 2022 annual meeting of stockholders, each of the Class II and Class III director nominees elected by our stockholders will be elected to hold office for a term of one year, and until their successors are duly elected and qualified; and |
| • | at the 2023 annual meeting of stockholders, the terms of each of the Class I, Class II and Class III directors will expire, the Board will no longer be divided into classes, and all director nominees elected by our stockholders will be elected to hold office for a term of one year, and until their successors are duly elected and qualified. |
Thus, if the Declassification Amendments are adopted by our stockholders, the declassification of our Board would be phased in, and the Board will be fully declassified (and all Board members will stand for election annually) commencing with the 2023 annual meeting of stockholders.
The Declassification Amendments include the items described above, as well as the following additional, related amendments to our Certificate of Incorporation:
| • | Amend Article Seventh, Section 4 of our Certificate of Incorporation to provide that any director chosen by the Board to fill newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause will hold office for a term expiring at the next succeeding annual meeting of stockholders and until such director’s successor shall have been duly elected and qualified. |
| • | Amend Article Seventh, Section 3 of our Certificate of Incorporation to provide that, from and after the 2023 annual meeting of stockholders, stockholders holding a majority of the votes entitled to be cast at an election of directors may remove directors either with or without cause, as required by the Delaware General Corporation Law for declassified boards. Currently, stockholders may remove directors only for cause (which is the default provision under the DGCL for removal of directors on classified boards) and only upon the affirmative vote of the holders of at least three-quarters of the voting power of all outstanding shares of stock of the Corporation entitled to vote generally for the election of Directors, voting together as a single class. |
Appendix B to this proxy statement shows all of the proposed changes to our Certificate of Incorporation to be included in the Certificate of Amendment.
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CORPORATE GOVERNANCE
Conforming Bylaw Amendments
The Board has conditionally approved amendments to our Bylaws to conform our Bylaws to the changes contained in the Declassification Amendments (the Bylaw Amendments) if the Declassification Amendments are adopted by our stockholders. The Board is not seeking stockholder approval of the amendments to our Bylaws, but the effectiveness of the Bylaw Amendments is contingent upon, and will be simultaneous with, the filing and effectiveness of the Certificate of Amendment.
Impact of the Outcome of the Stockholder Vote on this Declassification Proposal
If this proposal is approved by our stockholders:
| • | The Company will file the Certificate of Amendment, reflecting the Declassification Amendments, with the Secretary of State of the State of Delaware immediately after the requisite vote for this Proposal 1 is obtained. |
| • | The Fifth Amended and Restated Bylaws, reflecting the Bylaws Amendments, will become effective upon the filing and effectiveness of the Certificate of Amendment setting forth the Declassification Amendments. |
| • | The directors elected at this 2021 Annual Meeting will serve a one-year term ending at the 2022 annual meeting of stockholders. |
If this proposal is not approved, and the Declassification Amendments are not adopted by our stockholders, our Board will remain classified, the Certificate of Amendment will not be filed, each of the Class II directors elected at this 2021 Annual Meeting will be elected to serve a three-year term ending at the 2024 annual meeting of stockholders, and none of the other changes described above will be made to our Certificate of Incorporation or Bylaws.
Required Vote
The affirmative vote of the holders of at least three-quarters (3/4) of the voting power of all of our outstanding shares entitled to vote generally in the election of directors, voting together as a single class, is required for approval of Proposal 1. Abstentions and broker non-votes, if any, have the same effect as votes against this proposal.
| The Board of Directors of the Company recommends a vote “FOR” Proposal No. 1 to amend our Certificate of Incorporation to eliminate the classification of the Board. Proxies will be voted “FOR” Proposal No. 1, unless otherwise specified in the proxy. |
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ELECTION OF DIRECTORS
Our Company is governed by a Board of Directors. Pursuant to our certificate of incorporation, the precise number of directors shall be fixed, and may be altered from time to time, exclusively by a Board resolution adopted by the affirmative vote of a majority of the total number of directors then in office. The number of directors constituting our whole Board is currently fixed at thirteen, however based on the recommendation of the Nominating and Corporate Governance Committee, the Board has approved a decrease in the size of the Board from thirteen directors to twelve, effective as of the date of the Annual Meeting. Carlyle has the right to designate two directors pursuant to the Investment Agreement (although there is currently one vacancy on the Board which Carlyle has the right to fill), and our remaining directors are divided into three classes with staggered three-year terms so that the term of one class expires at each annual meeting of stockholders. In addition, the Company’s Corporate Governance Guidelines provide that any director who is appointed to fill a vacancy on the Board between annual meetings stands for election at the following annual meeting, regardless of class into which such director was appointed. The director nominee designated by Carlyle will be proposed for election by the holders of Series A Convertible Preferred Stock, and the three Class II director nominees and one Class III director nominee (who was appointed by the Board in 2021) will be proposed for election by the holders of common stock and Series A Convertible Preferred Stock, voting together as a single class, at the Annual Meeting on May 7, 2021.
It is intended that the persons named in the accompanying proxy will vote to elect the nominees listed below unless otherwise instructed. The directors designated by Carlyle will serve until the next annual meeting of stockholders in 2022, the Class II elected directors will serve until the annual meeting of stockholders in 2024 (unless Proposal No. 1 is approved by the stockholders, in which case the Class II directors will be elected to serve a one year term that will expire at our 2022 annual meeting of stockholders), and the Class III elected director will serve until the annual meeting of stockholders in 2022, and in each case, until their successors are elected and qualified to serve or until an earlier death, resignation or retirement.
All of the nominees are presently serving as directors of the Company. The nominees have agreed to be named in this Proxy Statement, stand for re-election and serve if elected. If for any reason any nominee designated by Carlyle shall not be available for election as a director at the Annual Meeting, it is intended that shares represented by the accompanying proxy will be voted for the election of a substitute nominee designated by Carlyle. If for any reason any Class II or Class III nominee shall not be available for election as a director at the Annual Meeting, it is intended that shares represented by the accompanying proxy will be voted for the election of a substitute nominee designated by our Board, or the Board may determine to leave the vacancy temporarily unfilled or may, by resolution, reduce the size of the Board.
The professional experience and skills and qualifications highlighted in the nominee and continuing directors’ biographies below summarize the experience, qualifications, areas of expertise or skills that the Board of Directors used to determine that the person should serve as a director.
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PROPOSAL No. 2: Nominee for Election as Director to Be Elected by Holders of Series A Convertible Preferred Stock
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Patrick R. McCarter
Age: 46
Director Since: 2020
Committees: - Compensation - Nominating and Corporate Governance
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Professional Experience • Head of Global Technology, Media and Telecommunications Sector at The Carlyle Group LP (2017-present) • Partner at The Carlyle Group LP (2017-present) • Member of Northwestern’s McCormick School of Engineering Advisory Council (2018-present) • Various other positions including Managing Director and Principal at The Carlyle Group LP (2005-2016) • Associate at The Carlyle Group LP (2001-2003) • Investment Banking Analyst in the Financial Institutions group of Morgan Stanley (1998-2001)
Other Current Public Company Directorships • ZoomInfo Technologies Inc. (NASDAQ: ZI) (2018-present)
Other Directorships • HireVue, Inc. (2019-present) • Ampere Computing LLC (2017-present) • Veritas Technologies LLC (2016-present)
Skills and Qualifications: | |||
| • Directorship |
• Industry Experience | |||
| • Finance / Accounting |
• Leadership / Management | |||
| • Governance |
• Mergers & Acquisitions and Integration Experience | |||
The Board of Directors of the Company recommends that holders of Series A Convertible Preferred Stock vote “FOR” the foregoing nominee for election as a director. Proxies will be voted “FOR” the nominee, unless otherwise specified in the proxy.
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PROPOSAL No. 3: Three Nominees for Election as Class II Directors and One Nominee for Election as a Class III Director, Each to Be Elected by Holders of Common Stock and Series A Convertible Preferred Stock, Voting Together as a Single Class
Nominees for Election as Class II Directors
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Mary S. Chan
Age: 58
Director Since: 2020
Committees:
- Compensation
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Professional Experience • Managing Partner at VectoIQ, LLC (2016-present) • President and COO at VectoIQ Acquisition Corp. II (2020-present) • President of Global Connected Consumer & OnStar Service at General Motors (2012-2015)
Other Current Public Company Directorships • Magna International Inc. (NYSE: MGA) (2017-present) • SBA Communications (NASDAQ: SBAC) (2015-present) (Compensation Committee)
Other Directorships • Dialog Semiconductor Plc (OTCMKTS: DLGNF) (2016-present) (Chair of Compensation Committee) • Service King (2017-present) • Microelectronics Technologies, Inc. (TPE: 2314) (2012-2020) • WiTricity (2016-2020)
Skills and Qualifications: | |||
| • Directorship |
• Information Technology | |||
| • Finance / Accounting |
• Leadership / Management | |||
| • Industry Experience |
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Stephen (Steve) C. Gray
Age: 62
Director Since: 2011
Committees: - Compensation (Chair)
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Professional Experience • Founder and Chairman of Gray Venture Partners, LLC, a private investment Company (2009-present) • Senior Advisor to The Carlyle Group LP (2018-present) and (2007-2015) • President and CEO of Syniverse Holdings, Inc. (2014-2018) • President of McLeodUSA Incorporated (1992-2004) • VP of Business Services at MCI Inc. (1990-1992) • SVP of National Accounts and Carrier Services for TelecomUSA (1988-1990) • Various sales management positions with WilTel Network Services and the Clayton W. Williams Companies, including ClayDesta Communications Inc. (1986-1988)
Other Current Public Company Directorships • None
Other Directorships • INAP Holdings, LLC (2020-present) (Compensation Committee) • ImOn Communications, LLC (Current Vice Chairman, former Chairman) (2007-present) • Involta, LLC (Chairman) (2010-present) • HH Ventures, LLC (d/b/a ReadyMobile LLC) (Chairman) (2009-2020) • SecurityCoverage, Inc. (Chairman) (2005-2019) • Syniverse Holdings, Inc. (2011-2019) • Insight Communications, Inc. (2005-2012)
Skills and Qualifications: | |||
| • Directorship |
• Leadership / Management | |||
| • Finance / Accounting |
• Strategic Planning | |||
| • Industry Experience |
• Mergers & Acquisitions and Integration Experience | |||
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L. William (Bill) Krause
Age: 78
Director Since: 2011
Committees: - Compensation - Nominating and Corporate Governance
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Professional Experience • President of LWK Ventures, a private advisory and investment firm (1991-present) • Senior Advisor to The Carlyle Group LP (2010-present) • Board Partner at Andreesen Horowitz (2014-present) • CEO (1981-1990) and Chairman (1987-1993) of 3Com Corporation, a global data networking Company
Other Current Public Company Directorships • None
Other Directorships • Veritas Holding, Ltd (2016-present) • Coherent, Inc., (NASDAQ: COHR) (2009-2019) • Brocade Communication Systems, Inc. (NASDAQ: BRCD) (now Broadcom Inc.) (2004-2017) • Core-Mark Holding Company, Inc. (NASDAQ: CORE) (2005-2014) • 3Com Corporation (1981-1993) (Chairman)
Skills and Qualifications: | |||
| • Directorship |
• Leadership / Management | |||
| • Industry Experience |
• Strategic Planning | |||
| • Information Technology |
• Mergers & Acquisitions and Integration Experience | |||
Nominee for Election as a Class III Director
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Derrick A. Roman
Age: 57
Director Since: 2021
Committees: - Audit |
Professional Experience • Audit, consulting and senior client relationship partner at PricewaterhouseCoopers LLP (1997-2020) • Diversity and inclusion and corporate responsibility leader at PricewaterhouseCoopers LLP • Certified Public Accountant
Other Current Public Company Directorships • None
Other Directorships • National Constitution Center Board of Trustees (2000-Present)
Skills and Qualifications: | |||
| • Audit Committee Financial Expert |
• Leadership / Management | |||
| • Finance / Accounting |
• Governance | |||
| • Industry Experience |
• Risk Management and Internal Controls | |||
The Board of Directors of the Company recommends a vote “FOR” each of the foregoing nominees for election as directors. Proxies will be voted “FOR” each nominee, unless otherwise specified in the proxy.
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Directors Continuing in Office
Continuing Class III Directors with Terms Expiring at the 2022 Annual Meeting of Stockholders
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Charles L. Treadway
Age: 55
Director Since: 2020
Committees: - None
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Professional Experience • President and CEO of CommScope (2020-present) • Operating Executive with The Carlyle Group LP (July 2020-September 2020) • CEO of Accudyne Industries (2016-2020) • CEO of Thomas & Betts Corporation, a global business unit of ABB Group (2012-2016) • President and COO, Thomas & Betts Corporation (2011-2012) • President of Electrical Division, Thomas & Betts Corporation (2009-2011)
Other Current Public Company Directorships • None
Other Directorships • None
Skills and Qualifications: | |||
| • Industry Experience |
• Strategic Planning | |||
| • Leadership / Management |
• Mergers & Acquisitions and Integration Experience
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Claudius (Bud) E. Watts IV
Age: 59
Director Since: 2011
Chairman of the Board Since: 2020
Committees: - None
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Professional Experience • Private investor and Founding Partner of Meeting Street Capital, LLC (2018-present) • Senior Advisor to The Carlyle Group LP (2018-present) • Partner with The Carlyle Group LP (2000-2017) • Founded and led The Carlyle Group LP’s Technology Buyout business (2004-2014) • Managing Director in the M&A group of First Union Securities, Inc. (1998-2000) • Principal at Bowles Hollowell Conner & Co. (1994-1998) • Fighter Pilot, United States Air Force (1984-1992)
Other Current Public Company Directorships • None
Other Directorships • Carolina Financial Corporation – Chairman (NASDAQ: CARO) (2015-2020) • Former director on boards of numerous other public and private companies, including service as Chairman and Lead Independent Director
Skills and Qualifications: | |||
| • Directorship |
• Industry Experience | |||
| • Finance / Accounting |
• Leadership / Management | |||
| • Governance |
• Mergers & Acquisitions and Integration Experience | |||
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Timothy T. Yates
Age: 73
Director Since: 2013
Lead Independent Director Since: 2020
Committees: - Audit (Chair)
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Professional Experience • Various senior leadership roles including EVP, CFO and CEO at Monster Worldwide, Inc. (2007–2016) • Led integration of Symbol into Motorola, Inc.’s Enterprise Mobility business (2007) • Various positions including independent consultant and SVP, CFO at Symbol Technologies, Inc. (2005–2007) • Co-Founder, Partner and CFO of Saguenay Capital, a boutique investment firm (2002–2005) • Partner at Cove Harbor Partners, a private investment and consulting firm, which he founded (1996–2002) • Various senior leadership roles at Bankers Trust New York Corporation, including serving as Chief Financial and Administrative Officer (1971–1995)
Other Current Public Company Directorships • None
Other Directorships • Monster Worldwide, Inc. (NASDAQ: MWW) (2007-2016) • Symbol Technologies, Inc. (2006-2007)
Skills and Qualifications: | |||
| • Audit Committee Financial Expert |
• Leadership / Management | |||
| • Directorship |
• Strategic Planning | |||
| • Finance / Accounting |
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Continuing Class I Directors with Terms Expiring at the 2023 Annual Meeting of Stockholders
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Frank M. Drendel
Age: 76
Director Since: 2011
Chairman Emeritus: 2020
Committees: - None
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Professional Experience • Chairman of the Board of CommScope (2011–2020) • Founder, CEO and Chairman of the Board of CommScope (1976–2011) • Cable Television Hall of Fame Inductee (2002)
Other Current Public Company Directorships • None
Other Directorships • National Cable & Telecommunications Association (1982-present) • Tyco International, Ltd. (NYSE: TYC) (acquired by Johnson Controls International) (2012-2016) • Sprint Nextel Corporation (2005-2008) • Nextel Communications (1997-2005) • General Instrument Corporation (1987-2000)
Skills and Qualifications: | |||
| • Directorship |
• Leadership / Management | |||
| • Extensive Experience with Our Business |
• Mergers & Acquisitions and Integration Experience | |||
| • Industry Experience |
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Joanne M. Maguire
Age: 67
Director Since: 2016
Committees: - Nominating and Corporate Governance (Chair) |
Professional Experience • EVP of Lockheed Martin Corporation, a provider of advanced-technology systems for national security, civil and commercial customers (2006-2013) • Various leadership positions at Lockheed Martin (2003-2006) • Progressively responsible positions at TRW’s Space & Electronics sector (now part of Northrop Grumman) from engineering analyst to VP and Deputy to the sector’s CEO, serving in leadership roles over programs as well as engineering, advanced technology, manufacturing and business development
Other Current Public Company Directorships • Visteon Corporation (NASDAQ: VC) (2015-present) • Tetra Tech, Inc. (NASDAQ: TTEK) (2016-present)
Other Directorships • Charles Stark Draper Laboratory (2013-present) • Freescale Semiconductor, Ltd. (2013-2015)
Skills and Qualifications: | |||
| • Directorship |
• Leadership / Management | |||
| • Governance |
• Risk Management | |||
| • Industry Experience |
• Strategic Planning | |||
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Thomas J. Manning
Age: 65
Director Since: 2014
Committees: - Audit
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Professional Experience • Executive Chairman of Cresco Labs • Senior Fellow in the Advanced Leadership Initiative at Harvard University (2019-2021) • Executive-in-Residence at the Booth School of Business (2018-present) • Lecturer in Law at the University of Chicago Law School teaching courses on corporate governance, private equity and United States-China relations, and innovative solutions (2012-2018) • 2019 Fellow in the Advanced Leadership Initiative at Harvard University and Senior Fellow for 2020 • CEO of Dun & Bradstreet (Aug 2018-Feb 2019) • Chairman & Interim CEO of Dun & Bradstreet (Feb 2018-Aug 2018) • CEO of Cerberus Asia Operations & Advisory Limited, a subsidiary of Cerberus Capital Management, a global private equity firm (2010-2012) • CEO of Indachin Limited, an incubator which developed early-stage information-based companies in China and India (2005-2009) • Senior partner with Bain & Company and head of Bain’s information technology strategy practice in the Silicon Valley and Asia (2003-2005) • Global Managing Director of the Strategy & Technology Business of Capgemini and CEO of Capgemini Asia Pacific and CEO of Ernst & Young Consulting Asia Pacific, led the development of consulting and IT service and outsourcing businesses across Asia (1996-2003) • Various positions in McKinsey & Company, Buddy Systems, Inc., a telemedicine company he founded, and CSC Index in early career
Other Current Public Company Directorships • Chindata Group Holdings Limited (NASDAQ: CD) (2020-present) (Chair of the Audit Committee) • Cresco Labs Inc. (Chairman – 2016-2020, Executive Chairman of the Board – 2020-present)
Other Directorships • Clear Media Limited (Chairman of the Remuneration Committee) (2016-2020) • Dun & Bradstreet (NYSE: DNB) (2013-2019) (Lead Director and Chair of the Nominating and Corporate Governance Committee) • iSoftStone Holdings Limited (2010-2014) • AsiaInfo-Linkage, Inc. (2006-2014) • GOME Electrical Appliances Company (2007-2012) • Bank of Communications Co., Ltd. (2004-2010) • China Board of Directors Ltd. (2005-2009) (Chairman) • Bain & Company’s China Board (2003-2005)
Skills and Qualifications: | |||
| • Audit Committee Financial Expert |
• Information Technology | |||
| • Directorship |
• Leadership / Management | |||
| • Finance / Accounting |
• Regulatory Matters | |||
| • Governance |
• Strategic Planning | |||
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POLICIES ON CORPORATE GOVERNANCE
Our Board believes that good corporate governance is important to ensure our business is managed for the long-term benefit of our stockholders. We have adopted a Code of Conduct that applies to all our directors, executive officers and senior financial and accounting officers, as well as a Code of Ethics and Business Conduct that applies to all of our employees. We have also adopted Corporate Governance Guidelines. Current versions of the Code of Conduct, the Code of Ethics and Business Conduct and the Corporate Governance Guidelines are available on our website at www.commscope.com and will also be provided upon request to any person without charge. Requests should be made in writing to our Corporate Secretary at CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, North Carolina 28602, or by phone at (828) 324-2200. In the event of any amendment or waiver of our Code of Conduct or Code of Ethics and Business Conduct applicable to our directors or executive officers, such amendment or waiver will be posted on our website.
The Company currently has separate individuals serving in the positions of Chairman of the Board and Chief Executive Officer. The Board of Directors does not have a set policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board regularly evaluates whether the roles of Chairman of the Board and Chief Executive Officer should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Company. The Board believes these issues should be considered as part of the Board’s broader oversight and succession planning process. The Board believes that Mr. Watts is appropriate to serve as employee Chairman as he has a long history of service to the Company, most recently as the Board’s Independent Lead Director.
Mr. Yates was appointed as Lead Independent Director in 2020 upon Mr. Watts appointment as Chairman of the Board. Among other things, our Lead Independent Director presides at all meetings of the independent directors and any Board meeting when the Chairman is not present, advises the Chairman as to the Board’s agenda and information to be provided to the Board, and serves as the principal liaison and facilitator between the independent directors and the Chairman and Chief Executive Officer. In addition, our Lead Independent Director has the authority to convene special meetings of the independent directors, responds to stockholder questions directed to the independent directors and is available to major stockholders for consultation and direct communication.
THE BOARD’S ROLE IN MANAGEMENT’S SUCCESSION PLANNING
As reflected in our Corporate Governance Guidelines, the Board’s primary responsibilities include planning for Chief Executive Officer succession and monitoring and advising on management’s succession planning for other executive officers. The Board’s goal is to have a long-term and continuing program for effective senior leadership development and succession. The Board is actively engaged in these endeavors and has a contingency plan in place for emergencies such as the departure, death or disability of the Chief Executive Officer or other executive officers.
The Chief Executive Officer and Chief Human Resources Officer report to the Board at least twice a year on succession planning and management development.
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THE BOARD’S ROLE IN RISK OVERSIGHT
While risk management is primarily the responsibility of our management, the Board provides overall risk oversight focusing on the most significant risks facing the Company. The Board oversees the risk management processes that have been designed and are implemented by our executives to determine whether those processes are functioning as intended and are consistent with our business and strategy. The Board executes its oversight responsibility for risk management directly and through its committees. The Board’s role in risk oversight has not affected its leadership structure.
The Audit Committee is specifically tasked with reviewing with management, the independent auditors and our legal counsel, as appropriate, our compliance with legal and regulatory requirements and any related compliance policies and programs. The Audit Committee is also tasked with reviewing our financial and risk management policies and oversight of our enterprise risk management program, which is our comprehensive assessment of key risks related to finance, operations and management information systems, including those related to cybersecurity. Members of our management who have responsibility for designing and implementing our risk management processes regularly meet with the Audit Committee. Additionally, the Nominating and Corporate Governance Committee is tasked with overseeing our environmental and corporate responsibility efforts and any related risks. The Board’s other committees oversee risks associated with their respective areas of responsibility.
The full Board considers specific risk topics, including risk-related issues pertaining to laws and regulations enforced by the United States and foreign government regulators and risks associated with our business plan and capital structure. In addition, the Board receives reports from members of our management that include discussions of the risks and exposures involved with their respective areas of responsibility, and the Board is routinely informed of developments that could affect our risk profile or other aspects of our business.
Nasdaq listing standards and our Corporate Governance Guidelines, which are available on our website as described above, require that the Board be comprised of a majority of directors who qualify as independent directors under applicable Nasdaq rules. The Board has determined that each of our non-employee directors, Austin A. Adams, Mary S. Chan, Stephen C. Gray, L. William Krause, Joanne M. Maguire, Thomas J. Manning, Patrick R. McCarter, Derrick A. Roman, and Timothy T. Yates, is independent under applicable Nasdaq rules and, prior to his retirement, Daniel F. Akerson was independent under such rules. The Board has determined that Charles L. Treadway, Claudius E. Watts IV and Frank M. Drendel are not independent.
The Nominating and Corporate Governance Committee will consider director nominees recommended by stockholders. A stockholder who wishes to recommend a director candidate for consideration by the Nominating and Corporate Governance Committee should send such recommendation to our Corporate Secretary at CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, North Carolina 28602, who will then forward it to the committee. Any such recommendation should include a description of the candidate’s qualifications for board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the stockholder and the candidate for more information. A stockholder who wishes to nominate an individual as a candidate for election, rather than recommend the individual to the Nominating and Corporate Governance Committee as a nominee, must comply with the advance notice requirements set forth in our Bylaws. See “Stockholder Proposals for the Company’s 2022 Annual Meeting” in this Proxy Statement for more information on these procedures.
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The Nominating and Corporate Governance Committee will consider and evaluate persons recommended by stockholders in the same manner as it considers and evaluates other potential directors. With respect to the directors to be elected by the holders of shares of Series A Convertible Preferred Stock, such nominees are required to have been designated by Carlyle pursuant to the Investment Agreement.
The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board of Directors those candidates to be nominated for election. In reviewing such candidates, our Corporate Governance Guidelines, which are available on our website as described above, set forth criteria that the Nominating and Corporate Governance Committee must consider when evaluating a director candidate for membership on the Board of Directors. These criteria are as follows:
| • | Integrity: reputation for integrity, honesty and adherence to high ethical standards; |
| • | Sound business judgment: demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to our current and long-term objectives and a willingness to contribute positively to the decision-making process; |
| • | Ability and willingness to commit sufficient time to the Board: commitment to understand us and our industry and to regularly attend and participate in meetings of the Board of Directors and its committees; and |
| • | Ethics and independence: ability to understand the sometimes-conflicting interests of our various constituencies, which include stockholders, employees, customers, governmental units, creditors and the general public, and to act in the overall best interests of all stakeholders. |
The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for any prospective nominee.
Our Corporate Governance Guidelines also require the Nominating and Corporate Governance Committee to consider the mix of backgrounds and qualifications of the directors in order to assure that the Board of Directors has the necessary experience, knowledge and abilities to perform its responsibilities effectively and to consider the value of diversity on the Board of Directors, including diversity of experience, thoughts, gender, race, ethnicity, age and background. While diversity and variety of experiences and viewpoints represented on the Board should always be considered, a director nominee should not be chosen or excluded solely or largely because of race, religion, national origin, gender, sexual orientation or disability.
Our Board of Directors currently consists of twelve members (with one vacancy to be filled by Carlyle pursuant to the Investment Agreement). Claudius E. Watts IV was appointed Chairman of the Board of Directors in October 2020 after serving as Lead Independent Director since 2017. Upon Mr. Watts’ transition to Chairman, Frank M. Drendel, the former Chairman of our Board, was named Chairman Emeritus after serving on the Board since 2011, and Timothy T. Yates was elected as Lead Independent Director.
As of April 4, 2019, per the Investment Agreement between Carlyle and CommScope and effective with the closing of the acquisition of ARRIS International plc (ARRIS), Carlyle has the right to designate
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two directors to our Board to serve a one-year term. Mr. McCarter is a nominee designated by Carlyle and recommended by the Board for election in 2021 and expiring at the 2022 annual meeting. There is currently one vacancy on our Board as a result of Mr. Akerson’s retirement, which Carlyle has the right to fill. The directors designated by Carlyle will be voted on by the holders of Series A Convertible Preferred Stock as a single class at each annual meeting until certain beneficial ownership conditions are no longer met as detailed in the Investment Agreement.
The remainder of our Board is currently divided into three classes whose members serve three-year terms expiring in successive years. These directors hold office until their successors have been duly elected and qualified or until the earlier of their respective death, resignation or removal. At each annual meeting of stockholders, the successors to the directors whose terms then expire are elected to serve from the time of election and qualification until the third annual meeting of stockholders following such election. However, if Proposal No. 1 is approved by the stockholders at this Annual Meeting, then starting at this Annual Meeting and at each annual meeting hereafter, all directors whose terms expire at such annual meeting will be elected to serve for one-year terms, from the time of election and qualification until the next annual meeting of stockholders following such election.
The number of members on our Board of Directors may be modified from time to time exclusively by resolution of our Board of Directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. In addition, the Company’s Corporate Governance Guidelines provide that any director that is appointed to fill a vacancy on the Board between annual meetings stand for election at the next succeeding annual meeting of stockholders, regardless of class into which such director was appointed.
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors to satisfy their oversight responsibilities effectively in light of our business and structure, the Board of Directors focused primarily on each person’s background and experience as reflected in the information discussed in each of the director’s individual biographies set forth above. See Proposals No. 2 and No. 3: Election of Directors. We believe that our directors provide an appropriate diversity of experience and skills relevant to the size and nature of our business.
BOARD AND COMMITTEE EVALUATIONS
Each year, our Board and committees conduct self-evaluations to assess the qualifications, attributes, skills and experience represented on the Board; to assess their effectiveness and adherence to our Corporate Governance Guidelines and committee charters; and to identify opportunities to improve Board and committee performance.
STOCKHOLDER COMMUNICATIONS WITH BOARD OF DIRECTORS
Stockholders may send written communications to the Board of Directors, or any of the individual directors, c/o our Corporate Secretary at CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, North Carolina 28602. All communications will be compiled by the Corporate Secretary of the Company and submitted to the Board of Directors or the individual directors, as applicable, on a periodic basis.
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CORPORATE GOVERNANCE
BOARD MEETINGS, ATTENDANCE AND EXECUTIVE SESSIONS
The Board meets on a regularly scheduled basis during the year to review significant developments affecting us and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. Members of senior management regularly attend meetings of the Board and its committees to report on and discuss their areas of responsibility. Directors are expected to attend Board meetings and meetings of committees on which they serve. In addition, all directors are invited, but not required, to attend our annual stockholder meeting. In 2020, all the directors attended our virtual annual stockholder meeting. Directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. In 2020, the Board held ten meetings and committees of the Board held a total of sixteen meetings. All directors attended 90% or more of the meetings of the Board and committees on which they served.
In general, the Board reserves time following each regularly scheduled meeting to allow the independent directors to meet in executive session.
Our Board of Directors oversees the management of our business and affairs as provided by Delaware law and conducts its business through meetings of the Board of Directors and three standing committees: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. In addition, from time to time, other committees may be established under the direction of the Board of Directors when necessary or advisable to address specific issues.
Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee operates under a charter that was approved by our Board of Directors. Each of these charters is available on our investor relations website at http://ir.commscope.com.
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| Committee | Primary Responsibilities | |
|
Audit(1)
Members: Messrs. Yates (Chair), Adams, Manning and Roman
Number of Meetings in 2020: 5
|
• Assists the Board of Directors in its oversight of (i) our accounting and financial reporting processes and other internal control processes, (ii) the audits and integrity of our financial statements, and (iii) our compliance with legal and regulatory requirements. • Approves the independent registered public accounting firm’s appointment, compensation and retention and provides oversight of their work as well as annually assesses their qualifications and independence. • Considers and reviews the adequacy and effectiveness of our internal controls over financial reporting and any related significant findings of our independent auditor and internal audit. • Reviews our Code of Ethics and recommends changes as well as reviews and assesses any violations. • Reviews and approves any proposed related person transactions. • Reviews our financial and risk management policies, including approval of decisions to enter swaps or other derivatives. • Reviews our enterprise risk management program which is a comprehensive assessment of key risks including those related to cybersecurity.
| |
| Compensation(2)
Members: Messrs. Gray (Chair), Krause and McCarter and Ms. Chan
Number of Meetings in 2020: 6
|
• Reviews and approves the compensation philosophy for our Chief Executive Officer. • Reviews and approves all forms of compensation and benefits provided to our other executive officers. • Reviews and oversees the administration of our equity incentive plans. • May engage independent compensation advisors to provide advice regarding our executive compensation program and director compensation.
| |
|
Nominating and Corporate Governance(3)
Members: Ms. Maguire (Chair) and Messrs. Krause and McCarter
Number of Meetings in 2020: 5
|
• Identifies, screens and recommends candidates to the Board of Directors for election to our Board of Directors. • Reviews the composition of the Board of Directors and its committees. • Reviews and determines appropriate Board leadership structure. • Develops and recommends appropriate Corporate Governance Guidelines. • Oversees overall compliance with and execution of the Company’s Corporate Governance Guidelines. • Oversight of ESG policies and practices.
| |
| (1) | The Board of Directors has determined that each of member of the Audit Committee is an “audit committee financial expert” as such term is defined under the applicable regulations of the Commission and has the requisite accounting or related financial management expertise and financial sophistication under the applicable rules and regulations of Nasdaq. The Board of Directors has also determined that each member of the Audit Committee is independent under Rule 10A-3 under the Exchange Act and the enhanced independence standards for audit committee members as defined in the rules of Nasdaq and the Commission. All members of the Audit Committee can read and understand fundamental financial statements, are familiar with finance and accounting practices and principles and are financially literate. Mr. Roman has served as a member of the Audit Committee since his appointment to the Board in March 2021. |
| (2) | The Compensation Committee’s processes for fulfilling its responsibilities and duties with respect to executive compensation and the role of executive officers and management in the compensation process are each described under the heading “Determination of Compensation Awards” in this Proxy Statement. The Board of Directors has determined that each member of the Compensation Committee satisfies the enhanced independence standards for compensation committee members as defined in the rules of Nasdaq and the Commission. Ms. Chan was appointed to the Compensation Committee in March 2021. |
| (3) | The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent as defined in the Nasdaq rules. Mr. Akerson served as a member of the Nominating and Corporate Governance Committee until his retirement on December 31, 2020. Mr. McCarter was appointed to the Nominating and Corporate Governance Committee in January 2021. |
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Our Compensation Committee has the primary authority to determine and approve the compensation of our non-employee directors. When considering and approving changes to the level and composition of the directors’ compensation, the Compensation Committee considers input from its independent compensation consultant and market data from peer companies.
Directors who are employees of the Company or its affiliates (including Carlyle) receive no additional compensation for their service on our Board of Directors or its committees. Non-employee directors are each paid a basic cash retainer per year for service on our Board of Directors, payable quarterly, plus an additional amount for serving as a chair or member of a committee. The Lead Independent Director receives an additional cash retainer annually. We also reimburse non-employee directors for reasonable out-of-pocket expenses in the performance of their duties as directors. Non-employee directors received equity-based awards, in the form of stock options (if granted prior to our IPO in 2013) or restricted stock units (RSUs) (if granted subsequent to our IPO) at the time of their election to our Board of Directors. In addition, our non-employee directors receive an annual grant of RSUs on the date of the annual stockholders’ meeting. The RSUs vest on the date of the next annual meeting or, if earlier, the first anniversary of the grant date. If a director joins the Board or changes roles between stockholders’ meetings, the director fees and stock retainer are prorated.
In 2020, the Compensation Committee decided to maintain the non-employee director compensation program for 2020 with no changes from the compensation levels that had been approved in February 2019.
The following tables summarize our non-employee director compensation for 2020:
| Annual Non-Employee Director Compensation
|
||||
| Basic Cash Retainer |
$ |
90,000 |
| |
| Supplemental Cash Retainers: |
||||
| Lead Independent Director |
$ |
30,000 |
| |
| Audit Committee Chair(1) |
$ |
30,000 |
| |
| Audit Committee Member |
$ |
15,000 |
| |
| Compensation Committee Chair(1) |
$ |
20,000 |
| |
| Compensation Committee Member |
$ |
10,000 |
| |
| Nominating and Corporate Governance Committee Chair(1) |
$ |
15,000 |
| |
| Nominating and Corporate Governance Committee Member |
$ |
10,000 |
| |
| Annual Stock Retainer(2) |
$ |
180,000 |
| |
| (1) | Amount includes both the supplemental cash retainer for serving as the committee chair and the supplemental cash retainer for serving as a member of such Committee. |
| (2) | The number of RSUs granted as the annual stock retainer is determined based upon the closing price of our common stock on the grant date. |
In October 2020, Mr. Drendel retired as an employee of the Company, but he remains in service as a member of the Board of Directors. Upon his retirement as an employee, Mr. Drendel did not receive the initial equity award typically granted to new non-employee directors, but he will receive a prorated cash retainer for the remainder of the board year, paid in quarterly installments of $22,500 on October 1, 2020, January 1, 2021, and April 1, 2021, provided that he remains on the Board of Directors. He will be eligible to participate fully in our director compensation program for service on the Board of Directors, including the annual equity award, starting with the 2021 Annual Meeting. Mr. Drendel’s board compensation is included in the Summary Compensation Table.
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Employment Agreement with Mr. Watts
In connection with Mr. Drendel’s retirement as an employee, Mr. Watts was named Chairman of the Board and became an employee of the Company. We are party to an employment agreement with Mr. Watts. His agreement is on a one-year term, automatically renewing for an additional one-year period each year following the initial term, unless either party gives 60 days written notice of non-renewal. Mr. Watts receives a salary equal to $600,000 and is eligible to participate in the Company’s employee benefit programs, but he will not receive annual incentive awards under the AIP. In connection with his employment, Mr. Watts received 100,000 RSUs that vest subject to Mr. Watts’ continued service annually over three years beginning on the first anniversary of the grant date. In addition, Mr. Watts received 220,000 PSUs that may be earned upon the achievement of certain hurdles relating to our stock price (ranging from a low of $15 to a high of $40) and his continued service over a four-year period. None of the average stock price hurdles for Mr. Watts’ PSUs were met in 2020.
Pursuant to Mr. Watts’ employment agreement, in the event Mr. Watts’ employment is terminated by the Company for any reason other than for cause or disability or by Mr. Watts for good reason, in each case regardless of whether a change in control has occurred, Mr. Watts will be entitled to receive his accrued compensation and each of the following:
| • | severance pay equal to twelve months’ base salary, payable in equal monthly installments over twelve months, or two years’ base salary if such termination occurs within twenty-four months following a change in control, payable in a lump sum; and |
| • | a cash payment equal to the cost we would have incurred had he continued group medical, dental, vision and/or prescription drug benefit coverage for himself and his eligible dependents for twelve months, payable in periodic installments in accordance with our payroll practice. |
For purposes of Mr. Watts’ agreement, “good reason” includes a material reduction in base salary, a change in his title or position as Chairman, any requirement to permanently relocate to the Company’s headquarters, or a material breach of the agreement.
If Mr. Watts’ employment is terminated by the Company for cause or disability, by reason of his death or by the executive other than for good reason, we will pay to the executive his accrued compensation.
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DIRECTOR COMPENSATION TABLE FOR 2020
| Name | Fees Paid in Cash |
Stock Awards |
All Other Compensation ($)(2) |
Total ($) | ||||
| Claudius E. Watts IV |
105,000 |
179,998 |
1,869,249 |
2,154,247 | ||||
| Austin A. Adams |
105,000 |
179,998 |
— |
284,998 | ||||
| Daniel F. Akerson(3) |
100,000 |
179,998 |
— |
279,998 | ||||
| Mary S. Chan |
67,500 |
209,995 |
— |
277,495 | ||||
| Stephen C. Gray |
110,000 |
179,998 |
— |
289,998 | ||||
| L. William Krause |
110,000 |
179,998 |
— |
289,998 | ||||
| Joanne M. Maguire |
105,000 |
179,998 |
— |
284,998 | ||||
| Thomas J. Manning |
105,000 |
179,998 |
— |
284,998 | ||||
| Patrick R. McCarter(4) |
— |
— |
— |
— | ||||
| Timothy T. Yates |
127,500 |
179,998 |
— |
307,498 | ||||
| (1) | We granted each non-employee director 16,100 RSUs in 2020 which will vest May 8, 2021. We granted Ms. Chan 3,529 RSUs in April 2020 upon appointment to the Board. These units will vest on April 1, 2021. Amounts represent the grant date fair value of these RSUs, which was computed in accordance with FASB ASC Topic 718. |
| (2) | Amounts paid in 2020 are related to Mr. Watts’ 2020 employment agreement including $150,000 in salary, a $3,000 company contribution to the 401(k) plan, and a $129 life insurance premium. Also included is the $903,000 grant date fair value of Mr. Watts’ 100,000 employee RSUs and the $813,120 grant date fair value of Mr. Watts’ 220,000 employee PSUs. The fair value of these awards was computed in accordance with FASB ASC Topic 718. Mr. Watts’ employee RSUs were granted on October 1, 2020 and vest subject to Mr. Watts’ continued service annually over three years beginning on the first anniversary of the grant date. Mr. Watts’ employee PSUs were also granted on October 1, 2020 and vest based upon a combination of achievement of various stock price hurdles (ranging from a low of $15 and a high of $40) and continued service over a four-year period. None of Mr. Watts’ employee RSUs or employee PSUs were vested as of December 31, 2020. |
| (3) | Mr. Akerson retired from the Board of Directors effective December 31, 2020. |
| (4) | Mr. McCarter is employed by Carlyle and did not receive director compensation from the Company. |
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CERTAIN RELATIONSHIPS AND RELATED PERSON
TRANSACTIONS
Our Board has adopted a written statement of policy for the evaluation of and the approval, disapproval and monitoring of transactions involving us and “related persons.” For the purposes of the policy, “related persons” will include our executive officers, directors and director nominees or their immediate family members, or stockholders owning five percent or more of our outstanding common stock and their immediate family members.
The policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, the amount involved exceeds $120,000, and a related person had or will have a direct or indirect material interest. Pursuant to this policy, our management will present to our Audit Committee each proposed related person transaction, including all relevant facts and circumstances relating thereto. Our Audit Committee will then:
| • | review the relevant facts and circumstances of each related person transaction, including the financial terms of such transaction, the benefits to us, the availability of other sources for comparable products or services, if the transaction is on terms no less favorable to us than those that could be obtained in arm’s-length dealings with an unrelated third party or employees generally and the extent of the related person’s interest in the transaction; and |
| • | consider the impact on the independence of any independent director and the actual or apparent conflicts of interest. |
Any related person transaction may only be consummated if our Audit Committee has approved or ratified such transaction in accordance with the guidelines set forth in the policy. Certain types of transactions have been pre-approved by our Audit Committee under the policy. These pre-approved transactions include:
| • | certain employment and compensation arrangements; |
| • | transactions where the related person’s interest is only as an employee (other than an executive officer), director or owner of less than ten percent (10%) of the equity in another entity; |
| • | transactions where the related person is an executive officer of another company and the aggregate amount involved does not exceed the greater of $200,000 or five percent (5%) of the total annual revenues of the other company; |
| • | charitable contributions to an organization, foundation or university at which the related person’s only relationship is as an employee, trustee or director, if the contribution is made pursuant to the Company’s policies and approved by someone other than the related person; |
| • | transactions where the interest of the related person arises solely from the ownership of a class of equity securities in our Company where all holders of such class of equity securities will receive the same benefit on a pro rata basis; |
| • | transactions determined by competitive bids; |
| • | certain regulated transactions involving the rendering of services at rates or charges fixed by law or governmental authority; and |
| • | certain transactions involving banking-related services such as services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services. |
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No director may participate in the approval of a related person transaction for which he or she, or his or her immediate family members, is a related person.
On April 4, 2019, the Company issued 1,000,000 shares of Series A Convertible Preferred Stock to Carlyle for an aggregate purchase price of $1.0 billion, or $1,000 per share, pursuant to the Investment Agreement between the Company and Carlyle, dated November 8, 2018.
The Series A Convertible Preferred Stock ranks senior to the shares of the Company’s common stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. Dividends can be paid in cash, in kind with Series A Convertible Preferred Stock or any combination of the two options at the Company’s sole discretion. During 2020, we paid Carlyle dividends in-kind of $41.8 million and cash dividends of $14.3 million for the Series A Convertible Preferred Stock.
The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of CommScope common stock at a conversion rate of 36.36 shares of common stock per share of Series A Convertible Preferred Stock (equivalent to $27.50 per common share). The conversion rate is subject to customary anti-dilution and other adjustments. At any time after the third anniversary of the issuance of the Series A Convertible Preferred Stock, if the volume weighted average price of CommScope’s common stock exceeds the mandatory conversion price of $49.50 for at least thirty trading days in any period of forty-five consecutive trading days (including the final five consecutive trading days of such forty-five day trading period), the Company has the option to convert all of the outstanding shares of Series A Convertible Preferred Stock into CommScope common stock. During the three months following the eight and one-half year anniversary of the Investment Agreement closing date and the three months following each anniversary thereafter, holders of the Series A Convertible Preferred Stock will have the right to require CommScope to redeem all or any portion of the Series A Convertible Preferred Stock at 100% liquidation preference plus all accrued and unpaid dividends. The redemption price is payable, at the Company’s option, in cash or a combination of cash and common stock subject to certain restrictions. Upon the occurrence of a change of control, the Company will have the right, subject to the rights of the holders of outstanding shares of Series A Convertible Preferred Stock to convert prior to such redemption, to redeem all of the Series A Convertible Preferred Stock for the greater of (i) an amount in cash equal to the sum of the liquidation preference of the Series A Convertible Preferred Stock, all accrued but unpaid dividends and, if the applicable redemption date is prior to the fifth anniversary of the first dividend payment date, the present value, discounted at a rate of 10%, of any remaining scheduled dividends through the five year anniversary of the first dividend payment date, assuming CommScope chose to pay such dividends in cash and (ii) the consideration the holders would have received if they had converted their shares of Series A Convertible Preferred Stock into common stock immediately prior to the change of control event.
Holders of Series A Convertible Preferred Stock are entitled to vote with the holders of common stock on an as-converted basis, voting together as a single class. Holders of Series A Convertible Preferred Stock are entitled to a separate class vote with respect to amendments to the Company’s organizational documents that have an adverse effect on the Series A Convertible Preferred Stock and the creation or classification of, or issuances by, the Company of securities that are senior to, or equal in priority with, the Series A Convertible Preferred Stock. So long as Carlyle or its affiliates beneficially
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own shares of Series A Convertible Preferred Stock and/or shares of common stock issued upon conversion of Series A Convertible Preferred Stock (Conversion Common Stock) that represent, in the aggregate and on an as-converted basis, at least 50% of Carlyle’s initial shares of Series A Convertible Preferred Stock on an as-converted basis, Carlyle has the right to designate two directors to be nominated by the Board for election to the Board. Until Carlyle no longer has the right to designate directors for election to the Board, it and its affiliates have committed to vote all of their shares of Series A Convertible Preferred Stock and/or common stock (i) in favor of director nominees recommended by the Board, (ii) against stockholder director nominees not approved and recommended by the Board, (iii) in favor of the Company’s say-on-pay proposal and other equity compensation proposals that have been approved by the compensation committee and (iv) in favor of the Company’s proposal for ratification of the appointment of the Company’s independent registered public accounting firm. With regard to all other matters submitted to the vote of stockholders, Carlyle and its affiliates are under no obligation to vote in the same manner as recommended by the Board or otherwise.
During 2020, JPMorgan Chase & Co. (JPMorgan) reported beneficial ownership of more than 5.0% of our outstanding shares of common stock. J.P. Morgan Securities LLC, a subsidiary of JPMorgan, acted as an advisor in connection with our debt refinancing transactions in July 2020, and we paid J.P. Morgan Securities LLC fees in the amount of $3.2 million for these services in 2020.
Additionally, JPMorgan Chase Bank, N.A., a subsidiary of JPMorgan, acted as an arranger, administrative agent, collateral agent and lender on our debt agreements for our senior secured term loan due 2026 (the 2026 Term Loan) and our senior secured asset-based revolving credit facility (the Revolving Credit Facility), each dated as of April 4, 2019, which we entered into in connection with the acquisition of ARRIS. We paid administrative and agency fees in the amount of $0.8 million to JPMorgan Chase Bank, N.A. in 2020 related to their services under our debt agreements.
On April 4, 2019, we borrowed $3.2 billion under the 2026 Term Loan with an interest rate of LIBOR plus 3.25%. We repaid $32.0 million under the 2026 Term Loan and $125.4 million in interest during 2020, and as of [March 9], 2021, $[●] billion remained outstanding. We borrowed and repaid $250.0 million under the Revolving Credit Facility in the second quarter of 2020 and paid $1.1 million of interest in connection with the borrowing. As of February 19, 2021, no amounts were outstanding, and we had availability of $695.0 million, reflecting a borrowing base of $735.5 million reduced by $40.5 million of letters of credit under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin of 1.25% to 1.50% or, at the option of the borrowers, a base rate plus an applicable margin of 0.25% to 0.50%.
All agreements were negotiated at arm’s length and reviewed and ratified by the Audit Committee.
We have entered into indemnification agreements with each of our directors and certain of our officers. These indemnification agreements provide the directors and officers with contractual rights to indemnification and expense advancement which are, in some cases, broader than the specific indemnification provisions under Delaware law. We believe that these indemnification agreements are, in form and substance, substantially similar to those commonly entered into by similarly situated companies. A form of indemnification agreement is filed as an exhibit to our Annual Report on Form 10-K.
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The following table provides information regarding our executive officers:
| Name
|
Age
|
Position
| ||
| Charles L. Treadway |
55 | President, Chief Executive Officer and Director | ||
| Alexander W. Pease |
49 | Executive Vice President and Chief Financial Officer | ||
| John R. Carlson |
64 | Senior Vice President and Chief Commercial Officer | ||
| Frank (Burk) B. Wyatt, II |
58 | Senior Vice President, Chief Legal Officer/General Counsel and Secretary | ||
| Morgan C.S. Kurk |
51 | Executive Vice President and Chief Technology Officer | ||
| Brooke B. Clark |
46 | Senior Vice President and Chief Accounting Officer | ||
| Robyn T. Mingle
|
55
|
Senior Vice President and Chief Human Resources Officer
| ||
Charles (Chuck) L. Treadway
Mr. Treadway was appointed as our President and Chief Executive Officer in October 2020. He also serves as a member of our Board of Directors. Mr. Treadway most recently served as Chief Executive Officer of Accudyne Industries, a global provider of precision-engineered, process-critical and technologically advanced pumps and flow control equipment, systems and high efficiency industrial compressors, from 2016 to 2020. Prior to joining Accudyne Industries, Mr. Treadway held various leadership positions at Thomas & Betts Corporation, a global leader in the design, manufacture and marketing of essential components used to manage the connection, distribution, transmission and reliability of electrical power in industrial, construction and utility applications, including President and Chief Executive Officer from 2012 to 2016, President and Chief Operating Officer from 2011 to 2012 and Group President of Electrical from 2009 to 2011. He previously served in several management and executive positions at Schneider Electric S.A., Prettl International, Inc. and Yale Security, Inc.
Alexander W. Pease
Mr. Pease has been our Executive Vice President and Chief Financial Officer since 2018. From 2016 to 2018, Mr. Pease served as Executive Vice President and Chief Financial Officer of Snyder’s-Lance, Inc. Mr. Pease served as a principal at McKinsey & Company as a leader in their global corporate finance and business functions practice from 2015 to 2016. From 2011 to 2015, he was Senior Vice President and Chief Financial Officer at EnPro Industries, Inc., overseeing six operating divisions in addition to finance, accounting, strategy and development, global supply chain and information technology. Before joining EnPro, Mr. Pease worked at McKinsey & Company and served in the US Navy as a SEAL Platoon commander.
John (Jack) R. Carlson
Mr. Carlson became our Senior Vice President and Chief Commercial Officer in November 2020. He previously served as the President and Chief Executive Officer of Sullair, a premier global industrial air compressor manufacturer, a Hitachi Group Company, from 2016 to 2020. Mr. Carlson also served as Chairman of the Board of the China-based IHI-Sullair joint venture during that time. From 2001 to 2016, Mr. Carlson held varying leadership positions including, President of North America at Southwire Company, a global leader in copper rod production and design/manufacturing and sales of utility, OEM and electrical wire and cable. Prior to that, Mr. Carlson served as Sector CEO of Yale Security Group from 1999 to 2000. From 1991 until 1998, Mr. Carlson held multiple roles with Schneider Electric including Vice President of the Motor Control Division, Vice President of the Industrial Segment and Vice President of Marketing. He began his career with Square D Company, which was acquired by Schneider Electric in 1991, in 1979 and held various roles in sales and product management until 1998.
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EXECUTIVE OFFICERS
Frank (Burk) B. Wyatt, II
Mr. Wyatt has been Senior Vice President, Chief Legal Officer/General Counsel and Secretary of CommScope since 2000. Prior to joining our Company as General Counsel and Secretary in 1996, Mr. Wyatt was an attorney in private practice with Bell, Seltzer, Park & Gibson, P.A. (now Alston & Bird LLP).
Morgan C.S. Kurk
Mr. Kurk became our Executive Vice President and Chief Technology Officer (CTO) upon close of the ARRIS acquisition, a position he previously held from 2016 to 2017. Mr. Kurk also assumed leadership of our Broadband Networks segment, in addition to his CTO responsibilities, in December 2020. Mr. Kurk most recently served as our Executive Vice President and Chief Operating Officer in 2018 and 2019. Prior to 2016, he served as Senior Vice President of the Wireless segment, with responsibility for indoor, outdoor and backhaul businesses from 2012 to 2015. Mr. Kurk joined CommScope in 2009 as Senior Vice President of the Enterprise business unit. From 1997 to 2009, Mr. Kurk held a variety of positions at Andrew Corporation and one of its successors, including Director of Business Development, Vice President of R&D, PLM, and Strategy and Vice President and General Manager of the Wireless Innovations Group. Prior to joining Andrew, Mr. Kurk worked for Motorola, where he was a hardware development engineer for cellular base stations and a product manager for a CDMA base station product line.
Brooke B. Clark
Ms. Clark has been our Senior Vice President, Chief Accounting Officer since September 2018. Ms. Clark previously served as Vice President, Corporate Accounting since 2013. She served in various positions within our finance organization since joining CommScope in 2004. Prior to joining CommScope, Ms. Clark was employed by Deloitte & Touche, LLP. Ms. Clark is a Certified Public Accountant in North Carolina.
Robyn T. Mingle
Ms. Mingle became our Senior Vice President, Chief Human Resources Officer, in 2016. Prior to joining CommScope, she was the Chief Human Resource Officer at Xylem Inc. from 2011 to 2015, where she was a founding executive team member for the global water Company spin-off from ITT Corp. From 2003 to 2011, Ms. Mingle was the Senior Vice President, Human Resources at Hovnanian Enterprises, Inc., one of the nation’s largest homebuilders. She spent the first 14 years of her career with The Black & Decker Corporation in various human resource roles.
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BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
The following tables set forth information with respect to the beneficial ownership of our common stock and Series A Convertible Preferred Stock as of [●], 2021 by:
| • | each of our NEOs; |
| • | each of our directors; |
| • | all our directors and executive officers as a group; and |
| • | each individual or entity known to own beneficially more than 5% of the capital stock. |
We had [●] shares of common stock and [●] shares of Series A Convertible Preferred Stock outstanding as of [●], 2021. None of the executive officers or directors named in the table below owned, beneficially or of record, any shares of the Company’s Series A Convertible Preferred Stock. The amounts and percentages of shares beneficially owned are reported based on Commission regulations governing the determination of beneficial ownership of securities. Under the Commission rules, an individual or entity is deemed to be a “beneficial” owner of a security if that individual or entity has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. An individual or entity is also deemed to be a beneficial owner of any securities of which that individual or entity has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are not deemed to be outstanding for purposes of computing the ownership percentage of any other individual or entity. Under these rules, more than one individual or entity may be deemed to be a beneficial owner of securities as to which such individual or entity has no economic interest. Except as otherwise indicated in the footnotes to the table below, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the shares of capital stock and the business address of each such beneficial owner, unless otherwise noted, is c/o CommScope Holding Company, Inc., 1100 CommScope Place, SE, Hickory, North Carolina 28602.
| Name of Beneficial Owner
|
|
Common Stock
|
|
|
Options to Purchase Common Stock (1)
|
|
|
RSUs (2)
|
|
|
Total Shares of Common Stock Beneficially Owned
|
|
|
Percentage of Class
|
| |||||||||
| Executive Officers and Directors:
|
||||||||||||||||||||||||
| Charles L. Treadway President, Chief Executive Officer
|
[—] | — | — | [—] | * | |||||||||||||||||||
| Alexander W. Pease Executive Vice President and Chief
|
[61,998] | (3) | [130,276] | — | [192,274] | * | ||||||||||||||||||
| John R. Carlson Senior Vice President and Chief Commercial Officer
|
[—] | — | — | [—] | * | |||||||||||||||||||
| Frank B. Wyatt, II Senior Vice President, Chief Legal Officer/General Counsel and Secretary
|
[107,333] | [138,786] | — | [246,119] | * | |||||||||||||||||||
| Morgan C.S. Kurk Executive Vice President and Chief Technology Officer
|
[46,031] | [143,772] | — | [143,772] | * | |||||||||||||||||||
| Marvin S. Edwards, Jr. Former President, Chief Executive Officer and Director
|
[701,703] | [888,500] | — | [1,590,203] | * | |||||||||||||||||||
| Frank M. Drendel Former Chairman of the Board
|
[2,536,815] | (4) | [169,127] | — | [2,705,942] | [1.4]% |
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BENEFICIAL OWNERSHIP
| Name of Beneficial Owner
|
Common Stock
|
Options to Purchase Common Stock (1)
|
RSUs (2)
|
Total Shares of Common Stock Beneficially Owned
|
Percentage of Class
| |||||||||
| Claudius E. Watts IV Chairman of the Board
|
[107,577] | — | [16,100] | [123,677] | * | |||||||||
| Austin A. Adams Director
|
[39,100] | — | [16,100] | [55,200] | * | |||||||||
| Mary S. Chan Director
|
[—] | — | [19,629] | [19,629] | * | |||||||||
| Stephen C. Gray Director
|
[31,018] | — | [16,100] | [47,118] | * | |||||||||
| L. William Krause Director
|
[80,843] | — | [16,100] | [96,943] | * | |||||||||
| Joanne M. Maguire Director
|
[27,763] | — | [16,100] | [43,863] | * | |||||||||
| Thomas J. Manning Director
|
[31,260] | — | [16,100] | [47,360] | * | |||||||||
| Patrick R. McCarter Director
|
[—] | — | — | [—] | * | |||||||||
| Derick A. Roman Director
|
[—] | — | — | [—] | * | |||||||||
| Timothy T. Yates Director
|
[56,021] | — | [16,100] | [72,121] | * | |||||||||
| Directors and executive officers as a group (19 persons)
|
[3,871,437] | [1,574,304] | [132,329] | [5,578,070] | [2.8]% |
| * | Denotes less than 1% |
| (1) | Includes options to purchase shares of common stock that are currently exercisable or will become exercisable within 60 days of [●], 2021. |
| (2) | Includes restricted stock units that will vest and become exercisable within 60 days of [●], 2021. |
| (3) | Includes [75] shares held in a custodial account for Mr. Pease’s daughter. |
| (4) | Includes [85,050] shares held in three separate guarantor retained annuity trusts established by Mr. Drendel and [133,330] shares held by the trusts of the deceased spouse of Mr. Drendel. |
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BENEFICIAL OWNERSHIP
| Common Stock | Series A Convertible Preferred Stock |
|||||||||||||||
| Name and Address of Beneficial Owner
|
|
Total Number of Shares
|
|
|
Percentage of Class
|
|
|
Total Number of Shares
|
|
|
Percentage of Class
|
| ||||
| Large Stockholders: | ||||||||||||||||
| The Carlyle Group L.P.(1) 1001 Pennsylvania Avenue, NW Washington, DC 20004 |
1,041,819 | 100.00% | ||||||||||||||
| Wellington Management Company LLP(2) 280 Congress Street Boston, MA 02210 |
26,903,744 | 13.4% | ||||||||||||||
| The Vanguard Group(3) 100 Vanguard Blvd. Malvern, PA 19355 |
20,209,720 | 10.1% | ||||||||||||||
| The Hartford Mutual Funds, Inc.(4) 690 Lee Rd. Wayne, PA 19087 |
17,020,986 | 8.5% | ||||||||||||||
| FPR Partners, LLC(5) 199 Fremont Street, Suite 2500 San Francisco, CA 94105 |
16,453,018 | 8.2% | ||||||||||||||
| JPMorgan Chase & Co.(6) 383 Madison Avenue New York, NY 10179
|
|
14,645,768
|
|
|
7.3%
|
|
||||||||||
| (1) | According to a Schedule 13D filed jointly by Carlyle Group Management LLC, The Carlyle Group LP, Carlyle Holdings I GP Inc., Carlyle Holdings I GP Sub LLC, Carlyle Holdings I LP, TC Group, LLC, TC Group Sub LP, TC Group VII S1, LLC, TC Group VII S1, LP, and Carlyle Partners VII S1 Holdings, LP (Carlyle Partners VII) on April 11, 2019. As of [●], 2021, the shares of Series A Convertible Preferred Stock held by Carlyle Partners VII were convertible into [38,401,396] shares of common stock. |
| (2) | According to a Schedule 13G/A filed jointly by Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP on February 3, 2021, reporting beneficial ownership of our common stock as of December 31, 2020. According to the Schedule 13G/A, Wellington Management Group LLP is a parent holding company or control person with shared power to vote or to direct the vote of 23,618,590 of the shares listed in the table and shared power to dispose or direct the disposition of 26,903,744 shares. The shares listed in the table are beneficially owned by the following subsidiaries of Wellington Management Group LLP: Wellington Group Holdings LLP; Wellington Investment Advisors LLP; Wellington Management Global Holdings, Ltd.; Wellington Management Company LLP; Wellington Management Canada LLC; Wellington Management Singapore Pte Ltd; Wellington Management Hong Kong Ltd; Wellington Management International Ltd; Wellington Management Japan Pte Ltd; and Wellington Management Australia Pty Ltd. Some of the securities covered by the Schedule 13G/A are owned by clients of the Wellington entities named therein, including The Hartford MidCap Fund, which has filed a separate Schedule 13G reporting its ownership. Therefore, some of the shares covered by this Schedule 13G/A may also be covered by the Schedule 13G filed by The Hartford MidCap Fund (see footnote (4) to this table). |
| (3) | According to a Schedule 13G/A filed by The Vanguard Group on February 10, 2021, reporting beneficial ownership of our common stock as of December 31, 2020. The shares listed in the table are beneficially owned by the following subsidiaries of The Vanguard Group: Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. The Vanguard Group has shared voting power with respect to 135,930 of the shares, sole dispositive power with respect to 19,912,550 of the shares, and shared dispositive power over 297,170 of the shares. |
| (4) | According to a Schedule 13G filed by The Hartford Mutual Funds, Inc. on behalf of Hartford Midcap Fund on February 9, 2021, reporting beneficial ownership of our common stock as of December 31, 2020. The Hartford Mutual Fund, Inc. has shared voting and dispositive power over the 17,020,986 shares reported on the Schedule 13G/A. |
| (5) | According to a Schedule 13G/A filed jointly by FPR Partners, LLC, Andrew Raab and Bob Peck on February 16, 2021, reporting beneficial ownership of our common stock as of December 31, 2020. According to the Schedule 13G/A, FPR Partners, LLC is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 and, as such, may be deemed to have beneficial ownership of 16,453,018 shares of our common stock through the investment discretion it exercises over its clients’ accounts. Andrew Raab and Bob Peck are the Senior Managing Members of FPR Partners, LLC. FPR Partners, LLC has the sole voting and dispositive power, and Andrew Raab and Bob Peck each have shared voting and dispositive power, over the 16,453,018 shares reported on the Schedule 13G/A. |
| (6) | According to a Schedule 13G/A filed by JPMorgan Chase & Co. on January 20, 2021, reporting beneficial ownership of our common stock as of December 31, 2020. According to the Schedule 13G, JPMorgan Chase & Co. is a parent holding company or control person with the sole power to vote 14,433,814 shares, and sole power to direct the disposition of 14,639,285 shares. The shares listed in the table are beneficially owned by the following subsidiaries of JPMorgan Chase & Co.: J.P. Morgan Investment Management Inc., JPMorgan Chase Bank, National Association and J.P. Morgan Securities LLC. |
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act and related rules promulgated by the Commission, our stockholders have an opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of our NEOs as described in this Proxy Statement. This proposal is commonly referred to as a “Say-on-Pay” proposal. This proposal is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. As required by these rules, the Board invites you to review carefully the Compensation Discussion and Analysis and the tabular and other disclosures on compensation under Executive Compensation and cast a vote on the Company’s executive compensation programs through the following resolution:
“Resolved, that the stockholders approve, on an advisory basis, the compensation of the Company’s NEOs as discussed and disclosed in the Compensation Discussion and Analysis, the compensation tables, and any narrative executive compensation disclosure contained in this Proxy Statement.”
As discussed in the Compensation Discussion and Analysis, the Board of Directors believes that the Company’s long-term success depends in large measure on the talents of our employees. The Company’s compensation system plays a significant role in our ability to attract, retain and motivate the highest quality workforce. The Board of Directors believes that its current compensation program directly links executive compensation to performance, aligning the interests of the Company’s executive officers with those of the stockholders.
Pursuant to Section 14A of the Exchange Act, this vote is advisory and will not be binding on the Company or the Compensation Committee. While the vote does not bind the Board of Directors to any particular action, the Board of Directors values the input of the stockholders and will take into account the outcome of this vote in considering future compensation arrangements.
The Company strongly encourages all stockholders to vote on this matter. Currently, Say-on-Pay votes are held by the Company annually. The next stockholder advisory vote on Say-on-Pay is expected to occur at the 2022 annual meeting of stockholders.
The Board of Directors recommends a vote “FOR” Proposal No. 4, to approve an advisory (non-binding) resolution regarding the compensation of the Company’s NEOs.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
TABLE OF CONTENTS
INTRODUCTION
This Compensation Discussion and Analysis (CD&A) describes our compensation philosophy, process, plans and practices for our NEOs. Our executive compensation program is intended to incent and reward our leadership to produce financial results that our Compensation Committee believes align with the interests of our stockholders.
OUR COMPANY
CommScope is a global provider of infrastructure solutions for communication and entertainment networks. Our solutions for wired and wireless networks enable service providers including cable, telephone and digital broadcast satellite operators and media programmers to deliver media, voice, IP data services and Wi-Fi to their subscribers and allow enterprises to experience constant wireless and wired connectivity across complex and varied networking environments. Our solutions are complemented by a broad array of services including technical support, systems design and integration. We are a leader in digital video and Internet Protocol Television distribution systems, broadband access infrastructure platforms and equipment that delivers data and voice networks to homes. We are a strong part of communities from coast to coast and around the world, with nearly
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EXECUTIVE COMPENSATION
30,000 employees spread across 45 states and 54 countries. Our global leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions, and global manufacturing and distribution scale.
2020 LEADERSHIP TRANSITIONS AND RELATED COMPENSATION STRUCTURE
Over the course of 2020, we had several transitions among our NEOs:
| • | On October 1, 2020, Marvin S. Edwards, Jr., our President and Chief Executive Officer, stepped down after fifteen years of service to CommScope. During his tenure, Mr. Edwards led our transformation from a structured cable and connectivity business to an industry-leading provider in virtually all aspects of telecommunications and broadband networks. Charles L. Treadway was appointed as our new President and Chief Executive Officer. This leadership transition was the result of the Company’s ongoing succession planning program led by the Board of Directors. |
| • | With experience successfully growing multiple global businesses in a range of industries, Mr. Treadway brings to CommScope significant strategic, operational and go-to-market expertise. He has served 17 of the last 20 years as Chief Executive Officer of global businesses located in the United States, China, and Latin America. In each of his Chief Executive Officer assignments, Mr. Treadway led efforts that generated highly profitable, above-market growth. Most recently, Mr. Treadway served as Chief Executive Officer of Accudyne Industries, where he drove significant revenue growth and margin expansion with strategic focus, product innovation, improved sales and marketing efforts, and disciplined execution. |
| • | Frank M. Drendel, who founded CommScope in 1976 and had served continuously as our Chief Executive Officer and/or Chairman of the Board since that time, retired as a CommScope employee but remains on the Board of Directors. Over the course of his career, Mr. Drendel advanced our evolution from a small coaxial cable business established at his kitchen table into the diversified, global communications infrastructure business that it is today. In recognition of his unique status and distinguished service, Mr. Drendel was named Chairman Emeritus. |
| • | Mr. Drendel was succeeded as Chairman of the Board by Claudius E. Watts IV. Mr. Watts has a long history of service to CommScope, most recently as the Board’s Lead Independent Director. Mr. Watts works with Mr. Treadway and the management team on strategic, corporate development and capital structure matters. Considering his active engagement, Mr. Watts became an employee of CommScope. As a result, the independent members of the Board elected Timothy T. Yates as our new Lead Independent Director. |
| • | John R. Carlson was hired as our new Chief Commercial Officer, replacing Jeffrey M. White, who passed away in August 2020. Mr. Carlson is responsible for the development and growth of our sales and marketing operations. Mr. Carlson joined CommScope from Sullair, a global industrial air compressor manufacturer (a Hitachi Group Company), where he served as Chief Executive Officer and board chairman of the China-based IHI-Sullair joint venture. He has more than 40 years’ of global leadership experience in industrial manufacturing and sales and distribution, and a proven track record of driving sales performance and profitability. |
Due to the depth of Mr. Treadway’s and Mr. Carlson’s experience, the Compensation Committee set their salaries at the same level as their immediate predecessors ($1,100,000 and $575,000, respectively). Mr. Treadway received a pro rata AIP bonus award for 2020, but due to his date of hire, Mr. Carlson was not eligible to participate in the AIP in 2020.
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EXECUTIVE COMPENSATION
Based upon stockholder feedback, the Compensation Committee did not grant options under our Executive Performance Option Program (EPOP) to Mr. Treadway and Mr. Carlson. Instead, the Compensation Committee instituted a new equity performance program and granted them PSUs that vest based upon a combination of performance conditions and service conditions. The performance conditions for the PSUs require the achievement of various hurdles relating to the average price of our common stock over a 60-day trading period (ranging from a low of $15 and a high of $40), and the service conditions require continued service over a four-year period in order for all shares to become eligible to vest. The portion of the PSUs relating to each target price and service date will vest only if both conditions are met, and vesting will occur on the date on which the later of the two conditions is achieved. The Compensation Committee also granted Mr. Treadway and Mr. Carlson RSUs that vest in equal installments over three years, conditioned upon their continued service. These awards (500,000 RSUs and 1,100,000 PSUs for Mr. Treadway and 80,000 RSUs and 160,000 PSUs for Mr. Carlson) are intended to cover their equity compensation opportunities for 2020 and 2021. Mr. Treadway and Mr. Carlson will be eligible for additional equity awards in 2022.
OUR NAMED EXECUTIVE OFFICERS
Our NEOs for 2020, whose compensation is discussed in this CD&A, are as follows:
|
Name
|
Title
| |
| Charles L. Treadway |
President and Chief Executive Officer (principal executive officer) | |
| Alexander W. Pease |
Executive Vice President and Chief Financial Officer (principal financial officer) | |
| John R. Carlson |
Senior Vice President and Chief Commercial Officer | |
| Frank B. Wyatt, II |
Senior Vice President, Chief Legal Officer/General Counsel and Secretary | |
| Morgan C.S. Kurk |
Executive Vice President and Chief Technology Officer | |
| Marvin S. Edwards, Jr. |
Former President and Chief Executive Officer(1) | |
| Frank M. Drendel |
Former Chairman of the Board(2) | |
| Jeffrey M. White |
Former Chief Commercial Officer(3) | |
(1) Mr. Edwards’ employment was terminated in October 2020.
(2) Mr. Drendel retired as an employee in October 2020 but remains on the Board as Chairman Emeritus.
(3) Mr. White passed away in August 2020.
2020 BUSINESS RESULTS AND COVID-19 IMPACTS
Like others in the network infrastructure industry and around the world, CommScope faced challenges in 2020 due to weakness in the overall economy caused by the global COVID-19 pandemic. While we did not achieve the revenue and earnings goals we set for ourselves in 2020, our entire team worked diligently throughout the year to respond to the pandemic crisis, continue to meet consumer needs, reduce business costs and improve cash flow. We are proud of what our team accomplished in 2020 and believe our position in the overall market is strong. The COVID-19 crisis highlighted the resiliency of our team, the importance of reliable network connectivity, and the need for products and services that will continue to push the boundaries of reliability, efficiency and collaboration for customers around the world.
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EXECUTIVE COMPENSATION
|
Key Features of our 2020 Financial Performance
|
|
• Revenue increased year over year to $8,435.9 million in 2020 compared to $8,345.1 million in 2019 due to the acquisition of ARRIS on April 4, 2019. On a combined company basis, including pre-acquisition ARRIS results in 2019, revenue decreased from $9,755.0 million in 2019.
• Net loss of $573.4 million in 2020 compared to $929.5 million in 2019. Adjusted EBITDA(1) of $1,215.2 million, down $82.3 million year over year.
• EPS of $(3.20) in 2020 compared to $(5.02) in 2019. Adjusted EPS(1) of $1.56 down $0.59 year over year
• Cash Flow from Operations of $436.2 million, down 26.9% year over year
• Adjusted Free Cash Flow(1) of $415.4 million, down 47.6% year over year
|
| (1) | See reconciliation of Non-GAAP financial measures included in Appendix A hereto. |
Our compensation program is designed to attract and retain key executives with competitive levels of compensation and also to motivate our executives by creating a strong link between pay and the Company’s performance. A significant portion of our executives’ compensation for 2020 was tied to the achievement of performance goals that align management’s objectives with key drivers of long-term stockholder value, including free cash flow, increased profitability, revenue growth and stock price appreciation. While our 2020 revenue and earnings were below expectations, we are proud to have taken steps to enhance free cash flow during a challenging period. Our better-than-expected free cash flow allowed the Company to repay $300 million of debt during 2020 and also bolstered our annual incentive payouts. However, achievement of our equity awards was well below target as those awards are based on our revenue, earnings and stock price.
2020 EXECUTIVE COMPENSATION HIGHLIGHTS
Key compensation considerations for 2020 include:
| • | No COVID-19 related adjustments to our executive compensation program. |
| • | In response to stockholder feedback, executives hired in 2020 did not receive EPOP awards. We introduced a new performance-based equity structure for Mr. Treadway and Mr. Carlson. PSUs under this program vest based upon a combination of achievement of various stock price hurdles (ranging from a low of $15 and a high of $40) and continued service over a four-year period. |
| • | Equity incentive awards granted to Mr. Treadway and Mr. Carlson are intended to cover 2020 and 2021 compensation. Mr. Treadway and Mr. Carlson will be eligible for additional equity awards in 2022. |
| • | No equity awards granted to NEOs who participated in the EPOP in 2019. |
| • | Limited changes to cash compensation for the NEOs. |
Pay Program Outcomes
The outcome of our 2020 pay program reflected the performance of the Company. Revenue and earnings were disappointing, but we achieved strong free cash flow results, which led to a payout of 82.6% of target under the AIP. However, no performance-based equity vested during the year. For our management team, the outcomes of executive compensation clearly reinforced and amplified the outcomes experienced by stockholders over the year.
| • | Annual incentive bonus achieved at 82.6% of target, driven by strong cash flow |
| • | Performance-vesting EPOP options tied to 2020 Adjusted EBITDA results were not earned due to performance below the threshold for the awards |
| • | No PSUs were earned from our 2018 performance awards, which were tied to cumulative revenue targets for 2018-2020 |
| • | No PSUs were earned under our new performance-based equity structure, which is tied to our stock price |
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EXECUTIVE COMPENSATION
SAY-ON-PAY RESULTS AND CONSIDERATION OF STOCKHOLDER SUPPORT
The CommScope management team regularly meets with investors to discuss a variety of business, industry and competitive dynamics. During the course of these discussions, the Company gathers feedback on its executive compensation programs to ensure that interests are aligned with stockholders. In 2020, the Company conducted stockholder outreach that included members from various parts of the organization, including Investor Relations, the General Counsel’s office, Human Resources, and Sustainability. Our outreach in 2020 included 8 of our top 11 stockholders, representing over 60% of the outstanding common stock, and we had discussions with stockholders that collectively own about 53% of the outstanding common stock.
In 2020, the Company received 66% support for its say-on-pay proposal. This level of support was below our desired levels. As a result, our stockholder outreach included discussions on executive compensation matters to better understand stockholders’ perspectives on our executive compensation programs and governance practices. During the course of these discussions, we solicited feedback on how we can continue to enhance our future compensation programs.
In response to this feedback, the Compensation Committee made several changes to our executive compensation programs.
|
What we heard
|
What we did
| |
|
• Stockholders prefer to have separate performance metrics for equity incentive awards compared to the AIP • Stockholders prefer rolling annual grants over front-loaded grants • Stockholders view catch-up performance provisions as allowing too many opportunities to achieve the same performance goal • Stockholders prefer that performance goals for future years be disclosed
|
Adopted a new long-term performance-based PSU program for new executives that: • Does not base performance on Adjusted EBITDA • Will use rolling grant cycles • Does not include catch-up vesting provisions • Includes stock-price based performance hurdles that have been fully disclosed
|
The Compensation Committee invites our stockholders to communicate any concerns or views on executive pay directly to the Board of Directors. Please refer to “Corporate Governance—Stockholder Communications with Board of Directors” on page 35 for information about communicating with the Board.
The following table summarizes the primary elements of our executive compensation program for 2020.
|
Compensation Element
|
Purpose
|
2020 Pay Outcome
| ||
| Base Salary
|
Recognize performance of job responsibilities as well as attract and retain individuals with superior talent.
|
NEO base salaries were not increased in 2020, other than for Mr. Kurk.
| ||
| Annual Incentive Plan (AIP) Bonus Awards |
Provide short-term incentives linked directly to achievement of financial objectives. • 60% Adjusted EBITDA • 30% Adjusted Free Cash Flow • 10% Corporate Revenue |
We achieved above target performance for the Adjusted Free Cash Flow metric and above threshold performance for the Adjusted EBITDA metric, but did not achieve threshold performance for the Corporate Revenue metric for 2020, resulting in an 82.6% payout. |
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EXECUTIVE COMPENSATION
|
Compensation Element
|
Purpose
|
2020 Pay Outcome
| ||
|
Equity Incentive Awards |
Directly link senior management’s and stockholders’ interests by tying long-term incentive to stock price appreciation.
Awards granted to Mr. Treadway, Mr. Carlson and Mr. White included restricted stock units (RSUs) that vest over three years, conditioned on continued service. Mr. White’s RSUs became fully vested upon his death in August 2020.
Mr. White also received performance share units (PSUs) with performance conditions based on cumulative consolidated revenue for 2021-2022. Mr. White’s PSUs were forfeited upon his death in August 2020.
Mr. Treadway and Mr. Carlson also received PSUs that may be earned upon the achievement of certain hurdles relating to our stock price (ranging from a low of $15 to a high of $40) and their continued service over a four-year period.
Other NEOs were not granted equity incentive awards in 2020. Stock options granted to these other NEOs in 2019. pursuant to our Executive Performance Option Program (EPOP) are intended to replace their equity awards for 2019, 2020 and 2021. • 50% of the stock options are time- based and vest in five equal installments beginning on the first anniversary of the grant date (time-vesting options) • 50% of the stock options are performance-based and vest over five years based on pre-established annual Adjusted EBITDA goals set at the inception of the program in 2019, and include a cumulative vesting feature (performance-vesting options) • Potential vesting in connection with qualifying retirement • 10-year term
If Proposal No. 6 is approved at the Annual Meeting, the performance-based EPOP options will be terminated and certain executives and senior officers will receive a grant of performance-based retention equity awards in 2021.
|
None of the average stock price hurdles for Mr. Treadway’s and Mr. Carlson’s PSUs were met in 2020.
For our NEOs who received EPOP options in 2019, the exercise price of the EPOP options was higher than the stock price as of December 31, 2020, and we did not meet the Adjusted EBITDA threshold for 2019 or 2020. This resulted in no performance-vesting options earned in 2020. |
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EXECUTIVE COMPENSATION
OUR PAY-FOR-PERFORMANCE APPROACH
The compensation programs approved by our Compensation Committee emphasize pay-for-performance over a longer-term time horizon and based on the realized value under incentive programs through the prominence of variable, at-risk compensation. AIP bonus awards and long-term equity awards are intended to ensure that total compensation reflects the overall level of success of the Company and are intended to motivate the NEOs to meet and exceed pre-established target levels of performance for each measure.
We seek to select performance metrics in our AIP and our long-term incentive program that support the Company’s strategy.
Annual Planning Cycle
The Compensation Committee generally approves annual compensation decisions for our executive officers in the first quarter of each year. The Committee’s approvals in the first quarter address target annual incentives effective as of January 1, base salary effective as of April 1, as well as equity awards that are approved in the first quarter and typically granted in the second quarter. In the timeline leading up to the annual approval of compensation decisions, the Compensation Committee undertakes a review process that spans several meetings and is intended to evaluate our approach to setting executive pay from multiple perspectives. This review begins in the third quarter of the prior year and takes into consideration our strategic business plan, market data, trends in executive compensation, the input of the Committee’s independent compensation consultant and input from stockholders, where applicable.
2020 Pay Program Outcomes
As detailed below, the 2020 outcomes of the incentive opportunities provided to our NEOs reflect our current year results as well as our focus on delivering long-term results. Specifically, the incentives earned under our 2020 AIP were below target, as our Adjusted Free Cash Flow was above target, our Adjusted EBITDA exceeded threshold and our Corporate Revenue failed to meet threshold. From a longer-term perspective, Mr. Treadway’s and Mr. Carlson’s PSUs will require significant growth in our stock price in order to vest. In addition, options granted in 2019 under the EPOP will require sustained improvement in our stock price and, in the case of performance-vesting options, significant growth in Adjusted EBITDA in order for executives to realize the targeted value of the program.
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EXECUTIVE COMPENSATION
| Pay Element | 2020 Outcome | |
|
AIP |
• Our executives earned incentives equal to 82.6% of target under the 2020 AIP, reflecting achievement above target for our Adjusted Free Cash Flow metric, achievement above threshold for our Adjusted EBITDA metric and below threshold performance for our Corporate Revenue metric.
| |
|
RSUs |
• The RSUs granted to Mr. Treadway, Mr. Carlson and Mr. White vest in equal installments on the first three anniversaries of the grant date, conditioned on continuous service. Pursuant to the terms of his award certificate, Mr. White’s RSUs vested upon his death in August 2020.
| |
|
PSUs |
• As of December 31, 2020, none of the average stock price hurdles for Mr. Treadway’s and Mr. Carlson’s PSUs had been met. The PSUs remain eligible to be earned in future years subject to achievement of the stock price hurdles and continued service over a four-year period.
• Mr. White’s PSUs, which included performance conditions based on cumulative consolidated revenue for 2021-2022, were forfeited upon his death in August 2020.
| |
|
Outstanding 2019 EPOP options |
• As of December 31, 2020, 100% of outstanding EPOP stock options issued to executives were out of the money based on the $13.40 closing price of our stock and the $18.60 exercise price for both time- and performance-vesting options.
• 0% of performance-vesting options eligible to vest based on our 2019 or 2020 performance were earned due to our failure to achieve the threshold Adjusted EBITDA goal.
• Unearned performance-vesting options will carry forward and are eligible to be earned in future years subject to achievement of cumulative Adjusted EBITDA goals.
| |
|
Outstanding 2018 PSUs |
• PSUs granted in 2018 could be earned between 0% and 200% of the granted units based on cumulative revenue for 2018-2020. • We failed to achieve the threshold cumulative revenue target for 2018-2020. As a result, 0% of the 2018 PSUs were earned.
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EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION-RELATED POLICIES AND PRACTICES
We endeavor to maintain sound executive compensation policies and practices, including compensation-related corporate governance standards, consistent with our executive compensation philosophy. The following summarizes our executive compensation and related governance policies and practices during 2020:
| What We Do | What We Don’t Do | |||
|
✓ |
Use a Pay-for-Performance philosophy |
×No backdating or spring-loading of equity awards | ||
|
✓ |
Grant a significant portion of executive pay as at-risk |
×No hedging of shares | ||
| ✓ | Apply “clawback” policy to awards to recover cash and equity payments from executives in certain circumstances |
×No pledging of shares | ||
|
✓ |
Require multi-year vesting for equity awards |
×No guaranteed bonuses | ||
|
✓ |
Engage regularly with stockholders on executive compensation issues |
×No incentives that encourage excessive risk taking | ||
|
✓ |
Use an independent compensation consultant |
×No excessive severance or change in control agreements | ||
|
✓ |
Require meaningful equity ownership |
×No excessive perquisite practices | ||
|
✓ |
Allocate equity awards between time- and performance-based awards
|
×No repricing of stock options or stock appreciation rights without stockholder approval
| ||
Base salaries for our NEOs are generally set at a level deemed necessary to attract and retain individuals with superior talent. In addition to considering industry and market practices, our Compensation Committee and Board of Directors annually review our NEOs’ performance. Adjustments in base salary are generally based on the factors noted above, including each NEO’s individual performance, role, scope of responsibility, experience and competitive pay practices.
After considering Mr. Edwards’ recommendations (other than with respect to his own compensation) and consistent with past practices, our Compensation Committee decided that the salary for the NEOs would remain unchanged in 2020, other than Mr. Kurk’s, which was increased to keep his base salary competitive with comparable positions.
The Compensation Committee determined that, due to the depth of their experience, Mr. Treadway’s salary would be the same as Mr. Edwards, our former CEO, and Mr. Carlson’s salary would be the same as Mr. White, our former CCO.
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The base salaries for our NEOs as established as of April 1, 2019 and April 1, 2020 are set forth in the following table.
|
Name
|
2019 Base
|
2020 Base
|
Percent
Increase |
|||||||||
| Charles L. Treadway(1) |
$1,100,000 | |||||||||||
| Alexander W. Pease |
$ | 625,000 | $625,000 | 0.00 | % | |||||||
| John R. Carlson(2) |
$575,000 | |||||||||||
| Frank B. Wyatt, II |
$ | 540,000 | $540,000 | 0.00 | % | |||||||
| Morgan C.S. Kurk |
$ | 575,000 | $590,008 | 2.61 | % | |||||||
| Marvin S. Edwards, Jr. |
$ | 1,100,000 | $1,100,000 | 0.00 | % | |||||||
| Frank M. Drendel |
$ | 615,000 | $615,000 | 0.00 | % | |||||||
| Jeffrey M. White(3)
|
|
$574,992
|
|
|||||||||
(1) Mr. Treadway became our Chief Executive Officer in October 2020.
(2) Mr. Carlson became our Chief Commercial Officer in November 2020.
(3) Mr. White became our Chief Commercial Officer in June 2020. He passed away in August 2020.
Historically, the Company’s consolidated financial performance has been the primary factor used in determining payouts for our NEOs under the AIP. As described in more detail below, payouts for 2020 performance were based on the level of achievement of Adjusted EBITDA, Adjusted Free Cash Flow and Corporate Revenue goals. The Compensation Committee approves the AIP performance measures and the target award, which is expressed as a percentage of base salary for the year, for each NEO.
Our Compensation Committee determined that Adjusted EBITDA, Adjusted Free Cash Flow and Corporate Revenue were meaningful measures of the Company’s financial performance and align with the interests of our stockholders for long-term value creation. These financial measures exclude items that could have a disproportionately negative or positive impact on our results in a particular period.
|
Performance Metric
|
Weighting
|
Rationale
| ||
| Adjusted EBITDA |
60% |
Measures the profitability of our business, incorporating our ability to generate revenue and manage our expenses. Adjusted EBITDA growth has historically been a key driver of long-term stockholder returns and represents the greatest weighting in our AIP.
| ||
| Adjusted Free Cash Flow |
30% |
Measures our ability to translate earnings into cash, indicating the health of our business and allowing the Company to repay debt and invest for the future.
| ||
| Corporate Revenue |
10% |
Measures the amount we recognize as sales to our customers, demonstrating our ability to generate organic revenue growth. Our Compensation Committee values revenue growth as a driver of long-term stockholder return.
|
For purpose of the AIP, Adjusted EBITDA consists of net income (loss) as reported on the Consolidated Statements of Operations, adjusted to exclude income tax expense (benefit), interest income, interest expense, other expense, net, depreciation, amortization of intangible assets,
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restructuring costs, asset impairments, equity based compensation, transaction and integration costs and other special items that the Company believes are useful to exclude in the evaluation of operating performance from period to period because these items are not representative of the Company’s core performance.
Adjusted Free Cash Flow consists of net cash provided by operating activities, less additions to property, plant and equipment, both as reported in the Company’s Consolidated Statements of Cash Flows, increased or reduced for unusual cash items as approved by the Compensation Committee.
Corporate Revenue consists of net sales as reported on the Consolidated Statements of Operations subject to equitable adjustments related to acquisitions or divestitures as approved by the Compensation Committee.
Our Compensation Committee retains the authority to change target award percentages or performance measures, as appropriate, to account for extraordinary business circumstances that are out of the Company’s control. In addition, the Compensation Committee may, at its sole discretion, decrease the amount of an award that would otherwise be payable to a NEO.
If a change in control of the Company occurs, we will pay each participant a cash amount equal to the participant’s target award for the AIP cycle then underway (with the payout prorated to the date of the change in control). We believe this is appropriate since the impact of a change in control is unpredictable and could potentially adversely affect participant awards under the AIP.
The levels of performance required to achieve target payout were tied to our annual operating plan and represent goals that were considered achievable but difficult to accomplish.
The following tables show the weighting of each performance metric, the levels of performance required to earn threshold, target and maximum payouts, and the actual performance achieved under our AIP for the year ended December 31, 2020 for all NEOs.
| Performance Metric
|
Weighting
|
Level
|
Threshold ($M)
|
Target ($M)
|
Maximum ($M)
|
|||||||||||
| Adjusted EBITDA | 60% | Goal
|
|
$1,094.9
|
|
|
$1,368.6
|
|
|
$1,642.3
|
| |||||
| % of Target Performance
|
|
80%
|
|
|
100%
|
|
|
120%
|
| |||||||
| % of Target Payout
|
|
50%
|
|
|
100%
|
|
|
210%
|
| |||||||
| Adjusted Free Cash Flow |
30% | Goal
|
|
$314.3
|
|
|
$392.9
|
|
|
$471.5
|
| |||||
| % of Target Performance
|
|
80%
|
|
|
100%
|
|
|
120%
|
| |||||||
| % of Target Payout
|
|
50%
|
|
|
100%
|
|
|
210%
|
| |||||||
| Corporate Revenue | 10% | Goal
|
|
$9,104.0
|
|
|
$9,385.6
|
|
|
$9,948.7
|
| |||||
| % of Target Performance
|
|
97%
|
|
|
100%
|
|
|
106%
|
| |||||||
| % of Target Payout |
50% |
|
100%
|
|
400% | |||||||||||
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| Performance Metric
|
Weighting
|
Actual
|
% of Target Actual
|
% of Target
|
||||||||||
|
Adjusted EBITDA |
60% | $1,215.2 | 88.8% | 72.0% | ||||||||||
|
Adjusted Free Cash Flow |
30% | $415.4 | 105.7% | 131.5% | ||||||||||
|
Corporate Revenue |
10% | $8,461.5 | 90.2% | — | ||||||||||
|
|
||||||||||||||
| Total |
100% |
|
82.6%
|
| ||||||||||
Based on the actual levels of achievement set forth above, our NEOs were entitled to bonus payments in amounts equal to 82.6% of their target bonus amounts. Pursuant to the terms of the AIP, bonus payouts for Messrs. Treadway, Edwards, and Drendel were prorated based upon their respective days of service in 2020. Mr. Carlson joined the Company in November 2020 and did not participate in the AIP for 2020.
| Threshold Award |
Target Award | Maximum Award | Actual 2020 Award | |||||||||||||||||
|
Name
|
(% of 2020 Salary) (1)
|
(% of 2020 Salary)
|
(% of 2020 Salary)
|
% of 2020 Salary
|
Payout Amount
|
|||||||||||||||
|
Charles L. Treadway |
75.0% | 150.0% | 343.5% | 123.94% | $340,832 | (2) | ||||||||||||||
|
Alexander W. Pease |
45.0% | 90.0% | 206.1% | 74.36% | $464,771 | |||||||||||||||
|
John R. Carlson |
— | — | — | — | — | |||||||||||||||
|
Frank B. Wyatt, II |
37.5% | 75.0% | 171.8% | 61.97% | $334,635 | |||||||||||||||
|
Morgan C.S. Kurk |
42.5% | 85.0% | 194.7% | 70.23% | $411,740 | |||||||||||||||
|
Marvin S. Edwards, Jr. |
75.0% | 150.0% | 343.5% | 123.94% | $1,027,661 | (2) | ||||||||||||||
|
Frank M. Drendel |
25.0% | 50.0% | 114.5% | 41.31% | $191,519 | (2) | ||||||||||||||
|
Jeffrey M. White(3)
|
|
42.5%
|
|
|
85.0%
|
|
|
194.7%
|
|
|
—
|
|
|
—
|
| |||||
| (1) | The threshold award reflects minimum performance of all three performance metrics (Adjusted EBITDA, Adjusted Free Cash Flow and Corporate Revenue). |
| (2) | Prorated pursuant to the terms of the AIP. |
| (3) | Mr. White passed away in August 2020. His estate did not receive a payout under our AIP. Mr. White received a $100,000 signing bonus when he joined the Company in 2020. |
The Compensation Committee believes that key 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 and on-going stake in the Company’s success. In determining equity incentive award grants, the Committee considered market practices among comparable companies as well as our compensation objectives and the desired role of equity compensation in the total compensation of our NEOs.
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MR. TREADWAY’S AND MR. CARLSON’S EQUITY INCENTIVE AWARDS
Upon hiring Mr. Treadway as our new Chief Executive Officer in October 2020, the Compensation Committee granted him 500,000 RSUs and 1,100,000 PSUs. Similarly, in December 2020, the Compensation Committee granted Mr. Carlson 80,000 RSUs and 160,000 PSUs in connection with his hiring as our new Chief Commercial Officer. The RSUs vest in equal installments over three years, conditioned upon their continued service. The PSUs vest based upon a combination of performance conditions and service conditions. The performance conditions require the achievement of various hurdles relating to the average price of our common stock over a 60-day trading period (ranging from a low of $15 and a high of $40), and the service conditions require continued service over a four-year period in order for all shares to become eligible to vest. The portion of the PSUs relating to each target price and service date will vest only if both conditions are met, and vesting will occur on the date on which the later of the two conditions is achieved. The average trading price is not required to be continuously satisfied through the applicable service date.
| Target Price | Service Condition (continuous service following |
Percentage of PSUs Vesting | ||
| $15 |
1 year | 10% | ||
| $20 |
1.5 years | 20% | ||
| $25 |
2 years | 20% | ||
| $30 |
2.5 years | 20% | ||
| $35 |
3 years | 20% | ||
| $40 |
4 years | 10% | ||
The performance condition and the related service conditions are “cliff” requirements, and PSUs will not be earned based upon achievement of average stock prices between the various target prices or continuous service between the service condition periods. No vesting will occur with respect to any conditions that are not achieved before the fourth anniversary of the grant date.
Mr. Treadway and Mr. Carlson will not receive equity awards in 2021 and they will become eligible for additional awards beginning in 2022.
MR. WHITE’S EQUITY INCENTIVE AWARDS
Awards granted to Mr. White in connection with his hiring in 2020 consisted of 155,038 RSUs that were scheduled to vest over three years, conditioned on his continued service, and 155,038 PSUs that included performance conditions based on cumulative consolidated revenue for 2021-2022 and, to the extent earned, would vest on the third anniversary of the grant date, conditioned on his continued service. Pursuant to the terms of his award certificates, Mr. White’s RSUs became fully vested upon his death in August 2020, and his PSUs were forfeited.
2020 EPOP RESULTS
In 2019 the Compensation Committee granted front-loaded stock options under the EPOP to our senior leadership. The EPOP options are intended to replace executive equity compensation that normally would have been granted to the 2019 NEOs during the years 2019, 2020 and 2021. Mr. Treadway, Mr. Carlson and Mr. White did not join the Company until 2020 and did not receive any EPOP options.
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One-half of the EPOP options are time-based and vest in five equal installments beginning on the first anniversary of the grant date. The remaining EPOP options are performance-based and vest over five years based on pre-established annual Adjusted EBITDA goals set at the inception of the program in 2019. The Compensation Committee approved the Adjusted EBITDA goals for each year of the five performance years in advance on the grant date. These goals reflected our five-year strategic plan developed in connection with our 2019 acquisition of ARRIS. At the time of grant, the Compensation Committee considered the target goals to be rigorous and meaningful, yet achievable.
Performance-vesting options that fail to vest in a given performance year will be eligible to vest over the remainder of the five-year performance period if our cumulative Adjusted EBITDA at the end of a given performance year exceeds the sum of the Adjusted EBITDA goals for all completed performance years (cumulative vesting feature).
Each EPOP participant was eligible to earn up to 20% of the maximum number of performance-vesting options during 2020, subject to achievement of threshold, target and stretch Adjusted EBITDA goals for the year. Our actual Adjusted EBITDA performance of $1,215.2 million was below the threshold required for the 2020 performance-vesting options to be earned. Our cumulative Adjusted EBITDA for 2019-2020 of $2,512.7 million was below the cumulative threshold requirement as well. As a result, no performance-vesting EPOP options were earned in 2020.
These options are eligible to be earned in future years pursuant to the cumulative vesting feature. Due to our underachievement relative to both 2019 and 2020 Adjusted EBITDA targets, cumulative vesting for these options will require significant overachievement relative to Adjusted EBITDA goals for future years through 2023.
The EPOP options allow for potential vesting upon a participant’s qualifying retirement after March 1, 2020. Qualifying retirement for these purposes requires any termination of service (other than for cause) after attainment of age sixty with at least ten years of service with the Company. Mr. Edwards met these requirements, and upon his termination in October 2020, 20% of his time-vesting options became vested. Mr. Edwards’ performance-vesting options for the then-current performance year remained outstanding for 2020 but failed to vest based on actual performance. Mr. Drendel also had met these age and service requirements upon his retirement as an employee, but since he is still in service as a director, his continuous service has not ended and his EPOP options continue to vest pursuant to their terms. In the event of a qualifying retirement for any participant between March 1, 2021 and March 1, 2022, 40% of the time-vesting options would become vested and the performance-vesting options would remain outstanding and eligible to vest for an additional performance year, based on actual performance. For a qualifying termination after March 1, 2022, the time-vesting options would become fully vested and the performance-vesting options would remain outstanding and eligible to vest for the remainder of the performance period, based on actual performance.
For more detail on the EPOP awards, refer to our EPOP disclosure beginning on page 56 of the proxy statement filed for our 2020 Annual Meeting. If Proposal No. 6 is approved at the Annual Meeting, the performance-based EPOP options will be terminated and certain executives and senior officers will receive a grant of performance-based retention equity awards in 2021. For more detail, refer to Proposal No. 6.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
We maintain a nonqualified Supplemental Executive Retirement Plan (SERP) that is intended to provide retirement benefits to certain of our executive officers. This plan has been closed to new participants since 2005. Mr. Wyatt participates in the SERP. Messrs. Edwards and Drendel will receive
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distributions from the SERP in 2021 due to the cessation of their employment in October 2020. For additional information regarding the SERP, see below under “Nonqualified Deferred Compensation Plans for 2020.”
EMPLOYEE BENEFITS AND PERQUISITES
Our NEOs are eligible to participate in the same plans as substantially all other of our United States employees which include medical, dental, vision, short-term and long-term disability insurance, and a Health Savings Plan. We also maintain the CommScope, Inc. Retirement Savings Plan, or the 401(k) plan, in which substantially all our United States employees, including our NEOs, are eligible to participate. We currently contribute 2% of the participant’s base salary and bonus to the 401(k) plan and provide matching contributions of up to 4% of the participant’s base salary and bonus, which provides for up to a maximum of 6% of the participant’s base salary and bonus, subject to certain statutory limitations ($285,000 for 2020). In addition, we provide our NEOs with a supplemental term life insurance policy. We provide these benefits due to their relatively low cost and the high value they provide in attracting and retaining talented executives.
We operate and maintain corporate aircraft that are used primarily for business travel by our directors and executive officers. We have a written policy that sets forth guidelines and procedures regarding limited permissible personal use of this aircraft by our executive officers. CommScope, Inc. of North Carolina, a wholly-owned subsidiary of the Company, maintains an Aircraft Time Sharing Agreement with Mr. Treadway, pursuant to which Mr. Treadway has limited use of the Company’s aircraft for non-business travel. Pursuant to this agreement, Mr. Treadway must reimburse our subsidiary for the incremental expenses for each personal use flight based on the variable costs of the flight, as permitted under Federal Aviation Administration rules. A similar agreement with Mr. Drendel was in place prior to his retirement as an employee in October 2020. In addition, prior to Mr. Drendel’s retirement as an employee, our subsidiary was party to an Aircraft Dry Lease and an Aircraft Services Agreement with Little River Leasing, LLC (Little River), a limited liability company that is wholly owned by Mr. Drendel. Both agreements with Little River were terminated in 2020.
We determine the incremental cost of any personal use of our corporate aircraft based on the direct cost of use per flight, which may include aircraft fuel, oil and other additives; crew travel and lodging expense; hangar costs away from the aircraft’s base of operation; insurance obtained for the specified flight; landing fees, airport taxes and similar assessments; customs, foreign permits and similar fees directly related to the flight; in-flight catering expenses; passenger ground transportation; and flight planning and weather contract services. Because our aircraft are used primarily for business travel, this methodology excludes fixed costs that do not change based on usage, such as the salaries of pilots and crew, purchase or lease costs of aircraft, hangar rent and insurance, and costs of maintenance and upkeep. We impute taxable income to the NEOs for any personal aircraft use in accordance with Internal Revenue Service regulations. We do not provide tax reimbursements, or “gross-ups”, on these amounts to executive officers.
For 2020, no NEO met or exceeded $10,000 in unreimbursed aggregate incremental costs associated with personal use of the aircraft.
We offer a voluntary non-qualified deferred compensation plan (DCP) that permits a group of our management, including the NEOs, to defer up to 90% of their annual compensation (including base salary, AIP and Sales Incentive Plan (SIP) awards). For additional information regarding the DCP, see below under “Nonqualified Deferred Compensation.”
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EMPLOYMENT, SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Treadway has an employment agreement, and each of Messrs. Pease, Carlson, Wyatt and Kurk has a severance protection agreement. The employment agreements entitle the executives to certain compensation and benefits, and both the employment agreements and severance protection agreements entitle the executives to receive certain payments and benefits upon a qualifying termination of employment, including a qualifying termination of employment in connection with a change in control of the Company. Each of Messrs. Edwards and Drendel received severance payments and benefits under their employment agreements in connection with the cessation of their employment in 2020. The employment and severance protection agreements are described below under “—Potential Payments upon Termination or Change in Control.”
III. EXECUTIVE COMPENSATION PHILOSOPHY AND ELEMENTS
We intend for our NEOs’ total compensation to reflect our pay-for-performance compensation philosophy. This philosophy includes both compensating our NEOs competitively when we meet or out-perform our goals as well as placing large portions of their compensation at-risk based on both the Company’s financial performance and our stock price performance. This assures that the financial incentives of our executives are in alignment with the interests of our stockholders. Furthermore, by delivering a significant portion of compensation in the form of at-risk incentives (including equity compensation), the compensation realized by our NEOs will be reduced if the Company does not achieve performance goals.
The principal objectives of our NEO compensation include the following:
| • | Competitive pay – providing compensation opportunities that enable us to attract superior talent in a highly competitive industry and retain key employees by rewarding outstanding achievement. |
| • | Pay-for-performance – creating incentives that reward management for outstanding financial results that our Compensation Committee believes will enhance near-term performance and drive sustainable performance over the longer term. |
| • | Alignment with stockholders – aligning our executives’ interests with those of our stockholders through our pay-for-performance philosophy and by encouraging our executives to have a meaningful equity stake in the Company. |
IV. 2020 COMPENSATION DECISION-MAKING PROCESS
DETERMINATION OF COMPENSATION AWARDS
Our Compensation Committee has the primary authority to determine and approve the compensation of our NEOs. The Committee is charged with reviewing our executive compensation policies and practices annually to ensure that the total compensation of our NEOs is fair, reasonable, competitive to our peers, and commensurate with the level of expertise and experience of our NEOs. To aid our Compensation Committee in making its determinations, our Chief Executive Officer provides recommendations to our Compensation Committee regarding the compensation of all officers who report directly to him.
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Our Compensation Committee reviews and approves the total amount of compensation for our NEOs and the allocation of total compensation among each of the components of compensation based principally on the following factors:
| • | Their compensation levels from prior years |
| • | Individual and Company performance |
| • | Each executive’s scope of responsibility and experience |
| • | The Compensation Committee’s judgment and general industry knowledge obtained through years of service with comparably-sized companies in our industry and other similar industries |
| • | Changes in the Company’s size or strategic position |
| • | Input about competitive market practices from the Compensation Committee’s independent compensation consultant |
| • | Feedback received from stockholders |
We believe that direct ownership in CommScope provides our NEOs with a strong incentive to increase the value of the Company. We encourage equity ownership by our NEOs and other employees through direct stock holdings and the award of various equity-based awards. We believe that equity awards granted to our NEOs substantially align their interests with those of our stockholders. In addition, we maintain formal stock ownership guidelines. See the “Stock Ownership Guidelines” section below for more information.
ROLE OF THE COMPENSATION CONSULTANT
The Compensation Committee relies on its independent compensation consultant to provide advice on matters relating to the compensation of our executives and non-employee directors. Compensia, a national compensation consulting firm, has served in this capacity since 2016.
A representative of Compensia attended all Compensation Committee meetings in 2020 and provided the following assistance to the Compensation Committee:
| • | Analyzed the compensation levels and practices of the companies in our compensation peer group |
| • | Reviewed the competitiveness of compensation of our NEOs including base salary, annual cash awards and long-term incentive awards |
| • | Reviewed and provided input on the design of the annual and long-term incentives provided to our NEOs and other executives |
| • | Reviewed the competitiveness of compensation of our non-employee directors |
| • | Reviewed and provided input on the CD&A section of our Proxy Statement |
| • | Provided support in connection with the amendment of our 2019 Long -Term Incentive Plan |
| • | Provided ad hoc advice and support |
Compensia reports directly to the Compensation Committee and provided no services to us other than the consulting services to the Committee. The Compensation Committee reviews the objectivity and independence of the advice provided by Compensia. In 2020, the Committee considered the specific independence factors adopted by the Commission and the NASDAQ Global Select Market and determined that Compensia is independent and that its work did not raise any conflicts of interest.
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In 2019, with the assistance of Compensia, the Compensation Committee developed and approved a compensation peer group as a source of competitive market data for evaluating the compensation of our executive officers and to support pay decisions for 2020, which included base salary, AIP targets, the EPOP award issued in 2019, and the equity awards granted to Mr. Treadway and Mr. Carlson in 2020. The compensation peer group consisted of 15 companies based on our selection criteria in 2019.
|
Compensation Peer Group
| ||
| Amphenol Corporation |
NCR Corporation | |
| Corning Inc. |
NetApp, Inc. | |
| Fortive Corporation |
Rockwell Automation, Inc. | |
| Hubbell Inc. |
Seagate Technology | |
| Jabil Inc. |
TE Connectivity Limited | |
| Juniper Networks, Inc. |
Western Digital | |
| Keysight Technologies |
Zebra Technologies, Inc. | |
| Motorola Solutions, Inc
|
||
Companies included in this peer group were identified based primarily on the following target selection criteria:
| • | Companies with a status as an independent, publicly traded company |
| • | Companies with revenue between approximately 0.33 times to 3.0 times our revenue on a trailing twelve-month basis |
| • | Companies with enterprise value between approximately 0.33 times to 3.0 times our enterprise value |
| • | Companies with a similar industry profile, prioritizing direct competitors and companies that operate in the Communications Equipment sector |
Companies included in the peer group did not need to meet all of the selection criteria above. Our Compensation Committee evaluated each company against all selection criteria in order to identify a peer group that, as a whole, was considered to be a strong representation of our competitive market for talent.
When evaluating executive compensation relative to practices among our peers, the Compensation Committee generally seeks to align with the market median.
We supplement information from the peer group public filings with data from the Radford Global Technology Survey. The data from this research, which is provided annually by Compensia, is a factor in determining executive compensation, as described above. While peer group and other market research data provides the framework for our compensation decisions, adjustments are also made by the Compensation Committee on an individual basis to account for individual performance and each executive’s scope of responsibility and experience.
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V. OTHER COMPENSATION POLICIES
COMPENSATION RECOUPMENT (“CLAWBACK”) POLICY
We have a compensation recoupment policy that provides that in the event of an accounting restatement due to material noncompliance with financial reporting requirements, the Company will, as directed by the Compensation Committee in its discretion, require executive officers to reimburse compensation in an amount deemed appropriate by the Compensation Committee. The policy applies to executive officers of the Company, including our NEOs, who, at any time during the three-year period preceding the accounting restatement, received payment of non-equity incentive compensation or realized compensation from equity incentive awards, based on the erroneous financial data.
ANTI-HEDGING AND ANTI-PLEDGING POLICIES
We have an Insider Trading policy to guide our employees and directors in complying with securities laws and avoid the appearance of improper conduct. Our policy specifically prohibits directors and employees, including our NEOs, from entering into hedging or monetization transactions involving CommScope securities such as covered calls, collars and forward sale contracts, and from purchasing CommScope securities on margin, holding CommScope securities in a margin account or pledging CommScope securities. In addition, all our Section 16 officers and directors, and certain other designated employees, are prohibited from trading in exchange traded options of CommScope securities.
We maintain stock ownership guidelines for our executive officers and the non-employee members of our Board of Directors. These guidelines were established to align with industry practice and to affirm to stockholders that our executives and directors have a meaningful long-term position in the Company and a longer-term view of its performance. The following table summarizes our stock ownership guidelines, which were based on market and peer group data and were adopted following consultation with the Compensation Committee’s independent compensation consultant.
|
Multiple of Salary Target
| ||
| CEO |
5x annual base salary | |
| Chairman & CFO |
3x annual base salary | |
| Designated Executive Officers |
2x annual base salary | |
|
Non-Employee Directors |
5x base cash retainer (excluding committee fees) |
The value of an executive’s or non-employee director’s stock ownership is measured as of December 31 of each year by reference to the 30-day average closing price of our stock on the Nasdaq Stock Market and using each individual’s base salary or base retainer then in effect.
Current and new executive officers and non-employee directors who are subject to these guidelines are expected to satisfy them by the end of the calendar year following the fifth anniversary of (i) the guidelines’ January 1, 2017 effective date or (ii) such later date that a Participant becomes subject to the Guidelines and to hold at least such minimum value in shares of our common stock, RSUs or intrinsic value of vested stock options for so long as applicable. All our executive officers and directors have met or are on track to meet their ownership requirements within the applicable five-year period.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE FOR 2020
The following table provides information regarding the compensation that we paid our NEOs for services rendered during the fiscal years ended December 31, 2020, 2019 and 2018.
|
Name and Principal
|
Year
|
Salary ($)(1)
|
Bonus ($)(2)
|
Stock Awards ($)(3)
|
Option Awards ($)(3)
|
Non-Equity Incentive Plan Compensation ($)(4)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5)
|
All Other Compensation ($)(6)
|
Total ($)
|
|||||||||||||||||||||||||||
| Charles L. Treadway President, Chief Executive Officer and Director |
2020 | 275,000 | — | 8,580,600 | — | 340,832 | — | 5,629 | 9,202,061 | |||||||||||||||||||||||||||
| Alexander W. Pease Executive VP and Chief Financial Officer |
2020 | 625,000 | — | — | — | 464,771 | — | 17,616 | 1,107,387 | |||||||||||||||||||||||||||
| 2019 | 625,000 | — | — | 2,944,897 | 166,494 | — | 17,160 | 3,753,551 | ||||||||||||||||||||||||||||
| 2018 | 468,750 | — | 999,995 | 499,994 | 149,964 | — | 5,838 | 2,124,541 | ||||||||||||||||||||||||||||
| John R. Carlson Senior VP and Chief Commercial Officer |
2020 | 71,875 | — | 2,057,760 | — | — | — | 1,503 | 2,131,138 | |||||||||||||||||||||||||||
| Frank B. Wyatt, II Senior VP, Chief Legal Officer/General Counsel and Secretary |
2020 | 540,000 | — | — | — | 334,635 | 45,879 | 120,311 | 1,040,825 | |||||||||||||||||||||||||||
| 2019 | 540,000 | — | — | 1,860,221 | 118,465 | 26,185 | 87,930 | 2,632,801 | ||||||||||||||||||||||||||||
| 2018 | 535,000 | — | 599,944 | 299,991 | 140,954 | 28,659 | 90,753 | 1,695,301 | ||||||||||||||||||||||||||||
| Morgan C.S. Kurk Executive VP and Chief Technology Officer |
2020 | 586,256 | — | — | — | 411,740 | — | 17,616 | 1,015,612 | |||||||||||||||||||||||||||
| 2019 | 575,000 | 950 | — | 2,015,088 | 153,174 | — | 17,160 | 2,761,372 | ||||||||||||||||||||||||||||
| 2018 | 575,000 | — | 999,983 | 499,989 | 183,956 | — | 60,425 | 2,319,353 | ||||||||||||||||||||||||||||
| Marvin S. Edwards, Jr. Former President and Chief Executive Officer |
2020 | 829,167 | — | — | — | 1,027,661 | 97,426 | 972,200 | 2,926,454 | |||||||||||||||||||||||||||
| 2019 | 1,100,000 | — | — | 12,088,716 | 517,110 | 54,686 | 231,526 | 13,992,038 | ||||||||||||||||||||||||||||
| 2018 | 1,091,250 | — | 4,666,591 | 2,333,323 | 513,406 | 58,843 | 229,932 | 8,893,345 | ||||||||||||||||||||||||||||
| Frank M. Drendel Former Chairman of the Board of Directors |
2020 | 463,580 | — | — | — | 191,519 | 153,582 | 142,656 | 951,337 | |||||||||||||||||||||||||||
| 2019 | 615,000 | — | — | 1,860,221 | 96,371 | 89,914 | 95,650 | 2,757,156 | ||||||||||||||||||||||||||||
| 2018 | 610,000 | 1,100 | 746,633 | 373,330 | 114,796 | 101,366 | 97,863 | 2,045,088 | ||||||||||||||||||||||||||||
| Jeffrey M. White Former Chief Commercial Officer
|
2020 | 95,832 | 100,000 | 3,199,984 | — | — | — | 4,983 | 3,400,799 | |||||||||||||||||||||||||||
| (1) | Salary reported may differ from the annual base salary rate set for the year due to the fact that changes in base salary were effective on April 1 as was the case for Mr. Kurk or because the employee was not employed for the full year as was the case for Mr. Treadway, Mr. Carlson, Mr. Edwards, Mr. Drendel and Mr. White. |
| (2) | Amounts represent payments for signing bonus in 2020 for Mr. White, service award (10 years) and patent award in 2019 for Mr. Kurk, and service award in 2018 for Mr. Drendel (45 years). |
| (3) | Amounts represent the grant date fair value of equity awards, which was computed in accordance with FASB ASC Topic 718 without regard to estimated forfeitures related to service-based vesting conditions. Refer to Note 15 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding the assumptions used to value these awards. The grant date fair value of the EPOP stock option awards considered the target number of units awarded to each NEO and the anticipated performance outcome as of the grant date. Assuming that the highest level of performance conditions is achieved, the grant date fair values of the 2019 EPOP stock option awards increase by, $980,659 for Mr. Pease, $619,459 for Mr. Wyatt, $671,030 for Mr. Kurk, $4,025,575 for Mr. Edwards and $619,459 for Mr. Drendel. |
|
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| (4) | Amounts represent AIP bonus payments by performance year. The AIP bonus payments for our NEOs in 2020, 2019 and 2018 were 82.6%, 31.3%, and 37.6% of target, respectively. |
| (5) | Amounts represent the portion of the aggregate earnings under the SERP that are “above market”. |
| (6) | The following table shows all amounts included in the “All Other Compensation” column for 2020 for each NEO: |
| All Other Compensation | ||||||||||||||||||||||||||||
| Name |
Company Contribution to 401(k) Plan ($) |
Company Contribution under ($) |
Life Insurance Premiums ($) |
Vacation Payout ($) |
Severance Payment ($)(a) |
Director Paid in Cash |
Total ($) |
|||||||||||||||||||||
|
Charles L. Treadway |
5,500 | — | 129 | — | — | — | 5,629 | |||||||||||||||||||||
|
Alexander W. Pease |
17,100 | — | 516 | — | — | — | 17,616 | |||||||||||||||||||||
|
John R. Carlson |
1,438 | — | 65 | — | — | — | 1,503 | |||||||||||||||||||||
|
Frank B. Wyatt, II |
17,100 | 102,695 | 516 | — | — | — | 120,311 | |||||||||||||||||||||
|
Morgan C.S. Kurk |
17,100 | — | 516 | — | — | — | 17,616 | |||||||||||||||||||||
|
Marvin S. Edwards, Jr. |
17,100 | 257,041 | 172 | 76,415 | 621,472 | — | 972,200 | |||||||||||||||||||||
|
Frank M. Drendel |
17,100 | 76,782 | 108 | 26,166 | — | 22,500 | 142,656 | |||||||||||||||||||||
|
Jeffrey M. White
|
4,875 | — | 108 | — | — | — | 4,983 | |||||||||||||||||||||
| (a) | Amounts represent the severance paid to Mr. Edwards in 2020. Additional severance amounts for Mr. Edwards and Mr. Drendel are contingent upon continuing compliance with restrictive covenants. See below discussion under the headings “—Employment Agreement with Mr. Edwards” and “—Employment Agreement with Mr. Drendel.” |
| (b) | Mr. Drendel was appointed Chairman Emeritus upon his retirement as an employee of the Company and earned director compensation for the fourth quarter of 2020. |
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EXECUTIVE COMPENSATION
GRANTS OF PLAN-BASED AWARDS IN 2020
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or (#) |
All Other Option Awards: Number of Securities Underlying (#) |
Exercise or Base Price of |
Grant Date Fair Value of |
|||||||||||||||||||||||||||||||||||||||
| Name |
Grant Date (1) |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
Option ($/sh) |
Option Awards ($) |
|||||||||||||||||||||||||||||||||||
|
Charles L. Treadway |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
206,250 | 412,500 | 944,625 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 2020 RSU(3) |
10/1/2020 | — | — | — | — | — | — | 500,000 | — | — | 4,515,000 | |||||||||||||||||||||||||||||||||
| 2020 PSU(4) |
10/1/2020 | — | — | — | — | 1,100,000 | — | — | — | — | 4,065,600 | |||||||||||||||||||||||||||||||||
|
Alexander W. Pease |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
281,250 | 562,500 | 1,288,125 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
|
John R. Carlson |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 2020 RSU(3) |
12/1/2020 | — | — | — | — | — | — | 80,000 | — | 974,400 | ||||||||||||||||||||||||||||||||||
| 2020 PSU(4) |
12/1/2020 | — | — | — | — | 160,000 | — | — | — | — | 1,083,360 | |||||||||||||||||||||||||||||||||
|
Frank B. Wyatt, II |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
202,500 | 405,000 | 927,450 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
|
Morgan C.S. Kurk |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
249,159 | 498,318 | 1,141,147 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
|
Marvin S. Edwards, Jr. |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
825,000 | 1,650,000 | 3,778,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
|
Frank M. Drendel |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
153,750 | 307,500 | 704,175 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
|
Jeffrey M. White(5) |
|
|||||||||||||||||||||||||||||||||||||||||||
| 2020 AIP(2) |
142,550 | 285,100 | 652,879 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 2020 RSU(3) |
6/1/2020 | — | — | — | — | — | — | 155,038 | — | — | 1,599,992 | |||||||||||||||||||||||||||||||||
| 2020 PSU(5) |
6/1/2020 | — | — | — | 77,519 | 155,038 | 310,076 | — | — | — | 1,599,992 | |||||||||||||||||||||||||||||||||
| (1) | The equity awards granted on June 1, 2020, October 1, 2020 and December 1, 2020 were approved by the Compensation Committee on May 5, 2020, September 29, 2020 and October 30, 2020, respectively. |
| (2) | Reflects the range of awards that could potentially have been earned during 2020 under our AIP. The “Threshold” column represents the minimum amount payable when threshold performance is met for all three performance metrics. The amounts actually earned are included under the column entitled “ —Non-Equity Incentive Plan Compensation” in our Summary Compensation Table for 2020 |
| (3) | Reflects RSUs granted in 2020. The awards granted to Mr. Treadway and Mr. Carlson vest in equal installments over three years beginning on October 1, 2021 and December 1, 2021, respectively. The award granted to Mr. White on June 1, 2020 would have vested equally over three years beginning June 1, 2020 but was accelerated in August 2020 upon his death. |
| (4) | Reflects potential share payouts with respect to PSUs (Stock Price metric) granted in 2020 at target. The “Target” column represents the amount payable (100% of target payout) if the specified targets are reached. The performance conditions require the achievement of various hurdles relating to the average price of our common stock over a 60-day trading period (ranging from a low of $15 and a high of $40), and the service conditions require continued service over a four-year period. |
| (5) | Reflects potential share payouts with respect to PSUs (Revenue metric) granted in 2020 at threshold, target, and maximum. The “Threshold” column represents the minimum amount payable (50% of target payout) when threshold performance is met. The “Target” column represents the amount payable (100% of target payout) if the specified performance targets are reached. The “Maximum” column represents the maximum amount payable (200% of target payout). These shares were forfeited due to the death of Mr. White in August 2020. |
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EXECUTIVE COMPENSATION
NARRATIVE SUPPLEMENT TO SUMMARY COMPENSATION TABLE FOR 2020 AND GRANTS OF PLAN BASED AWARDS IN 2020 TABLE
The terms of our cash incentive plans and equity incentive awards are described under “—2020 Compensation Actions” above, our employment and severance agreements are described under “—Potential Payments upon Termination or Change in Control—Employment and Severance Protection Agreements” below, and our nonqualified deferred compensation plans are described under “—Nonqualified Deferred Compensation for 2020” below.
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EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2020
The following table provides information regarding outstanding stock options and stock awards held by our NEOs as of December 31, 2020.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Name |
Grant Date |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable (1) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(1) |
Option Exercise Price ($) |
Option Expiration Date (3) |
Number of Shares Units of Stock | |||||||||||||||||||||||||||||||||