(e) Compensatory
Arrangements of Certain Officers
On
December 4, 2008, the Board of Directors of CommScope, Inc. (the “Company”) approved a
form of Amended and Restated Severance Protection Agreement (the “Severance
Agreement”). The Company intends to enter into a Severance
Agreement in the approved form with each of its named executive officers, each
of whom is a party to an existing severance protection agreement. The
existing severance protection agreements, which were entered into by certain
executives in 1997 and by other executives from time to time thereafter, will be
superseded by the Severance Agreements. The Severance Agreement was
revised to make certain changes required to comply with Sections 409A and 162(m)
of the Internal Revenue Code (the “Code”) and to make
certain other changes.
The
principal changes contained in the Severance Agreement are (i) to amend the term
of the agreement, the result of which is that, in the absence of a notice not to
extend the term, the remaining term will at all times be two to three years,
(ii) to amend the definition of Change in Control to conform to the definition
used in the Company’s 2006 Long-Term Incentive Plan and Annual Incentive Plan
(see below), (iii) to amend the definition of Pro-Rata Bonus to mean the
pro-rated actual bonus paid or payable under the Company’s Annual Incentive Plan
in respect of the fiscal year of the Company immediately prior to the year in
which the termination occurs, rather than the target bonus for the year of
termination, (iv) to specify the circumstances under which severance benefits
are available upon a termination of employment prior to a Change in Control (as
defined), and (v) to specify the timing of payments and reimbursements to be
made pursuant to the Severance Agreement. In all other material
respects, the Severance Agreement is substantially the same as the existing
severance protection agreements. As revised, the material terms of
the Severance Agreement are as follows.
The
initial term of the Severance Agreement will expire on December 31, 2011, and on
January 1, 2010 and each January 1 thereafter, the term will automatically
extend for one additional year unless either party gives at least ninety days’
notice of non-extension. Notwithstanding the foregoing, following the
occurrence of a Change in Control the term shall not expire prior to the
expiration of twenty-four months following such Change in Control.
If an
executive is terminated within twenty-four months following a Change in Control
(y) by the Company without Cause (as defined) or (z) by the executive for Good
Reason (as defined), the executive shall be entitled to receive, in addition to
all compensation earned or accrued through the date of termination, (i) an
amount equal to one and a half times (two times in the case of the chief
executive officer) the sum of (A) such executive’s base salary at the time of
the Change in Control (or, if greater, at any time thereafter) (the “Base Amount”) and (B)
the target annual bonus payable to such executive in respect of the fiscal year
immediately prior to that in which the termination date occurs (the “Target Bonus”) (such
sum, the “Severance
Payment”), (ii) an amount equal to the actual bonus paid or payable to
such executive in respect of the fiscal year immediately prior to that in which
the termination date occurs, pro-rated to reflect the number of days such
executive was employed by the Company during the year of termination (a “Pro-Rata Bonus”),
(iii) continuation of the life insurance, disability, medical, dental and
hospitalization coverages and benefits provided to such executive immediately
prior to the Change in Control (or, if greater, the coverages and benefits
provided at any time thereafter) for a period of eighteen months (twenty-four
months in the case of the chief executive officer) (the “Continuation
Period”), (iv) payment or reimbursement of outplacement services in an
amount not to exceed twenty-five percent of the sum of (A) the Base Amount and
(B) the Target Bonus, (v) payment or reimbursement of up to $2,000 for tax and
financial planning services in respect of the calendar year in which the
Severance Payment is made and (vi) payment or reimbursement for the cost of
relocation to such executive’s place of residence immediately prior to any
relocation such executive made for purposes of employment by the Company after
July 1, 1995. If an executive is terminated by reason of death
or disability, in addition to all compensation earned or accrued through the
date of termination, the executive shall be entitled to receive a Pro-Rata
Bonus.
Pursuant
to the Severance Agreement, a termination will be deemed to have occurred after
a Change in Control if an executive is terminated by the Company without Cause
at any time prior to a Change in Control and such termination (i) occurs after
the Company entered into a definitive agreement, the consummation of which would
constitute a Change in Control, or (ii) such executive reasonably demonstrates
that such termination was at the request of a third party who has indicated an
intention or has taken steps reasonably calculated to effect a Change in
Control.
The
principal change to the definition of Change in Control from that set forth in
the existing agreements is that it provides that a Change in Control shall occur
in the event of, among other things, the consummation of certain corporate
events such as a merger, consolidation, reorganization, liquidation,
dissolution, or sale of substantially all of the assets of the Company, as
opposed to the stockholder approval of any such events.
If, at
the end of the Continuation Period, an executive is not employed by another
employer, such executive will receive, for up to an additional six months, a
payment equal to one-twelfth of the sum of (A) the Base Amount and (B) the
Target Bonus, payable at the end of each of the six months following the end of
the Continuation Period, or, if earlier, until such executive obtains subsequent
employment. In addition, continuation of life, disability, medical,
dental and hospitalization coverages shall be extended for an additional six
months, or, if earlier, until such executive obtains such coverage through a
subsequent employer’s plans.
In the
event that it is determined that any payment or distribution of any benefit to
an executive is or will be subject to the excise tax imposed by Section 4999 of
the Code, such executive will be entitled to a gross-up payment intended to
indemnify such executive for this excise tax. This benefit and the
post-Continuation Period benefits described in the immediately preceding
paragraph, have been provided pursuant to the existing form of severance
protection agreement since 1997.