SCHEDULE 14A
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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.   )

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BELDEN INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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April 6, 2009

 

Dear Stockholder:

 

I am pleased to invite you to our 2009 Annual Stockholders’ Meeting. We will hold the meeting at 11 a.m. Central time on May 20, 2009 at the Saint Louis Club (16^th Floor), Pierre Laclede Center, 7701 Forsyth Boulevard, St. Louis, Missouri.

 

We are pleased to be taking advantage of the U.S. Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders primarily over the Internet. We believe that this e-proxy process should expedite stockholders’ receipt of proxy materials, lower the associated costs and conserve natural resources.

 

On April 6, 2009, we mailed our stockholders a notice containing instructions on how to access our 2009 Proxy Statement and 2008 Annual Report and vote online. The notice also included instructions on how to receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement, and proxy card. If you received your annual meeting materials by mail, the notice of annual meeting, proxy statement and proxy card from our Board of Directors were enclosed. If you received your annual meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the Internet, which are both available at http://investor.belden.com/annuals.cfm.

 

The agenda for this year’s annual meeting includes the following items:

 

 

Please refer to the proxy statement for detailed information on each proposal and the annual meeting. Your vote is important and we kindly request that you cast your vote.

 

Sincerely,

 

 

John Stroup

President and Chief Executive Officer

 

BELDEN INC.
7733 Forsyth Boulevard
Suite 800
St. Louis, Missouri 63105
(314) 854-8000

 

 

NOTICE OF 2009 ANNUAL STOCKHOLDERS’ MEETING

 

 

 

By Authorization of the Board of Directors,

 

 

Kevin Bloomfield

Senior Vice President, Secretary and General Counsel

 

St. Louis, Missouri

April 6, 2009

PROXY STATEMENT FOR THE
2009 ANNUAL MEETING OF STOCKHOLDERS
BELDEN INC.
To be held on Wednesday, May 20, 2009

 

TABLE OF CONTENTS

 

 

Under rules of the United States Securities and Exchange Commission (SEC), we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On April 6, 2009, we mailed to our stockholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice of Internet Availability also instructs you on how to access your proxy card to vote through the Internet or by telephone.

 

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the annual meeting, and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

 

QUESTIONS

 

 

 

 

 

 

 

 

The Belden Board has eleven members and three standing committees: Audit, Compensation, and Nominating and Corporate Governance. The Board had eleven meetings during 2008; six were telephonic. All directors attended 75% or more of the Board meetings and the Board committee meetings on which they served. The maximum number of directors authorized under the Company’s bylaws is eleven.

 

Mr. Harris, who had been a Company director since 1985, expressed his intent not to seek reelection and will retire from the Board when his term expires at this year’s annual meeting. The Board and management wish to thank Mr. Harris for his strong leadership and significant contributions to the Board and the Company.

 

 

 

At its regular meeting in February 2009, the Board determined that Ms. Brown, Ms. McLeod and Messrs. Aldrich, Bain, Balk, Cressey, Harris, Kalnasy, Monter and Rethore, each met the independence requirements of the NYSE listing standards. As part of this process, the Board determined that each such member had no material relationship with the Company.

 

The Audit Committee operates under a Board-approved written charter and each member meets the independence requirements of the NYSE’s listing standards. The Committee assists the Board in overseeing the Company’s accounting and reporting practices by:

 

 

 

A representative of Ernst & Young LLP is expected to be present at the annual meeting and will have the opportunity to make a statement if the representative desires to do so, and is expected to be available to respond to appropriate questions.

 

At its February 25, 2009 meeting, the Board determined that each of Ms. Brown and Messrs. Rethore, Bain and Harris was an Audit Committee Financial Expert as defined in the rules pursuant to the Sarbanes-Oxley Act of 2002 and each is independent.

 

The Audit Committee assists the Company’s Board of Directors in its general oversight of the Company’s financial reporting process. Management is responsible for the preparation and presentation of the Company’s financial statements. Ernst & Young LLP (“EY”), the Company’s independent registered public accounting firm for 2008, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of the Company’s financial statements with accounting principles generally accepted in the United States.

 

The Committee has reviewed and discussed the Company’s audited financial statements for 2008 with management and has discussed with EY the matters that are required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended.

 

EY has provided to the Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence. The Committee has discussed with EY and confirmed that firm’s independence. The Committee has concluded that EY’s provision of non-audit services to the Company and its subsidiaries is compatible with EY’s independence.

 

Based on these reviews and discussions, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for 2008.

 

Bernard G. Rethore (Chair)

Lorne D. Bain

Judy L. Brown

Michael F.O. Harris

 

The following table presents fees for professional services rendered by EY for the audit of the Company’s annual financial statements and internal control over financial reporting for 2008 and 2007 as well as other permissible audit-related and tax services.

 

 

“Audit fees” primarily represent amounts paid or expected to be paid for audits of the Company’s financial statements and internal control over financial reporting under SOX 404, review of SEC comment letters, reviews of SEC Forms 10-Q, Form S-4 and Form 10-K, and statutory audit requirements at certain non-U.S. locations.

“Audit-related fees” are primarily related to due diligence services on completed and potential acquisitions.

 

“Tax fees” for 2008 and 2007 are for domestic and international compliance totaling $541,232 and $20,252, respectively, and tax planning totaling $404,798 and $59,714, respectively.

 

In approving such services, the Audit Committee did not rely on the pre-approval waiver provisions of the applicable rules of the SEC.

 

Audit Fees: For 2008, the Committee reviewed and pre-approved the audit services and estimated fees for the year. Throughout the year, the Committee received project updates and, if appropriate, approved or ratified any amounts exceeding the original estimates.

 

Audit-Related and Non-Audit Services and Fees: Annually, and otherwise as necessary, the Committee reviews and pre-approves all audit-related and non-audit services and the estimated fees for such services. For recurring services, such as tax compliance, expatriate tax returns, and statutory filings, the Committee reviews and pre-approves the services and estimated total fees for such matters by category and location of service. The projected fees are updated quarterly and the Committee considers and, if appropriate, approves any amounts exceeding the original estimates.

 

For non-recurring services, such as special tax projects, due diligence or other tax services, the Committee reviews and pre-approves the services and estimated fees by individual project. The projections are updated quarterly and the Committee reviews, and, if appropriate, approves any amounts exceeding the original estimates.

 

Should an engagement need pre-approval before the next Committee meeting, the Committee has delegated to the Committee Chair (or if he were unavailable, another Committee member) authority to grant such approval. Thereafter, the entire Committee will review such approval at its next quarterly meeting.

 

The Compensation Committee of Belden determines, approves and reports to the Board on compensation for the Company’s elected officers. The Committee reviews the design, funding and competitiveness of the Company’s retirement programs. The Committee also assists the Company in developing compensation and benefit strategies to attract, develop and retain qualified employees. The Committee operates under a written charter approved by the Board.

 

The Nominating and Corporate Governance Committee identifies, evaluates and recommends nominees for the Board for each annual meeting (and to fill vacancies during interim periods); evaluates the composition, organization, and governance of the Board and its committees; oversees senior management succession planning; and develops and recommends corporate governance principles and policies applicable to the Company. The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders if such nominations are submitted to the Company prior to the deadline for proposals as noted above under the caption “Nomination of Director Candidates.”

 

The Committee’s responsibilities with respect to its governance function include considering matters of corporate governance and reviewing (and recommending to the Board revisions to) the Company’s corporate governance guidelines and its code of ethics, which applies to all Company employees, officers and directors. The Committee is governed by a written charter approved by the Board.

 

Current copies of the Audit, Compensation and Nominating and Corporate Governance charters, as well as the Company’s governance principles and code of ethics, are available on the Company’s website at www.belden.com under the heading “Corporate Governance.” Printed copies of these materials are also available to stockholders upon request, addressed to the Corporate Secretary, Belden Inc., 7733 Forsyth Boulevard, Suite 800, St. Louis, Missouri 63105.

 

The Company’s Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board (including Bryan Cressey, Chairman of the Board and presiding director for non-management director meetings), any Board committee or any chair of any such committee by U.S. mail, through calling the Company’s hotline or via e-mail.

 

To communicate with the Board, any individual director or any group or committee of directors, correspondence should be addressed to the Company’s Board or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary, Belden Inc.” at 7733 Forsyth Boulevard, Suite 800, St. Louis, MO 63105. To communicate with any of our directors electronically or through the Company’s hotline, stockholders should go to our corporate website at www.belden.com. Under the heading “Corporate Governance,” you will find the Company’s hotline number (with access codes for dialing from outside the U.S.) and an e-mail address that may be used for writing an electronic message to the Board, any individual directors, or any group or committee of directors. Please follow the instructions on our website to send your message.

 

All communications received as set forth in the preceding paragraph will be opened by (or in the case of the hotline, initially reviewed by) our corporate ombudsman for the sole purpose of determining whether the contents represent a message to our directors. The Belden Ombudsman will not forward certain items which are unrelated to the duties and responsibilities of the Board, including: junk mail, mass mailings, product inquiries, product complaints, resumes and other forms of job inquiries, opinion surveys and polls, business solicitations, promotions of products or services, patently offensive materials, advertisements, and complaints that contain only unspecified or broad allegations of wrongdoing without appropriate information support.

 

In the case of communications to the Board or any group or committee of directors, the corporate ombudsman’s office will send copies of the contents to each director who is a member of the group or committee to which the envelope or e-mail is addressed.

 

In addition, it is the Company’s policy that each director attends the annual meeting absent exceptional circumstances. Each director attended the Company’s 2008 annual meeting.

 

Each non-employee director receives a $60,000 annual cash retainer; a time vested (twelve month) annual restricted share (RSU) award of $115,000 divided by the then-current share price; an additional $10,000 per year for the chair of the Audit Committee; an additional $5,000 per year to the chairs of the Compensation and Nominating and Corporate Governance Committees; an additional $5,000 per year to members of the Audit Committee and members of other committees who serve on more than one committee; and upon appointment, a non-employee director receives a time-vested RSU award of 2,500 shares. The following table provides information on non-employee director compensation for 2008.

 

 

 

 

 

The Board’s policy is that each non-employee director holds Company stock equal in value to five times his or her annual cash retainer (currently 5 times $60,000). Upon appointment, a member has five years to meet this requirement, but must meet interim goals during the five-year period of: 20% after one year; 40% after two years; 60% after three years; and 80% after four years. The in-the-money value of vested stock options and the value of unvested RSUs are included in making this determination at the higher of their grant date value or current market value. Each non-employee director meets either the full-period or interim-period holding requirement: Messrs. Bain, Balk, Cressey, Harris, Kalnasy, Monter and Rethore each meet 100% of the stock holding requirement. Mr. Aldrich, who was appointed to the Board in February 2007, meets the second-year interim requirement and Ms. Brown and Ms. McLeod, who were appointed to the Board in February 2008, meet the first-year interim requirement.

 

The Company has eleven directors-Ms. Brown, Ms. McLeod, and Messrs. Aldrich, Bain, Balk, Cressey, Harris, Kalnasy, Monter, Rethore and Stroup. The term of each director will expire at this annual meeting and the Board proposes that each of them (other than Mr. Harris who plans to retire at this meeting) be reelected for a new term of one year and until their successors are duly elected and qualified. Each nominee has consented to serve if elected. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.

 

 

THE BELDEN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
NOMINATED SLATE OF DIRECTORS.

 

In 2000, the shareholders of the Company (then named Cable Design Technologies Corporation) approved the Cable Design Technologies Corporation 2001 Long-Term Incentive Plan (the “Plan”). The Plan originally authorized the issuance of 900,000 shares (adjusted for a 2-for-1 reverse stock split in 2004). In 2005, the Company’s shareholders authorized an additional 2,500,000 shares under the Plan. Now, the Board has amended the Plan to increase the number of shares available under the Plan, subject to approval by the Company’s shareholders. At this meeting, you are requested

to approve an amendment to the Plan that increases by 2,200,000 the number of shares that may be granted under the Plan. Of this amount, beginning in 2009, no more than 1,100,000 shares shall be available for grants of awards other than stock options or stock appreciation rights (SARs). As part of the amendment you are also being asked to approve language that was added to the Plan to clarify that the following shares of stock may not again be made available for issuance as awards under the Plan: (i) shares of stock not issued or delivered as a result of the net settlement of an outstanding SAR or as a result of the net settlement of an option; (ii) shares of stock used to pay the exercise price or withholding taxes in connection with an exercise or vesting of an award, or (iii) shares of stock repurchased on the open market with proceeds from an option exercise. These clarifications are consistent with the Company’s historical practices.

 

As reflected below in the Equity Compensation Plan Information on December 31, 2008 Table, there were 802,356 shares available for issuance under the Plan at the end of 2008. On February 24, 2009, 1,361,275 awards of SARs, PSUs and RSUs were awarded to eligible participants, including the named officers. At the time of these awards, there were 903,401 shares available for issuance under the Plan. Certain executive officers (including Messrs. Stroup, Benoist and Bloomfield) received 458,600 of the equity awards granted on February 24, 2009, which were in the form of SARs and PSUs granted on the condition that shareholders approve this proposal to increase the share reserve under the Plan by 2,200,000 and approve the other Plan amendments described above.

 

The table below shows equity awards made or anticipated to be made that are contingent on approval of this proposal.

 

 

 

If this proposal is not approved, the awards shown above will be void and will be replaced with cash equivalent awards and there will be no shares available for future grants. If the proposal is approved the number of shares available for future grants (including the May 2009 director grants) would be approximately 1,742,000.

 

The Plan is intended to promote the long-term interests of the Company by aligning employee financial interests with long-term stockholder value. Additional shares are necessary in order to achieve the purpose of the Plan over its remaining term.

 

General.  The Plan provides for the granting to employees, directors and other individuals who perform services for the Company (“Participants”) the following types of incentive awards: stock options, stock appreciation rights (“SARs”), restricted stock, performance grants and other types of awards that the Board of Directors or a duly appointed committee of the Board of Directors deems to be consistent with the purposes of the Plan.

 

The Plan provides that no Participant is entitled to receive grants of common stock, stock options or SARs in a calendar year in excess of 400,000 shares or units. The Plan affords the Company latitude in tailoring incentive compensation to support corporate and business objectives, and to anticipate and respond to a changing business environment and competitive compensation practices.

 

Plan Administration.  The Plan is administered by the Compensation Committee and the Committee has the exclusive authority to select Plan participants and to determine the type, size and terms of each award, to modify the terms of awards, to determine when awards will be granted and paid, and to make all other determinations which it deems necessary or desirable in the interpretation and administration of the Plan.

 

With limited exceptions, including termination of employment as a result of death, disability or retirement, or except as otherwise determined by the Committee, rights to these forms of contingent compensation are forfeited if a recipient’s employment or performance of services terminates within a specified period following the award. Generally, a Participant’s rights and interests under the Plan will not be transferable except by will or by the laws of descent and distribution.

 

Options:  The Committee may grant non-qualified stock options (“NSO”) and incentive stock options (“ISO”) at a price fixed by the Committee. The option price may not be less than the fair market value of the Company’s stock on the grant date and, for ISOs issued to an employee owning more than ten percent of the voting power of the Company’s stock, may not be less than 110% of the fair market value of the Company’s stock on the grant date.

 

Options generally will expire not later than ten years after the date on which they are granted. Options will become exercisable at such times and in such installments as the Committee shall determine. Payment of the option price must be made in full at the time of exercise in such form (including cash, common stock of the Company or the surrender of another outstanding award or any combination thereof) as the Committee may determine.

 

SARs:  A SAR (or stock appreciation right) entitles the holder to receive cash or common stock (or combination thereof) equal to (or, in the discretion of the Committee, less than) the difference between the exercise price or option price per share and the fair market value per share at the time of such exercise, times the number of shares subject to the SAR or option or other award, or portion thereof, which is exercised. The Plan prohibits SARs issued below the fair market value of the Company Stock on the grant date.

 

Restricted Stock Units.  A restricted stock unit is an award of a given number of shares of common stock which are subject to a restriction against transfer and to a risk of forfeiture during a period set by the Committee. During the restriction period, dividends on the underlying shares accrue and are distributed if and when the restricted stock vests.

 

Performance Grants:  Performance grants are awards whose final value, if any, is determined by the degree to which specified performance objectives have been achieved during an award period set by the Committee, subject to such adjustments as the Committee may approve based on relevant factors. The Committee may

determine performance measures based on measures of industry, Company, unit or Participant performance (or any combination of the foregoing) and the Committee may adjust these as it deems appropriate.

 

A target value of an award is established (and may be amended thereafter) by the Committee and may be a fixed dollar amount, an amount that varies from time to time based on the value of a share of common stock, or an amount that is determinable from other criteria specified by the Committee. Payment of the final value of an award is made as promptly as practicable after the end of the award period or at such other times as the Committee may determine.

 

Upon the liquidation or dissolution of the Company, all outstanding awards under the Plan shall terminate immediately prior to the consummation of such liquidation or dissolution, unless otherwise provided by the Committee. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, all restrictions on any outstanding awards shall lapse and Participants will be entitled to the full benefit of such awards immediately prior to the closing date of such sale or merger, unless otherwise provided by the Committee.

 

The Board of Directors or the Committee may amend or terminate the Plan, except that no amendment shall become effective without the prior approval of the Company’s stockholders if such approval is necessary for continued compliance with the performance-based compensation exception of Section 162(m) of the Internal Revenue Code, under the Incentive Stock Options provisions of Section 422 of the Internal Revenue Code or by any NYSE listing requirements. Furthermore, any termination may not materially and adversely affect any outstanding right or obligation under the Plan without the affected participant’s consent.

 

By its terms, the Plan will expire on December 6, 2010, ten years from the date that the Plan was initially approved by the Company’s shareholders. However, prior to such expiration, the Plan permits the Company’s Board to extend the Plan for up to an additional five years with certain limitations.

 

Federal Income Tax Consequences — Incentive Stock Options.  The grant of incentive stock options to an employee does not result in any income tax consequences. The exercise of an incentive stock option does not result in any income tax consequences to the employee if the incentive stock option is exercised by the employee during his employment with the Company or a subsidiary, or within a specified period after termination of employment due to death or retirement for age or disability under then established rules of the Company. However, the excess of the fair market value of the shares of stock as of the date of exercise over the option price is a tax preference item for purposes of determining an employee’s alternative minimum tax. An employee who sells shares acquired pursuant to the exercise of an incentive stock option after the expiration of (i) two years from the date of grant of the incentive stock option, and (ii) one year after the transfer of the shares to him (the “Waiting Period”) will generally recognize long-term capital gain or loss on the sale.

 

An employee who disposes of his incentive stock option shares prior to the expiration of the Waiting Period (an “Early Disposition”) generally will recognize ordinary income in the year of sale in an amount equal to the excess, if any, of the lesser of (i) the fair market value of the shares as of the date of exercise or (ii) the amount realized on the sale, over the option price. Any additional amount realized on an Early Disposition should be treated as capital gain to the employee, short- or long-term, depending on the employee’s holding period for the shares. If the shares are sold for less than the option price, the employee will not recognize any ordinary income but will recognize a capital loss, short- or long-term, depending on the holding period.

 

The Company will not be entitled to a deduction as a result of the grant of an incentive stock option, the exercise of an incentive stock option, or the sale of incentive stock option shares after the Waiting Period. If an

employee disposes of his incentive stock option shares in an Early Disposition, the Company will be entitled to deduct the amount of ordinary income recognized by the employee.

 

Federal Income Tax Consequences — Non-Qualified Stock Options.  The grant of NSO’s under the Incentive Plan will not result in the recognition of any taxable income by the participants. A participant will recognize income on the date of exercise of the non-qualified stock option equal to the difference between (i) the fair market value on the date the shares were acquired, and (ii) the exercise price. The tax basis of these shares for purposes of a subsequent sale includes the option price paid and the ordinary income reported on exercise of the option. The income reportable on exercise of the option by an employee is subject to federal and state income and employment tax withholding.

 

Generally, the Company will be entitled to a deduction in the amount reportable as income by the participant on the exercise of a non-qualified stock option.

 

Federal Income Tax Consequences — Stock Appreciation Rights.  Stock Appreciation Rights awards involve the issuance of shares, without other payment by the recipient, as additional compensation for services to the Company. The recipient will recognize taxable income upon exercise equal to the fair market value of the shares on the date of the exercise, which becomes the tax basis in a subsequent sale, less the exercise price, which is paid in shares. Generally, the Company will be entitled to a corresponding deduction in an amount equal to the income recognized by the recipient.

 

Federal Income Tax Consequences — Restricted Stock and Performance Share Grants.  Restricted stock granted under the Plan generally will not be taxed to the recipient, nor deductible by the Company, at the time of grant. On the date the restrictions lapse and the shares become transferable or not subject to a substantial risk of forfeiture, the recipient recognizes ordinary income equal to the excess of the fair market value of the shares on that date over the purchase price paid for the stock, if any. The participant’s tax basis for the shares includes the amount paid for the shares and the ordinary income recognized. Generally, the Company will be entitled to a deduction in an amount of income recognized by the recipient. Performance share units that are converted into restricted stock units will result in the same treatment. Performance share units not converted into restricted stock units have no tax consequences.

 

The discussion set forth above is intended only as a summary and does not purport to be a complete enumeration or analysis of all potential tax effects relevant to recipients of awards under the Plan. Accordingly, all award recipients are advised to consult their own tax advisors concerning the federal, state, local and foreign income and other tax considerations relating to such awards and rights thereunder.

 

Incorporation by Reference.  The foregoing is only a summary of the Plan and is qualified in its entirety by reference to the full text of the amended Plan, a copy of which is attached hereto as Appendix I.

 

THE BELDEN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE RESERVE INCREASE.

 

 

 

The following table shows the amount of Belden common stock beneficially owned (unless otherwise indicated) by our directors, the executive officers named in the Summary Compensation Table below and the directors and named executive officers as a group. Except as otherwise noted, all information is as of March 25, 2009.

 

 

 

 

Based upon a review of filings with the Securities and Exchange Commission and other reports submitted by our directors and officers, we believe that all of our directors and executive officers complied during 2008 with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 with two exceptions. On November 13, 2008, Gray Benoist inadvertently filed a Form 4 seventeen days late upon learning of the purchase of 3,000 shares of common stock by each of his sons. On January 26, 2009, Steven Biegacki inadvertently filed a Form 4 102 days late upon learning of the purchase and sale during 2008 of a total of 2,030 shares of common stock by his son.

 

 

The following table shows information regarding those shareholders known to the Company to beneficially own more than 5% of the outstanding Belden shares for the period ending on December 31, 2008.

 

 

 

The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section of this proxy statement. Based on such review and discussion, the Committee recommended to the Board of Belden that the Compensation Discussion and Analysis be included in the proxy statement.

 

Glenn Kalnasy (Chair)
David Aldrich
Mary McLeod
John Monter

 

This part of the proxy statement is divided into six sections:

 

 

This CD&A explains how our executive compensation programs are designed and operate with respect to our listed officers. For 2008, they are:

 

 

The unprecedented global economic conditions impacted our markets and our financial results. As a result, none of the listed officers received Restricted Stock Unit awards for the 2008 performance period (discussed below) and annual cash incentive awards fell from last year’s amounts, as summarized in the following table. (Mr. Stroup plans to give his cash incentive award to charity.) These results reflect our philosophy of pay-for-performance and having at-risk pay represent a significant component of total direct compensation. In light of the global economic downturn, we also have frozen salaries of officers and the Board has elected to defer an increase in director compensation that Deloitte Consulting LLP (the Compensation Committee’s independent compensation consultant) had recommended.

 

 

 

The Compensation Committee of our Board of Directors oversees our executive compensation programs. The Committee annually reviews and approves the compensation elements for all executive officers, including the listed officers. The Committee submits its recommendations regarding compensation for Mr. Stroup to the Board for approval. For other executive officers, Mr. Stroup makes recommendations regarding their compensation to the Committee for the Committee’s approval. Mr. Stroup may adjust base salaries of other executive officers in accordance with salary merit increase guidelines that are reviewed annually by the Committee.

 

Our executive compensation programs are designed to facilitate the achievement of our strategic business objectives and promote the short- and long-term profitable growth of the company. Our equity plan is designed to align the executives’ long-term interests with those of Belden’s stockholders. Our compensation programs also are intended to help recruit, retain and motivate the employees the company will need to achieve these objectives.

 

Belden’s compensation design objectives are:

 

 

The key compensation elements for executive officers are set out in the following table.

 

 

 

The Committee annually reviews a tally sheet, a summary of each component of compensation, for each listed officer.

 

 

The Committee’s approval of compensation actions with respect to executive officers (other than its recommendations to the Board regarding Mr. Stroup’s compensation) is based on Mr. Stroup’s performance evaluation of each officer.

 

Each listed officer has entered into an employment agreement with the company that addresses (among other things) the officer’s separation from the company in the event of resignation, retirement, termination for cause, termination without cause, change-of-control of the company, disability and death. A quantitative summary of these events for each listed officer is included below under the caption “Payments upon Termination or Change of Control.”

 

As part of its oversight, the Committee will review current market data on executive compensation and executive compensation philosophy, strategy and implementation. The Committee sometimes will have Deloitte Consulting, LLP (the Committee’s compensation consultant) assist it in such matters. In its most recent review, the Committee concluded that annual compensation for executive officers — with respect to compensation levels as well as structure—remained consistent with our philosophy and objectives.

 

Consistent with our pay for performance philosophy, we target salaries of executive officers at the 50th percentile of the survey data of the competitive market and target annual cash incentive and long-term equity opportunities at the 75th percentile of the competitive market. For 2008, survey salary data included:

 

We adjusted the survey data to reflect our revenue size. Because comparative compensation information is one of several tools used in setting executive compensation, the Committee uses its discretion in determining the nature and extent of its use.

 

 

Salaries of the listed officers are reviewed annually and at the time of a promotion or other change in responsibilities. Increases in salary are based on a review of the individual’s performance, the competitive market, the individual’s experience and internal equity. Mr. Stroup annually reviews each executive officer’s performance and the Board reviews Mr. Stroup’s performance.

Each executive officer’s performance is scored on the following scale:

 

Performance Ranking

 

 

The executive officer is then scored on our merit salary increase guidelines that are annually revised to reflect the competitive market based on the salary survey data noted above; the Committee reviews these annually. The executive officer is measured based on three categories—below market, market and above market.

 

2008 Merit Increase Guidelines for U.S. Employees (including U.S.-Based Listed Officers)

 

 

The listed officers’ salaries and market scoring are:

 

 

Mr. Sheehan left the company in February 2008; at that time, his annual base salary was $375,000. Mr. Pace left the company at the end of January 2009; at that time, his base salary was $260,000. Information regarding the terms of Messrs. Sheehan and Pace’s separations are discussed below under the caption “Departure of Former Executive Officers.”

 

Executive officers participate in our annual cash incentive plan. Seven hundred fifty employees participated in the plan’s 2008 performance period. Under the plan, participants earn cash awards based on the achievement of Company and individual performance goals. For 2008, the amount paid under the plan to all participants was $1,588,900, or 0.08% of 2008 revenue.

Annual cash incentive awards primarily reward short-term financial and operational performance goals (referred to below as a “Financial Factor) and the accomplishment of the participant’s personal goals (referred to below as a “Personal Performance Factor”). To attract, hire, motivate and retain individuals who can fulfill our strategic objectives, we target cash incentives for each officer (which is expressed as a percentage of the officer’s annual base salary) at the 75^th percentile of the competitive market based on the survey data as discussed above.

 

The actual award is computed using the following formula:

 

Actual Award = Target Award X a Financial Factor X a Personal Performance Factor (rounded to nearest hundred).

 

To ensure the company can deduct the awards as an ordinary business expense under IRC Section 162(m) (which limits the deductibility of compensation in excess of $1 million to certain officers unless such excess compensation is “performance-based”), the 2008 awards to the listed officers were initially set to achieve a maximum payout subject to the Compensation Committee’s right to reduce the award (negative discretion), which the Committee did in arriving at the amounts noted below.

 

2008 Annual Cash Incentive Awards

 

 

 

Financial Factor

 

The Financial Factor for Messrs. Stroup, Benoist and Bloomfield was based entirely on our consolidated results — 80% on consolidated net income from continuing operations and 20% on consolidated working capital turns. These goals were chosen because in the compensation committee’s view they are the key elements that drive annual improvement in operating results and are key to the Company achieving its three-year strategic objectives.

 

The Financial Factor for Messrs. Kumra and Pace, who as listed officers oversee business units, was divided equally between their division results (50%) and consolidated results (50%). We chose this split so division presidents would provide appropriate focus on their achieving division operating and financial goals. The Financial Factor for division performance was based on division operating income (70%) and division working capital turns (30%).

 

Definitions used in calculating the Financial Factor

 

 

 

The Committee reserves the right to adjust these measures for unusual events that may occur during the year.

 

Financial Factor Allocation

 

 

The table below shows threshold, target and actual levels of the Financial Factor for Messrs. Stroup, Benoist and Bloomfield. The objectives in the Financial Factors reflect a significant level of difficulty for the executives given the business environment and challenges faced by the Company in 2008 — as evidenced by the payouts — and are intended to reflect 75th percentile performance levels. The target level for the consolidated net income component of the Financial Factor was the same as used by the Company in its 2008 operating budget and the target level for the working capital turns component of the Financial Factor was the actual 2007 working capital turns plus one turn improvement.

 

Both of these represented stretch goals compared to 2007 performance — i.e., 2007 consolidated adjusted net income from continuing operations was $146.2 million compared to a 2008 target of $181.4 million and the 2007 consolidated adjusted working capital turns was 4.5 compared to a 2008 target of 5.5. Although there is no maximum level of financial performance, the annual cash incentive plan is capped with respect to the payment of individual awards at a maximum award of $5 million per year and the amount payable to all participants in any one-year performance period is capped at three times the total target amounts for all participants.

 

Under the annual cash incentive plan, the criteria are considered independently of one another. That is, an award can be granted if the threshold is met for any given criterion. This was the case in 2008 as the thresholds for working capital turns (both at a business unit level and on a consolidated basis) were met, but the thresholds for net income were not met.

 

2008 Financial Factor for Consolidated Results (Messrs. Stroup, Benoist and Bloomfield)

 

The table below shows threshold, target and actual levels of the Financial Factors for Mr. Pace and Mr. Kumra. Similar to the corporate level goals, there is no maximum level to financial performance.

 

2008 Financial Factor for Division Results (Messrs. Kumra and Pace)

 

 

Adjustments

 

Consolidated net income, consolidated working capital, division operating income and division working capital were adjusted to reflect certain unusual events that occurred during the year. These one-time adjustments primarily concerned goodwill impairment and restructuring of the Company’s operations. The Committee believed it was appropriate to adjust the financial results for these matters to encourage timely restructuring of the Company’s operations. These restructurings were necessary for the Company to achieve its operating income and working capital goals, which are key elements in improving operating and financial performance.

 

Had these adjustments not been made, the Financial Factor for Messrs. Stroup, Benoist and Bloomfield would have been .16; the Financial Factor for Mr. Kumra would have been .31; and the Financial Factor for Mr. Pace would have been .19.

 

Personal Performance Factor

 

Awards based on the Financial Factor are adjusted by each executive officer’s Personal Performance Factor, which may range from 0.5 to 1.5 based on the attainment of their 2008 personal performance goals. The personal performance goals reflected in the Personal Performance Factor measure the attainment of short and long-term annual goals, including those set out in the Company’s three-year strategic plan. The Company’s key strategic initiatives for 2008 included consolidating its manufacturing to low cost regions, increasing its number of high potential employees, improving its operational efficiency through Lean management techniques, and developing and implementing global marketing and sales processes.

 

Mr. Stroup annually scores each executive officer on the achievement of their goals and the Board scores Mr. Stroup on the attainment of his goals. The 2008 Personal Performance Factors for the listed officers ranged from .85 to 1.17 with a mean of 1.01 and a median of 1.00.

 

Our long-term equity incentive plan is designed to ensure that our participants (including officers) have a continuing stake in the long-term success of the company. In addition, the plan emphasizes pay-for-performance. In general, under the plan executive officers receive half of their equity awards in the form of stock appreciation rights (SARs) and the other half in the form of performance share units (PSUs).

 

Individual performance, the competitive market (targeted at the 75th percentile), executive experience and internal equity were factors used to determine the total dollar value awarded to each listed officer of equity awards at the beginning of the performance period in February 2008, which we refer to as the “Long-Term Incentive (LTI) Value”.

LTI Value

 

We use the following matrix to determine the LTI for each officer. An officer will not receive an equity award if his or her PPF was less than .85. Mr. Stroup’s LTI for 2008 was based on his employment agreement. His agreement provides that, for the three-year period of 2006 through 2008, he will receive equity awards having a grant date value of not less than $2.5 million per year. However, the Board also rated Mr. Stroup for his 2007 performance at the top-end of the range. Mr. Stroup also received an additional equity award in 2008 in connection with his entering into a new employment agreement, which is discussed below under the caption “Chief Executive Officer Compensation.” All of his 2008 equity awards are listed below in the table “2008 Equity Awards of Listed Officers.”

 

LTI Value Matrix

 

 

If the target LTI is, say, $100,000 and the officer’s PPF is 1.0, he or she would receive equity awards with LTI value between $70,000 to $120,000. If the officer’s PPF is 1.16, he or she would receive equity awards with LTI value between $130,000 to $190,000.

 

Half of the award would be in the form of SARs and the other half in the form of PSUs. The SARs value would be calculated using the Black-Scholes-Merton (“Black-Scholes”) option pricing formula and the PSUs would be based on the current Belden stock price.

 

SARs = (50% X LTI value) divided by the Black-Scholes value of a Belden SAR, rounded to the nearest multiple of 100.

 

PSUs = (50% X LTI value) divided by the current Belden stock price, rounded to the nearest multiple of 100.

 

The SARs provide a material incentive to executives to obtain a significant stock ownership stake in the Company, but only if the Company’s share price increases during their ten-year term and they serve as a retention tool because they take three years to fully vest. The PSUs have value to the holder only if targeted financial performance goals are achieved during their one-year performance measurement period.

 

Unlike our annual cash incentive plan, under which the criteria have separate thresholds, the PSUs are based on a consolidated (corporate) Financial Factor, which must meet a combined threshold of 0.7 in order for any RSUs to be awarded. There are no minimum thresholds for the criterion, but a combined financial factor of 0.7 must be met for any restricted stock units to be granted. Because this Financial Factor for 2008 was less than 0.7, no RSUs were awarded and the PSUs resulted in no equity compensation to the recipients. This result is reflective of our policy to use equity awards as both a retention tool and an award for positive performance.

Terms of 2008 SARs and PSUs Granted to Officers

 

 

2008 Equity Awards to Listed Officers

 

At its February 2008 meeting, the Compensation Committee made equity awards in the form of 611,237 SARs and stock options, 116,000 PSUs and 40,050 RSUs to more than 160 employees. The total represented approximately 1.7% of outstanding shares of Belden stock on February 24, 2008.

 

 

 

To align their interests with those of the Company’s stockholders, Company officers who are required to report their holdings of Belden stock to the Securities and Exchange Commission must hold stock whose value is at least three times their annual base salary (five times in the case of Mr. Stroup). Officers have five years from May 2005 (the date the guidelines were implemented or, if later, five years from becoming an officer) to acquire the appropriate shareholdings. In addition, officers must make interim progress toward the ownership requirement during the five year period—20% after one year, 40% after two years, 60% after three years and 80% after four years. For purposes of determining ownership, unvested RSUs and the value of vested in-the-money options and SARs are included. For calculation purposes, the Company will use the higher of the current trading price or the acquisition price. As of December 31, 2008, except for Mr. Kumra, each of the named executive officers either met his interim or five-year stock ownership guideline. In accordance with Company policy, an officer is prohibited from selling Belden stock, which was received from the Company as an equity award, until the officer meets the interim guideline.

 

IRS Section 162(m) imposes a limit of $1 million on the amount of compensation that Belden may deduct in any one year with respect to certain executive officers, including the CEO. There is an exception to this limitation for performance-based compensation meeting certain requirements. Stock option and SAR awards are performance-based compensation meeting those requirements and, as such, should be fully deductible. The Company anticipates that its 2008 annual cash incentive and performance share awards will be performance-based compensation under IRC 162(m).

 

To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all compensation to be deductible but considers these tax considerations when reviewing executive compensation.

 

If we are required to restate our financial statements due to material noncompliance as a result of misconduct with any financial reporting requirement, the CEO and the CFO may be required to reimburse the company for any bonus or other incentive-based or equity-based compensation received during the twelve-month period following the filing or public release of the financial statements that are restated and for any profits from the sale of the company stock over the same twelve-month period.

 

Mr. Sheehan

 

At the end of February 2008, Mr. Sheehan, Global Vice President of Sales and Marketing, left the Company. In connection with his departure, Mr. Sheehan entered into a separation agreement with the Company. Pursuant to his agreement, Mr. Sheehan received, among other things, severance of $637,500 (an amount equal to the sum of his annual salary and 2007 target annual cash incentive award), his actual annual incentive award for 2007 of $330,500, and additional consideration for a six-month extension of his twelve-month non-compete covenant (as set out in his employment agreement) of $187,500.

 

Mr. Pace

 

At the end of January 2009, Mr. Pace, Vice President, Operations and President, Specialty Products, left the Company. In connection with his departure, pursuant to a separation agreement with the Company, Mr. Pace received the amounts payable under his Executive Employment Agreement, including: severance of $442,000 (an amount equal to the sum of his annual salary and 2008 target annual cash incentive award) and his actual annual incentive award for 2008 of $30,300. Per his employment agreement, Mr. Pace is subject to 12-month non-solicitation and non-competition covenants.

 

 

All elements of Mr. Stroup’s compensation are approved by the Board or the Compensation Committee. Upon his appointment in 2005, Mr. Stroup entered into an employment agreement with the Company, having an initial term of three years. In 2007, the Committee raised Mr. Stroup’s target annual incentive from 100% of salary to 130% to reflect the competitive market, his 1.4 Personal Performance Factor (PPF) for 2006 and the Company’s 2006 strong performance.

 

Based on the Board’s assessment of Mr. Stroup’s 2007 performance (which is reflected in scoring him a maximum PPF), the Company’s strong 2007 performance, and Deloitte’s summary of the competitive market, in February 2008, the Board extended Mr. Stroup’s employment agreement to October 2011; increased his annual base salary to $700,000; and granted him a stock option award having a grant date value of approximately $3 million. Mr. Stroup’s new base salary approximates the median of peer data used by Deloitte and is between the 25th and 50th percentile of survey data compiled at the time of the new agreement. His target total direct compensation (base salary, annual cash incentive and long-term equity awards) is slightly above the 75th percentile of survey data.

Listed below are the companies in Deloitte’s peer group that were reviewed in determining competitive levels for purposes extending Mr. Stroup’s employment agreement in February 2008:

 

Altera Corp.
Amkor Technology, Inc.
Amphenol Corp.
Atmel Corp.
AVX Corp.
CommScope, Inc.
Energizer Holdings, Inc.
Exide Technologies
Fairchild Semiconductor International
Harman International Industries Inc.
Hexcel Corp.
JDS Uniphase Corp.
Juniper Networks, Inc.
Molex, Inc.
ON Semiconductor Corp.
Plexus Corp.
Spectrum Brands, Inc.
Thomas & Betts Corp.

 

The peer group was established to include manufacturing companies comparable to Belden based on revenue and market capitalization, and their meeting three requirements — each has annual revenues in excess of $1 billion, has more than 30% of revenues derived from outside the U.S. and has three or more business segments.

 

Because comparative compensation information is one of several tools used in setting executive compensation, the Committee uses its discretion in determining the nature and extent of its use.

 

For 2008, our financial results were adversely impacted by the global economic downturn. Although 2008 revenues of $2 billion were down marginally from 2007, our adjusted earnings per diluted share of $2.68 were down 6.6 percent from our 2007 performance. However, during 2008, we still made progress in achieving several of our strategic initiatives, including improvements in product portfolio management, brand and talent management, and cost and efficiency improvements throughout the company through Lean enterprise and regional manufacturing initiatives. Also in 2008, we accomplished another key strategic priority to expand our signal transmission product portfolio by acquiring Trapeze Networks, a provider of wireless LAN equipment and network management software. Based on these results, the Board gave Mr. Stroup a PPF of 1.0.

 

 

The Company has an employment agreement with each of the listed officers (the scope of Mr. Kumra’s agreement is limited to the consequences of severance). These agreements address key provisions of the employment relationship, including payment of severance benefits upon a termination of employment before and after a change of control of the Company. Information regarding benefits under these agreements is provided following this Compensation Discussion and Analysis under the heading Payment upon Termination or Change of Control.

 

For each executive officer, the Committee (with the assistance of Deloitte and management) reviewed the key provisions of the executive employment agreements to ensure they were competitive based on survey data. The termination of employment provisions of these agreements were provided to address the competitive market for the positions filled by executive officers. In consultation with Deloitte, the Committee determined that it was necessary to provide executive officers with a predetermined amount of compensation in the event they were to leave the Company under certain circumstances, including a termination of the executive officer’s employment without cause before or after a change in control of the Company, rather than to negotiate such terms on a case-by-case basis.

 

The Company from time to time leases corporate aircraft as needed to provide flexibility to executive officers and other associates for business use and to allow more efficient use of executive time for Company matters. It is Company policy that corporate aircraft shall be used for business purposes only.

 

This Compensation Discussion and Analysis should be read in conjunction with the following tables: