SCI SYSTEMS, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
FOR
SENIOR EXECUTIVE OFFICERS
I. INTRODUCTION
1.1. Purpose. The purpose of this Plan is to recruit and retain highly
qualified executives and other employees, to provide incentives to such
individuals to attain the goals of SCI Systems, Inc. (the "Company") and its
Affiliates (as defined below) and to provide the employees of the Company with
incentive compensation based on the performance of the Company in order to
enhance shareholder value. The Plan is designed to ensure that the bonuses paid
hereunder to eligible participants, is deductible under Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
1.2. Description. This Plan is the means by which the Committee
shall determine annual incentive bonuses and effect and implement awards for
participating employees hereunder.
II. DEFINITIONS
As used in this Plan, the following terms shall have the following
meanings:
"Affiliate" means (a) an entity that directly or through one or more
intermediaries is controlled by the Company, and (b) any entity in which the
Company has a significant equity interest, as determined by the Company.
"Annual Incentive Bonus" means the bonus payable with respect to a
fiscal year of the Company determined in accordance with Article 5 hereof.
"Base Compensation" means the base rate of salary payable to a
Participant as most recently reflected on the books and records of the Company,
exclusive of bonus, commission, fringe benefits, employee benefits, expense
allowances and other nonrecurring forms of remuneration.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Change in Control" means:
(1) any "Person" (as defined in Section 3(a)(9) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act) as modified and used in Section
13(d) and 14(d) of the Exchange Act) other than (1) the Company or any of
its subsidiaries, (2) any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries,
(3) an underwriter temporarily holding securities pursuant to an offering
of such securities, (4) any corporation owned, directly or indirectly, by
the stockholders of the Company is substantially the same proportions as
their ownership of the company's common stock or (5) any of its
subsidiaries and any investment funds managed by it or any of its
subsidiaries is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 30% of the combined voting power of the
Company's then outstanding voting securities;
(2) during any period of not more than two consecutive years, not including any
period prior to the effective date of this Plan, individuals who at the
beginning of such period constituted the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (1), (3), or
(4) of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
at least a majority thereof;
(3) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation
which (A) would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
or parent entity) 50% or more of the combined voting power of the voting
securities of the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation and (B) no person acquires
30% or more of the combined voting power of the Company's or such surviving
or parent entity's then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets (or any transaction having
a similar effect).
"Committee" means the Compensation Committee of the Board, which shall
consist of two or more members of the Board of Directors of the Company, each of
whom shall be an "outside director" within the meaning of Section 162(m) of the
Code. .
"Participant" means an employee of the Company or any Affiliate meeting
the requirements of Article 2 hereof, who is selected to participate in the Plan
by the Committee.
"Performance Measures" means the criteria and objectives, established
by the Committee. The Committee may amend or adjust the Performance Measures or
other terms and conditions of an outstanding award in recognition of unusual or
nonrecurring events affecting the Company or its financial statements or changes
in law or accounting, but only to the extent such adjustment would not cause any
portion of the award, upon payment, to be nondeductible pursuant to Section
162(m) of the Code. Such criteria and objectives may include one or more of the
following: revenue growth rate, growth in earnings per share, return on net
assets (defined as EBIT divided by net assets), cash return on assets, operating
return on assets, return on invested capital, return on capital employed, return
on equity, or any combination of the foregoing. If the Committee desires that
compensation payable pursuant to any award subject to Performance Measures be
"qualified performance-based compensation" within the meaning of Section 162(m)
of the Code, the Performance Measures (i) shall be established by the Committee
no later than the end of the first quarter of the applicable period (or such
other time designated by the Internal Revenue Service) and (ii) shall satisfy
all other applicable requirements imposed under Treasury Regulations promulgated
under Section 162(m) of the Code, including the requirement that such
Performance Measures be stated in terms of an objective formula or standard.
Before any award is paid to any holder or an award subject to Performance
Measures under this Plan, the Committee shall certify in writing that the
applicable Performance Measures were in fact satisfied.
"Plan" means the SCI Systems, Inc. Annual Incentive Compensation Plan
for Senior Executive Officers, as in effect and as amended from time to time.
III. ADMINISTRATION
The administration and operation of the Plan shall be supervised by the
Committee with respect to all matters. The Committee may delegate responsibility
for the day-to-day administration and operation of the Plan to such employees of
the Company as it shall designate from time-to-time. The Committee shall
interpret and construe any and all provisions of the Plan and any determination
made by the Committee under the Plan shall be final and conclusive. Neither the
Board nor the Committee, nor any member of the Board, nor any employee of the
Company shall be liable for any act, omission, interpretation, construction or
determination made in connection with the Plan (other than acts of willful
misconduct) and the members of the Board and the Committee and the employees of
the Company shall be entitled to indemnification and reimbursement by the
Company to the maximum extent permitted at law in respect of any claim, loss,
damage or expense (including counsel's fees) arising from their acts, omissions
and conduct in their official capacity with respect to the Plan. The Plan shall
be interpreted in view of the intention that any grant of compensation pursuant
to the Plan is intended to qualify as performance-based compensation with the
meaning of Code Section 162(m) and the regulations and interpretations
promulgated thereunder.
IV. PARTICIPATION
Each employee of the Company holding a position of Chief Executive
Officer, President, Chief Operating Officer, Chief Financial Officer or
Executive Vice President shall be eligible to receive awards under the Plan.
V. ANNUAL INCENTIVE BONUS
5.1. Establishment of Performance Goals. Within the first ninety (90)
days of each fiscal year of the Company, the Committee shall establish the
Performance Measures for the payment of individual awards under the Plan.
5.2. Annual Incentive Bonus. The Committee may establish percentages of
each eligible Participant's Base Compensation to be paid as an Annual Incentive
Bonus under this Article 5 upon the attainment of the Performance Measures.
After establishing the percentages of Base Compensation to be paid as an Annual
Incentive Bonus under this Article 5 for a fiscal year, the Committee may
reduce, but not increase, by up to 25% of the amount of the Annual Incentive
Bonus which would have otherwise been payable to a Participant based upon the
Committee's determination of the performance of such Participant for such fiscal
year in other qualitative goals established by the Committee from time to time.
In no event shall the amount of the Annual Incentive Bonus payable to any
Participant attributable to a fiscal year exceed $4,500,000
5.3. Determination of Achievement of Performance Measures.
The Committee shall certify the level of achievement of the Performance
Measures as soon as practical after the end of the fiscal year for which the
determination is being made.
5.4. Payment of Annual Incentive Bonus.
(a) As soon as practical after the expiration of each fiscal year
of the Company, Participants who remained employed until the
last day of the fiscal, shall be entitled to receive the
Annual Incentive Bonus determined in accordance with this
Article 5. A participant who during the year died or became
disabled shall be entitled to a prorated Annual Incentive
Bonus based on the number of months and partial months elapsed
during such fiscal year. Payment of Annual Incentive Bonuses
shall be made in cash.
(b) Notwithstanding the provisions of Subsection (a) hereof, in
the event of a Change of Control, all Participants who are
employed as of the date of the Change of Control shall be
entitled to an Annual Incentive Bonus determined in accordance
with this Subsection (b), to be paid as soon as practical
following the date of the Change of Control. In determining
the amount of the Annual Incentive Bonus payable pursuant to
this Subsection (b), the actual achievement of the Company
for the twelve months ending on the last day of the fiscal
quarter ending prior to the date of the Change of Control
shall be measured against the Performance Measures
applicable to the fiscal year in which the Change of Control
occurs.
(c) The Committee may, in its discretion, institute a program
allowing Participants to defer the receipt of all or a portion
of their Annual Incentive Bonus otherwise payable under
Subsection (a) of this Section.
5.5. Participants Rights Unsecured. The right of any Participant to
receive Annual Incentive Bonus under the Plan shall constitute an unsecured
claim against the general assets of the Company.
5.6 Withholding Taxes. The Company shall have the right to deduct from
each bonus payment any federal, state and local taxes required by such laws to
be withheld with respect to the payment.
VI. GENERAL PROVISIONS
6.1. Amendment and Termination. The Committee may at any time
amend, suspend, discontinue or terminate the Plan. All determinations concerning
the interpretation and application of this Section 6.1 shall be made by the
Committee.
6.2. Designation of Beneficiary. Each Participant who defers receipt of
all or a portion of any Annual Bonus under the Plan may designate a beneficiary
or beneficiaries (which beneficiary may be an entity other than a natural
person) to receive any payments to be made following the Participant's death.
Such designation may be changed or cancelled at any time without the consent of
any such beneficiary. Any such designation, change or cancellation must be made
on a form provided for that purpose by the plan administrator and shall not be
effective until received by the plan administrator. If no beneficiary has been
named, or the designated beneficiary or beneficiaries shall have predeceased the
Participant, the beneficiary shall be the Participant's spouse or, if no such
spouse shall survive the Participant, the Participant's estate. If a Participant
designates more than one beneficiary, the rights of such beneficiaries shall be
made in equal shares, unless the Participant has designated otherwise.
6.3. Miscellaneous.
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(a) No Right of Continued Employment. Nothing in this
Plan shall be construed as conferring upon any Participant any right
to continue in the employment of the Company or any of its
subsidiaries or Affiliates.
(b) No Limitation on Corporate Actions. Nothing contained in
the Plan shall be construed to prevent the Company or any Affiliate
from taking any corporate action which is deemed by it to be
appropriate or in its best interest, whether or not such action would
have an adverse effect on the Plan or any awards made under the Plan.
No employee, Participant or other person shall have any claim against
the Company or any of its subsidiaries or Affiliates as a result of any
such action.
(c) Nonalienation of Benefits. Except as expressly provided
herein, no Participant or his beneficiaries shall have the power or
right to transfer, anticipate, or otherwise encumber the Participant's
interest under the Plan. The Company's obligations under this Plan are
not assignable or transferable except to a corporation that acquires
all or substantially all of the assets of the Company or any
corporation into which the Company may be merged or consolidated. The
provisions of the Plan shall inure to the benefit of each Participant
and his beneficiaries, heirs, executors, administrators or successors
in interest.
(d) Severability. If any provision of this Plan is held
unenforceable, the remainder of the Plan shall continue in full force
and effect without regard to such unenforceable provision and shall be
applied as though the unenforceable provision were not contained in the
Plan.
(e) Governing Law. The Plan shall be construed in
accordance with and governed by the laws of the State of Delaware,
without reference to the principles of conflict of laws.
(f) Headings. Headings are inserted in this Plan for
convenience of reference only and are to be ignored in a construction
of the provisions of the Plan.
SCI SYSTEMS, INC.
Dated: By:
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Attest:
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