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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5517
SCIENTIFIC-ATLANTA, INC.
(Exact name of Registrant as specified in its charter)
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Georgia 58-0612397
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
One Technology Parkway, South
Atlanta, Georgia 30092-2967
(Address of principal executive offices) (Zip Code)
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404-903-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
Common Stock, par value -------------------
$0.50 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at September 8, 1994 was approximately $1,675,447,261.
As of September 8, 1994, the registrant had outstanding 75,687,468 shares of
common stock (adjusted for the 2-for-1 stock split declared in August, 1994).
DOCUMENTS INCORPORATED BY REFERENCE:
Specified portions of the Proxy Statement for the registrant's 1994 Annual
Meeting of Shareholders are incorporated by reference to the extent indicated
in Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Scientific-Atlanta, Inc. (the "Company") designs, manufactures and
markets a variety of standard and proprietary commercial electronic signal
generating and receiving equipment. The Company's products connect information
generators with information users via broadband terrestrial and satellite
networks, and include applications for the converging cable, telephone, and
data networks.
The Company identified Communications and Instrumentation as its major
business segments in prior years and provided business segment information
related to sales, operating profit, assets, capital expenditures, depreciation
and amortization and backlog. The customer base, marketing strategies,
technology to support new product development and manufacturing processes for
utility load management products and measurement and control systems have
recently become more closely aligned with those of the Communications segment
and, accordingly, management and operations which support these products and
services were moved into the Communications segment from the Instrumentation
segment.
In addition, sales of electronic equipment such as sonar and microwave
energy products, particularly sales of government and defense related products,
supplied by the Instrumentation segment have recently declined. As a result,
the Company now operates primarily in one business segment, Communications,
providing satellite and terrestial based networks to a range of customers and
applications and network management and systems integration to add value to
those networks. This segment represents approximately 90 percent of
consolidated sales, operating profit and identifiable assets.
The Company has evolved from a manufacturer of electronic test
equipment for antennas and electronics for the cable industry to a producer of
a wide variety of products for terrestrial and satellite communications
networks, including digital video, voice and data communications products. The
Company's products include receivers, transmitters, distribution amplifiers,
modulators, demodulators, signal encoders and decoders, controllers, signal
processors, set-top (home communications) terminals, digital audio terminals,
fiber optic distribution equipment, and satellite earth station antennas.
These products, and integrated systems and networks using these and other
products, are sold to CATV system operators, telephone companies,
communications carriers, communications network operators, and multi-facility
business organizations which use communications satellites for intracompany
communications. Sales are also made to independent system integrators,
distributors and dealers who resell to some of the above types of customers.
The Company sells modulators, demodulators and signal processors for
video and audio receiving stations (often referred to as "headend" systems),
products for distributing communications signals by coaxial cable and fiber
optics from headend systems to subscribers, set-top terminals that enable
television sets to receive all channels transmitted by system operators, and
interdiction equipment which enables connections, disconnections and changes in
service to be made from the headend. The Company's set-top terminals include
units which are addressable from the headend system so as to permit control of
channel authorizations, including authorizations for pay-per-view events,
impulse ordering and automatic recording of billing information at the cable
operator's central facility, and menu-driven volume controllable units. The
Company manufactures equipment for transmitting compact-disc quality music
programming via satellite and cable media.
Sales of set-top terminals constituted approximately 21 % of the
Company's total sales for fiscal year 1994, and approximately 18 % and 20 % of
such sales in each of the fiscal years 1993 and 1992, respectively.
Proprietary software used in the terminals, as well as system manager software
at the headend system, was developed by the Company and is updated from time to
time. The Company's new digital home communications terminals will enable
subscribers to access new services such as advanced pay-for-view ordering of
special events and movies, fully interactive home shopping services, electronic
program guides and more.
Other computer-based systems designed and delivered by the Company are
used to distribute video information for other business users. These include
airline information systems which link video terminals and cameras in an
airport under a central control.
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The Company's products, both analog and digital, are being utilized by
the Company's traditional cable operator customers to upgrade their networks to
provide new services and by the Regional Bell Operating Companies to build new
video, voice and data networks. They are also utilized by electric utilities
in load management systems which monitor and control power usage and monitor
power outages.
The Company's satellite earth stations receive and transmit signals
for video, voice and data and are utilized in satellite-band telephone, data
and television distribution networks. Some of these earth stations are part of
national and international communications systems which communicate by means of
a satellite with earth stations in other countries or with other earth stations
in the same national network. Earth stations in these systems may be connected
with local telephone, teletype, television or other terrestrial communications
networks. The Company's earth stations, signal encoders and decoders, packet
switches and controllers are also used in private business networks for the
exchange of audio, video and data via satellite among various office,
manufacturing and sales facilities and for the delivery of television
programming to hotels, motels and apartment complexes. The Company's data
communications product offerings include private interactive data systems using
VSAT (very small aperture terminal) technology.
The Company designs, manufactures and sells digital video compression
communications products for direct satellite broadcast and cable television
systems and digital storage and retrieval products for applications such as ad
insertion for television broadcasters and cable operators. The Company's
compression products utilize the open architecture MPEG-2 technology developed
by an international standards group. MPEG-2 digital equipment allows cable,
telephone, computer and consumer electronics products and systems to operate
together across networks and in the home.
The Company's satellite products and systems include tracking and
telemetry equipment, earth observation satellite ground stations, shipboard
and command telephony and facsimile communications products and intercept
systems. The Company produces telemetry instruments, radar platforms, special
receivers, special measurement devices and other equipment used to track
aircraft, missiles, satellites and other moving objects and to communicate with
and receive and record various measurements and other data from the object.
The Company develops services and applications which can be utilized
by its customers on their terrestrial and satellite-based networks.
Applications recently introduced include a system which enables power companies
to detect power failures automatically, telephony capability over cable
networks, interactive systems for video conferencing, retail banking and
distance learning and interactive video games.
OTHER PRODUCTS AND SERVICES.
The Company produces advanced products and systems that measure,
analyze or control processes associated with acoustics, signal analysis and
machinery diagnostics. Their applications range from sonars and anti-submarine
warfare analysis tools to vibration and acoustic analyzers used to measure jet
engine vibration, helicopter rotor wing trim and balance and non-intrusive
medical testing. Products include acoustic systems, machinery diagnostic
systems, signal processors and trainers and are used in engineering design,
structural evolution, accoustic and electronic testing and turbine engine
balancing.
The Company's microwave instrumentation systems are used to design and
manufacture antennas for communication and radar systems. Products include
pattern recorders, receivers, positioners and various display units, which
measure, record and display various characteristics of antennas such as signal
pattern, gain, phase, amplitude and frequency.
MARKETING AND SALES
The Company's products are sold primarily through its own sales
personnel who work out of offices in Atlanta and other metropolitan areas in
the United States. Certain products are also marketed in the United States
through independent sales representatives and distributors. Sales in foreign
countries are made through wholly-owned subsidiaries and branch offices, as
well as through independent distributors and sales representatives. The
Company's management personnel are also actively involved in marketing and
sales activities.
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GOVERNMENT AND FOREIGN SALES
The Company's sales to units of the United States Government
constituted 11% of the Company's sales for fiscal year 1993 and 12% for fiscal
year 1992. Such sales were less than 10% during fiscal year 1994.
The Company's sales to customers in foreign countries constituted 33%,
26% and 27% of the Company's total sales for fiscal years 1994, 1993 and 1992,
respectively. Substantially all of these sales were export sales. Foreign
subsidiary sales were not material for any of these fiscal years. Sales to no
one geographic area constituted 10 % of the Company's total sales during those
years.
BACKLOG
The Company's backlog consists of unfilled customer orders believed to
be firm and long-term contracts which have not been completed. The Company's
backlog as of July 1, 1994 and July 2, 1993 was $405,860,000 and $272,629,000,
respectively.
The Company believes that approximately 90 % of the backlog existing
at July 1, 1994 will be shipped within the succeeding fiscal year. The Company
includes in its backlog with respect to long-term contracts only amounts
representing orders currently released for production. The amount contained in
backlog for any contract or order may not be the total amount of the contract
or order. The amount of the Company's backlog at any time does not reflect
expected revenues for any fiscal period.
PRODUCT RESEARCH AND DEVELOPMENT AND PATENTS
The Company conducts an active research and development program to
strengthen and broaden its existing products and systems and to develop new
products and systems. The Company's development strategy is to identify
products and systems which are, or are expected to be, needed by substantial
numbers of customers in the Company's markets and to allocate a greater share
of its research and development resources to areas with the highest potential
for future benefits to the Company. In addition, the Company develops specific
applications related to its present technology. Expenditures in fiscal 1994,
1993 and 1992 were principally for development of commercial cable and
telephone digital products, satellite network products and interactive data
communications products. In fiscal 1994, 1993 and 1992, the Company's research
and development expenses were approximately $60,417,000, $60,161,000 and
$52,267,000, respectively.
The Company holds patents with respect to certain of its products and
actively seeks to obtain patent protection for significant inventions and
developments.
MANUFACTURING
The Company develops, designs, fabricates, manufactures, assembles or
acquires its products. Manufacturing operations range from complete assembly
of a particular product by one individual or small group of individuals to
semi-automated assembly lines for volume production. Because many of the
Company's products include precision electronic components requiring close
tolerances, the Company maintains rigorous and exacting test and inspection
procedures designed to prevent production errors, and also constantly reviews
its overall production techniques to enhance productivity and reliability. The
Company's set-top terminals and certain pole-line hardware for the CATV
industry are manufactured by contract vendors with high-quality, high-volume
production facilities. In addition to such manufacturing by contract vendors,
the Company plans to commence its own manufacturing of set-top terminals in
1995.
MATERIALS AND SUPPLIES
The materials and supplies purchased by the Company are standard
electronic components, such as custom integrated circuits, wire, circuit
boards, transistors, capacitors and resistors, all of which are produced by a
number of manufacturers. The principal suppliers of the Company's set-top
terminals and active solid state components are Matsushita Electronic
Components Co., Ltd. and Motorola, Inc., respectively. The Company also
purchases aluminum and steel, including castings and semi-fabricated items
produced by a variety of sources. The Company considers its sources of
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supply to be adequate and is not dependent upon any single supplier, except for
Matsushita Electronic Components Co., Ltd., for any significant portion of the
materials used in the products it manufactures.
EMPLOYEES
The Company had approximately 4,000 employees on July 1, 1994. The
Company believes its employee relations are satisfactory.
COMPETITION
The businesses in which the Company is engaged are highly competitive.
The Company competes with companies which have substantially greater resources
and a larger number of products, as well as with smaller specialized companies.
Some of the Company's customers are in businesses closely related to the
production of such products and are, therefore, potential competitors of the
Company. The Company believes that its ability to compete successfully results
from its marketing strategy, engineering skills, ability to provide quality
products at competitive prices and broad coverage by its sales personnel.
ITEM 2. PROPERTIES
The Company owns office and manufacturing facilities in metropolitan
Atlanta, Georgia, and San Diego, California, which comprise four plants
containing a total of approximately 412,400 square feet.
The Company also owns approximately 128 acres of land in Gwinnett
County, Georgia, where antenna test ranges and a hub station used in providing
interactive data communications services are located and 219 acres of land in
Walton County, Georgia, held for future antenna test range expansion. The
Company presently owns one building and leases two buildings in San Diego
County, California, which are not required for present operations and are under
sublease to other tenants.
Additional major manufacturing facilities containing an aggregate of
approximately 200,800 square feet are leased by the Company at the following
locations under leases expiring (including renewal options) from 1995 to 2002:
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LOCATION APPROXIMATE FOOTAGE
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Doraville (Atlanta), Georgia 63,500
Melbourne, Florida 10,000
Toronto, Ontario 16,000
Norcross (Atlanta), Georgia 53,500
Vancouver, British Columbia 57,800
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The Company also leases office and warehouse space in several
buildings in the Atlanta, Georgia, and Tempe, Arizona areas and leases sales
and service offices in 25 U.S. and foreign cities. The Company is currently
expanding its manufacturing capabilities, both in the U. S. and abroad, to
meet the increased demand for its products.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which may or could
have a material adverse impact on the Company or its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended July 1, 1994.
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EXECUTIVE OFFICERS OF THE COMPANY
The following persons are the executive officers of the Company:
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Executive
Name Age Officer Since Present Office
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James F. McDonald 54 1993 President and
Chief Executive Officer
John E. Breyer 59 1989 Senior Vice President
and Group President
William E. Eason, Jr. 51 1993 Senior Vice President,
General Counsel and
Corporate Secretary
Dr. H. Allen Ecker 58 1979 Senior Vice President,
Technical Operations
John H. Levergood 60 1992 Senior Vice President
and Group President
Raymond D. Lucas 56 1989 Senior Vice President,
Strategic Operations
Jack W. Simpson, Sr. 52 1993 Senior Vice President
and Group President
Harvey A. Wagner 53 1994 Senior Vice President,
Chief Financial Officer
and Treasurer
Julian W. Eidson 55 1978 Vice President
and Controller
Brian C. Koenig 47 1988 Vice President, Human Resources
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Each executive officer is elected annually and serves at the pleasure
of the Board of Directors.
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Mr. McDonald was elected President and Chief Executive Officer of the
Company effective July 15, 1993. He was a general partner of J.H. Whitney &
Company, a private investment firm, from 1991 until his employment by the
Company. From 1989 to 1991 he was President and Chief Executive Officer of
Prime Computer, Inc., a supplier of CAD/CAM software and computer systems.
Prior to that time he was President and Chief Operating Officer of Gould, Inc.,
a computer and electronics company (1984 to 1989) and held a variety of
positions with IBM Corporation (1963 to 1984).
Mr. Eason has been a partner at Paul, Hastings, Janofsky & Walker
since 1989. He has been Secretary of the Company since August, 1993, and
became Senior Vice President and General Counsel in February, 1994. Paul,
Hastings, Janofsky & Walker performs legal services for the Company. Mr. Eason
receives a fixed salary from the Firm for work which he performs for clients of
the Firm other than the Company, but has no interest in the Firm's earnings and
profits.
Mr. Levergood re-joined the Company in December 1992. He had
previously been employed by the Company in various managerial positions (most
recently as Chief Operating Officer) until December 1989. From January through
June, 1990, he was President and Chief Operating Officer of Dowden
Communications, an operator of cable television systems. He was an independent
communications consultant from June, 1990 until he re-joined the Company in
1992.
Mr. Simpson was President and Chief Executive Officer of Mead Data
Central, Inc., an electronic publisher, from June, 1982 through November, 1992.
From December, 1992 until joining the Company in October, 1993, he was
President of Infobyte, Inc., a consulting firm.
Mr. Wagner was Vice President-Finance and Chief Financial Officer of
Computervision Corporation, a supplier of CAD/CAM/CAE software and services
from September, 1989 until he joined the Company in June, 1994.
All other executive officers have been employed by the Company in the
same or similar capacities for more than five years. There are no family
relationships among the executive officers.
PART II
Item 5. Market for the Registrant's Common Stock and Related Matters
The Common Stock of the Company is traded on the New York Stock
Exchange (symbol SFA). The approximate number of holders of record of the
Company's Common Stock at September 8, 1994 was 6,021.
It has been the policy of the Company to retain a substantial portion
of its earnings to finance the expansion of its business. In 1976 the Company
commenced payment of quarterly cash dividends and intends to consider the
continued payment of dividends on a regular basis; however, the declaration of
dividends is discretionary with the Board of Directors, and there is no
assurance regarding the payment of future dividends by the Company.
Information as to the high and low stock prices and dividends paid for
each quarter of fiscal years 1994 and 1993 is included in Note 5 of the Notes
to Financial Statements included in this Report.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data is set forth on page 20 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion of Consolidated Statement of Financial
Position, Consolidated Statement of Earnings, and Consolidated Statement of
Cash Flows are set forth on pages 12, 14, 15 and 18 of this Report.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and notes
thereto, schedules containing certain supporting information and the report of
independent public accountants are set forth on pages 11 through 32 of this
Report. See Part IV, Item 14 for an index of the statements, notes and
schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Pursuant to Instruction G(3) to Form 10-K, the information required in
Items 10-13 (except for the information set forth at the end of Part I with
respect to Executive Officers of the Company) is incorporated by reference from
the Company's definitive proxy statement for the Company's 1994 Annual Meeting
of shareholders, which is expected to be filed pursuant to Regulation 14A
within 120 days after the end of the Company's 1994 fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
(1) The consolidated financial statements listed below are
included on pages 11 through 29 of this Report.
Report of Independent Public Accountants
Consolidated Statement of Financial Position
as of July 1, 1994 and July 2, 1993
Consolidated Statement of Earnings for each of the
three years in the period ended July 1, 1994
Consolidated Statement of Cash Flows for each of the
three years in the period ended July 1, 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
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Schedule VIII Valuation and Qualifying Accounts for each 30
of the three years in the period ended
July 1, 1994
Schedule IX Short-Term Borrowings for each of the 31
three years in the period ended July 1,
1994
Schedule X Supplementary Income Statement Information 32
for each of the three years in the period
ended July 1, 1994
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All other Schedules called for under Regulation S-X are not submitted because
they are not applicable or not required or because the required information is
not material or is included in the financial statements or notes thereto.
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(3) Exhibits:
(3) (a) The following is incorporated by reference to the registrant's
report on Form 10-K for its fiscal year ended June 29, 1990:
(i) Amended and Restated Articles of Incorporation, as
amended.
(b) By-laws of registrant as currently in effect.
(10) Material Contracts -
(a) The following material contract is incorporated by reference
to the registrant's report on Form 10-Q for its fiscal quarter
ended March 31, 1987:
(i) Agreement pertaining to the compensation of Sidney
Topol. *
(b) The following material contract is incorporated by reference
to the registrant's report on Form 10-Q for its fiscal quarter
ended December 29, 1989:
(i) Scientific-Atlanta, Inc. Non-Employee Directors Stock
Option Plan. *
(c) The following material contracts are incorporated by
reference to the registrant's report on Form 10-K for the
fiscal year ended June 26, 1992:
(i) Scientific-Atlanta, Inc. 1981 Incentive Stock Option Plan,
as amended.*
(ii) 1985 Executive Deferred Compensation Plan of Scientific-
Atlanta, Inc., as amended.*
(iii) Scientific-Atlanta, Inc. Annual Incentive Plan for
Key Executives, as amended.*
(iv) Scientific-Atlanta, Inc. Long Term Incentive Compensation
Plan, as amended.*
(v) Scientific-Atlanta, Inc. 1978 Non-Qualified Stock Option
Plan for Key Employees, as amended.*
(d) The following material contract is incorporated by reference
to the registrant's report on Form 10-K for the fiscal year
ended July 2, 1993:
(i) Scientific-Atlanta, Inc. 1992 Employee Stock Option Plan.*
(e) Scientific-Atlanta, Inc. Supplemental Executive Retirement
Plan. *
(f) 1994 Scientific-Atlanta, Inc. Executive Deferred Compensation
Plan.*
(g) Form of Severance Protection Agreement between the Registrant
and certain officers and key employees.*
(h) Scientific-Atlanta, Inc. Retirement Plan for Non-Employee
Directors, as amended.*
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(11) Computation of Earnings per Share of Common Stock
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule
______________________
* Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Scientific-Atlanta, Inc.:
We have audited the accompanying consolidated statement of financial position
of Scientific-Atlanta, Inc. (a Georgia corporation) and subsidiaries as of July
1, 1994 and July 2, 1993 and the related consolidated statements of earnings
and cash flows for each of the three years in the period ended July 1, 1994
appearing on pages 13, 17 and 19, respectively. These financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scientific-Atlanta, Inc. and
subsidiaries as of July 1, 1994 and July 2, 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 1994 in conformity with generally accepted accounting principles.
As explained in Notes 9 and 10 to the financial statements, effective June 27,
1992, the Company changed its method of accounting for income taxes,
postretirement and postemployment benefits.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in
Item 14(a)(2) of this Form 10-K are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Atlanta, Georgia, ARTHUR ANDERSEN LLP
August 4, 1994
REPORT OF MANAGEMENT
The management of Scientific-Atlanta, Inc. (the Company) has the responsibility
for preparing the accompanying financial statements and for their integrity and
objectivity. The statements, which include amounts that are based on
management's best estimates and judgments, have been prepared in conformity
with generally accepted accounting principles and are free of material
misstatement. Management also prepared the other information in the Form 10-K
and is responsible for its accuracy and consistency with the financial
statements.
The Company maintains a system of internal control over the preparation of its
published annual and interim financial statements. It should be recognized
that even an effective internal control system, no matter how well designed,
can provide only reasonable assurance with respect to the preparation of
reliable financial statements; further, because of changes in conditions,
internal control system effectiveness may vary over time.
Management assessed the Company's system of internal control in relation to
criteria for effective internal control over the preparation of its published
annual and interim financial statements. Based on its assessment, it is
management's opinion that its system of internal control as of July 1, 1994 is
effective in providing reasonable assurance that its published annual and
interim financial statements are free of material misstatement.
As part of their audit of our financial statements, Arthur Andersen LLP
considered certain elements of our system of internal controls in determining
their audit procedures for the purpose of expressing an opinion on the
financial statements.
The audit committee of the board of directors is composed solely of outside
directors and is responsible for recommending to the board the independent
public accountants to be retained for the year, subject to stockholder
approval. The audit committee meets three times each year to review with
management the Company's system of internal accounting controls, audit plans
and results, accounting principles and practices, and the annual financial
statements.
/s/ James F. McDonald /s/ Harvey A. Wagner
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James F. McDonald Harvey A. Wagner
President and Chief Executive Officer Senior Vice President and Chief
Financial Officer
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MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Scientific-Atlanta's financial position was strong at the end of 1994 with
stockholders' equity of $395.6 million and cash on hand of $123.4 million.
The current ratio of 2.5:1 at July 1, 1994 compared to 3.2:1 at
July 2, 1993. Cash generated from earnings and the sale of an investment in
International Cablecasting Technologies, Inc. (ICT) was used for capital
expenditures, investments in partnerships, the settlement of securities
class action litigation and to fund working capital requirements.
CASH AND CASH EQUIVALENTS at the end of 1994 were $123.4 million, up from
$103.5 million last year. This increase reflects cash generated from
operations, the sale of ICT and the issuance of stock pursuant to stock
option plans. Ending working capital, excluding cash, was $179.4 million, or
22.1 percent of sales, as compared to 24.2 percent in the prior year.
RECEIVABLES were $206.1 million at year-end, compared to $150.9 million at the
prior fiscal year-end. The increase reflects the sales growth in 1994.
Average days sales outstanding increased to 74 for 1994 from 70 for 1993.
INVENTORY TURNOVER was 4.4 times in 1994, compared to 4.6 in the prior year.
Inventories of $136.8 million at year-end were $9.4 million higher than at
the end of the prior year, reflecting the higher production and sales levels
in 1994. See Note I for details.
CURRENT DEFERRED INCOME TAXES increased $4.0 million due to increases in
nondeductible accrued liabilities.
OTHER CURRENT ASSETS, which include prepaid insurance, deposits, royalties,
license fees and other miscellaneous prepaid expenses, increased $5.8
million due to higher deposits, royalties and license fees.
NET PROPERTY, PLANT AND EQUIPMENT increased by $14.2 million in 1994 as capital
spending exceeded depreciation and disposals. Capital additions of $34.9
million included investments for increased capacity and productivity
improvements.
COST IN EXCESS OF NET ASSETS ACQUIRED decreased in 1994, reflecting
amortization of goodwill.
OTHER ASSETS, which include license fees, investments, noncurrent deferred tax
charges, intellectual property, various prepaid expenses and cash surrender
value of company-owned life insurance, increased $8.2 million in 1994 due
primarily to higher prepaid license fees. See Note 2.
TOTAL BORROWINGS at year-end amounted to $7.6 million, up $0.2 million from the
prior year. The borrowings include industrial development bonds and working
capital loans for foreign subsidiaries. Working capital borrowings increased
to support the operations of foreign subsidiaries. Details of borrowings
are shown in Note 6.
ACCOUNTS PAYABLE were $82.3 million at year-end, up from $47.2 million last
year. The increase reflects higher production and inventory levels and an
increase to 33 days in accounts payable from 28 in 1993.
ACCRUED LIABILITIES of $95.5 million include accruals for compensation,
warranty and service, customer downpayments and taxes, excluding income
taxes. Higher customer downpayments, accruals for compensation and
retirement benefits and other miscellaneous accruals were the principal
factors in the year-to-year increase. See Note 7 for details.
OTHER LIABILITIES of $41.2 million are comprised of deferred compensation,
postretirement benefit plans, postemployment benefits and other
miscellaneous accruals. See Note 8 for details.
STOCKHOLDERS' EQUITY was $395.6 million at the end of 1994, up $42.8 million
from the prior year. Net earnings of $35.0 million and the issuance of stock
grants and stock pursuant to stock option plans of $12.3 million were
partially offset by dividends of $4.5 million and a decrease in accumulated
translation adjustments. See Note 15 for details of changes in stockholders'
equity.
RETURN ON AVERAGE STOCKHOLDERS' EQUITY for 1994 was 9.5 percent, up from 6.1
percent the prior year, reflecting improved earnings performance.
-12-
<PAGE> 14
Scientific-Atlanta, Inc., and Subsidiaries
Consolidated Statement of Financial Position
<TABLE>
<CAPTION>
In Thousands
---------------------------------------
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 123,387 $ 103,536
Receivables, less allowance for doubtful accounts of
$3,839,000 in 1994 and $4,224,000 in 1993 206,145 150,851
Inventories 136,813 127,408
Deferred income taxes 27,918 23,919
Other current assets 10,774 4,938
-------- --------
TOTAL CURRENT ASSETS 505,037 410,652
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and improvements 3,823 3,658
Buildings and improvements 28,890 26,721
Machinery and equipment 108,585 92,066
-------- --------
141,298 122,445
Less -Accumulated depreciation and amortization 55,510 50,813
-------- --------
85,788 71,632
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 7,689 8,438
-------- --------
OTHER ASSETS 41,705 33,488
-------- --------
TOTAL ASSETS $ 640,219 $ 524,210
======== ========
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of long-term debt $ 6,487 $ 5,962
Accounts payable 82,285 47,224
Accrued liabilities 95,505 73,780
Income taxes currently payable 17,989 3,070
-------- --------
TOTAL CURRENT LIABILITIES 202,266 130,036
-------- --------
LONG-TERM DEBT, less current maturities 1,088 1,398
-------- --------
OTHER LIABILITIES 41,219 39,886
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS EQUITY
Preferred stock, authorized 50,000,000 shares; no shares issued
Common stock, $0.50 par value, authorized 350,000,000 shares,
issued 75,494,670 shares in 1994 and 37,196,194
shares in 1993 37,747 18,598
Additional paid-in capital 141,179 129,072
Retained earnings 215,926 204,274
Accumulated translation adjustments 794 946
-------- --------
395,646 352,890
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 640,219 $ 524,210
======= ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
-13-
<PAGE> 15
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF EARNINGS
The Consolidated Statement of Earnings summarizes
Scientific-Atlanta's operating performance over the
last three years, during which time the company has
accelerated development of new products and
expanded into international markets.
EARNINGS WERE UP $15.0 MILLION OVER 1993. Higher sales
and improved margins were the primary factors in
the increase.
Earnings in 1993 were up $3.7 million over 1992.
Higher sales and improved gross margins were the
principal factors in the increase.
SALES INCREASED 11 PERCENT OVER 1993. Continued strong
sales growth in cable television distribution
equipment and addressable home communications
terminals (converters) and significant improvement
in sales of network systems were offset partially
by reduced sales due to completion of the PrimeStar
television contract, lower digital audio sales and
sales of defense related products. International
sales increased to 33 percent of total sales in
1994, up from 26 percent in the prior year. Higher
sales of cable equipment and network systems
contributed to the growth in international sales.
Sales in 1993 increased 26 percent over 1992.
Strong growth in sales of transmission products,
international cable equipment and digital audio
products contributed to the improved sales growth.
COST OF SALES AS A PERCENT OF SALES DECREASED 2.2
PERCENTAGE POINTS. Mix changes, manufacturing
efficiencies, higher margins on addressable
converter products and improved program
management contributed to the improved margins.
Certain material purchases are denominated in yen
and accordingly, the purchase price in U.S.
dollars is subject to change based on exchange
rate changes. Recently the exchange rate for
Japanese yen has fallen to a post-war low. The
Company has forward exchange contracts to
purchase yen to hedge a portion of its purchase
commitments for a period of approximately three
months.
Cost of sales as a percent of sales increased 1.6
percentage points in 1993. Mix changes and costs
associated with the launch of new compression
products adversely affected margins.
SALES AND ADMINISTRATIVE EXPENSE INCREASED 3 PERCENT IN
1994. Increases in sales and marketing costs
associated with ongoing investments to support
expansion into international markets and the
introduction of new products were offset slightly
by lower administrative costs, primarily
professional fees. Sales and administrative
expenses as a percent of sales declined to 14.5
percent in 1994 from 15.6 percent in 1993.
Sales and administrative expense increased 12
percent in 1993. Increased expenses reflect
costs associated with higher sales volumes,
ongoing investments to support the introduction
of new products and expansion into international
markets and higher professional expenses.
RESEARCH AND DEVELOPMENT EXPENSES OF $60.4 MILLION
WERE UP SLIGHTLY OVER THE PRIOR YEAR.
Accelerated research and development activity,
particularly, development of digital products,
was offset by declines in defense related
products and the reallocation of engineering
resources from research and development efforts
to specific customer orders. The revenue from
these orders will be recognized in future periods
and, accordingly, the related costs have been
inventoried. Product development activity is
expected to continue near current levels.
Research and development was expanded in 1993 to
accelerate new product development, particularly
continued development of digital video
compression products.
INTEREST EXPENSE WAS $1.1 MILLION IN 1994 AND $0.9
MILLION IN 1993. Reductions in interest expense
from lower average borrowings and lower interest
rates on working capital borrowings by foreign
subsidiaries was offset by interest on other
obligations, including obligations related to the
acquisition of certain assets of Nexus
Engineering Corp.
INTEREST INCOME WAS $3.2 MILLION IN 1994 AND $2.9
MILLION IN 1993. The increase in interest income
reflects higher average cash balances.
OTHER EXPENSE WAS $17.4 MILLION IN 1994. Other
expense included a $17.5 million charge to settle
securities class action litigation, losses of
$1.0 million from partnership activities and net
gains from other miscellaneous items of
$1.1 million.
-14-
<PAGE> 16
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF EARNINGS
Other income of $0.7 million in 1993 included
royalty income, rental income, and other
miscellaneous items of $1.7 million and losses from
foreign currency transactions of $1.0 million.
THE PROVISION FOR INCOME TAXES WAS 32 PERCENT OF PRE-
TAX EARNINGS IN 1994, 7 PERCENTAGE POINTS HIGHER
THAN 1993 AND 1992. The lower provisions in 1993
and 1992 reflect interest income on tax-exempt
investments and benefits from international tax
planning. Details of the provision for income
taxes are discussed in Note 9.
ACCOUNTING CHANGES RESULTED IN A CHARGE OF $4.7 MILLION
TO EARNINGS IN 1993. Effective as of the first
quarter of fiscal 1993, the Company adopted the
provisions of SFAS No. 106 "Postretirement
Benefits", SFAS No. 112 "Postemployment Benefits"
and SFAS No. 109 "Accounting for Income Taxes".
Charges of $6.7 million and $1.9 million for SFAS
No. 106 and SFAS No. 112, respectively, were
partially offset by a credit of $3.9 million for
SFAS No. 109, reducing previously reported earnings
for the quarter ended September 25, 1992 by $0.06
per share. The adoption of these standards did not
have a significant impact on income from operations
and is not expected to significantly impact
earnings in subsequent years. See Notes 9 and 10.
EARNINGS PER SHARE OF $0.46 INCREASED $0.19 AFTER AN
INCREASE OF $0.04 IN 1993. Shares outstanding and
share equivalents increased 2 percent to 76.6
million in 1994 from 75.1 million in 1993.
-15-
<PAGE> 17
(This page intentionally left blank.)
-16-
<PAGE> 18
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $ 811,583 $ 730,632 $ 580,831
--------- --------- ---------
COST AND EXPENSES
Cost of sales 566,729 526,227 408,845
Sales and administrative 117,604 114,040 102,144
Research and development 60,417 60,161 52,267
Interest expense 1,066 933 568
Interest income (3,151) (2,933) (4,424)
Other (income) expense, net 17,416 (694) (271)
--------- --------- ----------
760,081 697,734 559,129
--------- --------- ----------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 51,502 32,898 21,702
PROVISION FOR INCOME TAXES 16,480 8,224 5,425
--------- --------- ----------
EARNINGS BEFORE ACCOUNTING CHANGES 35,022 24,674 16,277
Cumulative effect of changes in accounting
for postretirement benefits, postemployment
benefits and income taxes -- (4,700) --
--------- --------- ----------
NET EARNINGS $ 35,022 $ 19,974 $ 16,277
========= ========= =========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE
Primary
Before accounting changes $ 0.46 $ 0.33 $ 0.23
Accounting changes -- (0.06) --
--------- --------- ----------
Net earnings $ 0.46 $ 0.27 $ 0.23
========= ========= =========
Fully diluted $ 0.46 $ 0.27 $ 0.23
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON EQUIVALENT SHARES OUTSTANDING
Primary 76,638 75,082 70,226
========= ========= =========
Fully diluted 77,105 75,257 71,678
========= ========= =========
</TABLE>
See accompanying notes.
-17-
<PAGE> 19
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows summarizes the main sources of Scientific-Atlanta's
cash and its uses. These flows of cash provided or used are summarized by
the Company's operating activities, investing activities and financing
activities.
Cash on hand at the end of 1994 was $123.4 million. Cash generated from
earnings and the sale of ICT was used for capital expenditures, investments
in partnerships, the settlement of securities class action litigation and
to fund working capital requirements.
CASH PROVIDED BY OPERATING ACTIVITIES was $48.5 million for 1994, compared to
$19.3 million for 1993. In 1994 and 1993 cash provided by improved
earnings and increases in payables was partially offset by increases in
accounts receivable and inventories. See Management's Discussion of the
Statement of Financial Position for details of this performance.
CASH USED BY INVESTING ACTIVITIES of $29.4 million during 1994 included $34.9
million for purchases of plant and equipment and $5.2 million for
investments in partnerships. Expenditures focused on increased capacity
and productivity improvements. Cash provided by investing activities
included $11.2 million from the sale of ICT. In 1993 cash used by
investing activities included $24.0 million for purchases of plant and
equipment and $6.3 million for the purchase of certain net assets of Nexus
Engineering Corp. See Note 2 for details.
CASH PROVIDED BY FINANCING ACTIVITIES WAS $0.8 MILLION IN 1994. The issuance
of stock pursuant to stock option and employee benefit plans and increases
in short-term borrowings generated $5.0 million and $0.5 million,
respectively, of cash during the year.
Cash provided by financing activities was $21.7 million in 1993. The
issuance of stock pursuant to stock option and employee benefit plans and
increases in short-term borrowings generated $24.4 million and $1.9
million, respectively, of cash during the year.
-18-
<PAGE> 20
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(In Thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings $ 35,022 $ 19,974 $ 16,277
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 20,938 19,068 16,082
Cumulative effect of accounting changes -- 4,700 --
Compensation related to stock benefit plans 4,787 2,056 1,803
Provision for losses on accounts receivable 73 145 1,036
Loss on sale of property, plant and equipment 824 517 232
Start-up costs and losses of partnerships 475 -- 2,500
Changes in operating assets and liabilities:
Receivables (55,367) (23,212) (36,318)
Inventories (12,063) (21,998) (17,229)
Deferred income taxes (2,582) 7,416 (520)
Accounts payable and accrued liabilities 57,736 15,062 21,127
Other assets (22,881) (5,939) (2,376)
Other liabilities 21,735 1,903 4,756
Net effect of exchange rate fluctuations (163) (374) 38
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,534 19,318 7,408
--------- -------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (34,904) (23,998) (18,491)
Payment for businesses purchased (1,060) (6,314) --
Proceeds from the sale of property, plant
and equipment 596 2,292 109
Investment in ICT -- (387) (11,334)
Proceeds from the sale of investment in ICT 11,174 -- --
Investment in and advances to partnerships (5,240) -- (2,500)
--------- -------- ---------
NET CASH USED BY INVESTING ACTIVITIES (29,434) (28,407) (32,216)
--------- -------- ---------
FINANCING ACTIVITIES:
Net short-term borrowings 520 1,875 3,470
Principal payments on long-term debt (305) (300) (297)
Dividends paid (4,497) (4,248) (3,657)
Issuance of stock 5,033 24,410 3,782
--------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 751 21,737 3,298
--------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,851 12,648 (21,510)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 103,536 90,888 112,398
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 123,387 $103,536 $ 90,888
========= ======== =========
</TABLE>
See accompanying notes.
-19-
<PAGE> 21
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Data) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ 811,583 $ 730,632 $ 580,831 $ 493,653 $ 614,319
- ------------------------------------------------------------------------------------------------------------------------
Cost of Sales 566,729 526,227 408,845 353,190 405,637
Sales and Administrative Expense 117,604 114,040 102,144 97,050 102,582
Research and Development Expense 60,417 60,161 52,267 49,175 39,719
Interest Expense 1,066 933 568 1,106 1,489
Interest Income (3,151) (2,933) (4,424) (6,221) (5,276)
Other (Income) Expense, Net 17,416 (694) (271) (2,179) 5,967
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 51,502 32,898 21,702 1,532 64,201
- ------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 16,480 8,224 5,425 475 19,902
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE ACCOUNTING CHANGES 35,022 24,674 16,277 1,057 44,299
- ------------------------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- (4,700) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 35,022 $ 19,974 $ 16,277 $ 1,057 $ 44,299
- ------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE $ 0.46 $ 0.27 $ 0.23 $ 0.02 $ 0.63
- ------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PAID PER SHARE $ 0.06 $0.05 5/6 $0.05 1/3 $0.05 1/3 $0.05 1/3
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
WORKING CAPITAL, NET $ 302,771 $ 280,616 $ 233,691 $ 226,190 $ 225,232
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 640,219 $ 524,210 $ 440,913 $ 394,211 $ 388,873
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Debt and Current Maturities $ 6,487 $ 5,962 $ 4,081 $ 608 $ 4,747
Long-Term Debt 1,088 1,398 1,704 2,004 2,301
Stockholders' Equity 395,646 352,890 299,725 281,636 279,469
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL INVESTED $ 403,221 $ 360,250 $ 305,510 $ 284,248 $ 286,517
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SALES PER EMPLOYEE $ 220 $ 213 $ 190 $ 165 $ 173
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN % TO SALES 30.2% 28.0% 29.6% 28.5% 34.0%
- ------------------------------------------------------------------------------------------------------------------------
NET RETURN ON SALES 4.3% 2.7% 2.8% 0.2% 7.2%
- ------------------------------------------------------------------------------------------------------------------------
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 9.5% 6.1% 5.7% 0.4% 16.9%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The Company's year ends on the Friday closest to June 30 of each year. Fiscal
year ends are as follows:
1994: July 1, 1994
1993: July 2, 1993
1992: June 26, 1992
Fiscal 1993 includes fifty-three weeks.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries after elimination of all material intercompany
accounts and transactions.
FOREIGN CURRENCY TRANSLATION
The financial statements of certain foreign operations are translated into U.S.
dollars at current exchange rates. Resulting translation adjustments are
accumulated as a component of stockholders' equity and excluded from net
earnings. Foreign currency transaction gains and losses are included in cost
of sales and other income. Such gains and losses were not material during the
periods being reported.
METHOD OF RECORDING CONTRACT PROFITS
Revenues from progress-billed contracts are primarily recorded using the
percentage-of-completion method based on contract costs incurred to date.
Losses, if any, are recorded when determinable. Costs incurred and accrued
profits not billed on these contracts are included in receivables. These
receivables from commercial customers and government agencies were $17,628 at
July 1, 1994, and $28,524 at July 2, 1993. It is anticipated that substantially
all such amounts will be collected within one year.
DEPRECIATION, MAINTENANCE AND REPAIRS
For financial reporting purposes, depreciation is provided using principally
the straight-line method over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments are capitalized. The cost and accumulated depreciation of property
retired or otherwise disposed of are removed from the respective accounts, and
the gains or losses thereon are included in the consolidated statement of
earnings.
WARRANTY COSTS
The Company accrues warranty costs at the time of sale. Expenses related to
unusual product warranty problems and product defects are recorded in the
period the problem is identified.
EARNINGS PER SHARE
Earnings per share were computed based on the weighted average number of shares
of common stock outstanding and equivalent shares derived from dilutive stock
options.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost includes materials, direct labor, and manufacturing overhead. Market is
defined principally as net realizable value. Inventories include purchased and
manufactured components in various stages of assembly as presented in the
following table:
1994 1993
---- ----
Raw Materials and
Work-In-Process $ 94,890 $ 71,780
Finished Goods 41,923 55,628
-------- ---------
Total Inventory $136,813 $ 127,408
======== =========
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets of businesses acquired is amortized on a
straight-line basis over seventeen years.
FINANCIAL PRESENTATION
Certain prior year amounts have been reclassified to conform with current year
presentation. All per share amounts have been restated to reflect the 2-for-1
stock split effected as a dividend declared in August 1994 and the 3-for-2
stock split effected as a dividend issued in December 1992.
2. INVESTMENTS AND ACQUISITION
During 1994 the Company entered into partnership agreements in connection with
the formation of Comunicaciones Broadband and Scientific-Atlanta of Shanghai,
Ltd. and invested $5,240 in the partnerships. The Company's equity in the
losses of these partnerships was $345 in 1994.
-21-
<PAGE> 23
In February 1993 the Company acquired certain net assets of Nexus Engineering
Corp. for $6,314 cash and obligations of $4,398 in a purchase transaction. The
pro forma effect on operations for prior periods and the effect on 1993 were
immaterial.
The Company acquired 11 percent of the outstanding common stock of
International Cablecasting Technologies, Inc., for a cash investment of $11,334
in August 1991 and acquired additional common stock in 1993 for $387. During
1994, the Company disposed of its investment in ICT for a loss of $549 which
was included in other (income) expense.
In December 1991 the Company entered into a partnership agreement with a 44
percent partnership interest to form Checkout Channel, L.P. The Company's
equity in the losses of Checkout Channel, L.P. was $500 in 1992. The agreement
was terminated in July 1992.
3. SALES AND BUSINESS SEGMENT INFORMATION
Sales to the United States government were 11 percent and 12 percent of total
sales in 1993 and 1992, respectively. Sales were not material to any one
customer in 1994. Export sales accounted for 33 percent, 26 percent, and 27
percent of total sales in 1994, 1993 and 1992, respectively. Foreign subsidiary
sales were not material for any of the three fiscal years presented, nor were
they material to any one geographic location.
The Company identified Communications and Instrumentation as its major business
segments in prior years and provided business segment information related to
sales, operating profit, assets, capital expenditures, depreciation and
amortization and backlog. The customer base, marketing strategies, technology
to support new product development and manufacturing processes for utility load
management products and measurement and control systems have recently become
more closely aligned with those of the Communications segment and, accordingly,
management and operations which support these products and services were moved
into the Communications segment from the Instrumentation segment.
In addition, sales of electronic equipment such as sonar and microwave energy
products, particularly sales of government and defense related products,
supplied by the Instrumentation segment have recently declined. As a result,
the Company now operates primarily in one business segment, Communications,
providing satellite and terrestial based networks to a range of customers and
applications and network management and systems integration to add value to
those networks. This segment represents approximately 90 percent of
consolidated sales, operating profit and identifiable assets.
4. OTHER (INCOME) EXPENSE
Other expense of $17,416 in 1994 included a $17,500 charge to settle securities
class action litigation, losses of $992 from partnership activities and net
gains from other miscellaneous items of $1,076.
Other income of $694 in 1993 included royalty income, rental income and other
miscellaneous items of $1,656 and losses from foreign currency transactions of
$962.
Other income of $271 in 1992 included $2,500 of start-up costs and losses of a
terminated partnership offset by gains from foreign currency transactions, the
settlement of an insurance claim and other miscellaneous items.
5. QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL QUARTERS
-------------------------------------
First Second Third Fourth
----- ------ ----- ------
1994
- -------------
Sales $170,292 $178,033 $204,047 $259,211
Gross margin 49,592 53,238 63,387 78,637
Gross margin % 29.1% 29.9% 31.1% 30.3%
Net earnings
(loss) 7,150 (4,581)(1) 11,907 20,546
Earnings (loss)
per share 0.09 (0.06) (1) 0.16 0.27
Stock prices:
High 18.81 19.06 18.25 18.94
Low 14.50 14.94 12.94 12.88
Dividends paid
per share 0.01 1/2 0.01 1/2 0.01 1/2 0.01 1/2
(1)Includes charge of $11,900 ($0.15 per share) to settle securities class
action litigation.
-22-
<PAGE> 24
FISCAL QUARTERS
-------------------------------------
First Second Third Fourth
----- ------ ----- ------
1993
- ------------
Sales $171,200 $186,647 $184,138 $188,647
Gross margin 48,011 44,077 52,938 59,379
Gross margin % 28.0% 23.6% 28.7% 31.5%
Net earnings 2,090(1) 1,425 6,922 9,537
Earnings
per share 0.03(1) 0.02 0.09 0.13
Stock prices:
High 9.71 13.50 15.00 17.50
Low 7.58 9.08 9.19 11.32
Dividends paid
per share 0.01 1/3 0.01 1/2 0.01 1/2 0.01 1/2
(1) Includes one-time, after-tax charges of $4,700 ($0.06 per share) from the
adoption of Financial Accounting Standards Board Statement (SFAS) No. 106
"Postretirement Benefits", No. 112 "Postemployment Benefits" and No. 109
"Accounting for Income Taxes" effective June 27, 1992.
6. INDEBTEDNESS
Long-term debt consisted of:
1994 1993
-------- -------
6 1/4%-10% capitalized leases,
payable in varying installments
ranging from $200 to $250
through 1999 $ 1,150 $ 1,400
8 1/4% mortgage 248 303
-------- -------
1,398 1,703
Less-Current maturities 310 305
-------- -------
$ 1,088 $ 1,398
======== =======
Long-term debt at July 1, 1994 had scheduled maturities as follows: 1995--$310;
1996--$315; 1997--$321; 1998--$252; 1999--$200.
At July 1, 1994, property, plant and equipment costing approximately $5,925
were pledged as collateral on long-term debt.
Foreign short-term debt was $6,177 and $5,657 at the end of 1994 and 1993,
respectively.
The average interest rates for foreign short-term debt at year-end 1994 and
1993 were 8.3 percent and 10.8 percent, respectively.
Total interest paid was $1,071, $831 and $586, in 1994, 1993 and 1992,
respectively.
7. ACCRUED LIABILITIES
Accrued liabilities consisted of:
1994 1993
--------- --------
Compensation $ 26,939 $ 19,641
Customer down payments 17,506 7,406
Warranty and service 11,597 15,718
Taxes 5,941 3,952
Other 33,522 27,063
--------- --------
$ 95,505 $ 73,780
========= ========
8. OTHER LIABILITIES
Other liabilities consisted of:
1994 1993
--------- --------
Retirement $ 28,595 $ 28,597
Compensation 5,177 2,397
Other 7,447 8,892
--------- --------
$ 41,219 $ 39,886
========= ========
9. INCOME TAXES
The Company adopted the provisions of SFAS No. 109, "Accounting for Income
Taxes", effective the first quarter of fiscal 1993. The statement requires
that deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts. The cumulative effect of this change increased net income
by $3,856. Prior to 1993, provisions were made for deferred income taxes where
differences existed between the time that transactions affected taxable income
and the time that these transactions entered into the determination of income
for financial statement purposes.
-23-
<PAGE> 25
The tax provision differs from the amount resulting from multiplying earnings
before income taxes by the statutory federal income tax rate as follows:
1994 1993 1992
---- ---- ----
Statutory federal
tax rate 35.0% 34.0% 34.0%
State income taxes, net
of federal tax benefit 4.6 5.6 3.1
Tax reserves 0.5 (8.1) 16.1
Export incentives (2.1) (4.7) (6.1)
Exempt interest income (1.9) (3.1) (7.3)
Foreign tax adjustment (0.3) (1.1) (11.7)
Research and develop-
ment tax credit (3.4) -- (5.4)
Other, net (0.4) 2.4 2.3
---- ---- ----
32.0% 25.0% 25.0%
==== ==== ====
Income tax provision (benefit) includes the following:
1994 1993 1992
--------- -------- --------
Current tax provision
Federal $ 14,602 $ 8,131 $ 4,431
State 3,879 3,456 1,093
Foreign 581 467 391
--------- -------- --------
19,062 12,054 5,915
--------- -------- --------
Deferred tax benefit
Federal (1,911) (1,938) (162)
State (263) (684) (65)
Foreign (408) (1,208) (263)
--------- -------- --------
(2,582) (3,830) (490)
--------- -------- --------
Total provision
for income taxes $ 16,480 $ 8,224 $ 5,425
========= ======== ========
Total income taxes paid include settlement payments for federal and state audit
adjustments. The total income taxes paid were $1,551, $3,464 and $4,072 in
1994, 1993 and 1992, respectively.
The components of the net deferred tax benefit were:
1994 1993 1992
---- ---- ----
Liabilities not
currently deductible $(2,857) $ 921 $ 1,132
Income deferred under
completed contract
method 96 (436) (1,260)
Postretirement benefits (599) (786) (722)
Tax credit/loss
carryforwards (644) (847) (267)
Warranty reserves 1,542 (1,084) (763)
Inventory valuation (658) (1,914) 1,360
Other 538 316 30
------- ------- -------
Total deferred tax
benefit, net $(2,582) $(3,830) $ (490)
======= ======= =======
The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:
Current deferred tax assets 1994 1993
---- ----
Liabilities not currently
deductible $15,809 $10,974
Inventory valuation 7,993 7,335
Warranty reserves 2,158 3,668
Bad debt reserves 1,635 1,532
Other 323 410
------- -------
27,918 23,919
Valuation allowance -- --
------- -------
Net current deferred tax asset $27,918 $23,919
======= =======
Noncurrent deferred tax assets
Postretirement and
postemployment benefits $12,482 $11,891
Tax credit/loss carryforwards 3,297 2,653
Liabilities not currently
deductible 155 2,166
------- -------
15,934 16,710
Valuation allowance -- --
------- -------
Net noncurrent deferred tax
asset 15,934 16,710
------- -------
Noncurrent deferred tax
liabilities
Depreciation (6,499) (5,827)
Other (48) (79)
------- -------
Net noncurrent deferred tax
liability (6,547) (5,906)
------- -------
Net noncurrent deferred tax
asset $ 9,387 $10,804
======= =======
The net noncurrent deferred tax asset is included in Other Assets at July 1,
1994 and July 2, 1993.
In 1994, 1993 and 1992 earnings before income taxes included $2,641, $83 and
$402, respectively, of earnings generated by the Company's foreign operations.
-24-
<PAGE> 26
10. RETIREMENT AND BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of
its domestic employees. The benefits are based upon the employees' years of
service and compensation.
The Company's funding policy is to contribute annually the amount expensed each
year consistent with the requirements of federal law to the extent that such
costs are currently deductible.
The following table sets forth the plan's funded status, amounts recognized in
the Company's Consolidated Statement of Financial Position at year-end, using
March 31 as a measurement date for all actuarial calculations of asset and
liability values and significant actuarial assumptions:
1994 1993
------- --------
Accumulated benefit obligation
Vested portion $ 51,699 $ 46,955
Nonvested portion 1,577 2,678
-------- --------
53,276 49,633
Effect of projected future
compensation levels 10,070 7,172
-------- --------
Projected benefit obligation 63,346 56,805
Plan assets at fair value (56,755) (56,930)
-------- --------
Projected benefit obligation in
excess of (less than) plan
assets 6,591 (125)
Unrecognized prior service costs 419 534
Unrecognized net gain (loss) (1,035) 2,201
Unrecognized net asset from
initial application of SFAS 87 8,336 8,992
Fourth quarter contribution (608) --
-------- -------
Accrued pension cost $ 13,703 $11,602
======== =======
Discount rate 8.0% 8.0%
Rate of increase in future
compensation 4.5% 5.5%
Expected long-term rate of
return on assets 10.0% 8.0%
Plan assets are invested in listed stocks, bonds and short-term monetary
investments.
The Company's net pension expense was $2,709 in 1994; $2,686 in 1993; and
$3,100 in 1992.
The components of pension expense are as follows:
1994 1993 1992
-------- ------- --------
Service cost of
benefits earned $ 4,522 $ 3,459 $ 3,744
Interest cost 4,295 3,895 3,783
Actual return on
plan assets (2,694) (6,479) (3,926)
Net amortization and
deferral (3,414) 1,811 (501)
------- ------- --------
Net periodic pension
cost $ 2,709 $ 2,686 $ 3,100
======= ======= ========
The Company has unfunded defined benefit retirement plans for certain key
officers and non-employee directors. Accrued pension cost for these plans was
$4,338 at July 1, 1994 and $3,447 at July 2, 1993. Retirement expense for
these plans was $906, $156 and $1,216, in 1994, 1993 and 1992, respectively.
In addition to providing pension benefits, the Company has contributory plans
that provide certain health care and life insurance benefits to eligible
retired employees.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," effective the first quarter of fiscal 1993.
This statement requires the accrual of the cost of providing postretirement
benefits, including medical and life insurance coverage, during the active
service period of the employee. The Company elected to immediately recognize
the accumulated liability, measured as of April 1, 1992. This resulted in a
one-time charge of $6,696, net of a deferred tax benefit of $4,104. Prior to
1993, the Company recognized expense in the year the benefits were provided.
Postretirement health care and life insurance costs charged to expense were
approximately $287 in 1992.
-25-
<PAGE> 27
The following table sets forth the plan's funded status and amounts recognized
in the Company's Consolidated Statement of Financial Position at year-end,
using March 31 as a measurement date for all actuarial calculations of
liability values:
1994 1993
---- ----
Accumulated postretirement
benefit obligation
Retirees $ 8,135 $ 6,745
Fully eligible active
participants 1,271 3,301
Other active participants 274 457
-------- ---------
9,680 10,503
Unrecognized net gain 1,060 --
Fourth quarter claims
payments (370) (129)
-------- ---------
Accrued postretirement
benefit cost $ 10,370 $ 10,374
======== =========
The components of postretirement benefit expense are as follows:
1994 1993
---- ----
Service cost of benefits earned $ 25 $ 23
Interest cost on accumulated
postretirement benefit
obligation 808 812
----- ----
Postretirement benefit expense $ 833 $835
===== ====
Significant actuarial assumptions are as follows:
1994 1993
---- ----
Annual rate of increase in per capita cost
Pre-Medicare 11.25% 15.00%
Annual decline 0.75% 1.00%
Final rate of interest 6.00% 7.00%
Post-Medicare 9.50% 12.00%
Annual decline 0.50% 0.75%
Final rate of increase 6.00% 6.00%
Impact of one percentage point
in health care cost trend rate
on
Accumulated post
retirement benefit
obligation 7.6% 8.9%
Interest cost component
of benefits 8.2% 9.3%
Discount rate used to measure
accumulated post-retirement
benefit obligation 8.0% 8.0%
The Company also adopted SFAS No. 112, "Employers Accounting for Postemployment
Benefits" effective the first quarter of 1993. This statement requires the
accrual method of accounting for benefits to former or inactive employees after
employment but before retirement. Postemployment benefits include disability
benefits, severence benefits, and continuation of health care benefits. A
one-time charge of $1,860, net of a deferred tax benefit of $1,140, related to
the adoption of SFAS No. 112 was recognized effective June 27, 1992. The
effect of this change on 1993 operating results, after recording the one time
charge, was not material. Postemployment costs charged to expense in 1992 were
not material.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of those instruments. The fair value of long-term
investments and foreign currency contracts are based on quoted market prices.
1994 1993
------------------ -----------------
CARRYING/ Carrying/
CONTRACT FAIR Contract Fair
AMOUNT VALUE Amount Value
-------- ----- -------- ------
Cash and cash
equivalents $123,387 $ 123,387 $103,536 $103,536
Long-term
investments $ -- $ -- $ 11,721 $ 18,881
Foreign
currency
contracts
Sell $ 5,132 $ 5,149 $ 289 $ 293
Buy $ 62,218 $ 66,695 $ 35,081 $ 38,185
12. RELATED PARTY TRANSACTIONS
During 1994 the Company had sales of $12,127 to Comunicaciones Broadband and
Scientific-Atlanta of Shanghai, Ltd. and had a net receivable of $4,774 from
these partnerships at July 1, 1994.
13. COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS
Rental expense under operating lease agreements for facilities and equipment
for 1994, 1993 and 1992 was approximately $9,303, $7,983 and $6,665,
respectively. The Company pays taxes, insurance, and maintenance costs with
respect to most leased items. Remaining operating lease terms range up to
twenty years. Future minimum payments at July 1, 1994, under operating leases
were $41,805. Payments under these leases for the next five years are as
follows: 1995-- $8,922; 1996-- $7,666; 1997-- $5,068; 1998-- $4,359; 1999--
$3,455. The Company has obligations under certain partnership agreements to
make cash contributions of $4,410 in 1995 and $3,250 in 1996.
-26-
<PAGE> 28
The Company has employment agreements with certain officers which include
certain benefits in the event of termination of the officers' employment as a
result of a change in control of the Company.
The Company is also committed under certain purchase agreements which are
intended to benefit future periods.
The Company had forward exchange contracts maturing at various dates to
purchase or sell the equivalent of $67,350 and $35,370 in various foreign
currencies at July 1, 1994 and July 2, 1993, respectively. The Company uses
these contracts to hedge certain firm commitments and assets denominated in
currencies other than the U.S. dollar, primarily Japanese yen. In management's
opinion, settlement of these contracts will not result in any material adverse
financial effect in the future.
The Company is a party to various legal proceedings arising in the ordinary
course of business. In management's opinion, the outcome of these proceedings
will not have a material adverse effect on the Company's financial position or
results of operations.
14. COMMON STOCK AND RELATED MATTERS
In August 1994, the Company declared a 2-for-1 stock split effected in the form
of a 100 percent stock dividend payable on or about October 6, 1994, to
shareholders of record on September 8, 1994. This stock split has been
accounted for as of July 1, 1994, by a transfer from retained earnings to
common stock in the amount of the par value of stock outstanding at July 1,
1994. In December 1992, the Company issued a 3-for-2 stock split effected in
the form of a 50 percent stock dividend. The stock split has been accounted
for by a transfer from retained earnings to common stock in the amount of the
par value of the additional stock issued. All per share amounts and options
have been restated to reflect the stock splits.
The following information pertains to options on the company's common stock for
the years ended July 1, 1994 and July 2, 1993:
Number of shares
---------------------
1994 1993
--------- ---------
Outstanding, beginning of year 4,171,528 7,702,482
Options granted 1,214,700 1,541,700
Options canceled (247,804) (367,598)
Options exercised (at option
prices ranging from $2.875
to $16.937 in 1994) (656,372) (4,705,056)
--------- ---------
Outstanding, end of year (at
option prices ranging from
$2.875 to $17.375 in 1994) 4,482,052 4,171,528
========= =========
Exercisable, end of year (at
option prices ranging from
$2.875 to $17.125 in 1994) 1,647,078 808,812
========= =========
At July 1, 1994, an additional 3,782,102 shares were reserved under employee
and director stock option plans.
The Company has an employee stock purchase plan whereby the Company contributes
to the purchase price of stock for participating employees. At July 1, 1994,
689,060 shares were reserved for issuance to employees under the plan.
The Company has a 401(k) plan whereby the Company matches eligible employee
contributions in Company stock. At July 1, 1994, 1,249,612 shares were reserved
for issuance to employees under the plan.
In April 1987 the Company adopted a Shareholder Rights Plan (which was amended
in August 1988 and May 1994) and pursuant thereto declared a dividend of one
Common Stock Purchase Right ("Right") for each outstanding share of common
stock. The Rights will become exercisable if a person or group (an "Acquiring
Shareholder") (i) holds 10 percent or more of the Company's common stock and is
determined by the Board of Directors to be an "adverse person" as defined by
the Plan, or (ii) acquires or makes a tender offer to acquire 15 percent of the
Company's common stock. Either such event is referred to as the "Distribution
Date". If a person acquires 15 percent of the Company's common stock or is
determined by the Board of Directors to be an "adverse person" or, after the
"Distribution Date" the Company is merged with any entity, each Right will
entitle the holder thereof, other than the Acquiring Shareholder, to purchase
$33 worth of the Company's or the surviving
-27-
<PAGE> 29
corporation's common stock, as the case may be, based on the Company's market
price at the time, for $17.
The Rights may be redeemed by the Company at a price of $.0167 per Right until
the expiration of the rights or 10 days after any party acquires 15 percent of
more of the Company's common stock. Rights are exercisable until the Company's
right of redemption discussed above has expired. The Rights have no voting
power and, until exercised, no dilutive effect on earnings per share. If not
previously redeemed, the Rights will expire on April 13, 1997. At July 1,
1994, 147,516,586 shares were reserved for Common Stock Purchase Rights.
At July 1, 1994, a total of 153,237,360 shares of authorized stock were
reserved for the above purposes.
-28-
<PAGE> 30
15. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
(In Thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
PREFERRED STOCK
Shares authorized 50,000 50,000 50,000
Shares issued -- -- --
COMMON STOCK ($0.50 PAR VALUE)
Shares authorized 350,000 350,000 350,000
-------- -------- --------
Shares issued at
beginning of year 37,196 24,086 24,086
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) 37,748 -- --
Issuance of a 3-for-2 stock
split effected in the form of
a stock dividend (See Note 14) 12,042 --
Issuance of shares under
employee benefit plans 481 1,068 --
Issuance of restricted shares 70 -- --
Shares in treasury -- -- (989)
-------- -------- --------
Shares outstanding 75,495 37,196 23,097
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $129,072 $115,022 $117,267
Issuance of shares under
employee benefit plans 10,910 14,050 (2,245)
Restricted shares issued to
employees, net of unearned
compensation 1,197 -- --
-------- -------- --------
Balance at end of year $141,179 $129,072 $115,022
======== ======== ========
RETAINED EARNINGS
Balance at beginning of year $204,274 $194,569 $181,949
Net earnings 35,022 19,974 16,277
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) (18,873) -- --
Issuance of a 3-for-2 stock
split effected in the form of
a stock dividend (See Note 14) -- (6,021) --
Cash dividends(1) (4,497) (4,248) (3,657)
-------- -------- --------
Balance at end of year $215,926 $204,274 $194,569
======== ======== ========
(1) $0.06 per share, $0.05 5/6 per
share, and $0.05 1/3 per share
in 1994, 1993 and 1992,
respectively
ACCUMULATED TRANSLATION ADJUSTMENTS
Balance at beginning of year $ 946 $ 1,351 $ 1,635
Foreign currency translation
adjustments (152) (405) (284)
-------- -------- --------
Balance at end of year $ 794 $ 946 $ 1,351
======== ======== ========
TREASURY STOCK
Balance at beginning of year $ -- $(23,260) $(31,258)
Issuance of shares under
employee benefit plans -- 23,260 7,998
-------- -------- --------
Balance at end of year $ -- $ -- $(23,260)
======== ======== ========
</TABLE>
-29-
<PAGE> 31
SCHEDULE VIII
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at ------------------------------------ Balance at
beginning Charged to Charged to end of
Description of period costs and expenses other accounts (1) Deductions(2) period
----------- ----------- ------------------ ------------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Deducted on the balance sheet
from asset to which it applies:
July 1, 1994 --
Allowance for doubtful accounts $ 4,224 $ 73 $ 115 $ (573) $ 3,839
======== ======== ======== ========= =========
July 2, 1993 --
Allowance for doubtful accounts $ 4,160 $ 145 $ 420 $ (501) $ 4,224
======== ======== ======== ========= =========
June 26, 1992 --
Allowance for doubtful accounts $ 3,885 $ 1,036 $ 320 $ (1,081) $ 4,160
======== ======== ======== ======== =========
</TABLE>
Notes:
(1) Represents recoveries on accounts previously written off, and in fiscal
1993, the $167 acquired with the purchase of Nexus Engineering Corp.
(2) Amounts represent uncollectible accounts written off.
-30-
<PAGE> 32
SCHEDULE IX
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Weighted Maximum Average Weighted
average amount amount average
Category of aggregate Balance at interest rate at outstanding outstanding interest rate
short-term borrowings end of period end of period(4) during the period during the period(2) during the period(3),(4)
- --------------------- ------------- ------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Year ended July 1, 1994:
Notes payable (1) $ 6,177 8.3% $ 6,474 $ 5,493 10.0%
======== ======= ======== ======== ======
Year ended July 2, 1993:
Notes payable (1) $ 5,656 10.8% $ 6,214 $ 6,028 10.7%
======== ======= ======== ======== ======
Year ended June 26, 1992:
Notes payable (1) $ 3,781 10.3% $ 3,781 $ 3,207 10.0%
======== ======= ======== ======== ======
</TABLE>
Notes:
(1) Notes payable represent borrowings under credit arrangements which
have no termination date but are reviewed annually for renewal.
(2) The average amount outstanding during the period was computed by
dividing the total of month-end outstanding principal balances by 12.
(3) The weighted average interest rate during the period was computed by
dividing the actual interest expense related to short-term borrowings
by average short-term debt outstanding.
(4) Represents interest on funds borrowed in foreign currencies.
-31-
<PAGE> 33
SCHEDULE X
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
Col. A Col. B
Charged to costs
Item and expenses
---- ----------------
Year ended July 1, 1994:
Advertising costs $ 6,689
========
Year ended July 2, 1993:
Advertising costs $ 6,194
========
Year ended June 26, 1992:
Advertising costs $ 5,854
========
-32-
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Scientific-Atlanta, Inc.
(Registrant)
<TABLE>
<S> <C>
/s/ James F. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
James F. McDonald Date
President and Chief Executive Officer
and Director
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ James F. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
James F. McDonald Date
President and Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Harvey A. Wagner September 23, 1994
- ----------------------------------------------- -------------------------------------------
Harvey A. Wagner Date
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
/s/ Julian W. Eidson September 23, 1994
- ----------------------------------------------- -------------------------------------------
Julian W. Eidson Date
Vice President and Controller
(Principal Accounting Officer)
</TABLE>
-33-
<PAGE> 35
<TABLE>
<S> <C>
/s/ Marion H. Antonini September 23, 1994
- ----------------------------------------------- -------------------------------------------
Marion H. Antonini, Director Date
/s/ William E. Kassling September 23, 1994
- ----------------------------------------------- -------------------------------------------
William E. Kassling, Director Date
/s/ Wilbur Branch King September 23, 1994
- ----------------------------------------------- -------------------------------------------
Wilbur Branch King, Director Date
/s/ Mylle Bell Mangum September 23, 1994
- ----------------------------------------------- -------------------------------------------
Mylle Bell Mangum, Director Date
/s/ Alonzo L. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
Alonzo L. McDonald, Director Date
/s/ David J. McLaughlin September 23, 1994
- ----------------------------------------------- -------------------------------------------
David J. McLaughlin, Director Date
/s/ James V. Napier September 23, 1994
- ----------------------------------------------- -------------------------------------------
James V. Napier, Director Date
/s/ Sidney Topol September 23, 1994
- ----------------------------------------------- -------------------------------------------
Sidney Topol, Director Date
</TABLE>
-34-
<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
OF
SCIENTIFIC-ATLANTA, INC.
(AS AMENDED AUGUST 25, 1994)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the
State of Georgia, County of Gwinnett.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the state of Georgia as the board of
directors may from time to time determine and the business of the corporation
may require or make desirable.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meetings. The annual meeting of the shareholders of
the corporation shall be held at such place and time in the United States as
may be determined by the board of directors, for the purpose of electing
directors and transacting such other business as may properly be brought before
the meeting. To be properly brought before the meeting, business must be
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, (b) otherwise properly
brought before the meeting by or at the direction of the board of directors, or
(c) otherwise properly brought before the meeting by a shareholder. In addition
to any other applicable requirements, for business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation, no earlier than 90 days and
no later than 60 days prior to the date of such meeting, regardless of any
postponements, deferrals or adjournments of such meeting to a later date;
provided, however, that if less than 60 days' notice or prior public disclosure
of the date of the meeting is given or made, notice by a holder of record must,
to be timely, be so delivered or received not later than the close of business
on the tenth day following the day on
1
<PAGE> 2
which such notice of the date of the meeting is mailed or the day on which such
public disclosure was made. A shareholder's notice to the Secretary shall set
forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the shareholder proposing such
business, (iii) the class and number of securities of the corporation which are
beneficially owned by the shareholder, and (iv) any material interest of the
shareholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 1, provided, however, that nothing in this
Section 1 shall be deemed to preclude discussion by any shareholder of any
business properly brought before the annual meeting.
The presiding officer at an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 1,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2. Special Meetings. (a) Special meetings of the shareholders
shall be held at the principal office of the corporation or at such other place
in the United States as may be designated in the notice of such meetings, and
shall be called by the chief executive officer or the secretary only when so
directed by the board of directors or when so requested in writing by the
holders of at least 75 percent of the issued and outstanding capital stock of
the corporation entitled to vote in an election of directors.
(b) Anything in these by-laws to the contrary notwithstanding, the
following procedures shall apply to the call of any special meeting of
shareholders, or a special meeting in lieu of the annual meeting of
shareholders, at the request of holders of the outstanding capital stock of the
corporation:
(i) Every written request for the call of a special meeting
shall bear the signature and date of signature of each
shareholder who signs the request and shall state the purpose
or purposes for which the meeting is to be called.
2
<PAGE> 3
(ii) The record date for the determination of shareholders
entitled to request the corporation to call a special meeting
shall be the date which is 45 calendar days prior to the date
(the "Filing Date") that written requests complying with the
requirements of law and these by-laws signed by a sufficient
number of record holders to request a special meeting in
accordance with this Section 2 have been received by the
corporation (the "Minimum Request Condition").
(iii) Promptly after receipt of a written request or requests
for the call of a special meeting, the corporation shall
engage nationally recognized independent inspectors of
election for the purpose of determining the validity of the
request or requests and any revocations thereof. Within 15
calendar days of the Filing Date, such independent inspectors
shall deliver to the corporation a written report stating
whether the Minimum Request Condition has been satisfied. If
such written report states that the Minimum Request Condition
has been satisfied, or if no report is delivered by
independent inspectors within 15 calendar days of the Filing
Date, the chief executive officer or the secretary of the
corporation shall call the special meeting by mailing notice
thereof not later than 45 calendar days after the Filing Date.
(iv) The date, time and place of the special meeting shall be
determined by the board of directors and shall be set forth in
the notice of meeting, which notice shall comply with the
provisions of Section 3 of this Article II.
(v) The record date for the determination of shareholders
entitled to notice of and to vote at the special meeting shall
be set by the board of directors in accordance with the
provisions of Section 4 of Article V of these by-laws.
Section 3. Notice of Meetings. Written notice of every meeting of
shareholders, stating the place, date and hour of the meeting, shall be given
personally or by mail to each shareholder of record entitled to vote at such
meeting not less than 10 nor more than 60 days before the date of the meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage thereon prepaid (except as
hereinafter provided) addressed to the shareholder at his address as it appears
on the corporation's record of stockholders. The corporation may utilize a
class of mail other than first class if the notice of the meeting is mailed,
with adequate postage prepaid, not less than 30 days before the date of the
meeting. Attendance of a shareholder at a meeting of
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shareholders (1) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting, and (2) waives
objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented. Notice need
not be given to any shareholder who signs a waiver of notice either before or
after the meeting.
Section 4. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at all
meetings of the shareholders except as otherwise provided by statute, by the
articles of incorporation, or by these by-laws. If a quorum is not present or
represented at any meeting of the shareholders, the holders of a majority of
the voting shares, present in person or represented by proxy, may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 120 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
Section 5. Voting. When a quorum is present at any meeting, action on
a matter (other than the election of directors) is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
question is one upon which by express provision of law, of the articles of
incorporation or of these by-laws, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
Each shareholder shall at every meeting of the shareholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power registered in his name on the books of the corporation, but no proxy
shall be voted or acted upon after eleven months from its date, unless
otherwise provided in the proxy.
Section 6. Consent of Shareholders. Any action required or permitted to
be taken at any meeting of the shareholders may be taken without a meeting if
all of the shareholders consent thereto in writing, setting forth the action so
taken, and such writing is delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Such consent shall have the same
force and effect as a unanimous vote of shareholders.
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Section 7. List of Shareholders. The corporation shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving their names
and addresses and the number, class and series, if any, of the shares held by
each. The officer who has charge of the stock transfer books of the corporation
shall prepare and make, before every meeting of shareholders or any adjournment
thereof, a complete list of the shareholders entitled to vote at the meeting or
any adjournment thereof, arranged in alphabetical order, with the address of
and the number and class and series, if any, of shares held by each. The list
shall be produced and kept open at the time and place of the meeting and shall
be subject to inspection by any shareholder during the whole time of the
meeting for the purposes thereof. The said list may be the corporation's
regular record of shareholders if it is arranged in alphabetical order or
contains an alphabetical index.
ARTICLE III
DIRECTORS
Section 1. Powers. Except as otherwise provided by any legal agreement
among shareholders, the property, affairs and business of the corporation shall
be managed and directed by its board of directors, which may exercise all
powers of the corporation and do all lawful acts and things which are not by
law, by any legal agreement among shareholders, by the articles of
incorporation, or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 2. Meetings and Notice. The board of directors of the
corporation may hold meetings, both regular and special, either within or
without the state of Georgia. Regular meetings of the board of directors may be
held without notice at such time and place as shall from time to time be
determined by resolution of the board. Special meetings of the board may be
called by the chairman of the board or the chief executive officer or by any
three directors on one day's oral, telegraphic or written notice duly given or
served on each director personally, or three days' notice deposited, first
class postage prepaid, in the United States mail. Such notice shall state a
reasonable time, date and place of meeting, but the purpose need not be stated
therein. Notice need not be given to any director who signs a waiver of notice
either before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of all objections to
the place and time of the meeting, or the manner in which it has been called or
convened, except when the director states, at the beginning of the meeting, any
such objection or objections to the transaction of business.
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Section 3. Quorum. At all meetings of the board a majority of directors
shall constitute a quorum for the transaction of business, and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board, except as may be otherwise specifically provided
by law, by the articles of incorporation, or by these by-laws. If a quorum
shall not be present at any meeting of the board, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4. Consent of Directors. Unless otherwise restricted by the
articles of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as
the case may be, consent thereto in writing, setting forth the action so taken,
and the writing or writings are delivered to the corporation for inclusion in
the minutes of the proceedings of the board or committee or filing with the
corporate records. Such consent shall have the same force and effect as a
unanimous vote of the board.
Section 5. Committees. The board of directors may by resolution
designate from among its members one or more committees, each committee to
consist of one or more directors. The board may designate one or more directors
as alternate members of any committee, who may replace any absent member at any
meeting of such committee. Any such committee, to the extent provided in the
resolution, shall have and may exercise all of the authority of the board of
directors in the management of the business and affairs of the corporation,
except that it shall have no authority to (1) approve or propose to
shareholders action which the Georgia Business Corporation Code requires to be
approved by shareholders; (2) fill vacancies on the board of directors or any
of its committees; (3) amend the articles of incorporation; (4) adopt, amend or
repeal by-laws; or (5) approve a plan of merger not requiring shareholder
approval. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
The provisions of Sections 2 and 3 of this Article III shall apply to
committees and their members as well as to the board of directors. Each
committee shall keep regular minutes of its meetings and report the same to the
board of directors when required.
Section 6. Compensation of Directors. Directors shall be entitled to
such reasonable compensation for their services as directors or members of any
committee of the board as shall be fixed from time to time by resolution
adopted by the board, and shall also be entitled to reimbursement for any
reasonable
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expenses incurred in attending any meeting of the board or any such committee.
Section 7. Nominations of Directors. Nominations of candidates for
election at any meeting of the shareholders of the corporation as directors of
the corporation may be made (i) by, or at the direction of, the board of
directors or (ii) by any holder of record entitled to vote at such meeting in
an election of directors who complies with the notice procedures set forth in
this Section 7.
Nominations, other than those made by, or at the direction of, the
board of directors, shall be made pursuant to timely notice in writing to the
secretary of the corporation as set forth in this Section 7. To be timely, any
such notice must be delivered to, or mailed and received at, the principal
executive offices of the corporation not less than 60 days nor more than 90
days prior to the date of such meeting, regardless of any postponements,
deferrals or adjournments of such meeting to a later date; provided, however,
that if less than 60 days' notice or prior public disclosure of the date of the
meeting is given or made, notice by a holder of record must, to be timely, be
so delivered or received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting is mailed or
the day on which such public disclosure was made. Such notice by a holder of
record must set forth (i) as to each person whom such holder proposes to
nominate for election as a director, all information relating to such person
that would be required to be disclosed, or otherwise required, pursuant to
Sections 13 or 14 of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act"), in
connection with any acquisition of shares and the solicitations of proxies with
respect to nominees for election of directors pursuant to the Exchange Act,
regardless of whether such person is subject to such provisions of such
Exchange Act, and (ii) as to the holder of record giving such notice, (a) the
name and address, as they appear on the records of the corporation, of such
holder, together with the name and address of any other shareholder of the
corporation who is a record or beneficial owner of securities of the
corporation and who is known by such holder to be supporting such nominee(s)
and (b) the class and number of securities which are beneficially owned and
owned of record by such holder on the date of such holder's notice and the
class and number of securities of the corporation beneficially owned and owned
of record by any person known by such holder to be supporting such nominee(s).
At the request of the board of directors, any person nominated by, or at the
direction of, the board of directors for election as a director shall furnish
to the secretary of the corporation that information that would be required to
be set forth in any holder's notice of nomination pertaining to such nominee.
Ballots bearing the names of all the persons who have been nominated for
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election as directors at any meeting of shareholders in accordance with the
procedures set forth in this Section 7 shall be provided for use at such
meeting.
The board of directors of the corporation may reject any nomination by
a holder of record not timely made in accordance with the procedures set forth
in this Section 7. If the board of directors determines that the information
provided in a holder's notice of nomination does not satisfy the informational
requirements of this Section 7 in any material respect, the secretary of the
corporation shall promptly notify such holder of the deficiency in such notice.
The holder shall have an opportunity to cure the deficiency by providing
additional information to the secretary within such period of time, not to
exceed five days, from the date such notice of deficiency is given to such
holder, as the board of directors shall determine. If the deficiency is not
cured within such period, or if the board of directors reasonably determines
that the additional information provided by such holder, together with
previously provided information, does not satisfy the requirements of this
Section 7 in any material respect, then the board of directors may reject such
holder's nomination. The secretary of the corporation shall notify in writing
any holder making a nomination whether such nomination has been made in
accordance with the time and informational requirements of this Section 7.
Notwithstanding the procedures set forth herein, if the board of directors does
not make a determination as to the validity of any nomination by a holder of
record, the presiding officer at the meeting of shareholders shall determine
and declare at such meeting whether a nomination was or was not made in
accordance with the procedures set forth in this Section 7. If the presiding
officer determines that a nomination was not made in accordance with the
procedures set forth in this Section 7, he shall so declare at such meeting of
shareholders and the defective nomination shall be disregarded.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation, shall be chosen by
the board of directors and shall be a chairman of the board, a chief executive
officer, a vice president, a secretary, and a treasurer. The board of directors
may also choose a vice chairman, additional vice presidents, one or more
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
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Section 2. Compensation. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors or a committee or officer
appointed by the board. As used herein the term "salaries" shall include any
bonus, incentive payments, or other plans or programs involving remuneration to
officers.
Section 3. Term of Office. Unless otherwise provided by resolution of
the board of directors, the principal officers shall be chosen annually by the
board at the first meeting of the board following the annual meeting of
shareholders of the corporation, or as soon thereafter as is conveniently
possible. Subordinate officers may be elected from time to time. Each officer
shall serve until his successor shall have been chosen and qualified, or until
his death, resignation or removal.
Section 4. Removal. Any officer may be removed from office at any
time, with or without cause, by the board of directors whenever in its judgment
the best interest of the corporation will be served thereby.
Section 5. Vacancies. Any vacancy in an office resulting from any cause
may be filled by the board of directors.
Section 6. Powers and Duties. Except as hereinafter provided, the
officers of the corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the board of directors. At the annual meeting
at which officers are elected, the board shall by resolution designate a chief
executive officer, who will be responsible to the board for the general
management of the company.
(a) Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and directors, and shall
see that all orders and resolutions of the board are carried into
effect. He shall have such powers and perform all such other duties
as the board may direct.
(b) Vice Chairman of the Board. The vice chairman shall have
such duties, responsibilities and authority as the board of directors
may prescribe, subject to the limitations expressed or implied by
these by-laws. In the absence of the chairman or in the event of his
inability or incapacity to act, the vice chairman shall perform the
duties and exercise the powers of the chairman.
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(c) President and Chief Executive Officer. The President and
chief executive officer shall be responsible for the operation and
management of the company and shall be responsible for the proper
utilization and security of the company's assets and resources. He
shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, within such limitations as the
board by resolution may establish. The president and chief executive
officer may delegate his powers to other officers and agents of the
company; provided, however, that such delegation shall be reported to
the board of directors no less frequently than once a year at the
annual meeting, or at such other time as a significant change is made
to a previously reported delegation.
(d) Vice Presidents. The vice presidents shall have such
duties, responsibilities and authority as the chief executive officer
shall delegate, subject to any limitations imposed by the board and
subject to the limitations expressed or implied by these by-laws. In
the absence of the chief executive officer or in the event of his
inability or incapacity to act, the vice president designated as the
executive vice president shall perform the duties of the chief
executive officer and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the chief executive
officer.
(e) Secretary. The secretary shall attend all meetings of the
board of directors and all meetings of the shareholders and record all
the proceedings of the meetings of the corporation and of the board of
directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the shareholders and
special meetings of the board of directors, and shall perform such
other duties as may be prescribed by the board of directors or chief
executive officer, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The board
of directors may give general authority to any other officer to affix
the seal of the corporation and to attest the affixing by his
signature.
(f) Assistant Secretary. The assistant secretary, or if
there be more than one, the assistant secretaries in the order
determined by the board of directors (or, if there be no such
determination, then in the order of their election), shall, in the
absence of the secretary or in the event of his inability or refusal
to act, perform the duties and
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exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from
time to time prescribe.
(g) Treasurer. The treasurer shall, subject to the
direction of a vice president designated by the chief executive
officer, have general custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit
all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board
of directors. The treasurer shall disburse the funds of the
corporation as may be ordered by the board of directors, taking proper
vouchers for such disbursements. If required by the board of
directors, the treasurer shall give the corporation a bond (which
shall be renewed every six years) in such sum and with such surety or
sureties as shall be satisfactory to the board of directors for the
faithful performance of the duties of the treasurer's office and for
the restoration to the corporation, in case of death, resignation,
retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under
control of the treasurer and belonging to the corporation.
(h) Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order
determined by the board of directors (or if there be no such
determination, then in the order of their election), shall, in the
absence of the treasurer or in the event of his inability or refusal
to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
(i) Controller. The controller shall be the chief accounting
officer of the corporation. Subject to the direction of a vice
president designated by the chief executive officer, the controller
shall maintain adequate records of all assets, liabilities, and
transactions of the corporation in the conduct of its business. The
controller shall require reports from the other officers and agents of
the corporation who receive or disburse funds for its account, at such
time and in such form as the controller may deem advisable. The
controller shall compile and maintain such accounting and statistical
records and data as may be required, and shall prepare and submit to
the executive officers, including the treasurer, and to the board of
directors such periodical and special financial statements as may be
called for by them. In conjunction with other officers and heads of
divisions, the controller shall
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initiate and enforce rules and regulations, budgets, and other
measures and procedures for the purpose of enhancing the efficiency,
economy, and profit with which the business of the corporation is
conducted. The controller shall see that adequate internal audits of
the financial records of the corporation are currently and accurately
made.
Section 7. Voting Securities of the Corporation. Unless otherwise
ordered by the board of directors, the chief executive officer shall have full
power and authority on behalf of the corporation to attend and to act and vote
at any meetings of security holders of corporations in which the corporation
may hold securities, and at such meetings shall possess and may exercise any
and all rights and powers incident to the ownership of such securities which
the corporation might have possessed and exercised if it had been present. The
chief executive officer from time to time may delegate like powers upon any
other officer or agent of the corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form of Certificate. Every holder of fully-paid stock in the
corporation shall be entitled to have a certificate in such form as the board
of directors may from time to time prescribe.
Section 2. Lost Certificates. A new certificate may be issued in place
of any certificate theretofore issued by the corporation and alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed.
When issuing such new certificate, the officer of the corporation responsible
for such issuance may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as he shall require and/or to give the corporation a bond in such sum as he may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfers.
(a) Transfers of shares of the capital stock of the
corporation shall be made only on the books of the corporation by the
registered holder thereof, or by his duly authorized attorney, or
with a transfer clerk or transfer agent appointed as in Section 5 of
this Article provided, and on surrender of the certificate or
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certificates for such shares properly endorsed and the payment of all
taxes thereon.
(b) The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and for all
other purposes, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
(c) Shares of capital stock may be transferred by delivery of
the certificates therefor, accompanied either by an assignment in
writing on the back of the certificates or by separate written power
of attorney to sell, assign and transfer the same, signed by the
record holder thereof, or by his duly authorized attorney in fact, but
no transfer shall affect the right of the corporation to pay any
dividend upon the stock to the holder of record as the holder in fact
thereof for all purposes, and no transfer shall be valid, except
between the parties thereto, until such transfer shall have been made
upon the books of the corporation as herein provided.
(d) The board may, from time to time, make such additional
rules and regulations as it may deem expedient, not inconsistent with
these by-laws or the certificate of incorporation, concerning the
issue, transfer, and registration of certificates for shares of the
capital stock of the corporation.
Section 4. Record Date. In order that the corporation may determine
the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date, which shall not be more than 70 days prior to the
date on which the particular action requiring such determination of
stockholders is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of and to vote at any meeting of
shareholders, the record date shall be at the close of business on the day next
preceding the day on which the notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. If no record date is fixed for determining shareholders entitled to take
action without a meeting, the record date shall be the date the first
shareholder signs the consent. If no record date is fixed
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for other purposes, the record date shall be at the close of business on the
day on which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the board of directors shall fix a new record date for the adjourned meeting.
Section 5. Transfer Agent and Registrar. The board of directors may
appoint one or more transfer agents or one or more transfer clerks and one or
more registrars, and may require all certificates of stock to bear the
signature or signatures of any of them.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the corporation's capital stock, subject to the provisions of the
articles of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 3. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal" and "Georgia." The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise. In the event it is
inconvenient to use such a seal at any time, the signature of the corporation
followed by the word "Seal" enclosed in parentheses shall be deemed the seal of
the corporation.
Section 4. Annual Statements. Not later than four months after the
close of each fiscal year, and in any case prior to the next annual meeting of
stockholders, the corporation shall prepare:
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(1) A balance sheet showing in reasonable detail the financial
condition of the corporation as of the close of its fiscal year,
and
(2) A profit and loss statement showing the results of its operations
during its fiscal year.
Upon written request the corporation promptly shall mail to any
shareholder of record a copy of the most recent such balance sheet and profit
and loss statement.
Section 5. Fair Price to Shareholders; Business Combinations. All of
the requirements of Part 2 of Article 11 and all of the requirements of
Article 11A of the Georgia Business Corporation Code shall be applicable to the
corporation.
ARTICLE VII
INDEMNIFICATION
Section 1. Definitions. As used in this Article, the term
(a) "change of control", for purposes of this Article VII, means (1)
an acquisition by a person of beneficial ownership of 20% or more of the
combined voting power of the corporation's then outstanding voting securities,
provided that any such securities acquired directly from the corporation shall
be excluded from the determination of such person's beneficial ownership (but
shall be included in calculating total outstanding securities); or (2) the
individuals who are members of the incumbent board (as defined below) cease for
any reason to constitute two-thirds of the Board of Directors; or (3) approval
by the shareholders of the corporation of (i) a merger or consolidation
involving the corporation if the shareholders of the corporation, immediately
before such merger or consolidation, do not own, immediately following such
merger or consolidation, more than 80% of the combined voting power of the
outstanding voting securities of the corporation in substantially the same
proportion as their ownership of voting securities immediately before such
merger or consolidation or (ii) a complete liquidation or dissolution of the
corporation or an agreement for the sale or other disposition of all or
substantially all of the assets of the corporation.
Notwithstanding the foregoing, a change of control shall not be deemed
to occur solely because twenty percent (20%) or more of the then outstanding
voting securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the
corporation or any of its subsidiaries or (ii) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the
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shareholders of this corporation in the same proportion as their ownership of
shares in this corporation immediately prior to such acquisition.
Moreover, notwithstanding the foregoing, a change of control shall not
be deemed to occur solely because any person (the "Subject Person") acquired
beneficial ownership of more than the permitted amount of the outstanding
voting securities as a result of the acquisition of voting securities by the
corporation which, by reducing the number of voting securities outstanding
increases the proportional number of shares beneficially owned by the Subject
Person, provided, that if a change of control would occur (but for the
operation of this sentence) as a result of the acquisition of voting securities
by the corporation, and after such share acquisition by the corporation, the
Subject Person becomes the beneficial owner of any additional voting securities
which increases the percentage of the then outstanding voting securities
beneficially owned by the Subject Person, then a change of control shall occur.
(b) "corporation" includes any domestic or foreign predecessor entity
of the corporation or a corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(c) "director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
A director is considered to be serving an employee benefit plan at the
corporation's request if his duties to the corporation also impose duties on,
or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. Director includes, unless the context requires
otherwise, the estate or personal representative of a director.
(d) "expenses" include attorneys' fees.
(e) "incumbent board" includes the individuals who as of May 11, 1994
are members of the Board of Directors and any individual becoming a director
subsequent to May 11, 1994 whose election, or nomination for election by the
corporation's shareholders was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; provided, however, that any
individual who is not a member of the incumbent board at the time he or she
becomes a member of the Board of Directors shall become a member of the
incumbent board upon the completion of two full years as a member of the Board
of Directors; provided further, however, that notwithstanding the foregoing, no
individual shall be considered a member of the incumbent board if
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such individual initially assumed office (1) as a result of either an actual
threatened "election contest" (within the meaning of Rule 14a-11 promulgated
under the 1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors (a
"Proxy Contest") or (2) with the approval of the other members of the Board of
Directors, but by reason of any agreement intended to avoid or settle a Proxy
Contest.
(f) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(g) "party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(h) "proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
Section 2. Indemnification of Directors and Officers - General.
(a) Subject to the terms and conditions of this Article VII, the
corporation shall indemnify an individual made a party to a proceeding because
he is or was a director or officer of the corporation against liability
incurred in connection with a proceeding to the fullest extent permitted by the
Georgia Business Corporation Code (the "GBCC"), as the same now exists or may
hereafter be amended (but only to the extent any such amendment permits the
corporation to provide broader indemnification rights than the GBCC permitted
the corporation to provide prior to such amendment).
(b) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director or officer did not meet the standard of
conduct set forth in the GBCC.
(c) To the extent that a director or officer has been successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party, or in defense of any claim, issue, or matter therein, because he is or
was a director or officer of the corporation, the corporation shall indemnify
the director or officer against reasonable expenses incurred by him in
connection therewith regardless of whether the director or officer has met the
standards set forth in the GBCC and without any action or determination under
Section 4 of this Article VII.
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Section 3. Advance for Expenses.
(a) The corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding in advance of
final disposition of the proceeding if:
(1) The director or officer furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of conduct
set forth in the GBCC; and
(2) The director or officer furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay any advances if it
is ultimately determined that he is not entitled to indemnification under this
Article
(b) The undertaking required by paragraph (2) of subsection (a) of this
Section 3 must be an unlimited general obligation of the director or officer
but need not be secured and may be accepted without reference to financial
ability to make repayment.
Section 4. Limitations on Indemnification.
(a) The corporation shall not indemnify a director under Section 2 of
this Article VII unless a determination has been made in the specific case that
indemnification of the director is permissible in the circumstances because he
has met the standard of conduct set forth in the GBCC.
(b) The corporation shall indemnify an officer under Section 2 of this
Article VII unless a determination has been made in the specific case that
indemnification of the officer is precluded in the circumstances because he has
failed to meet the standard of conduct set forth in the GBCC.
(c) In either paragraph (a) or (b) above, such determination shall be
made within 60 days of the request for indemnification:
(i) By the Board of Directors by majority vote of a
quorum consisting of directors not at the time parties to the
proceeding;
(ii) If a quorum cannot be obtained under paragraph
(i) of this subsection, by majority vote of a committee duly
designated by the Board of Directors (in which designation directors
who are parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding;
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(iii) By special legal counsel:
(A) Selected by the Board of Directors or
its committee in the manner prescribed in paragraph (i) or
(ii) of this subsection; or
(B) If a quorum of the Board of Directors
cannot be obtained under paragraph (i) of this subsection and
a committee cannot be designated under paragraph (ii) of this
subsection, selected by majority vote of the full Board of
Directors (in which selection directors who are parties may
participate); or
(iv) By the shareholders, but the shares owned by or
voted under the control of the officers and directors who are at the
time parties to the proceeding may not be voted on the determination;
provided, however, that following a change of control of the corporation, with
respect to all matters thereafter arising out of acts, omissions or events
prior to the change of control of the corporation concerning the rights of any
person seeking indemnification under this Article VII, such determination shall
be made by special legal counsel selected by such person and approved by the
Board of Directors or its committee in the manner described in Section
4(c)(iii) above (which approval shall not be unreasonably withheld), which
counsel has not otherwise performed services (other than in connection with
similar matters) within the five years preceding its engagement to render such
opinion for such person or for the corporation or any affiliates (as such term
is defined in Rule 405 under the Securities Act of 1933, as amended) of the
corporation (whether or not they were affiliates when services were so
performed) ("Independent Counsel"). Unless such person has theretofore selected
Independent Counsel pursuant to this Section 4 and such Independent Counsel has
been approved by the corporation, legal counsel approved by a resolution or
resolutions of the Board of Directors of the corporation prior to a change of
control of the corporation shall be deemed to have been approved by the
corporation as required. Such Independent Counsel shall determine as promptly
as practicable whether and to what extent such person would be permitted to be
indemnified under applicable law and shall render its written opinion to the
corporation and such person to such effect. In making a determination under
this Section 4, the special legal counsel and Independent Counsel referred to
above shall determine that indemnification is permissible unless clearly
precluded by this Article VII or the applicable provisions of the GBCC. The
corporation agrees to pay the reasonable fees of the Independent Counsel
referred to above and to fully indemnify such Independent Counsel against any
and all expenses, claims, liabilities and
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damages arising out of or relating to this Article or its engagement pursuant
hereto.
(d) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made as set forth in
paragraph (c) above.
(e) Indemnification under this Article VII in connection with a
proceeding by or in the right of the corporation shall be limited to reasonable
expenses incurred in connection with the proceeding.
Section 5. Enforceability. The provisions of this Article shall be
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. This Article shall be deemed to
grant each person who is entitled to indemnification hereunder rights against
the corporation to enforce the provisions of this Article, and any repeal or
other modification of this Article or any repeal or modification of the GBCC or
any other applicable law shall not limit any rights of indemnification then
existing or arising out of events, acts, omissions, circumstances occurring or
existing prior to such repeal or modification, including, without limitation,
the right to indemnification for proceedings commenced after such repeal or
modification to enforce this Article with regard to acts, omissions, events or
circumstances occurring or existing prior to such repeal or modification.
Section 6. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director or officer of the
corporation as to liabilities incurred in connection with any proceeding,
including an action by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 7 Statements to Shareholders. If the corporation indemnifies
or advances expenses to an officer or director under this Article VII in
connection with a proceeding by or in the right of the corporation, the
corporation shall report the indemnification or advance in writing to the
shareholders with or before the notice of the next shareholders' meeting.
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<PAGE> 1
EXHIBIT 10(e)
SCIENTIFIC-ATLANTA, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
This Scientific-Atlanta, Inc. Supplemental Executive Retirement Plan
is designed to provide supplemental retirement benefits to certain key
executive employees of Scientific-Atlanta, Inc. and its subsidiaries. This
Plan is not intended to qualify under Section 401(a) of the Internal Revenue
Code, but is an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees. The Plan constitutes an unfunded, unsecured contractual obligation
of the Company to pay certain retirement benefits to participants out of the
general assets of the Company.
ARTICLE I
DEFINITIONS
For purposes of this Plan, each term defined below, when capitalized,
shall have the meaning specified below:
1.1 "Accrue" shall mean the rate at which the benefits under this
Plan are credited to a Participant. Benefits which
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Accrue under this Plan do not Vest in the employee except as provided in
Section 3.3 hereof.
1.2 "Accrued Benefit" shall mean that percentage of a
Participant's Final Average Earnings which has Accrued pursuant to Section 3
hereof, as determined from time to time. Accrued Benefits are not earned by or
payable to a Participant unless such Benefits have Vested as provided in
Section 3.3 hereof.
1.3 "Change in Control" shall have the meaning set forth in
Section 8.3 hereof.
1.4 "Committee" shall mean the Human Resources and Compensation
Committee of the Board of Directors of Scientific-Atlanta, Inc.
1.5 "Company" shall mean Scientific-Atlanta, Inc. and any of its
majority-owned subsidiaries.
1.6 "Compensation" shall mean a Participant's base salary and any
bonus payments received by the Participant pursuant to the Scientific-Atlanta,
Inc. Annual Incentive Plan.
1.7 "Continuous Service" shall mean the period of time during
which a Participant is continuously employed by the Company. A Participant
shall be credited with a month of Continuous Service if he or she is employed
by the Company on any day during a calendar month. In addition, if an
employee is reemployed by the Company after a break in service, the employee's
prior service shall be treated as Continuous
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Service if the break in service was less than twelve (12) months or if service
prior to the break was of a longer duration than the break in service.
1.8 "Early Retirement Date" shall mean either (a) the first day of
the calendar month in which a Participant is at least fifty-five (55) years of
age and has completed ten (10) years of Continuous Service, or (b) the first
day of the calendar month in which the Participant is at least sixty (60) years
of age, regardless of years of service.
1.9 "Final Average Earnings" shall mean the average annual
Compensation of a Participant for each of the three calendar years in which
such Compensation was the highest during each of the ten calendar years
preceding and including the calendar year in which the date of the
Participant's retirement, death or termination of employment occurs.
1.10 "Normal Retirement Date" shall mean the first day of the
calendar month in which a Participant is at least sixty-five (65) years of age
and has completed ten (10) years of Continuous Service.
1.11 "Participant" shall mean any eligible employee selected to
participate in the Plan pursuant to Section 2.2 hereof.
1.12 "Plan" shall mean the Scientific-Atlanta, Inc. Supplemental
Executive Retirement Plan, as it may be amended from time to time.
1.13 "Reduced Service Period" shall mean, in the case of
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a participant who is first employed by the Company after the first day of the
month in which the Participant attains forty-five (45) years of age, the period
between the first day of the calendar month during which the Participant's
employment commences and the first day of the calendar month during which the
Participant would attain age 65. Provided, however, that if the Participant is
55 years of age or older at the date of his employment, the Reduced Service
Period shall mean the ten-year period commencing on the first day of the
calendar month during which the Participant's employment commences.
1.14 "retire" or "retirement" shall include any voluntary termination
of the Participant's employment by the Participant or any involuntary
termination of the Participant's employment by the Company without "Cause".
For purposes of this Plan other than Article VIII, a termination for "Cause" is
a termination evidenced by a resolution adopted in good faith by two-thirds of
the Board of Directors of the Company that the Participant (i) has been
convicted of a felony, or (ii) has engaged in conduct which constitutes (A)
willful neglect in carrying out his duties to the Company or (B) willful
misconduct, in either case which is demonstrably and materially injurious to
the Company, monetarily or otherwise; provided, however that no termination of
the Participant's employment shall be for Cause as set forth in clause (ii)
above until (x) there shall have been delivered to the Participant a copy of
the written notice setting forth that
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the Participant was quilty of the conduct set forth in clause (ii) and
specifying the particulars thereof in detail, and (y) the Participant shall
have been provided an opportunity to be heard by the Board (with the assistance
of the Participant's counsel if the Participant so desires). No act, nor
failure to act, on the Participant's part shall be considered "willful" unless
he has acted, or failed to act, with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best interest of
the Company. Notwithstanding anything contained in this Plan to the contrary,
no benefits shall be paid under this Plan to any Participant when such
Participant's employment is terminated by the Company for cause.
1.15 "Vest" shall mean that the benefits Accrued under this Plan
for a Participant are payable to the Participant at the times and in the
amounts provided for herein. Benefits under this Plan Vest only as provided in
Section 3.3 hereof.
ARTICLE II
PARTICIPATION
2.1 Eligible Employees.
The class of eligible employees from which Participants may be
selected is limited to officers, division presidents and other key executives
of the Company.
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2.2 Selection of Participants.
From time to time, the Committee shall select from among the
class of eligible employees one or more individuals for admission to the Plan.
The Committee's determinations shall be made in its sole discretion and shall
be conclusive and binding on all persons. The Committee shall notify in
writing each Participant of his or her selection as a Participant.
ARTICLE III
BENEFIT ACCRUALS AND VESTING
3.1 General.
Except as provided in Sections 3.2 and 4.2 hereof, benefits
shall Accrue under this Plan at the rate of three and one-half percent (3-1/2%)
of Final Average Earnings for each of the Participant's first ten (10) years of
Continuous Service, and at the rate of one and one-half percent (1-1/2%) of
Final Average Earnings for each of the next ten (10) years of Continuous
Service. The maximum Accrued Benefit to which a Participant may be entitled
under the Plan shall be equal to fifty percent (50%) of the Participant's Final
Average Earnings.
3.2 Reduced Service Period.
In the event a Participant is first employed by the Company
after the first day of the month in which the
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Participant attains the age of forty-five (45) years, benefits shall Accrue
under this Plan over the Participant's Reduced Service Period as follows:
(a) For each full or partial year of Continuous Service during the
first half of the Reduced Service Period, benefits shall Accrue under this Plan
at an annual rate determined by dividing thirty-five percent (35%) of Final
Average Earnings by one-half (1/2) of the number of years (including any
partial year) contained in the Reduced Service Period; and
(b) For each full or partial year of Continuous Service during the
second half of the Reduced Service Period, benefits shall Accrue under this
Plan at an annual rate determined by dividing fifteen percent (15%) of Final
Average Earnings by one-half (1/2) of the number of years (including any
partial year) contained in the Reduced Service Period.
3.3 Vesting.
Except as provided in Articles VII and VIII hereof, a
Participant shall Vest in his or her Accrued Benefit hereunder on the earlier
of the completion of ten (10) years of Continuous Service or the attainment of
age sixty (60) regardless of service.
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ARTICLE IV
RETIREMENT BENEFITS
4.1 Normal Retirement (Age 65 With 10 Years of Service).
A Participant who retires from the Company on or after his or
her Normal Retirement Date shall be entitled to receive an annual retirement
benefit (the "Normal Retirement Benefit") for life equal to the excess of:
(a) the Participant's Accrued Benefits determined under sections
3.1 or 3.2 hereof; over
(b) the sum of:
(i) the annual retirement benefits payable to the
Participant as a life annuity pursuant to the Scientific-Atlanta, Inc. Defined
Benefit Retirement Plan (as such plan might be amended, supplemented or
superseded from time to time) which is the actuarial equivalent (as defined in
Section 5.3) of such Participant's Pension Equity Account as defined in such
Plan;
(ii) the annual retirement benefits payable to the
Participant pursuant to any employer funded defined benefit plan maintained by
a prior employer of the Participant, assuming that such benefits are payable in
the form of a single life annuity for the life of the Participant; and
(iii) the Participant's annual primary insurance
amount under the Federal Social Security Act as in effect on the Participant's
retirement date or, if applicable, his date
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of death. In determining such amount under Section 4.2 below for a Participant
who severs from service prior to his Normal Retirement Date, it shall be
assumed that the Participant will continue to receive until his Normal
Retirement Date, annual Compensation (which would be treated as wages for
purposes of the Federal Social Security Act) at the same rate which is in
effect immediately prior to his termination of employment.
4.2 Early Retirement.
(a) A Participant who retires from the Company on or after his
or her Early Retirement Date but prior to his or her Normal Retirement Date
shall be entitled to receive his or her Normal Retirement Benefit commencing on
the date of his or her retirement; provided, however, that such date of
commencement may, in the sole discretion of the Plan Administrator, be deferred
to the date that the Participant attains age sixty (60). If the Participant
retires prior to age 60, and begins to receive benefits under this Plan prior
to age 60, such Participant shall be entitled to receive only a Reduced
Retirement Benefit (determined as hereinafter provided) commencing at his or
her date of retirement. The amount of such Reduced Retirement Benefit shall be
equal to that percentage of the Participant's Normal Retirement Benefit
determined by subtracting from 100% the aggregate of 6.67% for each year
(prorated over any partial year based on completed months of service) between
the Participant's retirement date and the date on which the Participant reaches
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age sixty (60). If a Participant retires prior to age sixty (60) but does not
begin receiving benefits under this Plan until he or she is at least age sixty
(60), there shall be no reduction in the Participant's Normal Retirement
Benefit as of his or her date of retirement.
(b) If a Participant retires prior to his Early Retirement
Date, the Participant shall be entitled to receive any of his Normal Retirement
Benefit which is then Vested. Such Normal Retirement Benefit shall be payable,
in the sole discretion of the Plan Administrator, either (1) beginning at the
time the Participant becomes age fifty five (55), with a Reduced Retirement
Benefit determined as provided in subparagraph (a) above, (2) beginning at the
time the Participant becomes age sixty (60), with no reduction in the Normal
Retirement Benefit, or (3) as a single lump sum payment at the time of
retirement.
ARTICLE V
FORM OF PAYMENT
5.1 Normal Form of Payment.
Unless an optional form of payment is elected by the
Participant in accordance with Section 5.2 hereof, all retirement benefits
payable pursuant to this Plan will be paid in the form of a single life
annuity, payable monthly, for the
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life of the Participant. Except as otherwise provided in this Plan, the first
monthly payment shall be made on the first day of the calendar month following
the Participant's retirement date.
5.2 Other Forms of Payment.
With the prior consent of the Participant (except as otherwise
indicated below), the Plan Administrator may elect to pay such Participant's
retirement benefits in a form other than a single life annuity. The optional
forms of payment which the Plan Administrator may select are:
(a) A 100% joint and survivor annuity pursuant to which an annuity
is payable for the life of the Participant with a survivor's annuity for the
life of the Participant's spouse which is equal to 100% of the amount of the
annuity payable during the joint lives of the Participant and his or her
spouse;
(b) A 50% joint and survivor annuity pursuant to which an annuity
is payable for the life of the Participant with a survivor's annuity for the
life of the Participant's spouse which is equal to 50% of the amount of the
annuity payable during the joint lives of the Participant and his or her
spouse; or
(c) A ten-year certain installment payment pursuant to which a
fixed monthly benefit is payable to the Participant for the lesser of ten (10)
years or the life of the Participant, with the continuation of the same benefit
to the
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Participant's designated beneficiary for any remaining portion of the ten-year
certain period if the Participant dies prior to the end of such period.
(d) A five-year certain installment payment pursuant to which a
fixed monthly benefit is payable to the Participant for the lesser of five (5)
years or the life of the Participant, with the continuation of the same benefit
to the Participant's designated beneficiary for any remaining portion of the
five-year certain period if the Participant dies prior to the end of such
period; and
(e) A single lump sum payment (which does not require the consent
of the Participant).
5.3 Actuarial Equivalent.
Any optional form of payment shall be the actuarial equivalent
of the normal form of payment specified in Section 5.1 hereof. All
determinations of actuarial equivalency will be based on the 1983 Unloaded
Group Annuity Mortality Table weighted 50% male and an interest rate of 8.0%.
The lump sum amount will equal the present value of future payments under this
Plan assuming payment of benefits commenced immediately (or age 55 for a Vested
termination).
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ARTICLE VI
SPOUSAL BENEFIT
In the event a Participant who is Vested shall die while actively
employed, or after his or her Early Retirement Date but prior to the
commencement of payment of retirement benefits, the Participant shall be deemed
to have retired for purposes of this Plan on the later of (i) the day
immediately preceding his or her death, or (ii) the first day of the first
calendar month thereafter in which the Participant would have attained age 55,
and the Participant's surviving spouse, if any, shall be entitled to a benefit
equal to 50% percent of the retirement benefit the Participant would have
received if he had actually retired on such deemed retirement date. Such
benefit shall be payable in the form of a single life annuity for the life of
the surviving spouse.
ARTICLE VII
DISABILITY
In the event a Participant becomes disabled and is eligible for
benefits under the Scientific-Atlanta, Inc. Long Term Disability Plan, such
Participant shall continue to receive credit, for Vesting purposes only,
towards the Participant's years of Continuous Service during the period of such
disability.
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ARTICLE VIII
CHANGE IN CONTROL
8.1 Immediate Vesting.
In the event of a Change in Control of the Company, a
Participant shall be immediately Vested in his Accrued Benefits hereunder as of
the date of such Change in Control.
8.2 Termination Following Change in Control.
If a Participant's employment with the Company is terminated
during the two-year period following a Change in Control for any reason other
than cause, the Participant shall receive a lump sum payment equal to the
present value of the Participant's Accrued Benefits as of the date of such
termination.
8.3 Definition of Change in Control.
For purposes of this Plan, a Change in Control shall mean any
of the following events:
(a) The acquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities (the "Voting Securities"), provided, however,
that for purposes of this Section 8.3, the Voting Securities acquired directly
from the
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Company by any Person shall be excluded from the determination of such Person's
Beneficial Ownership of Voting Securities (but such Voting Securities shall be
included in the calculation of the total number of Voting Securities then
outstanding); or
(b) The individuals who are members of the Incumbent Board (as
defined below) cease for any reason to constitute at least two-thirds of the
Board. The "Incumbent Board" shall include the individuals who as of August
20, 1990, are members of the Board and any individual becoming a director
subsequent to August 20, 1990, whose election, or nomination for election by
the Company stockholders was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; provided, however, that any
individual who is not a member of the Incumbent Board at the time he or she
becomes a member of the Board shall become a member of the Incumbent Board upon
the completion of two full years as a member of the Board; provided further,
however, that notwithstanding the foregoing, no individual shall be considered
a member of the Incumbent Board if such individual initially assumed office (i)
as a result of either an actual or threatened "election contest" (within the
meaning of Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") or (ii) with the approval of the
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other Board members, but by reason of any agreement intended to avoid or settle
a Proxy Contest; or
(c) Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than
eighty percent (80%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger or consolidation or (ii) a complete liquidation
or dissolution of the Company or an agreement for the sale or other disposition
of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty percent (20%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company
or any of its subsidiaries or (ii) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the stockholders of the
Company in the same proportion as their ownership of stock in the Company
immediately prior to such acquisitions.
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Moreover, notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person, provided, that if after a Change in Control would occur (but for the
operation of this sentence) as a result of such acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional Voting Securities
which increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
ARTICLE IX
PLAN ADMINISTRATION
9.1 Plan Committee.
This Plan and all matters related to it shall be administered
by the Committee. The Committee shall have the authority to interpret the
provisions of this Plan and to resolve all questions arising in the
administration, interpretation and application of this Plan. Any such
determination by the Committee shall be conclusive and binding
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on all persons. The Committee may, in its sole discretion, delegate any or all
of its responsibilities relative to administration of this Plan to a Plan
Administrator or such officers of the Company as it designates. The Plan
Administrator shall be the Vice President of Human Resources or such other
person as shall be so designated by the Committee.
9.2 Claim Procedures. Any Participant claiming a benefit, or
requesting an interpretation, any information, or a ruling under this Plan
shall present the request, in writing, to the Plan Administrator, which shall
respond in writing within thirty (30) days from the date on which it receives
the claim or request.
ARTICLE X
MISCELLANEOUS
10.1 Termination or Amendment of the Plan.
The Committee may, at any time and from time to time, modify,
amend, suspend or terminate the Plan in any respect; provided, however, that
any modification, amendment, suspension or termination of the Plan shall not
reduce or otherwise adversely affect any Participant's Vested rights under any
terms, provisions or conditions of the Plan on the date of any modification,
amendment, suspension or termination, without the consent of the Participant.
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10.2 Non-Assignability.
No benefit payable pursuant to this Plan, nor any other right
under this Plan, shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void and
shall not be recognized or given effect by the Company.
10.3 No Right to Employment.
Nothing in the Plan shall confer upon any Participant the
right to continue in the employment of the Company nor does participating in
the Plan obligate the Participant to continue in the employ of the Company.
10.4 Effective Date.
The Plan became effective on June 21, 1993, and Participants
may be designated at any time on and after that date.
10.5 Governing Law.
This Plan is made in accordance with and shall be governed in
all respects by the laws of the State of Georgia, to the extent not preempted
by Federal law.
Dated: February 15, 1994.
/s/ David J. McLaughlin
--------------------------
Chairman, Human Resources
and Compensation Committee
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EXHIBIT 10(f)
SCIENTIFIC-ATLANTA
EXECUTIVE DEFERRED COMPENSATION PLAN
AS REVISED AUGUST 25, 1994
Article I - Introduction
1.1 Name of the Plan
This Plan shall be known as the Scientific-Atlanta Executive Deferred
Compensation Plan.
1.2 Purpose of Plan
The purpose of the Plan is to provide eligible executives of
Scientific-Atlanta, Inc., a Georgia corporation, and its subsidiaries the
opportunity to defer cash compensation payable to them for services to
Scientific-Atlanta, Inc. and its subsidiaries.
1.3 Date of Plan
This Scientific-Atlanta Executive Deferred Compensation Plan was
originally made at Norcross, Georgia, on the 19th day of May, 1993, for the
benefit of certain employees of Scientific-Atlanta, Inc. and its subsidiaries.
Article II - Definitions
For purposes of this Plan, the following words and phrases shall have
the meanings and applications set forth below:
2.1 Annual Incentive Plan Payment
The short-term executive incentive payment, if any, earned by a
Participant in the year preceding a Plan Year and payable by the Employer to
the Participant in the Plan Year.
2.2 Beneficiary
A person or entity designated in accordance with the terms and
conditions of this Plan to receive benefits upon the death of a Participant.
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2.3 Compensation Deferral Election
Each election made by a Participant to defer a portion of his or her
Compensation by executing and submitting an Election Form.
2.4 Compensation
The total of a Participant's Salary, Annual Incentive Plan Payment,
Long-Term Incentive Plan Payments and any other incentive payments approved by
the Plan Committee ("Other Incentive Compensation") which are payable to the
Participant by the Employer during a Plan Year. Compensation shall be
calculated before reduction for taxes or for compensation deferred pursuant to
this Plan.
2.5 Deferred Benefit Account
An account maintained pursuant to and in accordance with the terms and
conditions set forth in Article V hereof by or on behalf of the Employer for
each Compensation Deferral Election made by a Participant under this Plan.
2.6 Deferred Benefit Commencement Date
The date irrevocably designated by a Participant with respect to each
Compensation Deferral Election as the date on which the payment of the Deferred
Benefits that accumulate as a result of such elections are to begin.
2.7 Deferred Benefits
The amounts payable pursuant to this Plan to a Participant or to his
or her Beneficiary or estate following the Participant's Retirement,
termination of employment, the Deferred Benefit Commencement Date,
determination of Total Disability, or death.
2.8 Determination Date
The last day of each Plan Year.
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2.9 Election Amount
The amount of Salary, Annual Incentive Plan Payment, Long-Term
Incentive Plan Payment or Other Incentive Compensation to be deferred pursuant
to a single Compensation Deferral Election.
2.10 Election Form
The form completed by a Participant in order to make one or more
Compensation Deferral Elections.
2.11 Employer
Scientific-Atlanta, Inc. or any of its majority owned subsidiaries.
2.12 Employment Termination Date
The date of a Participant's Retirement, termination of employment,
determination of Total Disability, or death, whichever is applicable.
2.13 Long-Term Incentive Plan Payment
The long-term performance payment, if any, earned by a Participant
during the performance period immediately preceding the Plan Year and payable
by the Employer to the Participant in the Plan Year.
2.14 Participant
An employee of the Employer who is eligible to participate in this
Plan according to the criteria adopted from time to time by the Plan Committee
and who elects to participate in this Plan.
2.15 Plan
This Scientific-Atlanta Executive Deferred Compensation Plan, as
amended from time to time.
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2.16 Plan Committee
The Human Resources and Compensation Committee of the Board of
Directors of Scientific-Atlanta, Inc. or such other committee as shall be
designated by the Board of Directors from time to time.
2.17 Plan Year
The period beginning on the first day of the Scientific-Atlanta, Inc.
fiscal year and ending on and including the last day of Scientific-Atlanta's
fiscal year. The first Plan Year shall begin with the fiscal year beginning in
July 1993 (fiscal year 1994).
2.18 Plan Interest Rate
An annual rate of interest that shall be determined by the Committee
prior to the start of each Plan Year and credited to a Participant's Deferred
Benefit Accounts during the Plan Year.
2.19 Retirement
The discontinuation of employment with the Employer by a Participant
who is fifty-five years of age or older.
2.20 Salary
The base salary, including any raises in salary, earned by a
Participant in connection with his or her employment with the Employer and
payable to a Participant by the Employer in a Plan Year.
2.21 Total Disability
A physical or mental condition which is expected to be totally and
permanently disabling as determined in accordance with the terms and conditions
of the long-term disability insurance plan currently or most recently
maintained by the Employer for the benefit of the Participant claiming to be
totally disabled.
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Article III - Eligibility and Participation
3.1 Eligibility
Employees who are eligible to participate in this Plan will be
identified by the Plan Committee according to criteria adopted from time to
time by the Plan Committee. Such identification shall be conclusive and
binding upon all persons.
3.2 Participation
The Plan Committee shall notify in writing each employee who becomes
eligible to participate in this Plan of his or her eligibility. Eligible
employees may participate in this Plan by submitting an Election Form in
accordance with Section 4.1 hereof. Such election to participate shall be
effective upon the receipt and acceptance by the Plan Committee of such
Election Form.
3.3 Additional Compensation
A Participant shall receive the Deferred Benefits provided for herein
in addition to any compensation or other benefits paid or provided to the
Participant by the Employer. In the event that a Participant's participation
in this Plan shall cause the Participant to receive a reduced benefit under any
pension plan maintained by the Employer for the benefit of the Participant,
then the Employer shall pay the Participant, at the same time and in the same
manner as would have been paid under such pension plan, the additional pension
benefits that the Participant would have received under such pension plan if
the Participant had not participated in this Plan, unless the Participant is
entitled to receive such additional pension benefits under some other plan
maintained by the Employer for the benefit of the Participant.
Article IV - Compensation Deferral
4.1 Compensation Deferral Election
A Participant shall make a Compensation Deferral Election by executing
and submitting to the Plan Committee an Election Form. The Election Form shall
specify the Election Amount, the Deferred Benefit Commencement Date, the manner
of payment of the Deferred Benefits attributable to the election, and the
Beneficiary selected by the Participant to receive such Deferred Benefits in
the event of the Participant's death. An election to defer future Salary may
be made either before or during the Plan Year, provided, however, that any such
election must be submitted to the Plan Committee at least 30 days prior to the
applicable fiscal quarter and must apply to at least the entire fiscal quarter.
An election to defer all or a portion of an Annual Incentive Plan Payment, a
Long-Term Incentive Plan Payment or Other Incentive Compensation must be made
on or before the April 1 immediately preceding the Plan Year in which such
incentive award is payable.
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4.2 Election Amounts
Each Election Amount shall be selected as follows:
(a) With respect to Salary, a participant may defer a specified
percentage of the Salary which the Participant will earn and receive during the
balance of the Plan Year, provided, however, that no deferral election with
respect to the current Plan Year may be made after March 31. Percentage
deferral must be an increment of five percentage points and shall not exceed
fifty percent.
(b) With respect to an Annual Incentive Plan Payment, a Long-Term
Incentive Plan Payment or Other Incentive Compensation, a Participant may defer
either a specified percentage of the entire payment or a specified percentage
of the payment above a stated dollar amount; provided, however, that any such
percentage must be an increment of five percentage points.
4.3 Reduction of Compensation
The Employer shall deduct Election Amounts deferred from a
Participant's Salary ratably over each remaining pay period in the Plan Year.
The Employer shall deduct Election Amounts deferred from an Annual Incentive
Plan Payment, a Long-Term Incentive Plan Payment or Other Incentive
Compensation at the time such incentive award is otherwise payable.
4.4 Deferred Benefit Commencement Date
Except as otherwise provided in Article VI hereof, a Participant may
elect to defer receipt of an Election Amount until the Deferred Benefit
Commencement Date selected by the Participant. The permissible Deferred
Benefit Commencement Dates are (i) a set date which is no earlier than July 1
of the calendar year following the end of the Plan Year in which the Election
Amount is deferred; (ii) the Participant's date of Retirement; or (iii) a date
which is either the fifth or tenth anniversary of the Participant's Retirement.
4.5 Manner of Payment
Except as otherwise provided in Article VI hereof, the Participant may
elect to receive payment of the Deferred Benefits attributable to a
Compensation Deferral Election pursuant to one of the following methods:
(a) Annual, semiannual or quarterly installments payable over a
five, ten or fifteen year period, and commencing on the respective Deferred
Benefit Commencement Date; or
(b) A single lump sum payment of the entire balance of the
respective Deferred Benefit Account, determined as of and payable on the
Deferred Benefit Commencement Date.
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A Participant may change the manner of payment selected with respect
to a Compensation Deferral Election by submitting a request in writing to the
Plan Committee on or before the earlier (i) the date which is six months prior
to the Deferred Benefit Commencement Date, or (ii) the December 31 immediately
preceding the Deferred Benefit Commencement Date.
4.6 Designation of Beneficiaries
A Participant shall designate a Beneficiary with respect to each
Compensation Deferral Election and may change the Beneficiary designation with
respect to any Compensation Deferral Election at any time by submitting a
revised Beneficiary designation in writing reflecting the change to the Plan
Committee.
Article V - Deferred Benefit Accounts
5.1 Deferred Benefit Accounts
The Employer shall cause to be established and maintained a separate
Deferred Benefit Account with respect to each Compensation Deferral Election.
The Employer shall credit the Election Amount deferred pursuant to each such
election to the Participant's appropriate Deferred Benefit Account as of the
date deferred from the Participant's Compensation as provided in Section 4.3
hereof. The amount credited to a Participant's Deferred Benefit Account shall
equal the Election Amount deferred reduced by the amount, if any, that the
Employer may be required from time to time to withhold from such Election
Amount pursuant to any federal, state or local law.
5.2 Accrual of Interest
Except as otherwise provided by Section 6.2(b) hereof, interest shall
accrue, at the Plan Interest Rate in effect from time to time, on any amounts
credited to a Deferred Benefit Account from the date on which the amount is
credited and shall be credited and compounded weekly.
5.3 Determination of Account Balance
As of each Determination Date, the current balance of a Participant's
Deferred Benefit Account shall equal (A) the sum of (i) the balance of such
Deferred Benefit Account as of the immediately preceding Determination Date,
(ii) any Compensation deferred by such Participant to such Deferred Benefit
Account since the previous Determination Date and (iii) the amount of interest
credited to such Deferred Benefit Account since the preceding Determination
Date, minus (B) any payments to or withdrawals by the Participant from the
Deferred Benefit Account since the previous Determination Date.
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5.4 Statement of Accounts
Within ninety (90) days after each Determination Date, the Plan
Committee shall submit to each Participant a statement in such form as the Plan
Committee shall deem desirable, setting forth a summary of the Compensation
Deferral Elections made and the current balances of the Deferred Benefit
Accounts maintained for the Participant as of the Determination Date.
Article VI - Payment of Deferred Benefits
6.1 General
Except as otherwise provided herein, Deferred Benefits in each
Deferred Benefit Account shall be payable to a Participant upon the Deferred
Benefit Commencement Date for such Account and pursuant to the manner of
payment selected by the Participant on the applicable Election Form or any
permitted modification thereof. If the Participant has elected to receive such
Deferred Benefits in installments, the amount payable in the first year of such
installments shall be an amount that will fully amortize the balance in the
Participant's Deferred Benefit Account determined as of the Deferred Benefit
Commencement Date over the five, ten, or fifteen year period, based on assumed
interest earnings at the Plan Interest Rate in effect for such first year.
Thereafter, the amount payable in each succeeding year shall be adjusted to an
amount that will fully amortize the remaining balance in such Deferred Benefit
Account over the remaining years in the aforesaid five, ten, or fifteen year
installment period based on the Plan Interest Rate for such succeeding year.
6.2 Termination of Employment
Deferred benefits shall be paid to a Participant upon his or her
termination of employment, as follows:
(a) Upon the involuntary termination of a Participant's
employment by the Employer, if such termination is determined to be involuntary
by the Plan Committee:
(1) the Employment Termination Date shall be deemed to be the
Deferred Benefit Commencement Date applicable to each Deferred Benefit Account
for which the Deferred Benefit Commencement Date selected by the Participant
was a set date prior to the Participant's 55th birthday if the termination
occurs before such set date;
(2) For each Deferred Benefit Account, if any, for which the
Deferred Benefit Commencement Date selected by the Participant was Retirement
or later, the Employment Termination Date shall be deemed to be the
Participant's Retirement;
(3) The amount in each Deferred Benefit Account shall be payable
to the Participant either (i) on the Deferred Benefit Commencement Date that
applies to such Deferred Benefit Account, taking into consideration the
aforesaid deemed dates (Sections 6.2(a)(1) and 6.2(a)(2)) pursuant to
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the method requested by the Participant in his or her Election Form, or (ii) in
the manner requested by the Participant in his or her Election Form to apply in
the event of his or her involuntary termination by the Employer.
(4) For purposes of this Plan, termination for "good cause" of any
Participant will be construed to be and will be treated as a voluntary
termination by such a Participant, regardless of his or her age, and the
Employer will pay out to such a Participant all amounts in his or her Deferred
Benefit Accounts in accordance with Section 6.2(b) hereof. For purposes of
this Plan, "good cause" shall be determined by the Employer in its sole and
absolute discretion.
(b) Upon the voluntary termination of employment by a Participant
prior to attaining fifty-five years of age:
(1) the amounts in each of the Participant's Deferred Benefit
Accounts shall cease to earn interest and the balance of each Deferred Benefit
Account shall be determined as of the nearest pay date following the
Participant's Employment Termination Date determined in accordance with
Article V hereof; and
(2) the Employer shall pay the Participant the balance of each
such Deferred Benefit Account not according to the Participant's elections as
specified in his or her Election Forms but in a lump sum, to be paid within
sixty (60) days of the Participant's voluntary termination.
(c) For purposes of this Plan, voluntary termination of employment
with the Employer by a Participant who is fifty-five years or older will in all
instances be construed to be and will be treated as Retirement by such a
Participant, and the Employer will pay out to such a Participant all amounts in
his or her Deferred Benefit Account in accordance with the applicable Election
Form.
(d) Other provisions of this Plan to the contrary notwithstanding,
in the event that a Participant's employment with the Employer is terminated
for any reason within two (2) years after a "Change in Control" of
Scientific-Atlanta, Inc., the Employer shall pay the Participant the amounts in
the Participant's Deferred Benefit Accounts according to the terms of Section
6.2(a) hereof as if the Participant had been terminated involuntarily. For
purposes of this Section 6.2(e), a "Change in Control" shall mean any of the
following events:
(1) The acquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") of "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities (the "Voting Securities"), provided, however,
that for purposes of this Section 6.2(e)(1), the Voting Securities acquired
directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities (but
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such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding); or
(2) The individuals who are members of the Incumbent Board (as
defined below), cease for any reason to constitute at least two-thirds of the
Board. The "Incumbent Board" shall include the individuals who as of August
20, 1990 are members of the Board and any individual becoming a director
subsequent to August 20, 1990 whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; provided, however, that any
individual who is not a member of the Incumbent Board at the time he or she
becomes a member of the Board shall become a member of the Incumbent Board upon
the completion of two full years as a member of the Board; provided, further,
however, that notwithstanding the foregoing, no individual shall be considered
a member of the Incumbent Board if such individual initially assumed office (i)
as a result of either an actual or threatened "election contest" (within the
meaning of Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") or (ii) with the approval of the other
Board members, but by reason of any agreement intended to avoid or settle a
Proxy Contest; or
(3) Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than
eighty percent (80%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger or consolidation or (ii) a complete liquidation
or dissolution of the Company or an agreement for the sale or other disposition
of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty percent (20%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company
or any of its subsidiaries or (ii) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the stockholders of the
Company in the same proportion as their ownership of stock in the Company
immediately prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person, provided, that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting Securities
by the Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities which
increases the
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percentage of the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall be deemed to have occurred.
6.3 Total Disability
Deferred Benefits shall be paid to a Participant upon his or her
becoming Totally Disabled, as follows:
(a) Upon the determination that a Participant is Totally Disabled.
(1) No further deferrals will be made from his or her
Compensation: and
(2) the Employer shall pay the Participant the balance in each of
the Participant's Deferred Benefit Accounts as if the Participant had been
terminated involuntarily, as set forth in Section 6.2(a).
(b) For purposes of this Plan, once a Participant is determined to
be Totally Disabled, he or she will continue to be deemed Totally Disabled
irrespective of the Participant's ceasing to be considered Totally Disabled for
purposes of any other plan maintained by the Employer.
(c) In the event that a Totally Disabled Participant recovers and
resumes active employment with the Employer such Totally Disabled Participant
may resume participation in this Plan at the discretion of the Plan Committee;
provided, however, that in any event the Totally Disabled Participant shall
continue to receive payments of Deferred Benefits that are then being paid
pursuant to the terms of this Plan.
6.4 Death
Deferred Benefits shall be paid upon the death of a Participant, as
follows:
(a) Upon the death of a Participant, the Employer shall pay the
amounts in each of the Participant's Deferred Benefit Accounts to the
Beneficiary designated by the Participant with respect to each Compensation
Deferral Election in each of his or her respective Election Forms, or, if the
Participant fails to so designate a Beneficiary, to his or her estate.
(b) If the Participant dies prior to Retirement, the Employer
shall pay to each respective Beneficiary or to the Participant's estate, as the
case may be, the amounts in each of the Participant's respective Deferred
Benefit Accounts, in the same manner as for the Participant who has been
terminated involuntarily, as set forth in Section 6.2(a).
(c) If the Participant dies following Retirement or being
determined to be Totally Disabled but prior to his or her receiving the full
payment of all Deferred Benefits payable to him or her, the Employer shall pay
to each of the respective Beneficiaries or to the Participant's estate, as the
case may be, the same Deferred Benefits in the same manner as it otherwise
would have paid to the
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Participant as if the Participant had not died, unless the Participant has
specified in his or her Election Form a different manner of payment to a
Beneficiary.
(d) Notwithstanding the other provisions of Section 6.4, a
Beneficiary may request a different payment schedule than what has been elected
by the Participant, if such change does not further defer the scheduled payout,
by submitting a request in writing to the Plan Committee. The granting of any
such request shall be within the discretion of the Plan Committee.
(e) If a Beneficiary who is receiving Deferred Benefits pursuant
to this Plan dies, the remainder of the Deferred Benefits to which such
Beneficiary was entitled at the time of his or her death shall continue to be
payable to the beneficiary or beneficiaries designated by such Beneficiary in
writing to the Plan Committee (or to the Beneficiary's estate or heirs if he or
she fails to designate a beneficiary or beneficiaries).
Article VII - Hardship Withdrawals
7.1 Hardship Withdrawals. A participant may request a Hardship
Withdrawal of all or a portion of his or her Deferred Benefits before the
Deferred Benefit Commencement Date, as follows:
(a) The request for withdrawal must be to meet an "unforeseeable
emergency."
(b) For purposes of this Article VII, an unforeseeable emergency
is a severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or a dependent of the
Participant, loss of Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances that will constitute
an unforeseeable emergency will depend upon the facts of each case, but, in any
case, a hardship withdrawal may not be made to the extent that such hardship is
or may be relieved:
(1) Through reimbursement or compensation by insurance or
otherwise,
(2) By liquidation of the participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship, or
(3) By cessation of deferrals under the Plan.
(c) The request for a Hardship Withdrawal must be made in writing
to the Plan Committee and shall state the amount requested, the unforeseeable
emergency to which the amount will be applied and shall also affirm that no
other assets are reasonably available to meet the emergency.
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(d) The Plan Committee shall consider applicable regulatory
standards in assessing whether to grant a request for a Hardship Withdrawal.
Article VIII - Plan Administration
8.1 Plan Committee
This Plan and all matters related to it shall be administered by the
Plan Committee. The Plan Committee shall have the authority to interpret the
provisions of this Plan and to resolve all questions arising in the
administration, interpretation and application of this Plan. Any such
determination by the Plan Committee shall be conclusive and binding on all
persons. The Plan Committee may, in its sole discretion, delegate any or all
of its responsibilities relative to administration of this Plan to such
officers of Scientific-Atlanta, Inc., as it designates.
8.2 Claim Procedures
Any Participant or Beneficiary claiming a benefit, or requesting an
interpretation, any information, or a ruling under this Pan shall present the
request, in writing, to the Plan Committee, which shall respond in writing
within thirty (30) days from the date on which it receives the claim or
request.
Article IX - Participant's Rights
9.1 Ineligibility to Participate in Plan
In the event that the Plan Committee determines that a Participant has
become ineligible to continue to participate in this Plan, the Plan Committee
may terminate Participant's participation in this Plan upon ten (1) days' prior
written notice to the Participant. In such event, the Participant will not be
entitled to make further Compensation Deferral Elections, but all current
Compensation Deferral Elections shall continue in effect. All Deferred Benefit
Accounts shall be payable as otherwise provided in Article VI hereof.
9.2 Termination of Plan
The Board of Directors of Scientific-Atlanta, Inc. may terminate this
Plan at any time, and termination of this Plan shall be effective upon ten (10)
days' written notice to all Participants in the Plan. Upon such termination of
this Plan, the Employer shall pay all active Participants their Deferred
Benefits as provided in Section 6.1 as if each such Participant had actually
reached the Deferred Benefit Commencement Date for all of his or her Deferred
Benefit Accounts. The Plan Committee may, in its discretion, accelerate all
payments due under Plan in the event of a termination of the Plan.
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9.3 Participant's Rights
The right of a Participant or his or her Beneficiary or estate to
receive any benefits under this Plan shall be solely that of an unsecured
creditor of the Employer. Any asset acquired or held by the Employer or funds
allocated by the Employer in connection with the liabilities assumed by the
Employer pursuant to this Plan shall not be deemed to be held under any trust
for the benefit of any Participant or of any of Participant's Beneficiaries or
to be security for the performance of the Employer's obligations hereunder but
shall be and remain a general asset of the Employer. Provided, however, that
nothing herein shall affect the rights of the Participant with regard to this
Plan under that certain Benefits Protection Trust, between Scientific-Atlanta,
Inc. and Wachovia Bank & Trust Co., N.A., dated February 13, 1991, as amended
from time to time.
9.4 Spendthrift Provision
Neither a Participant nor any person claiming through a Participant
shall have the right to commute, sell, assign, transfer, pledge, mortgage or
otherwise encumber, transfer, hypothecate or convey any Deferred Benefit
payable hereunder or any part thereof in advance of it actually having been
received by a Participant or other appropriate recipient under this Plan, and
the right to receive all such Deferred Benefits is expressly declared to be
non-assignable and non-transferable. Prior to the actual payment thereof, no
part of the Deferred Benefits payable hereunder shall be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any person claiming through a Participant
or be transferable by operation of law in the event of a Participant's or any
such other person's bankruptcy or insolvency.
9.5 Plan Not An Employment Agreement
This Plan shall not be deemed to constitute an employment agreement
between the Employer and any Participant, and no provision hereof shall
restrict the right of the Employer to discharge a Participant as an employee of
the Employer or the right of a Participant to voluntarily terminate his or her
employment with the Employer.
9.6 Cooperation
Each Participant will cooperate with the Employer by furnishing any
and all information reasonably requested by the Employer in order to facilitate
the payment of Deferred Benefits hereunder and by taking any such other actions
as the Employer or the Plan Committee may reasonably request.
9.7 Offset
If a Participant or his or her Beneficiary, as the case may be, shall
be indebted to the Employer at any time that Deferred Benefits are to be paid
to a Participant or his or her Beneficiary under this
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Plan, then the Employer may reduce such Deferred Benefits by the amount of such
indebtedness prior to the payment of the Deferred Benefits.
Article X - Miscellaneous
10.1 Amendments and Modifications
The Board of Directors of Scientific-Atlanta, Inc. may amend this Plan in any
respect at any time. In addition, the Plan Committee may authorize the
following types of amendments to the Plan without Board approval:
(a) amendments required by law;
(b) amendments that relate to the administration of the Plan and that
do not materially increase the cost of the Plan; and
(c) amendments that are designed to resolve possible ambiguities,
inconsistencies or omissions in the Plan and that do not materially increase
the cost of the Plan.
All authorized amendments shall be effective upon ten (10) days' written notice
to the Participants. If any such amendment materially adversely affects a
Participant's Deferred Benefits, such affected Participant may, within ninety
(90) days after the effective date of such amendment, elect to terminate his or
her participation in the Plan pursuant to this Section 10.1 in which event the
date of such election shall be deemed to be such Participant's Deferred Benefit
Commencement Date.
10.2 Inurement
This Plan shall be binding upon and shall inure to the benefit of the Employer
and each Participant hereto, and their respective beneficiaries, heirs,
executors, administrators, successors and assigns.
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10.3 Governing Law
This Plan shall be interpreted and administered in accordance with the Employee
Retirement Income Security Act of 1974, as amended. To the extent that state
law is applicable, however, the laws of the State of Georgia shall apply.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
--------------------------------
Vice President - Human Resources
Attest:
/s/ William E. Eason, Jr.
- -------------------------
Secretary
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EXHIBIT 10(g)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the ____ day of September, 1994, by and between
Scientific-Atlanta, Inc. (the "Company") and __________________ (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes that
the possibility of a Change in Control (as hereinafter defined) exists and that
the occurrence of a Change in Control can result in significant distractions of
its key management personnel because of the uncertainties inherent in such a
situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a Change in Control and to ensure his continued
dedication and efforts in such event without undue concern for his personal
financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a Change in Control, the Company desires
to enter into this Agreement with the Executive to provide the Executive with
certain benefits in the event his employment is terminated as a result of, or
in connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:
1. Term of Agreement; Expiration of Term.
1.1 Term of Agreement.
(a) This Agreement shall commence as of the date hereof and shall
continue in effect through December 31, 1995.
(b) Notwithstanding the foregoing, commencing on January 1, 1995 and on
each January 1 thereafter, the term of this Agreement shall automatically be
extended for one (l) additional year unless either the Company or the Executive
shall have given written notice to the other at least ninety (90) days prior to
such January 1 that the term of this Agreement shall not be so extended.
(c) Notwithstanding any such notice by the Company not to extend, the
term of this Agreement shall not expire prior to the expiration of 24 months
after the occurrence of any Change in Control which occurs while this Agreement
is in effect.
1.2 Expiration of Term. Notwithstanding the foregoing or anything in this
Agreement to the contrary, the term of this Agreement shall expire on the day
prior to the day the Executive, individually or together with any Person (as
defined in Section 2.2(a)) and without prior approval of the Board, either (i)
consummates as an acquiror a transaction which constitutes a Change in Control
(as defined below) or (ii) makes a written definitive proposal for, or
otherwise participates directly or indirectly as an acquiror in, a transaction
which if consummated would constitute a Change in Control (each, a "Control
Action") and, in either case,
<PAGE> 2
such Control Action occurs prior to a Control Action by any other Person. If a
Control Action by any other Person is terminated, withdrawn or abandoned prior
to a Control Action by the Executive, it shall be deemed to have never occurred
for purposes of this Section 1.2.
2. Definitions.
2.1 Cause. For purposes of this Agreement, a termination for "Cause" is a
termination evidenced by a resolution adopted in good faith by two-thirds of
the Board that the Executive (i) has been convicted of a felony, or (ii) has
engaged in conduct which constitutes (A) willful neglect in carrying out his
duties to the Company or (B) willful misconduct, in either case, which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however that no termination of the Executive's employment shall be
for Cause as set forth in clause (ii) above until (x) there shall have been
delivered to the Executive a copy of a written notice setting forth that the
Executive was guilty of the conduct set forth in clause (ii) and specifying the
particulars thereof in detail, and (y) the Executive shall have been provided
an opportunity to be heard by the Board (with the assistance of the Executive's
counsel if the Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "willful" unless he has acted, or failed
to act, with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Company.
Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after a Notice of Termination is given by
either party shall constitute Cause for purposes of this Agreement.
2.2 Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities (the "Voting Securities"), provided, however,
that for purposes of this Section 2.2(a), the Voting Securities acquired
directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities (but
such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding); or
(b) The individuals who are members of the Incumbent Board (as defined
below), cease for any reason to constitute at least two-thirds of the Board.
The "Incumbent Board" shall include the individuals who as of August 20, 1990
were members of the Board and any individual becoming a director subsequent to
August 20, 1990 whose election, or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; provided, however, that any individual who
is not a member of the Incumbent Board at the time he or she becomes a member
of the Board shall become a member of the Incumbent Board upon the completion
of two full years as a member of the Board; provided, further, however, that
notwithstanding the foregoing, no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office (l) as a result
of either an actual or threatened "election contest" (within the meaning of
Rule 14a-11 promulgated under the 1934 Act) or other actual or
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threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") or (2) with the approval of the other
Board members, but by reason of any agreement intended to avoid or settle a
Proxy Contest; or
(c) Approval by stockholders of the Company of (1) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (2) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because twenty percent (20%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of
its subsidiaries or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person, provided, that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting Securities
by the Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a Change in
Control and the Executive reasonably demonstrates that such termination (1) was
at the request of a Third Party (as hereinafter defined) who effectuates a
Change in Control or (2) otherwise occurred in connection with or in
anticipation of a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control shall mean the
date immediately prior to the date of such termination of the Executive's
employment.
2.3 Disability. For purposes of this Agreement, "Disability" shall mean
(i) a physical or mental infirmity which has been determined to be a total and
permanent disability under and in accordance with the provisions of the
Company's Long Term Disability Income Plan (the "LTD Plan") or (ii) in the
event the Company does not maintain the LTD Plan at the time of the
determination of the Executive's Disability, a physical or mental infirmity
which impairs the Executive's ability to substantially perform duties of the
type performed by
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<PAGE> 4
the Executive prior to the onset of the infirmity, which impairment continues
for a period of at least one hundred eighty (180) consecutive days.
2.4 Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence within 24 months after a Change in Control of any of the events or
conditions described in Subsections (1) through (8) hereof:
(1) a change in the Executive's status, title, position or
responsibilities which reasonably represents an adverse change in
his status, title, position or responsibilities as in effect at any
time within ninety (90) days preceding a Change in Control; the
assignment to the Executive of any duties or responsibilities which
reasonably are inconsistent with such status, title, position or
responsibilities as in effect at any time within ninety (90) days
preceding a Change in Control; or any removal of the Executive from
or failure to reappoint or reelect him to any of his offices or
positions, except in connection with the termination of his
employment for Disability, Cause, as a result of his death or by
the Executive other than for Good Reason;
(2) a reduction in the Executive's base salary or any failure
to pay the Executive any compensation or benefits to which he is
entitled within five (5) days of the date due;
(3) the Company's requiring the Executive to be based at any
place outside a 50-mile radius from his current work location,
except for reasonably required travel on the Company's business
which is not materially greater than such travel requirements prior
to the Change in Control;
(4) the failure by the Company to (A) continue in effect (with
out reduction in benefit levels and/or reward opportunities) any
material compensation or benefit plan in which the Executive was
participating at any time within ninety (90) days preceding a
Change in Control including, but not limited to, the Annual
Incentive Plan for Key Executives (the "Annual Plan"), the Long
Term Incentive Compensation Plan, the 1978 Non-Qualified Stock
Option Plan for Key Employees, the 1981 Incentive Stock Option
Plan, the 1992 Employee Stock Option Plan, the Executive Deferred
Compensation Plans and the Supplemental Executive Retirement Plan
(the "SERP"), as such plans are in effect at any time within ninety
(90) days preceding a Change in Control, unless a substitute or
replacement has been implemented which provides substantially
identical compensation or benefits to the Executive or (B) provide
the Executive with compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each other compensation
or employee benefit plan, program and practice as in effect at any
time within ninety (90) days preceding a Change in Control;
(5) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy, of the Company;
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<PAGE> 5
(6) any material breach by the Company of any provision of this
Agreement;
(7) any purported termination of the Executive's employment
for Cause by the Company which does not comply with the terms of
Section 2.1 of this Agreement; and
(8) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any successor or assign of the
Company, to assume and agree to perform this Agreement, as
contemplated in Section 8(a) hereof.
(b) Any event or condition described in this section 2.4(a)(1) through
(8) which occurs prior to a Change in Control but (i) was at the request of a
third party who has indicated an intention or taken steps reasonably calculated
to effect a Change in Control (a "Third Party") who effectuates a Change in
Control, or (ii) otherwise arose in connection with or in anticipation of a
Change in Control which actually occurs, shall constitute Good Reason for
purposes of this Agreement notwithstanding that it occurred prior to the Change
in Control.
(c) The Executive's right to terminate his employment pursuant to this
Section 2.4 shall not be affected by his incapacity due to physical or mental
illness prior to the time the Executive has been determined to have a
Disability.
3. Termination of Employment.
3.1 Except as specifically provided in this Agreement, the provisions of
this Section 3 shall not apply to any termination of the Executive's employment
which occurs prior to a Change in Control.
3.2 If, during the term of this Agreement, the Executive's employment
with the Company shall be terminated within 24 months following a Change in
Control, the Executive shall be entitled to the following compensation and
benefits (in addition to any compensation and benefits provided for under any
of the Company's employee benefit plans, policies and practices):
(a) If the Executive's employment with the Company shall be
terminated (l) by the Company for Cause or Disability, (2) by reason of
the Executive's death, or (3) by the Executive other than for Good Reason, the
Company shall pay the Executive all amounts earned or accrued through the
Termination Date (as hereinafter defined) but not paid as of the Termination
Date, including (i) base salary, (ii) reimbursement for reasonable and
necessary expenses incurred by the Executive on behalf of the Company during
the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses
or incentive compensation (collectively, "Accrued Compensation"). In addition
to the foregoing, if the Executive's employment is terminated by the Company
for Disability or by reason of the Executive's death, the Company shall pay to
the Executive or his beneficiaries an amount equal to the "Pro Rata Bonus" (as
hereinafter defined). The "Pro Rata Bonus" shall mean for any fiscal year of
the Company which begins after the Change in Control, an
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<PAGE> 6
amount equal to the bonus or incentive award that the Executive would have been
entitled to receive under the Annual Plan in respect of the fiscal year of the
Company in which the Termination Date occurs had he continued in employment
until the end of such fiscal year, calculated as if all performance targets and
goals (if applicable) had been fully met by the Company and by the Executive,
as applicable, for such year, multiplied by a fraction the numerator of which
is the number of days in such fiscal year through the Termination Date and the
denominator of which is 365. The Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs and practices then in
effect.
(b) If the Executive's employment with the Company shall be terminated
(other than by reason of death), (1) by the Company (other than for Cause or
Disability) or (2) by the Executive for Good Reason, the Executive shall be
entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus;
(ii) except if the Executive's employment with the Company
shall be terminated by the Executive for Good Reason by reason of
relocation as described in Section 2.4(a)(3) and such relocation is in
connection with a relocation affecting more than one-half of the employees
employed at the same work location as the Executive ("Good Reason for Company
Relocation"), the Company shall pay the Executive as severance pay and in lieu
of any further compensation for periods subsequent to the Termination Date, in
a single payment an amount in cash (the "Severance Amount") equal to two (2)
times the sum of (A) the highest rate of the Executive's annual base salary as
in effect at any time within ninety (90) days preceding a Change in Control or
at any time thereafter ("Base Salary"), (B) the "Bonus Amount" (as defined
below) and (C) the "Perquisite Amount" (as defined below). If the Executive's
employment with the Company shall be terminated by the Executive for Good
Reason for Company Relocation, the Severance Amount shall equal one (1) times
the sum of (A) Base Salary, (B) the Bonus Amount and (C) the Perquisite Amount.
Any amount payable with respect to the Executive's Bonus Amount pursuant to
this Section 3.2(b)(ii) shall be reduced by the amount by which payments to the
Executive pursuant to the third paragraph of Section 8(c) of the Annual Plan
exceed the "target" percentage of such Executive's base salary under the Annual
Plan. The term "Bonus Amount" shall mean the highest of the total cash bonuses
earned by the Executive pursuant to the Annual Plan in any of the three fiscal
years of the Company immediately preceding the fiscal year in which the
Termination Date occurs (or such lesser number of full fiscal years during
which the Executive was employed by the Company); provided, however, that the
Bonus Amount shall not be less than an amount equal to the Executive's target
bonus pursuant to the Annual Plan for the fiscal year in which the Termination
Date occurs. The "Perquisite Amount" shall equal the highest amount paid to
the Executive in the calendar year ending prior to the Change in Control or in
any calendar year thereafter in respect of perquisites provided to the
Executive, including, but not limited to, car allowance, financial counseling,
annual physical examination and airline membership clubs and shall be in lieu
of the Company providing such perquisites to the Executive.
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(iii) for a number of months equal to 24 (12 if the Executive's
employment with the Company shall be terminated by the Executive for
Good Reason for Company Relocation) (the "Continuation Period"), the Company
shall at its expense continue on behalf of the Executive and his dependents and
beneficiaries (to the same extent provided to the dependents and beneficiaries
prior to the Executive's termination) the life insurance, disability, medical,
dental and hospitalization benefits provided (x) to the Executive at any time
within ninety (90) days preceding a Change in Control or at any time
thereafter, or (y) to other similarly situated executives who continue in the
employ of the Company during the Continuation Period. The coverage and
benefits (including deductibles and costs) provided in this Section 3.2(b)(iii)
during the Continuation Period shall be no less favorable to the Executive and
his dependents and beneficiaries, than the most favorable of such coverages and
benefits during any of the periods referred to in clauses (x) and (y) above.
The Company's obligation hereunder with respect to the foregoing benefits shall
be limited to the extent that the Executive obtains any such benefits pursuant
to a subsequent employer's benefit plans, in which case the Company may reduce
the coverage of any benefits it is required to provide the Executive hereunder
as long as the aggregate coverages and benefits of the combined benefit plans
is no less favorable to the Executive than the coverages and benefits required
to be provided hereunder. This Subsection (iii) shall not be interpreted so as
to duplicate any benefits to which the Executive or his dependents may be
entitled under any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment, including
without limitation, retiree medical and life insurance benefits;
(iv) the Company shall pay in a single payment an amount in
cash equal to the excess of (A) the actuarial equivalent of the
aggregate retirement benefit the Executive would have been entitled to receive
under the SERP, the Scientific-Atlanta, Inc. Retirement Plan (the
"Retirement Plan") and the Scientific-Atlanta, Inc. Restoration Retirement Plan
(the "Restoration Plan") had (x) the Executive remained employed by the Company
for an additional two (2) complete years of credited service (one (l) complete
year of credited service if the Executive's employment with the Company shall
be terminated by the Executive for Good Reason for Company Relocation), (y) his
annual compensation during such period been equal to his Base Salary and the
Bonus Amount (but only to the extent that the bonuses which are included in the
Bonus Amount are includible in compensation for purposes of the Retirement
Plan, the SERP and the Restoration Plan), and (z) he been fully (100%) vested
in his benefit under each such retirement plan, over (B) the actuarial
equivalent of the aggregate retirement benefit the Executive is actually
entitled to receive under such retirement plans. For purposes of this
Subsection (iv), "actuarial equivalent" shall be determined in accordance with
the actuarial assumptions used for the calculation of benefits under the
Retirement Plan as applied immediately prior to the Termination Date in
accordance with such plan's past practices (but shall in any event take into
account the value of any subsidized early retirement benefit); and
(v) all restrictions on any outstanding award (including
restricted stock awards) granted to the Executive shall lapse and such
awards shall become fully (100%) vested immediately, and all stock options and
stock appreciation rights granted to the Executive shall become fully (100%)
vested and shall become immediately exercisable.
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(c) The amounts provided for in Sections
3.2(a) and 3.2(b)(i), (ii), (iv) and (v) shall be paid within five (5) days
after the Executive's Termination Date.
(d) The Executive shall not be required
to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 3.2(b)(iii).
3.3 The severance pay and benefits provided for
in Sections 3.2(a) and 3.2(b)(i) and (ii) shall be in lieu of any other
severance pay to which the Executive may be entitled under any Company
severance plan, program or arrangement.
4. Notice of Termination. Any purported
termination by the Company or by the Executive shall be communicated by written
Notice of Termination to the other. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which indicates the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated. For purposes
of this Agreement, no such purported termination shall be effective without
such Notice of Termination.
5. Termination Date. "Termination Date" shall
mean in the case of the Executive's death, his date of death, and in all other
cases, the date specified in the Notice of Termination subject to the
following:
(a) If the Executive's employment is
terminated by the Company for Cause or due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Executive, provided that in the case of Disability
the Executive shall not have returned to the full-time performance of his
duties during such period of at least 30 days; and
(b) If the Executive's employment is
terminated for Good Reason, the date specified in the Notice of Termination
shall not be more than 60 days from the date the Notice of Termination is given
to the Company.
6. Excise Tax Limitation.
(a) Notwithstanding anything contained
in this Agreement or any other agreement or plan to the contrary, the payments
and benefits provided to, or for the benefit of, the Executive under this
Agreement or under any other plan or agreement (the "Payments") shall be
reduced (but not below zero) to the extent necessary so that no payment to be
made, or benefit to be provided, to the Executive or for his benefit under this
Agreement or any other plan or agreement shall be subject to the imposition of
excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (such reduced amount is hereinafter referred to as the "Limited
Payment Amount") if (A) the net amount of such Payments, as so reduced (and
after deduction of the net amount of federal, state and local income tax on
such reduced Payments) is greater than (B) the excess
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of (i) the net amount of such Payments, without reduction (but after deduction
of the net amount of federal, state and local income tax on such Payments),
over (ii) the amount of excise tax to which the Executive would be subject in
respect of such Payments. Unless the Executive shall have given prior written
notice specifying a different order to the Company, the Company shall reduce or
eliminate the Payments to the Executive by first reducing or eliminating those
payments or benefits which are not payable in cash and then by reducing or
eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the
Determination (as hereinafter defined). Any notice given by the Employee
pursuant to the preceding sentence shall take precedence over the provisions of
any other plan, arrangement or agreement governing the Executive's rights and
entitlements to any benefits or compensation.
(b) All determinations required to be
made under this Section 6 shall be made by a nationally recognized accounting
firm designated by the Company (other than the accounting firm that is
regularly engaged by the Person, or any affiliate of the Person, who has
effectuated a Change in Control) and reasonably acceptable to the Executive
(the "Accounting Firm"). The Accounting Firm shall provide their calculations,
together with detailed supporting documentation, both to the Company and the
Executive within 5 days after the Executive's Termination Date (or such earlier
time as is requested by the Company) and, with respect to the Limited Payment
Amount, a reasonable opinion to the Executive that he is not required to report
any excise tax on his federal income tax return with respect to the Limited
Payment Amount (collectively, the "Determination"). All fees, costs and
expenses (including, but not limited to, the costs of retaining experts) of the
Accounting Firm shall be borne by the Company and the Company shall pay such
fees, costs and expenses as they become due. The Determination by the
Accounting Firm shall be final, binding and conclusive upon the Company and the
Executive (except as provided in Subsection (c) below).
(c) If it is established pursuant to a
final determination of a court or an Internal Revenue Service (the "IRS")
proceeding which has been finally and conclusively resolved, that Payments have
been made to, or provided for the benefit of, the Executive by the Company,
which are in excess of the limitations provided in Section 6(a) (hereinafter
referred to as an "Excess Payment"), such Excess Payment shall be deemed for
all purposes to be a loan to the Executive made on the date the Executive
received the Excess Payment and the Executive shall repay the Excess Payment to
the Company on demand, together with interest on the Excess Payment at the
applicable federal rate (as defined in Section 1274(d) of the Code) from the
date of the Executive's receipt of such Excess Payment until the date of such
repayment. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the Determination, it is possible that Payments
which will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made under
this Section 6. In the event that it is determined (i) by the Accounting Firm,
the Company (which shall include the position taken by the Company, or together
with its consolidated group, on its federal income tax return) or the IRS or
(ii) pursuant to a determination by a court, that an Underpayment has occurred,
the Company shall pay an amount equal to such Underpayment to the Executive
within 10 days of such determination together with interest on such amount at
the applicable federal rate from the date such amount would have been paid to
the Executive until the date of payment.
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7. Unauthorized Disclosure or Use of Confidential
Information. The Executive shall not make any unauthorized disclosure or use
of confidential information. For purposes of this Agreement, unauthorized
disclosure or use of confidential information shall mean disclosure to any
person, group or other entity, or use by the Executive, without the consent of
the Board (other than pursuant to a court order, as is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties
as an executive of the Company or as may be legally required) of any material
confidential information obtained by the Executive while in the employ of the
Company (including any material confidential information with respect to any of
the Company's customers or methods of distribution) the disclosure or use of
which is demonstrably and materially injurious to the Company; provided,
however, that such term shall not include the disclosure or use by the
Executive, without consent, of any information known generally to the public
(other than as a result of disclosure or use by him in violation of this
Section 7) or any information not otherwise considered confidential and
material by a reasonable person engaged in the same business as that conducted
by the Company.
8. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and
shall inure to the benefit of the Company, its successors and assigns and the
Company shall require any successor or assign to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. The term "the Company" as used herein shall include such
successors and assigns. The term "successors and assigns" as used herein shall
mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company (including this Agreement) whether by
operation of law or otherwise.
(b) Neither this Agreement nor any right or
interest hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of
descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
9. Fees and Expenses. The Company shall pay all legal
fees and related expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a result of (a) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits or (b) the
Executive's hearing before the Board as contemplated in Section 2.1 of this
Agreement; provided, however, that the circumstances set forth in clause (a)
(other than as a result of the Executive's termination of employment under
circumstances described in Section 2.2(d)) occurred on or after a Change in
Control; provided, further, however, that notwithstanding the foregoing, the
Executive shall not be entitled to legal fees and related expenses pursuant to
this Section 9 if pursuant to a determination of a court which has been finally
and conclusively resolved, it is determined that the Executive's position is
entirely without merit or that the action commenced by the Executive is
frivolous.
10. Notice. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement (including the
Notice of Termination) shall be
10
<PAGE> 11
in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses last given by each party to the other,
provided that all notices to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company. All notices and
communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
11. Non-exclusivity of Rights. Except as expressly
provided in this Agreement, nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other
agreements with the Company or any of its subsidiaries. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its subsidiaries shall be payable
in accordance with such plan or program, except as explicitly modified by this
Agreement.
12. Settlement of Disputes; Arbitration. All claims by
the Executive for benefits under this Agreement shall be directed to
and determined by the Board and shall be in writing. Any denial by the Board
of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial
and the specific provisions of this Agreement relied upon. The Board shall
afford a reasonable opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to appeal to the Board a
decision of the Board within sixty (60) days after notification by the Board
that the Executive's claim has been denied. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Atlanta, Georgia in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
the Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
13. Settlement of Claims. The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others unless such
circumstances arise out of any illegal or fraudulent conduct which the Company
in good faith believes was engaged in by the Executive in connection with his
employment with the Company.
14. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreement or representations, oral or otherwise, express or implied, with
respect to the sub-
11
<PAGE> 12
ject matter hereof have been made by either party which are not expressly set
forth in this Agreement. No additional compensation provided under any benefit
or compensation plans to the Executive shall be deemed to modify or otherwise
affect the terms of this Agreement or any of the Executive's entitlements
hereunder.
15. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof.
16. Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior
agreements, if any, understandings and arrangements, oral or written, between
the parties hereto with respect to the subject matter hereof.
12
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
SCIENTIFIC-ATLANTA, INC.
ATTEST: By:________________________
Title:
________________________
Secretary
By:________________________
Section 12 hereof must be initialed by both parties.
13
<PAGE> 1
EXHIBIT 10(h)
As Amended August 25, 1994
SCIENTIFIC-ATLANTA, INC.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. The purpose of this plan ("Plan") is to enhance the ability
of Scientific-Atlanta, Inc. ("Company") to attract and retain the service of
experienced, able and knowledgeable persons to serve as members of the
Company's board of directors ("Board") over a substantial period of years
during which the full benefit of their capabilities can be realized to further
the growth and profitability of the Company and return to the shareholders.
2. ADMINISTRATION. The Plan shall be administered by a Plan
Administrator, who shall be appointed by the Board. In addition to the duties
stated elsewhere in the Plan, the Plan Administrator shall have full authority,
consistent with the Plan, to interpret the Plan and to make all determinations
necessary or desirable for the administration of the Plan.
3. ELIGIBLE PARTICIPANTS. Each person who is or becomes a member of the
Board on or after the effective date of this Plan and who never has been an
employee of the Company shall be deemed a Participant in this Plan after having
been a member of the Board for thirty-six consecutive months.
4. RETIREMENT DATES.
(a) A Participant's "Normal Retirement Date" is the first
day of the calendar month in which a Participant
attains the age of sixty-five (65) years and is no
longer a member of the Board or any subsequent month
designated by a Participant in accordance with
paragraph 6 below.
(b) A Participant's "Early Retirement Date" is the first
day of the calendar month designated by a Participant
in accordance with paragraph 6 below, prior to the
Normal Retirement Date, on or after the month in
which a Participant attains the age of fifty-five
(55) years.
5. RETIREMENT BENEFIT.
(a) The annual retirement benefit payable to any
Participant who retires on the Normal Retirement
Date, or any date thereafter, will be an amount equal
to the annual retainer paid by the Company to its
directors for the last year that the Participant is a
director.
<PAGE> 2
(b) The annual early retirement benefit payable to any
Participant who retires on the Early Retirement Date
will be the amount specified in 5(a) above, reduced
by the following early retirement factors:
Age at
Commencement Factor
------------ ------
64 .933
63 .867
62 .800
61 .733
60 .667
59 .633
58 .600
57 .567
56 .533
55 .500
If a Participant's age at the Early Retirement Date
falls between any two of these ages, these factors
shall be adjusted by straight-line interpolation.
Notwithstanding the foregoing, a Participant retiring
prior to his or her Normal Retirement Date may elect
to defer the commencement of retirement benefit
payments under this Plan to the same extent, and with
the same effect, as a participant retiring under the
Scientific-Atlanta, Inc. Retirement Plan and Trust
might defer the commencement of benefits under that
plan.
(c) No retirement benefit will be payable to any person
who is a member of the Board for less than
thirty-six (36) consecutive months.
6. BENEFIT PAYMENTS. A Participant may retire by written notice to the
Plan Administrator or the Secretary of the Company designating a retirement
date in accordance with paragraph 4 above. Retirement benefit payments will be
payable on the first day of each calendar quarter following retirement or in
accordance with such other schedule of payments as may be requested by the
Participant and approved by the Board. Benefit payments will continue to be
paid to the Participant for the remainder of the Participant's life.
Notwithstanding the foregoing, in lieu of the normal form of payment otherwise
provided under this Plan, the Plan Administrator may direct, in its sole and
absolute discretion, that benefits shall be paid in a single sum that is the
actuarial equivalent of the annual benefit payable to the Participant or, in
the event of the Participant's death, to his or her surviving spouse.
2
<PAGE> 3
7. SPOUSAL BENEFITS. Should a Participant die before retirement benefits
have begun to be paid to the Participant under this Plan, the Participant shall
be deemed to retire on the later of (i) the day before his/her death, or (ii)
the first day of the first calendar month thereafter in which the Participant
would have attained age 55, and the Participant's surviving spouse, if any,
shall be entitled to a benefit equal to the benefit that would have been paid
to the Participant. If the Participant dies after retirement benefits have
commenced, the participant's surviving spouse shall be entitled to annual
benefit payments equal to the annual benefit previously payable to the
Participant. In each case, the benefit shall continue for the lesser of (i)
ten years or (ii) a number of years equal to the number of years that the
Participant was a member of the Board; provided, however, that payments shall
not continue after the death of the spouse.
8. DISABILITY. Should a Participant become totally and permanently
disabled prior to retirement for a period of six (6) consecutive months while a
member of the Board and the Board determines that such disability will
continue, the Participant will be deemed to have retired on the first day of
the calendar month following the month in which the Board makes such
determination and the age of the Participant on such retirement date shall be
deemed the older of (i) 55, or (ii) the Participant's actual age on that date.
Payments will be made on the same basis as described in Sections 5, 6 and 7
above.
9. Notwithstanding anything contained in this Plan to the contrary, the
provisions of this paragraph 9 shall apply to any Participant whose membership
on the Board ends before a Change of Control occurs or who is a member of the
Board on the date that a Change of Control occurs and who ceases within
twenty-four (24) months after a Change of Control to be a member of the Board
for any reason.
(a) Each such Participant shall be immediately vested in
his or her retirement benefit payable under this Plan.
(b) The Company shall contribute to the trust maintained
pursuant to the Scientific-Atlanta, Inc. Benefits
Protection Trust Agreement a lump sum amount equal to
the then-present value of the Participant's
retirement benefit. This lump sum payment to the
trust shall be due on the later of (i) the date when
the Change of Control occurs or (ii) the date the
Participant ceases to be a member of the Board. The
retirement benefit of a Participant who ceases to be
a member of the Board within twenty-four months after
a Change of Control shall be computed as if the
Participant would retire on the first day that he or
she is eligible to retire (whether an Early
Retirement Date or a Normal Retirement Date)
following the Change of Control and the end of his or
her membership on the Board. Any retirement benefits
to which the Participant is entitled under the terms
of this Plan shall be payable from the trust, except
to the extent that the benefits are paid from the
general assets of the Company.
3
<PAGE> 4
(c) Notwithstanding the foregoing, in lieu of the form of
payment otherwise provided for in this paragraph 9,
the Plan Administrator may direct, in its sole and
absolute discretion, that upon a Change of Control
benefits under this Plan shall be paid in a single
lump sum that is the actuarial equivalent of the
annual benefits payable to the Participant or, in the
event of the Participant's death, to his or her
surviving spouse.
(d) "Change of Control" means a change of twenty-five
percent (25%) or more of the membership of the Board
(excluding membership changes resulting from normal
retirement of directors) within a twenty-four (24)
month period following the acquisition of beneficial
ownership by any person or entity, or group of
persons or entities and their affiliates acting in
concert, of twenty percent (20%) or more of the
voting securities of the Company. "Affiliates" and
"beneficial ownership" shall be defined in accordance
with Rules 12b-2 and 13d-3 of the Securities and
Exchange Commission, as the same may from time to
time be amended.
10. TERMINATION AND AMENDMENT OF THE PLAN. The Board may terminate the
Plan at any time and may amend the Plan from time to time but no such
termination or amendment shall adversely affect the rights of Participants
under this Plan, which shall be deemed fully vested and irrevocable on the date
that a director becomes a Participant in accordance with paragraph 3 above.
11. EFFECTIVE DATE. The effective date of this Plan is February 15, 1989.
4
<PAGE> 1
EXHIBIT 11
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands, Except Earnings Per Share)
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 74,986 72,308 68,512
Add - Shares of common stock assumed issued
upon exercise of options using the "treasury
stock" method as it applies to the computation
of primary earnings per share 1,652 2,774 1,714
--------- --------- ---------
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 76,638 75,082 70,226
Add - Additional shares of common stock assumed issued
upon exercise of options using the "treasury stock"
method as it applies to the computation of fully
diluted earnings per share 467 175 1,452
--------- --------- ---------
NUMBER OF SHARES OUTSTANDING
ASSUMING FULL DILUTION 77,105 75,257 71,678
========= ========= =========
- -------------------------------------------------------------------------------------------------------------
NET EARNINGS FOR PRIMARY
AND FULLY DILUTED COMPUTATION $ 35,022 $ 19,974 $ 16,277
========= ========= =========
- -------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
Primary $ 0.46 $ 0.27 $ 0.23
Fully diluted $ 0.46 $ 0.27 $ 0.23
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated August 4, 1994, appearing on page 11 of this Form 10-K, into
the Company's previously filed registration statements as listed below:
1. Registration Statements on Form S-8 covering the
Scientific-Atlanta, Inc. 1978 Non-Qualified Stock
Option Plan for Key Employees, as amended (File Nos.
2-72029, 33-5623, 33-20858, and 33-36926);
2. Registration Statements on Form S-8 covering the
Scientific-Atlanta, Inc. Employee Stock Purchase Plan,
as amended (File Nos. 33-5621 and 33-36925);
3. Registration Statement on Form S-8 covering the
Scientific-Atlanta, Inc. 1981 Incentive Stock Option
Plan (File No. 33-781);
4. Registration Statement on Form S-8 covering the
Scientific-Atlanta, Inc. Non-Employee Directors Stock
Option Plan (File No. 33-35313);
5. Registration Statement on Form S-8 covering the
Scientific-Atlanta, Inc. Voluntary Employee Retirement
and Investment Plan (File No. 33-69827);
6. Registration Statement on Form S-8 covering the
Scientific-Atlamta. Inc. 1992 Employee Stock Option
Plan (File No. 33-69218);
7. Registration Statement on Form S-8 covering the
Scientific-Atlanta, Inc. Restricted Stock Award
granted to James F. McDonald (File No. 33-52417); and
8. Registration Statement on Form S-8 covering the
Scientific-Atlanta, Inc. 1993 Restricted Stock Awards
(File No. 33-52135).
ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 23, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 1, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-1-1994
<PERIOD-START> JUL-3-1993
<PERIOD-END> JUL-1-1994
<EXCHANGE-RATE> 1.0
<CASH> 123,387
<SECURITIES> 0
<RECEIVABLES> 209,984
<ALLOWANCES> 3,839
<INVENTORY> 136,813
<CURRENT-ASSETS> 505,037
<PP&E> 141,298
<DEPRECIATION> 55,510
<TOTAL-ASSETS> 640,219
<CURRENT-LIABILITIES> 202,266
<BONDS> 1,088
<COMMON> 37,747
0
0
<OTHER-SE> 141,179
<TOTAL-LIABILITY-AND-EQUITY> 640,219
<SALES> 811,583
<TOTAL-REVENUES> 811,583
<CGS> 566,729
<TOTAL-COSTS> 760,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 73
<INTEREST-EXPENSE> 1,066
<INCOME-PRETAX> 51,502
<INCOME-TAX> 16,480
<INCOME-CONTINUING> 35,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,022
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
