<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCIENTIFIC-ATLANTA, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Scientific Atlanta(Logo)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Scientific-Atlanta, Inc., will be
held on Wednesday, November 8, 1995, at 9:00 a.m., local time, at the Swissotel,
3391 Peachtree Road, N.E., Atlanta, Georgia 30326 for the purpose of considering
and voting upon the following matters, all of which are described in the
attached Proxy Statement:
1. The election of three directors;
2. A proposal to approve the Corporation's Stock Plan for Non-Employee
Directors;
3. A proposal to ratify the selection of Arthur Andersen LLP as
independent auditors of the Corporation for the current fiscal year; and
4. Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on September 22, 1995,
shall be entitled to notice of and to vote at the meeting or any adjournment
thereof.
A proxy solicited by the Board of Directors, together with a Proxy
Statement and a copy of the 1995 Annual Report, are enclosed herewith. Please
sign, date, and return the proxy promptly in the enclosed business reply
envelope. If you attend the meeting and wish to vote in person, you may do so by
withdrawing your proxy prior to the meeting.
By order of the Board of
Directors
/s/ William E. Eason, Jr.
-------------------------
William E. Eason, Jr.
Secretary
October 3, 1995
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
Scientific-Atlanta, Inc., One Technology Parkway, South, Norcross, Georgia 30092
<PAGE> 3
SCIENTIFIC-ATLANTA, INC.
ONE TECHNOLOGY PARKWAY, SOUTH
NORCROSS, GEORGIA 30092
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Scientific-Atlanta, Inc. (the
"Corporation"), for use at the Annual Meeting of Shareholders of the Corporation
(the "Annual Meeting") to be held on November 8, 1995, and any adjournment
thereof. Shareholders of record as of the close of business on September 22,
1995 (the "Record Date") are entitled to notice of and to vote at the meeting.
On the Record Date, the Corporation had 77,044,007 shares of Common Stock, par
value $0.50 per share (the "Common Stock"), outstanding and entitled to vote at
the meeting, with each share entitled to one vote.
Copies of solicitation materials will be furnished to brokerage houses and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock. The Corporation has engaged Morrow & Co., Inc. to
assist in the solicitation of proxies from brokers, banks and their nominees
which are shareholders of record, at a cost of approximately $7,000. The costs
of this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Corporation. In addition to solicitations by
mail, directors and regular employees of the Corporation may solicit proxies in
person or by telephone or telegraph without receiving any compensation in
addition to their regular compensation as directors or employees.
Proxies are first being mailed to shareholders on October 3, 1995. Any
proxy which is returned by a shareholder properly completed and which is not
revoked will be voted at the meeting in the manner specified therein. Unless
contrary instructions are given, the persons designated as proxy holders in the
accompanying proxy card (or their substitutes) will vote FOR the election of the
Board of Directors' nominees, FOR Proposals 2 and 3, and in the proxy holders'
discretion with regard to all other matters. Any proxy given pursuant to this
solicitation may be revoked prior to the meeting at any time by delivering an
instrument revoking it, or a duly executed proxy bearing a later date, to the
Secretary of the Corporation. Any proxy given pursuant to this solicitation may
also be revoked by any shareholder who attends the meeting and gives oral notice
of his election to vote in person, without compliance with any other
formalities.
The presence at the meeting, in person or by proxy, of a majority of the
shares of Common Stock outstanding on the Record Date will constitute a quorum
at the meeting. Votes cast by proxy or in person at the Annual Meeting will be
counted by the persons appointed by the Corporation to act as the inspectors of
election for the meeting. Inspectors of election will treat shares represented
by proxies that reflect abstentions or include "broker non-votes" as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. With the exception of the proposal regarding the Stock Plan for
Non-Employee Directors (the "Stock Plan"), for which proposal abstentions will
be treated as "no" votes and will be included in the calculations for the
purpose of determining whether the matters have been approved, abstentions or
"broker non-votes" do not constitute a vote "for" or "against" any matter and
thus will be disregarded in any calculation of "votes cast." If a broker or
nominee has physically indicated on the proxy that it does not have
discretionary authority to vote on a matter, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares may be considered entitled to vote for quorum purposes and entitled to
vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees,
will be voted in favor of the proposals and the nominees for the Board of
Directors, as indicated in the accompanying proxy card.
<PAGE> 4
CERTAIN BENEFICIAL OWNERSHIP
The following table sets forth information, as of the dates specified in
the notes below, as to shares of the Corporation's Common Stock held by persons
known to the Corporation to be the beneficial owners of more than five percent
of the Corporation's Common Stock based upon information publicly filed by such
persons:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
- - ---------------------------------------------------- ----------------- -----------
<S> <C> <C>
FMR Corp. 8,684,204(2) 11.5%
82 Devonshire Street
Boston, Massachusetts 02109
The Equitable Companies Incorporated 7,685,500(3) 10.0%
787 Seventh Avenue
New York, New York 10019
SunBank Capital Management, 5,020,101(4) 6.6%
National Association
200 South Orange Avenue
Orlando, Florida 32801
Twentieth Century Companies, Inc. 3,898,300(5) 5.1%
4500 Main Street
Kansas City, Missouri 64141-9210
</TABLE>
- - ---------------
(1) The percent of class was computed by each beneficial owner as of a date
immediately preceding the filing of its Schedule 13G with the Securities and
Exchange Commission.
(2) Based on a Schedule 13G, dated February 13, 1995, filed with the Securities
and Exchange Commission by FMR Corp. and related entities. Of such shares,
FMR Corp. has sole voting power over 113,924 shares and sole dispositive
power over 8,684,204 shares. Includes shares held as trustee for certain of
the Corporation's employee benefit plans.
(3) Based on a Schedule 13G, dated June 9, 1995, filed with the Securities and
Exchange Commission by The Equitable Companies Incorporated and related
entities, including Alliance Capital Management L.P. The Equitable Companies
Incorporated and related entities have sole voting power over 7,031,800
shares and sole dispositive power over 7,685,500 shares.
(4) Based on a Schedule 13G, dated February 3, 1995, filed with the Securities
and Exchange Commission by SunBank Capital Management and related entities.
SunBank Capital Management and related entities have sole voting power over
3,655,631 shares, shared voting power over 9,570 shares, dispositive power
over 4,905,831 shares, and shared dispositive power over 34,030 shares.
(5) Based on a Schedule 13G, dated February 10, 1995, filed with the Securities
and Exchange Commission by Twentieth Century Companies, Inc. and related
entities, including Investors Research Corporation. Of such shares,
Twentieth Century Companies, Inc. and related entities have sole voting
power over 3,618,400 shares and sole dispositive power over 3,898,300
shares.
2
<PAGE> 5
The following table sets forth information as of June 30, 1995, regarding
ownership of the Corporation's Common Stock and Common Stock equivalents by each
director of the Corporation, by each executive officer named in the Summary
Compensation Table and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
(B)
(A) NO. OF SHARES (C)
NO. OF SHARES SUBJECT TO OPTIONS NO. OF SHARES (D)
OWNED EXERCISABLE PRIOR TO OF RESTRICTED STOCK DEFERRED COMMON
NAME DIRECTLY(1) AUGUST 31, 1995 NOT YET VESTED(2) STOCK EQUIVALENTS(3)
- - -------------------------------- ------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Marion H. Antonini.............. 4,000 41,250 -- 2,318
William E. Kassling............. 9,000 41,250 -- --
Wilbur Branch King.............. 20,324 20,626 -- --
Mylle Bell Mangum............... 4,730 7,500 -- --
Alonzo L. McDonald.............. 4,000 48,750 -- --
James F. McDonald............... 94,262 337,500 81,936(4) --
David J. McLaughlin............. 14,047 21,250 -- --
James V. Napier................. 14,118 84,376 -- 6,182
Sidney Topol.................... 32,452 -- -- --
John H. Levergood............... 1,046 20,000 16,498 --
Raymond D. Lucas................ 15,086 95,000 10,332 --
Jack W. Simpson, Sr............. 14,912 42,000 12,784 --
Harvey A. Wagner................ 6,138 25,000 7,300 --
All Directors and Executive
Officers as a Group........... 335,659 1,157,902 189,650 8,500
</TABLE>
The total shares beneficially owned by each director and executive officer
(columns A, B and C) constituted less than 1% of the outstanding Common Stock at
June 30, 1995. The aggregate shares beneficially owned (columns A, B and C) by
all directors and executive officers represented approximately 2.2% of the
outstanding Common Stock at that date.
- - ---------------
(1) Each person has sole voting and dispositive power with respect to the shares
shown. With respect to executive officers, the number of shares directly
owned includes shares held in the Corporation's Voluntary Employee
Retirement and Investment Plan (401k), with respect to which such officers
have voting and dispositive power.
(2) This column sets forth the number of performance-based restricted shares of
Common Stock which were granted under the Corporation's Long-Term Incentive
Plan (the "LTIP") and which had not vested as of June 30, 1995.
(3) Represents the number of shares of the Corporation's Common Stock used in
determining the value of the Phantom Stock Sub-Account under the Deferred
Compensation Plan for Non-Employee Directors. Under the terms of this Plan,
no shares are ever issued to the non-employee directors and they have no
voting or dispositive power with respect to any shares under this Phantom
Stock Sub-Account.
(4) Also includes 50,000 shares of time-based restricted stock awarded to Mr.
McDonald in connection with his employment by the Corporation, which had
not vested as of June 30, 1995, but with respect to which Mr. McDonald has
voting power.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Articles of Incorporation of the Corporation provide for the division
of the Board of Directors into three classes, with the directors in each class
serving for a term of three years. At the Annual Meeting, three nominees for
director are to be elected to serve until the Annual Meeting of Shareholders in
1998 and until their successors are elected and qualified. All of the nominees
for election as directors at this meeting, and all directors whose term of
office will continue after the Annual Meeting, are currently directors of the
Corporation.
3
<PAGE> 6
Directors are to be elected by a plurality of the votes cast at the Annual
Meeting in person or by proxy by the holders of shares entitled to vote in the
election. The Board of Directors is informed that all of the nominees are
willing to serve as directors, but if any of them should decline or be unable to
act as a director, the persons designated as proxy holders in the accompanying
proxy card(s) (or their substitutes) will vote for such substitute nominee or
nominee(s) as may be designated by the Board of Directors unless the Board
reduces the number of directors accordingly.
NOMINEES FOR DIRECTOR
The following information has been furnished by the respective nominees for
election as directors for a term expiring in 1998.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- - --------------------- --------------------------------------------------------- --------
<S> <C> <C>
Wilbur Branch King Attorney at Law, Of Counsel to Kilpatrick & Cody 1971
Alonzo L. McDonald Chairman and Chief Executive Officer, Avenir Group, Inc. 1985
James F. McDonald President and Chief Executive Officer of the Corporation 1993
</TABLE>
Mr. King was a partner in the law firm of Kilpatrick & Cody in Atlanta,
Georgia, for more than five years until his retirement in December 1986. Mr.
King has been Of Counsel to that firm since his retirement. Kilpatrick & Cody
represents the Corporation from time to time in certain legal matters. Mr. King
is 66.
Mr. Alonzo L. McDonald has been Chairman and Chief Executive Officer of
Avenir Group, Inc., a firm of private development bankers, for more than five
years. Previously, he was President and Vice Chairman of the Board of Bendix
Corporation and Managing Director and Chief Executive Officer for worldwide
operations of McKinsey & Company. He served as Director of the White House staff
during the Carter administration and in several other key government positions.
Mr. McDonald is 67 and is a director of CAE Industries and LaFarge Corporation.
Mr. James F. McDonald was elected President and Chief Executive Officer of
the Corporation, effective July 15, 1993. Mr. McDonald was a general partner of
J. H. Whitney & Company, a private investment firm, from 1991 until his
employment by the Corporation. 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 1986), and
subsequently Chairman and Chief Executive Officer of that corporation (1986 to
1989), and held a variety of positions with IBM Corporation (1963 to 1984). Mr.
McDonald is 55 and is a director of Burlington Resources, Inc. and Wachovia Bank
of Atlanta.
OTHER DIRECTORS
The following information has been furnished by the other directors, whose
terms of office will continue after the 1995 Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- - --------------------- --------------------------------------------------------- --------
<S> <C> <C>
Marion H. Antonini Chairman and Chief Executive Officer, Welbilt Corporation 1990
William E. Kassling Chairman and Chief Executive Officer, Westinghouse Air 1990
Brake Company
Mylle Bell Mangum Executive Vice President -- Strategic Management, Holiday 1993
Inn Worldwide
David J. McLaughlin President, McLaughlin and Company, Inc. 1987
James V. Napier Chairman of the Board of the Corporation 1978
Sidney Topol President, The Topol Group, Inc. 1972
</TABLE>
4
<PAGE> 7
Mr. Antonini has been Chairman of the Board of Welbilt Corporation since
July 1990 and President and Chief Executive Officer of that company since
September 1990. From 1986 to 1990, Mr. Antonini served as Chairman of KD
Equities, a merchant banking firm. Prior to that, he served as Group Vice
President of Xerox Corporation's Worldwide Operations from 1982 to 1986 and in
other executive positions with that company. Mr. Antonini, 65, is a director of
Beresford International, Vulcan Materials Company and Engelhard Corporation. His
term of office as a director of the Corporation expires in 1996.
Mr. Kassling was a Group Vice President of American Standard, Inc. for more
than five years before becoming Chairman of the Board and Chief Executive
Officer of Westinghouse Air Brake Company in March 1990. Mr. Kassling is 51 and
is a director of Dravo Corporation. His term of office as a director of the
Corporation expires in 1996.
Ms. Mangum has been Executive Vice President -- Strategic Management of
Holiday Inn Worldwide ("Holiday Inn") since August 1992. Ms. Mangum is also a
member of the Board of Directors and Executive Committee of Holiday Inn. From
1985 until August 1992, Ms. Mangum was Director, Corporate Planning and
Development with BellSouth Corporation. Ms. Mangum is 47 and is a director of
Reynolds Metals. Her term as a director of the Corporation expires in 1996.
Mr. McLaughlin, 59, has been President of McLaughlin and Company, Inc.
since 1985. From 1987 until 1990 he also served as Managing Principal of Sibson
& Company, Inc., consultants in the field of human resources. He is a director
of Exide Electronics Group, Inc., Smart & Final, Inc., HR Soft, Inc., Troy
Biosciences, Inc., and Cortez Software International, Inc. His term of office as
a director of the Corporation expires in 1997.
Mr. Napier has been Chairman of the Board of the Corporation since November
1992. Mr. Napier served as interim Chief Executive Officer of the Corporation
from December 1992 until July 1993. From 1988 to 1992, he was Chairman and
President of Commercial Telephone Group, Inc., a designer of telecommunications
products. From 1986 to 1988, he was an independent business consultant. From
March 1985 until March 1986, he served as President of HBO & Company, which
provides information processing materials and services to health care
facilities. Previously, he was Chairman and Chief Executive Officer of Contel
Corporation, a telecommunications company. Mr. Napier is 58 and is a director of
Engelhard Corporation, Vulcan Materials Company, HBO & Company, Intelligent
Systems, L.P., and Rhodes, Inc. His term of office as a director of the
Corporation expires in 1997.
Mr. Topol, 70, served as President of the Corporation from 1971 to 1983,
Chief Executive Officer from 1975 to 1987, and Chairman of the Board from 1978
to 1990. He is presently President of The Topol Group, Inc., a consulting and
investment firm, a position he has held for more than five years. Mr. Topol is a
director of Alpha Industries, Inc., Primestar Partners, and Wandel and Golterman
Technologies, Inc. He also serves as Chairman of the Massachusetts
Telecommunications Council. His term of office as a director of the Corporation
expires in 1997.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met five times during the 1995 fiscal year to
consider matters related to the Corporation's business. The Board of Directors
has an Executive Committee, an Audit Committee, a Human Resources and
Compensation Committee, a Governance and Nominations Committee and a Pension
Investment Committee. Each director attended more than 75% of the aggregate of
the total number of meetings of the Board and the committees of which he or she
is a member during the period of the 1995 fiscal year that he or she served as a
director or committee member.
The Executive Committee acts for the Board of Directors between meetings,
subject to certain limitations. Members of the Executive Committee, which met
once during the 1995 fiscal year, are directors Antonini, Kassling, King, James
F. McDonald and Napier. Mr. Napier is Chairman.
The Audit Committee makes recommendations as to the selection of
independent auditors, evaluates the audit services and the Corporation's
financial, accounting and internal audit policies, functions and systems,
5
<PAGE> 8
and approves the engagement of independent auditors to provide non-audit
services. The Audit Committee met three times during the 1995 fiscal year. The
Audit Committee consists of directors Antonini, Kassling, Alonzo L. McDonald,
Napier and Topol. Mr. McDonald is Chairman.
The Human Resources and Compensation Committee makes determinations as to
the compensation and benefits to be paid to the Corporation's officers and key
employees. The Human Resources and Compensation Committee met three times during
the 1995 fiscal year. The members of the Committee are directors Antonini, King,
Mangum, McLaughlin and Napier. Mr. McLaughlin is Chairman.
The Governance and Nominations Committee considers nominations for
directors (and will consider nominees by shareholders) and provides oversight of
the governance of the Board of Directors, including issues concerning size,
committee structure, membership and compensation of the Board. Nominations
should be in writing, addressed to Chairman, Governance and Nominations
Committee, c/o the Office of the General Counsel, Scientific-Atlanta, Inc., One
Technology Parkway, South, Norcross, Georgia 30092. The Governance and
Nominations Committee met twice during the 1995 fiscal year. The members of the
Committee are directors Antonini, Kassling, King and Napier. Mr. King is
Chairman.
The Pension Investment Committee reviews the performance of firms which
provide investment advice and services to the Corporation on pension investment
matters. Members of this Committee are directors Mangum, Alonzo L. McDonald,
McLaughlin and Topol. Mr. Topol is Chairman. The Committee met twice during the
1995 fiscal year.
COMPENSATION OF OFFICERS AND DIRECTORS
CASH COMPENSATION
The following table sets forth in the prescribed format the compensation
paid to the Chief Executive Officer and the other four most highly compensated
executive officers of the Corporation for services rendered in all capacities
during the Corporation's last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
---------------------------------- RESTRICTED -------- ALL
OTHER STOCK SECURITIES LTIP OTHER
NAME AND FISCAL ANNUAL AWARD(S) UNDERLYING PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMP.($)(1) ($)(2) OPTIONS(#) ($)(3) SATION($)(4)
- - ---------------------------- ------ --------- -------- ----------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James F. McDonald........... 1995 $522,115 $429,600 $ -- $ -- 200,000 $ 82,218 $ 86,731
President and Chief 1994 494,231 344,000 -- 1,350,000 350,000 103,808 154,016
Executive Officer 1993 -- -- -- -- -- -- --
John H. Levergood........... 1995 307,673 197,700 2,200 -- 40,000 216,630 20,124
Senior Vice President 1994 282,769 161,500 1,816 -- --(5) 53,610 17,560
and Group President(6) 1993 137,596 217,800 -- -- 60,000 -- 8,031
Raymond D. Lucas............ 1995 239,271 150,600 -- -- 16,000 151,385 16,529
Senior Vice President, 1994 228,308 127,200 -- -- 15,000 33,579 15,989
Strategic Operations 1993 220,308 113,300 -- -- 33,000 -- 14,124
Jack W. Simpson, Sr......... 1995 266,539 125,600 -- -- 24,000 141,351 78,633
Senior Vice President 1994 177,885 159,500 -- -- 60,000 41,564 126,213
and Group President(7) 1993 -- -- -- -- -- -- --
Harvey A. Wagner............ 1995 240,000 150,000 -- -- -- 15,786 193,437
Senior Vice President, 1994 13,846 -- -- -- 50,000 -- 70,477
Chief Financial Officer 1993 -- -- -- -- -- -- --
and Treasurer(8)
</TABLE>
- - ---------------
(1) The amounts disclosed in this column represent preferential earnings on
deferred compensation.
6
<PAGE> 9
(2) This column does not include performance-based restricted stock awards. See
"Long-Term Incentive Awards" below. On June 30, 1995, the number and value
of all outstanding grants of restricted stock held by the named executive
officers were as follows: Mr. McDonald 81,936 shares/$1,802,592; Mr.
Levergood 16,498 shares/$362,956; Mr. Lucas 10,332 shares/$227,304; Mr.
Simpson 12,784 shares/$281,248; and Mr. Wagner 7,300 shares/$160,600.
(3) The amounts disclosed in this column for fiscal 1995 include cash payouts to
Messrs. Levergood, Lucas and Simpson for achievement of performance
objectives related to fiscal years 1993, 1994 and 1995 under the
Corporation's 1990 Long-Term Incentive Plan of $174,158, $124,786 and
$108,438, respectively, and for each of the listed executive officers the
dollar value of the portion of the performance-based restricted stock
awards previously granted under the Corporation's Long-Term Incentive Plan
(adopted in 1994) which vested in fiscal 1995 as a result of the
achievement by the Corporation of certain performance objectives during
fiscal 1995. The dollar value of stock awards was calculated based on the
closing market price of the Corporation's Common Stock on August 23, 1995,
the date the Human Resources and Compensation Committee of the Board
confirmed the vesting of such awards.
(4) For the 1995 fiscal year, this column includes $60,698, $64,144 and $183,351
paid as relocation assistance to Messrs. McDonald, Simpson and Wagner,
respectively, and $18,591, $12,835, $9,148, $8,691, and $5,923 of term life
insurance premiums paid by the Corporation on behalf of Messrs. McDonald,
Levergood, Lucas, Simpson and Wagner, respectively. The amounts also
include $139 contributed by the Corporation on behalf of Mr. Lucas to the
Employee Stock Purchase Plan. All other amounts in fiscal year 1995
represent contributions to the Corporation's 401(k) Plan.
(5) No options were granted to Mr. Levergood in the Corporation's 1994 fiscal
year. Mr. Levergood received a two-year grant of options during the 1993
fiscal year.
(6) Mr. Levergood re-joined the Corporation as an officer in December 1992. He
had retired from the Corporation in December 1989. The amounts shown as
salary in the above table exclude $45,224 in retirement benefits and
$158,250 in consulting fees paid to Mr. Levergood in fiscal 1993.
(7) Mr. Simpson joined the Corporation as Senior Vice President, Network Systems
Group in fiscal 1994.
(8) Mr. Wagner joined the Corporation as Senior Vice President, Chief Financial
Officer and Treasurer in fiscal 1994.
STOCK OPTIONS
The following tables set forth certain information in the prescribed
formats with respect to options granted and exercised under the Corporation's
various stock option plans during the last fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(#) YEAR ($/SH) DATE(2) 5%($) 10%($)
- - -------------------------------- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James F. McDonald............... 150,000 9.4% $21.9375 8/24/04 $2,069,456 $5,244,409
50,000 3.1 21.2500 2/03/05 668,201 1,693,351
John H. Levergood............... 40,000 2.5 21.9375 8/24/04 551,855 1,398,509
Raymond D. Lucas................ 16,000 1.0 21.9375 8/24/04 220,742 559,404
Jack W. Simpson, Sr............. 24,000 1.5 21.9375 8/24/04 331,113 839,105
Harvey A. Wagner................ --(3) -- -- -- -- --
</TABLE>
- - ---------------
(1) The dollar amounts in these columns are determined using assumed rates of
appreciation set by the Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, in the
7
<PAGE> 10
market value of the Corporation's Common Stock. Such amounts are based on
the assumption that the named persons hold the options for their full
10-year term. The actual value of the options will vary in accordance with
the market price of the Corporation's Common Stock.
(2) Stock options were awarded under the Corporation's 1992 Employee Stock
Option Plan (the "1992 Plan"). The options become exercisable at the rate
of 25% per year commencing on the date of grant, except that if a change of
control occurs (as defined in the 1992 Plan), all options become
exercisable immediately. Options under the 1992 Plan may be exercised
within a period of two years following a termination by reason of
retirement, within one year following a termination by reason of death or
disability, and within 30 days following a termination for other reasons,
except for cause, in which case the option expires immediately upon the
giving of the notice of such termination.
(3) No options were granted to Mr. Wagner in the Corporation's 1995 fiscal year.
In connection with his employment by the Corporation during the 1994 fiscal
year, Mr. Wagner received a two-year grant of options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- - ------------------------- ----------- ----------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C>
James F. McDonald........ -- $ 0 225,000 / 325,000 $1,189,844 / $1,213,281
John H. Levergood........ 45,000 511,875 10,000 / 45,000 625 / 161,250
Raymond D. Lucas......... -- 0 87,250 / 52,500 1,263,876 / 547,407
Jack W. Simpson, Sr...... -- 0 36,000 / 48,000 150,375 / 151,125
Harvey A. Wagner......... -- 0 25,000 / 25,000 121,875 / 121,875
</TABLE>
- - ---------------
(1) The amounts in this column are calculated using the difference between the
closing market price of the Corporation's Common Stock at the end of the
Corporation's 1995 fiscal year and the option exercise prices.
LONG-TERM INCENTIVE AWARDS
No long-term incentive awards were made during fiscal year 1995 to the
executive officers named in the Summary Compensation Table above.
Performance-based restricted shares awarded in 1994 to these executive officers
were intended to cover fiscal years 1994 and 1995. The shares awarded to Mr.
Wagner in fiscal year 1994 in connection with his employment by the Corporation
related only to performance during fiscal year 1995 and subsequent fiscal years.
RETIREMENT PLANS AND OTHER ARRANGEMENTS
Defined Benefit Retirement Plan. The Corporation presently has in effect a
non-contributory retirement plan (the "Retirement Plan") for the benefit of its
employees which provides for the payment of fixed benefits upon normal
retirement at age 65 on the basis of years of service and all cash compensation
of each employee. Examples of annual retirement benefits payable under the
Retirement Plan are set forth in the table below. These examples are based on
the following: (i) retirement at the normal retirement age of 65, (ii) "average
compensation" is the average compensation in the highest consecutive five of the
last ten calendar years of service that immediately precede retirement, and
(iii) the benefits are straight life annuities. Benefits under the Retirement
Plan are not reduced by Social Security benefits. The years of service, as of
June 30, 1995, credited for retirement benefits for the persons named in the
Summary Compensation Table are James F.
8
<PAGE> 11
McDonald, 1 11/12 years; John H. Levergood, 23 11/12 years; Raymond D. Lucas,
5 11/12 years; Jack W. Simpson, Sr., 1 2/3 year; and Harvey A. Wagner, 1 year.
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
AVERAGE ANNUAL -----------------------------------------------
COMPENSATION 15 20 25 30 35
--------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000......................... $25,814 $33,730 $42,458 $42,753 $51,628
150,000......................... 30,797 41,324 51,758 52,118 53,052
175,000......................... 30,797 41,324 51,758 52,118 53,052
200,000......................... 30,797 41,324 51,758 52,118 53,052
225,000......................... 30,797 41,324 51,758 52,118 53,052
250,000......................... 30,797 41,324 51,758 52,118 53,052
500,000......................... 30,797 41,324 51,758 52,118 53,052
</TABLE>
- - ---------------
(1) The Corporation also maintains a supplemental executive retirement plan for
certain key executive officers, including Messrs. McDonald, Lucas, Simpson
and Wagner. Provisions of the plan include a ten-year vesting requirement
and a normal retirement age of 65. Benefits are based upon fifty percent of
final average pay with offsets for the Retirement Plan, Social Security
benefits and any retirement benefits payable from former employers. The
Corporation has also agreed to provide to Mr. Levergood supplemental
retirement benefits based upon Mr. Levergood's average annual earnings
multiplied by a retirement factor. Under this arrangement, Mr. Levergood
could receive retirement benefits of up to sixty percent of his average
annual earnings (base salary and annual bonus) for the highest three years
of his employment with the Corporation. The table does not include such
supplemental benefits.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") changed the Internal
Revenue Code by placing an annual maximum limit of $150,000 on the compensation
which may be considered in determining a participant's benefits. Previous to
this change in the statute, the Internal Revenue Code allowed a maximum limit of
$235,840 (i.e., $200,000, indexed for a cost of living adjustment). Effective
July 1, 1994, the Corporation adopted a nonqualified Restoration Retirement Plan
("Restoration Plan") to replace the benefits to certain participants that had
been eliminated by the changes made to the Internal Revenue Code by the OBRA.
Thus, effective July 1, 1994, participants' compensation, as defined in the
Restoration Plan, in excess of the newly prescribed limit and up to what the
limit would have been had OBRA not been enacted will be considered under the
Restoration Plan. Participants under the Corporation's Supplemental Executive
Retirement Plan ("SERP") will continue to have all compensation, as defined in
the SERP, in excess of the maximum limit prescribed by the Internal Revenue Code
considered in determining their pension benefits.
Agreements with Certain Persons. The Corporation has letter agreements
with Messrs. Levergood, Lucas, Simpson and Wagner which provide for the
continuation of salary and certain benefits for a 12-month period (24-months
with respect to Mr. Levergood) in the event of termination of employment without
cause. The Corporation also has agreements with Messrs. McDonald, Lucas, Simpson
and Wagner which provide for the payment of two times the executive's
compensation plus the continuation of the executive's benefits for two years in
the event the executive's employment with the Corporation is terminated within
two years from the time of a change of control (as defined in the agreement) of
the Corporation, unless such termination is for cause. The Corporation has an
agreement with Mr. Levergood which entitles Mr. Levergood to receive the
continuation of his base salary for up to 36 months in the event Mr. Levergood
is terminated by the Corporation within 18 months of a change of control of the
Corporation, as defined in such agreement. In the event Mr. Levergood
voluntarily terminates his employment within 18 months of a change of control of
the Corporation, Mr. Levergood is entitled to a continuance of his base salary
for 24 months or his normal retirement date or death, whichever occurs first.
DIRECTOR COMPENSATION
Annual Fees. Each Director who is not an employee receives a $30,000
annual retainer, paid quarterly, and $1,250 for each meeting of the Board and
each meeting of a committee he or she attends. The Chairman of the Board and
each Committee chair receive an additional annual retainer of $55,000 and
$5,000, respectively, paid quarterly. Non-Employee Directors may elect to defer
all or a portion of their retainer and
9
<PAGE> 12
meeting fees under the Corporation's Non-Employee Director Deferred Compensation
Plan. At the election of the participant, deferred amounts are deposited into
either an interest account, which earns interest at a rate set annually by the
Human Resources and Compensation Committee, or into a phantom stock account,
which is deemed to represent the number of shares of the Corporation's Common
Stock which the amount deferred could purchase at the market price of such stock
at the time of deferral. If the proposed Stock Plan described in Proposal 2 is
approved by the Corporation's shareholders, the annual retainer payable to each
Non-Employee Director will be reduced to $25,000.
Non-Employee Director Retirement Plan. Under the Retirement Plan for
Non-Employee Directors, each director who is not an employee of the Corporation
("Non-Employee Director"), who has been a member of the Board of Directors for
at least 36 consecutive months and who retires on or after his 65th birthday is
entitled to receive for the remainder of his life an annual retirement benefit
equal to the annual retainer paid by the Corporation to its directors for the
last year that he was a director. If the proposed Stock Plan for Non-Employee
Directors is approved, the value of stock received under that Plan will be added
to the award retainer to determine the annual retirement benefit. A reduced
benefit is provided for Non-Employee Directors who retire prior to age 65. The
Plan also provides for payments to a Non-Employee Director who becomes totally
and permanently disabled and for payments to the spouse of a Non-Employee
Director who dies.
Non-Employee Director Stock Option Plan. Under this plan, an initial
option to purchase 30,000 shares of the Corporation's Common Stock is granted to
each Non-Employee Director upon commencing his or her service on the Board. An
option to purchase an additional 7,500 shares is granted to each such director
on the date of each annual meeting of shareholders. The exercise price for each
option is the closing sale price of the Corporation's Common Stock on the New
York Stock Exchange on the date the option is granted. Each option is
exercisable as to 25% of the shares covered thereby after the expiration of one
year following the date of grant and for an additional 25% of the shares after
the expiration of each succeeding year. The options granted under this plan are
exercisable only by a member of the Board, except in certain limited
circumstances. If the proposed Stock Plan is approved by the Corporation's
shareholders, the initial option award to each new Non-Employee Director will be
reduced to 20,000 shares of the Corporation's Common Stock and the annual option
grants will be reduced to 5,000 shares.
Stock Plan for Non-Employee Directors. This plan, which is being submitted
to the Corporation's shareholders for approval pursuant to Proposal 2 in this
Proxy Statement, provides for 500 shares of the Corporation's Common Stock to be
granted to each director on the date of each annual meeting of the Corporation's
shareholders, commencing with the 1995 annual meeting. In addition, under this
plan, each director is allowed, at his or her election, to receive up to 100% of
his or her quarterly compensation from the Corporation in the form of shares of
the Corporation's Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Napier, who served as interim Chief Executive Officer of the
Corporation from December 1992 until July 1993, is a member of the Human
Resources and Compensation Committee.
10
<PAGE> 13
REPORT OF THE
HUMAN RESOURCES AND COMPENSATION COMMITTEE
ROLE OF THE COMMITTEE AND THE BOARD
The Human Resources and Compensation Committee sets compensation policies
for the Corporation's senior management within guidelines approved by the Board
of Directors. The Committee evaluates individual and corporate performance from
a short and long-term perspective, establishes base salaries and approves annual
and long-term incentives for all officers, and administers the Corporation's
option and incentive plans. The Committee's recommendations regarding the
compensation of the Chief Executive Officer are subject to the approval of the
full Board.
COMPENSATION PHILOSOPHY
The Corporation's executive compensation program is designed to attract,
motivate and retain highly qualified executives and to encourage the achievement
of superior performance. The program is designed to:
- Foster a performance oriented environment with a high level of variable
compensation based on the short and long-term performance of the
individual, team, business unit and Corporation against demanding goals
and objectives.
- Provide total compensation opportunities which exceed industry medians
for superior financial results and outstanding personal performance.
- Align the interests of the Corporation's executives and shareholders
through the use of stock-based compensation plans.
BASE SALARIES
The Corporation positions its base salaries to be fully competitive with
the range of compensation levels of comparably-sized, high-technology companies
and with the Corporation's direct business competitors which have similar market
characteristics. National surveys such as Hewitt Associates' Total Compensation
Database(TM) and Radford Associates' Management Total Compensation Report and,
periodically, independent compensation consultants are utilized by the Committee
when determining such salaries.
In determining whether the base salaries of executives, including the Chief
Executive Officer, should be increased, the Committee takes into account
individual performance, performance of the operations directed by that
executive, and the positioning of compensation within established salary ranges.
INCENTIVE COMPENSATION
Under the Corporation's compensation philosophy, the majority of
compensation is intended to be payable under incentive plans. Payments and
awards under these incentive plans are based on the achievement of annual and
long-term goals and, accordingly, are "at risk". Executives of the Corporation
are eligible to participate in the following incentive plans as determined by
the Committee:
Senior Officer Annual Incentive Plan. This plan has been designed to
qualify as "performance-based" compensation under Internal Revenue Code
(the "Code") Section 162(m) ("Code Section 162(m)"). The plan was approved
by the Corporation's shareholders and became effective in the Corporation's
1995 fiscal year. It is being used initially only for the Corporation's
Chief Executive Officer. Payments under the plan are based upon the
achievement of annual goals. The award for Mr. McDonald under the Senior
Officer Annual Incentive Plan is discussed in a following section of this
report.
Annual Incentive Plan. Under the Annual Incentive Plan (the "AIP"),
awards are made based on company, group, and division results and
assessments of individual performance. Quantitative and qualitative
objectives are weighted 60% and 40%, respectively, in setting "target"
awards for corporate staff participants and 75% and 25%, respectively, for
business unit participants.
11
<PAGE> 14
Quantitative objectives, consistent with annual business plans
approved by the Board, are used in determining the amount of the award
governed by the company, group or division performance. Awards under the
quantitative portion of the AIP are not made if the minimum thresholds are
not met. The Committee may also take into account non-recurring
extraordinary circumstances unrelated to the Corporation's financial
performance.
The award for Mr. McDonald under the AIP is discussed in the next
section of this report. AIP awards for Messrs. Wagner and Lucas were based
on the quantitative performance of the Corporation, as measured by profit
before tax, gross margin, return on net assets and revenue results versus
plan, and an assessment of their individual performance against personal
qualitative objectives. In the case of Messrs. Levergood and Simpson, the
quantitative portion of their awards was based on the performance of their
respective groups, as measured by the same financial factors already
discussed and to a lesser degree by corporate performance. They were also
assessed on their individual performance against personal qualitative
objectives.
Senior Officer and AIP awards for the Chief Executive Officer and the
four other most highly compensated executives of the Corporation are
included in the "Bonus" column of the Summary Compensation Table.
1990 Long-Term Incentive Plan. Senior executives of the Corporation
have been eligible to receive cash awards under the 1990 Long-Term
Incentive Compensation Plan. The primary purpose of the plan was to offer
participants an incentive to achieve superior earnings and return on
capital, thereby helping assure superior long-term total return to
shareholders. Under the plan, the Committee selected the participants,
determined the number of contingent cash incentives which were awarded to
each participant, and established the criteria for each three-year period
which determined the value of the incentives. Awards are based on certain
growth in earnings per share and return on capital goals over each
three-year period. For fiscal years 1995, 1994 and 1993, the three-year
objectives were exceeded and payments were made under the plan. No further
awards will be granted under this plan.
Stock Option Plan. A larger group of executives, including the
executives named in the Summary Compensation Table, also receive grants of
stock options under the provisions of the 1992 Plan. The objective of the
grants is to align the interests of the executives with the interests of
the Corporation's shareholders by affording the executives the opportunity
of a potentially significant financial benefit if their efforts result in
stock price appreciation. The Committee takes into account the performance
of the individual recipient, the number of options previously awarded to
any individual participant and the Corporation's grant levels compared to
competitive practices, targeting near a median grant posture. Grants made
in fiscal 1995 to Mr. McDonald and the other named executives are shown in
the Summary Compensation Table and in the Option Grants Table. During
fiscal 1995, a total of 1,590,440 shares were granted to 357 optionees.
Long-Term Incentive Plan. This plan, which was approved by the
Corporation's shareholders in November 1994, permits the Committee to use
one or more long-term incentives to motivate excellent long-term
performance. In fiscal year 1994, performance-based restricted stock awards
were granted, subject to shareholder approval of the LTIP, to 20 key
executives including Messrs. McDonald, Levergood, Lucas, Simpson and
Wagner. These awards will vest over a term of up to 10 years, based on
improvement in the Corporation's weighted average return on equity over the
previous five-year period. No awards were made during fiscal 1995 to the
key executives listed in the Summary Compensation Table. The dollar value
of shares that vested based on the Corporation's fiscal year 1995
performance are shown in the Summary Compensation Table.
POLICY RELATIVE TO CODE SECTION 162(M)
The Omnibus Budget Reconciliation Act of 1993 (OBRA) limited deductible
senior officer annual compensation to $1,000,000, unless the compensation
qualifies as "performance-based" compensation under Code Section 162(m). In
general, the Corporation will seek to maximize the use of the
"performance-based" exemption provided under Code Section 162(m). Although the
new Senior Officer Annual Incentive Plan and
12
<PAGE> 15
the new LTIP have been designed to conform to the requirements of Code Section
162(m), the initial grant of rights to receive performance-based restricted
stock awards under the LTIP did not meet the requirements of Code Section 162(m)
since such awards were granted more than 90 days after the beginning of the 1994
fiscal year. The Committee also believes that inclusion of qualitative
(non-quantitative) objectives play an important role in incentive plans. The
Committee will continue to base a portion of incentive payments on such
qualitative assessments, even though they may not meet the Code Section 162(m)
requirements to qualify as "performance-based" compensation.
STOCK OWNERSHIP
The Committee believes that significant ownership of Common Stock by
officers and directors is desirable in that it more closely aligns the upside
and downside risk of return for these individuals with the Corporation's other
shareholders. As a result, the Corporation's officers and directors agreed
during fiscal year 1994 to increase their ownership over time to a level of one
times the annual salary for officers (three times in the case of the Chief
Executive Officer) and three times the annual retainer for outside directors. As
of the end of fiscal year 1995, officers' holdings averaged 2.6 times base
salaries and outside director holdings averaged 10.1 times annual retainers
(based on the closing price of the Common Stock at the 1995 fiscal year-end),
although certain individual officers and directors had not yet achieved the
respective ownership targets.
CHIEF EXECUTIVE OFFICER COMPENSATION
On July 15, 1993, Mr. James F. McDonald became the Corporation's President
and Chief Executive Officer. In setting his initial compensation arrangements,
the Committee emphasized a focus on long-term growth and success of the
Corporation. Mr. McDonald's base salary and annual incentive opportunity were
set somewhat lower than the median of competitive practice. He was, however,
granted stock options for 350,000 shares and also 100,000 shares of restricted
stock to align his potential remuneration directly with the returns to the
Corporation's other shareholders.
At the beginning of fiscal year 1995, Mr. McDonald's base salary was set
near the median for Chief Executive Officers of similarly-situated high
technology companies. This increase in base salary was fully warranted by Mr.
McDonald's excellent performance during his first year as Chief Executive
Officer. He was also granted a stock option of 100,000 shares.
Under the Senior Officer Annual Incentive Plan, Mr. McDonald had an
opportunity to earn a maximum of $330,000 if the Corporation achieved 125% or
more of its targeted performance as measured by profits before tax, gross
margin, return on net assets and sales (revenue). The results exceeded targeted
levels but did not reach the maximum in all cases. The Committee, therefore,
approved a payment of $209,600 per the provisions of the plan.
Mr. McDonald also had an opportunity to earn additional incentive pay under
the Annual Incentive Plan, based on his performance against qualitative
objectives. The Committee approved maximum payment of $220,000 based on
performance which clearly exceeded expectations. In reaching its decision, the
Committee noted excellent overall performance as evidenced by markedly improved
year over year results for all key financial indicators, progress in defining
the Corporation's overall strategy, strengthening relationships with key
customers, progress toward a worldwide manufacturing strategy, expansion of
initiatives to globalize the Corporation and progress toward developing a world
class quality culture. The combined total of Mr. McDonald's incentive payments
represented approximately 155% of the targeted amount.
Mr. McDonald was not a participant in the fiscal years 1993-1995
performance period under the 1990 Long-Term Incentive Plan. He did, however,
receive the right to 38,020 performance-based shares of restricted stock under
the Long-Term Incentive Plan adopted in 1994. Based upon the Corporation's 1995
fiscal year performance, the right to receive 3,802 shares under this award
vested.
13
<PAGE> 16
OTHER COMPENSATION PLANS
The Corporation also has various broad-based employee benefit plans.
Executives participate in these plans on the same terms as eligible,
non-executive employees, subject to any legal limits on the amounts that may be
contributed or paid to executives under the plans. The Corporation offers an
Employee Stock Purchase Plan pursuant to the provisions of Section 423 of the
Code under which employees may purchase Common Stock. The Voluntary Employee
Retirement and Investment Plan pursuant to the provisions of Section 401(k) of
the Code, permits employees to invest in a variety of funds on a pre-tax basis.
Matching contributions under the plan are made in Common Stock of the
Corporation.
The Corporation also maintains pension, insurance and other benefit plans
for its employees.
Submitted by the Human Resources and Compensation Committee:
David J. McLaughlin, Chairman
Marion H. Antonini
Wilbur Branch King
Mylle Bell Mangum
James V. Napier
PERFORMANCE GRAPH
The following graph shows a comparison of total return to shareholders for
the Corporation, the Standard & Poor's High Technology Index and the Standard &
Poor's 500 for the Corporation's last five fiscal years:
<TABLE>
<CAPTION>
S&P High
Measurement Period Technology
(Fiscal Year Covered) Scientific-Atlanta S&P 500 Index
<S> <C> <C> <C>
1990 100 100 100
1991 53 107 95
1992 87 120 100
1993 185 135 116
1994 197 139 127
1995 254 170 196
</TABLE>
14
<PAGE> 17
PROPOSAL NO. 2
PROPOSAL TO APPROVE
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
At the Annual Meeting, there will also be presented to the shareholders a
proposal to adopt the Corporation's Stock Plan for Non-Employee Directors (the
"Stock Plan"). The Board of Directors unanimously approved the Stock Plan and
recommends that the Corporation's shareholders approve this proposal to adopt
the Stock Plan.
The purpose of the Stock Plan is to aid the Corporation in attracting and
retaining highly qualified Non-Employee Directors, to provide additional
compensation as an incentive for Non-Employee Directors to contribute their best
efforts to the Corporation's success, and to emphasize and enhance the
Corporation's policy of seeking to have Non-Employee Directors maintain a
significant investment in the stock of the Corporation and thus a strong
commonality of interests with the shareholders.
ADMINISTRATION
The Stock Plan will be administered by the Governance and Nominations
Committee of the Corporation's Board of Directors or any other committee of the
Board which is vested by the Board with responsibility for administering the
Stock Plan (the "Committee"). The Committee will have the power to (i) interpret
the Plan, (ii) promulgate rules and regulations relating to the Plan, and (iii)
make all other determinations and take all other actions necessary or desirable
for the Stock Plan's administration. Decisions of the Committee regarding the
interpretation and administration of the Stock Plan are binding upon all
persons.
ELIGIBILITY
Participants under the Stock Plan will be the directors serving on the
Board who have not been employees of the Corporation or any of its subsidiaries
at any time during the twelve months preceding (i) the election by the
particular director, under the terms of the Stock Plan, to receive a portion of
his or her quarterly compensation from the Corporation in the form of shares of
the Corporation's Common Stock ("Elective Grant"), or (ii) the receipt by the
particular director of an annual stock award ("Stock Award") under the Stock
Plan (collectively, Elective Grants and Stock Awards are referred to as
"Awards"). For a Non-Employee Director to be eligible to receive a Stock Award
under the Stock Plan, he or she must have served on the Corporation's Board for
the entire period from the most recent annual meeting of the Corporation's
shareholders (prior to the annual meeting at which the Stock Award is to be
granted) to the annual meeting at which such Stock Award is granted (an
"Eligible Director"). Currently, there are nine directors serving on the Board
and eight directors would be eligible to participate in both types of Awards.
STOCK AWARDS
At each annual meeting of the shareholders of the Corporation, commencing
with the 1995 Annual Meeting and continuing through (and including) the 1999
annual meeting of the Corporation's shareholders, each Eligible Director will be
granted a Stock Award for 500 shares of the Corporation's Common Stock. Stock
certificates evidencing such Stock Awards (less any shares withheld at the
Eligible Director's request for payment of taxes, if any) will be issued and
delivered to such Eligible Directors as soon as practicable after the relevant
annual meeting of shareholders. Eligible Directors will not have any rights as
shareholders of the Corporation until the stock certificates evidencing Stock
Awards are issued. To the extent that stock dividends, distributions or other
rights have a record date subsequent to an annual meeting of shareholders but
prior to the issuance of stock certificates relating to Stock Awards,
appropriate adjustments to the number of shares included in the Stock Award
shall be made.
Eligible Directors may not assign, pledge, hypothecate or otherwise
transfer a right to, or interest in, a Stock Award, except that the
beneficiaries or heirs of an Eligible Director will receive the right to a Stock
Award if an Eligible Director dies after an annual meeting of shareholders at
which such Eligible Director was granted a Stock Award but before the issuance
of a stock certificate evidencing such Stock Award.
15
<PAGE> 18
ELECTIVE GRANTS
Each Non-Employee Director may elect to receive up to 100% of his or her
quarterly compensation from the Corporation in the form of shares of the
Corporation's Common Stock rather than in the form of cash. An election to
receive an Elective Grant must be made in writing by the Non-Employee Director
and must be delivered to the Secretary of the Corporation at least six months
and one day prior to the start of the fiscal quarter in which services by the
Non-Employee Director giving rise to the quarterly compensation will be
rendered. Such elections may be revoked or changed only by a writing delivered
to the Secretary of the Corporation at least six months and one day prior to the
fiscal quarter to which the quarterly compensation to be affected by the revoked
or changed election relates.
The number of shares of the Corporation's Common Stock that will be granted
under each Elective Grant will be equal to (i) the amount of quarterly
compensation that the Non-Employee Director has elected to receive in shares
divided by (ii) the fair market value per share of the Corporation's Common
Stock as of the last business day of the fiscal quarter, determined as the
closing price of such Common Stock on the New York Stock Exchange on the
applicable date. No fractional shares will be issued; they will be rounded to
the nearest whole share. The Corporation will issue stock certificates
evidencing the Elective Grants (less any shares withheld for taxes, if any) as
soon as practicable after the determination of the number of shares to be
granted.
Non-Employee Directors may not assign, pledge, hypothecate or otherwise
transfer a right to, or interest in, an Elective Grant, except that the
beneficiaries or heirs of a Non-Employee Director will receive the right to an
Elective Grant in the event of the death of such Non-Employee Director prior to
the issuance of a stock certificate evidencing such Elective Grant.
AMENDMENT OF STOCK PLAN
The Stock Plan may be amended at any time and from time to time by the
Committee with the approval of the Corporation's Board of Directors. No
amendment to the Stock Plan may be made without the approval of the shareholders
of the Corporation if such amendment would (i) change the calculation of the
Awards so as to increase the value of the Awards to the Non-Employee Directors,
(ii) increase the frequency of the Awards, (iii) materially increase in any
other way the benefits to the Non-Employee Directors under the Stock Plan, (iv)
materially modify the portions of the Stock Plan defining the directors eligible
to participate in the Stock Plan, or (v) disqualify a Non-Employee Director from
being a "disinterested" administrator (within the meaning of Rule 16b-3 or any
successor rule of the Securities and Exchange Commission) of any stock-based
plan of the Corporation. Notwithstanding the foregoing, in no case may the Stock
Plan provisions pertaining to the amount or determination of Stock Awards or the
determination of Non-Employee Directors eligible to receive Stock Awards be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
EFFECTIVE DATE
The Stock Plan will be effective as of August 23, 1995, when the Board of
Directors approved the Stock Plan, provided that the Stock Plan is approved by
the shareholders no later than August 22, 1996. If not so approved by the
shareholders, the Stock Plan shall be of no force and effect.
CHANGE IN CAPITALIZATION
In the event of a change in the outstanding shares of the Corporation's
Common Stock by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, reorganizations, or any other changes in corporate
structure, the number and/or the type of shares to be awarded under the Stock
Plan shall be automatically adjusted as appropriate to prevent an unfavorable
effect upon the value of the Awards to be made under the Stock Plan.
16
<PAGE> 19
VALUE OF STOCK AWARDS AND SHARES TO BE GRANTED UNDER STOCK AWARDS
The chart below states the number of shares of Common Stock and estimated
value of such shares that each Non-Employee Director, and the Non-Employee
Directors as a group, will receive as Stock Awards in the 1996 fiscal year.
NEW PLAN BENEFITS
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<CAPTION>
POSITION DOLLAR VALUE($)(1) NUMBER OF SHARES
----------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Each Non-Employee Director........................... $ 11,000 500
All Non-Employee Directors as a group................ 88,000 4,000
</TABLE>
- - ---------------
(1) The dollar value is based on the closing price per share of the
Corporation's Common Stock as of June 30, 1995.
The number of shares that Eligible Directors may receive in the future
under an Elective Grant in lieu of their quarterly compensation is not
determinable.
AVAILABILITY OF STOCK PLAN
Copies of the Stock Plan are available upon request directed to William E.
Eason, Jr., Senior Vice President and Secretary, Scientific-Atlanta, Inc., One
Technology Parkway, South, Norcross, Georgia 30092.
OTHER CHANGES TO DIRECTOR COMPENSATION
If the Stock Plan is approved by the shareholders, the Corporation's
Non-Employee Director compensation scheme will be revised as follows. The annual
cash retainer payable to Non-Employee Directors will be reduced from $30,000 to
$25,000. The Corporation's Stock Option Plan for Non-Employee Directors will be
amended to reduce the number of shares of Common Stock underlying options
awarded annually to each Director from 7,500 to 5,000 and underlying the initial
option award to each new Director from 30,000 to 20,000. Finally, the
Corporation's Retirement Plan for Non-Employee Directors will be amended to
include the stock received under the Stock Plan in determining retirement
benefits for Non-Employee Directors.
VOTE REQUIRED
Approval of the Stock Plan requires the affirmative vote of a majority of
the shares of Common Stock present or represented and entitled to vote at the
Annual Meeting. For purposes of determining whether the requisite approvals have
been obtained, abstentions are included in the calculation for the purpose of
determining whether the matter has been approved and will be treated as "no"
votes, and "broker non-votes" will be disregarded in the calculations.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL
UNLESS A VOTE AGAINST THE PROPOSAL OR AN ABSTENTION IS SPECIFICALLY INDICATED.
17
<PAGE> 20
PROPOSAL NO. 3
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP to be the
independent auditors of the Corporation for the fiscal year ending June 28,
1996, and proposes that the shareholders ratify this selection at the Annual
Meeting. Arthur Andersen LLP also acted as independent auditors of the
Corporation for the 1995 fiscal year.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
Ratification of the selection of Arthur Andersen LLP requires the
affirmative vote of a majority of the shares voting on such proposal (i.e.,
shares voting for or against the proposal).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR AN ABSTENTION IS SPECIFICALLY
INDICATED.
OTHER MATTERS
The Board of Directors of the Corporation knows of no other matters which
are to be brought before the meeting. However, if any such other matters should
be presented for consideration and voting, it is the intention of the persons
named in the enclosed form of proxy to vote the proxy in accordance with their
best judgment.
SECTION 16 COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's officers,
directors, and persons who own more than ten percent of a registered class of
the Corporation's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than ten-percent shareholders are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to the
Corporation, the Corporation believes that during the last fiscal year, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with, except that Larry
L. Enterline and Robert C. McIntyre, newly-elected officers of the Corporation,
inadvertently filed their respective "Initial Statements of Beneficial Ownership
of Securities" on Form 3 with the SEC a few days late.
FORM 10-K ANNUAL REPORT
A copy of the Corporation's Annual Report on Form 10-K, including financial
statements and schedules, filed with the Securities and Exchange Commission for
the fiscal year ended June 30, 1995, is included in the Annual Report to
Shareholders which accompanies these proxy materials. Copies of any exhibit(s)
to the Form 10-K will be furnished on request and upon the payment of the
Corporation's expenses in furnishing such exhibit(s). Any request for exhibits
should be in writing addressed to William E. Eason, Jr., Senior Vice President
and Secretary, Scientific-Atlanta, Inc., One Technology Parkway, South,
Norcross, Georgia 30092.
18
<PAGE> 21
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals by shareholders for presentation at the 1996 Annual Meeting must
be received by the Corporation not later than June 5, 1996, in order to be
included in the Corporation's Proxy Statement and form of proxy relating to that
meeting. Such proposals should be in writing and addressed to William E. Eason,
Jr., Senior Vice President and Secretary, Scientific-Atlanta, Inc., One
Technology Parkway, South, Norcross, Georgia 30092.
By order of the Board of
Directors
/s/ William E. Eason, Jr.
-------------------------
William E. Eason, Jr.
Secretary
October 3, 1995
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT A
[ ]
SCIENTIFIC-ATLANTA, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 8, 1995
The undersigned hereby appoints James V. Napier, James F. McDonald and William E. Eason, Jr., and each of them, with full power of
substitution, attorneys and proxies of the undersigned, to represent the undersigned and to vote the Common Stock as specified on
the reverse side at the Annual Meeting of Shareholders of Scientific-Atlanta, Inc. to be held on November 8, 1995 at 9:00 a.m.,
local time, at the Swissotel, 3391 Peachtree Road, N.E., Atlanta, Georgia 30326, and at any adjournment thereof, upon the following
matters and in accordance with their best judgment with respect to any other matters which may properly come before the meeting,
all as more fully described in the Proxy Statement for said Annual Meeting (receipt of which is hereby acknowledged).
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS LISTED
IN PROPOSAL 1 AND PROPOSALS 2 AND 3, AND IN ACCORDANCE WITH THE BEST JUDGMENT OF THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS
INCIDENT TO THE CONDUCT OF THE MEETING OR WHICH MAY OTHERWISE PROPERLY COME BEFORE THE MEETING. IF ANY OF THE NOMINEES FOR DIRECTOR
ARE UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PROXY HOLDER WILL VOTE FOR SUCH OTHER PERSON OR PERSONS AS THE BOARD OF
DIRECTORS MAY RECOMMEND.
(Continued and to be signed and dated on the reverse side.) SCIENTIFIC-ATLANTA, INC.
P.O. BOX 11064
NEW YORK, N.Y. 10203-0064
THE BOARD OF DIRECTORS FAVORS AN AFFIRMATIVE VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND PROPOSALS 2 AND 3.
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] *EXCEPTIONS [X]
listed below for all nominees listed below
Nominess: Wilbur Branch King, Alonzo L. McDonald and James F. McDonald
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that
nominee's name in the space provided below.)
*Exceptions
--------------------------------------------------------------------------------------------------
2. To approve the Corporation's Stock Plan for Non-Employee 3. Ratification of selection of Arthur Andersen LLP as
Directors. independent auditors of the Corporation.
FOR [X] AGAINST [X] ABSTAIN [X] FOR [X] AGAINST [X] ABSTAIN [X]
Change of Address and/or
Comments Mark Here [X]
NOTE: Please date and sign this Proxy
exactly as name appears. When signing as
attorney, trustee, administrator, executor
or guardian, please give your title as such.
In the case of joint tenants, each joint
owner should sign.
DATE: , 1995
-----------------------------
-----------------------------------------
Signature
-----------------------------------------
Signature (if held jointly)
VOTES MUST BE INDICATED
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. (X) IN BLACK OR BLUE INK. [X]
</TABLE>
<PAGE> 23
EXHIBIT B
The following is being filed to comply with Item 10 of Schedule 14A.
SCIENTIFIC-ATLANTA, INC.
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSES
The purposes of this Plan are to aid the Company in attracting and
retaining highly qualified Non-employee Directors, to provide additional
compensation as an incentive for Non-employee Directors to contribute their best
efforts to the Company's success, and to emphasize and enhance the Company's
policy of seeking to have Non-employee Directors maintain a significant
investment in the stock of the Company and thus a strong commonality of
interests with the shareholders.
2. DEFINITIONS
As used in this Plan:
(a) The term "Annual Meeting" means the annual meeting of shareholders
of the Company.
(b) The term "Award" means an Elective Grant or a Stock Award awarded
under this Plan.
(c) The term "Board" means the Board of Directors of the Company.
(d) The term "Board Approval" means approval by a majority of the
directors present at a Board meeting at which a quorum is present.
(e) The term "Company" means Scientific-Atlanta, Inc., a Georgia
corporation.
(f) The term "Committee" shall mean the Governance and Nominations
Committee of the Board or any another committee comprised of directors of
the Board which is vested by the Board with responsibility to administer
this Plan.
(g) The term "Elective Grant" shall mean the election by a
Non-employee Director pursuant to Section 3(a) hereof to receive a portion
of his or her Quarterly Compensation in the form of Shares.
(h) The term "Eligible Directors" shall mean those Non-employee
Directors who served on the Board for the entire period from the most
recent Annual Meeting before the grant of a particular Stock Award until
the Annual Meeting at which a Stock Award is granted.
(i) The term "Fair Market Value Per Share" means the closing sale
price of a Share on the New York Stock Exchange on the date such value is
determined or, if there is no trade on such Exchange on that date, then the
closing sale price on the next preceding date on which there is trade of
the Company's Common Stock on such Exchange. In the event that the
Company's Common Stock is not listed on the New York Stock Exchange on the
determination date, the Fair Market Value shall be determined as stated
above but with reference to trades on the largest stock exchange or other
public market on which the Company's Common Stock is then traded.
(j) The term "Non-employee Director" means any person who is elected
to the Board and who has not been an employee of the Company or any of its
subsidiaries at any time during the twelve (12) months preceding any
election by such person under Section 3 hereof or the receipt of a Stock
Award by such person under Section 4 hereof.
(k) The term "Plan" means this Scientific-Atlanta, Inc. Stock Plan for
Non-employee Directors, as amended from time to time.
(l) The term "Quarterly Compensation" means the sum of all meeting
fees, annual retainer fees, and Committee and Board Chairmanship fees for
service as a director earned by a Non-employee Director during a fiscal
quarter. Compensation paid to Non-employee Directors for their service to
the Company in any other capacity, shall be excluded from the calculation
of Quarterly Compensation.
1
<PAGE> 24
(m) The term "Share" means a share of the Company's Common Stock, $.50
par value. Shares delivered to the Non-employee Directors under this Plan
may be either authorized but previously unissued shares or previously
issued shares reacquired by the Company.
(n) The term "Shareholder Approval" means the affirmative vote of a
majority of the shares of Common Stock present or represented and entitled
to vote at a meeting of the shareholders of the Company at which a quorum
is present.
(o) The term "Stock Award" means an award consisting of 500 Shares
(subject to adjustment as herein provided) granted to an Eligible Director
pursuant to Section 4(a) hereof.
3. ELECTIVE GRANTS
(a) Each Non-employee Director may make an election to receive up to 100
percent (100%) of his or her Quarterly Compensation (in increments of 5%) in the
form of Shares pursuant to an Elective Grant made in accordance with this
Section 3(a). The election by the Non-employee Director to receive an Elective
Grant of Shares must be in writing and must be delivered to the Secretary of the
Company at least six months and one day before the start of the fiscal quarter
during which services are to be rendered by the Non-employee Director giving
rise to the Quarterly Compensation. The election made by a Non-employee Director
pursuant to this Section 3(a) shall be irrevocable, except as to Quarterly
Compensation payable for services rendered during a fiscal quarter of the
Company commencing at least six months and one day after an election to revoke
or change an earlier election is made in writing to the Secretary of the
Company.
(b) The number of Shares to be granted to a Non-employee Director who makes
an Elective Grant shall equal (i) the amount of the Quarterly Compensation
earned during the Company's fiscal quarter subject to the Elective Grant,
divided by (ii) the Fair Market Value Per Share on the last day of such fiscal
quarter. In no event shall the Company be required to issue fractional Shares.
Any fractional Share will be rounded to the nearest whole Share.
(c) Subject to the provisions of Sections 6 and 12 hereof, as soon as
practicable after each Non-employee Director's Elective Grant of Shares is
determined, the Company shall cause to be issued and delivered to such
Non-employee Director a stock certificate registered in the name of the
Non-employee Director evidencing his or her Elective Grant, less any Shares
withheld by the Company pursuant to Section 6 below.
(d) No right to an Elective Grant and no interest therein may be assigned,
pledged, hypothecated, or otherwise transferred by a Non-employee Director
except, in the event of the death of a Non-employee Director prior to the
issuance of a stock certificate evidencing an Elective Grant, to the
Non-employee Director's designated beneficiary or, in the absence of such
designation, by will or the laws of descent and distribution.
4. STOCK AWARDS
(a) Beginning with the 1995 Annual Meeting and at the Annual Meeting every
year thereafter through and including the Annual Meeting held in 1999, every
Eligible Director shall be granted a Stock Award.
(b) Subject to the provisions of Sections 6 and 12 hereof, as soon as
practicable after the applicable Annual Meeting, the Company shall cause to be
issued and delivered to each Eligible Director receiving a Stock Award a stock
certificate registered in the name of such Eligible Director evidencing the
Stock Award, less any Shares withheld by the Company pursuant to Section 6
below.
(c) Eligible Directors shall not be deemed for any purpose to be, or have
any rights as, shareholders of the Company with respect to any Stock Award until
the stock certificates are issued and then only from the date of the issuance of
such stock certificates. Appropriate adjustments shall be made for dividends or
distributions or other rights for which the record date is after an Annual
Meeting and prior to the issuance of such stock certificates.
2
<PAGE> 25
(d) No right to a Stock Award and no interests therein may be assigned,
pledged, hypothecated, or otherwise transferred by an Eligible Director except
that in the event of the death of an Eligible Director after an Annual Meeting
where such Eligible Director received a Stock Award and prior to the issuance of
a stock certificate evidencing such Stock Award, to the Eligible Director's
designated beneficiary or, in the absence of such designation, by will or by
laws of descent and distribution.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure of the Company or the Shares occurs, then the
number and/or kind of shares to be awarded under the Plan shall be automatically
adjusted as required in order to prevent an unfavorable effect upon the value of
the Awards to be made under this Plan.
6. TAX WITHHOLDING/DEFERRAL
(a) All Awards made pursuant to this Plan shall be subject to the
withholding of state and federal income taxes, FICA tax or other taxes to the
extent required by applicable law. The Company shall have the right, before
delivery of a stock certificate evidencing an Award, to require the recipient to
make arrangements satisfactory to the Company to satisfy such withholding
requirements. A Non-employee Director receiving an Award may satisfy such
withholding requirements by having the Company withhold Shares otherwise
issuable to the director if such director makes an irrevocable election, by way
of a written statement in a form acceptable to the Company, at least six (6)
months before the date the director recognizes federal taxable income with
respect to the receipt of such Award or during any period set forth in Rule
16b-3(e)(3) under the Securities Exchange Act of 1934.
(b) The right to receive any Shares under this Plan may be deferred under
the provisions of the Company's Deferred Compensation Plan for Non-Employee
Directors.
7. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
full authority, consistent with the Plan, to interpret the Plan and to
promulgate such rules and regulations with respect to the Plan as it deems
desirable for the administration of the Plan. The Committee shall have authority
to determine all matters relating to the administration and granting of Awards.
All decisions, determinations and interpretations of the Committee shall be
binding upon all persons.
8. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS
The Plan, the Awards, and the obligation of the Company to deliver Shares
under the Plan shall be subject to all applicable laws, regulations, and the
requirements of the exchanges on which Shares may, at the time, be listed. In
the event that the Shares to be issued under this Plan are not registered under
the Securities Act of 1933 and/or any applicable state securities laws prior to
the delivery of such Shares, the Company may require, as a condition to the
issuance thereof, that each Eligible Director to whom such Shares are to be
issued represent and warrant in writing to the Company that the Shares are being
acquired by him or her for investment for his or her account and not for resale
or with any intent of participating directly or indirectly in any distribution
of such Shares and a legend to that effect may be placed on the stock
certificates representing such Shares.
9. AMENDMENTS
The Committee with Board Approval may amend this Plan or any provision
thereof from time to time for the purpose of satisfying the requirements of any
changes in applicable laws or regulations or for any other purpose which at the
time may be permitted by law, provided that no amendment, except with
shareholder Approval, shall: (I) change the calculation of the Awards so as to
increase the value of the award to the Non-employee Directors; (ii) increase the
frequency of the Awards, (iii) materially increase in any other way the benefits
to the Non-employee Directors, (iv) materially modify the definitions of
Non-employee Director or
3
<PAGE> 26
Eligible Directors as defined herein, or (v) disqualify a Non-employee Director
from being a "disinterested" administrator (within the meaning of Rule 16b-3 or
any successor rule of the Securities and Exchange Commission) of any stock-based
plan of the Company. Notwithstanding the foregoing, in no case may the Plan
provisions pertaining to the amount or determination of a Stock Award or the
determination of Eligible Directors be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
10. DISCONTINUANCE
The Board may suspend or discontinue this Plan in whole or in part, but any
such suspension or discontinuance shall not affect Awards granted under this
Plan prior thereto.
11. GOVERNING LAW
This Plan is made in accordance with and shall be governed in all respects
by the laws of the State of Georgia.
12. EFFECTIVE DATE
This Plan shall become effective on the date of Board Approval of the Plan;
provided, however, that the Plan shall be submitted to the shareholders for
Shareholder Approval and, if not approved by the shareholders within one year
from the date of Board Approval, the Plan shall be of no force and effect.
Awards which would otherwise be awarded hereunder before Shareholder Approval of
the Plan is obtained shall be subject to such Shareholder Approval and no stock
certificates for such Awards shall be issued to Eligible Directors before or
until such Shareholder Approval is obtained.
13. TERM
The term of this Plan shall be for the period commencing as of the date of
Board Approval and ending with the Annual Meeting held in 1999.
Approved by the Board of Directors on August 24, 1995.
/s/ JAMES V. NAPIER
--------------------------------------
Chairman of the Board
/s/ WILLIAM E. EASON, JR.
- - --------------------------------------
Secretary
4
