<PAGE> 1
As filed with the Securities and Exchange Commission on December 27, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Scientific-Atlanta, Inc.
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 58-0612397
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
ONE TECHNOLOGY PARKWAY, SOUTH 30092
NORCROSS, GEORGIA (Zip Code)
(Address of Principal Executive Offices)
1996 EMPLOYEE STOCK OPTION PLAN
(Full Title of the Plan)
Please address a copy of all
James F. McDonald communications to:
Chief Executive Officer
Scientific-Atlanta, Inc. William E. Eason, Jr., Esq.
One Technology Parkway, South Scientific-Atlanta, Inc.
Norcross, Georgia 30092 One Technology Parkway, South
(Name and Address of Agent For Service) Norcross, Georgia 30092
Telephone: (770) 903-5000
(770) 903-5000
(Telephone Number, Including Area Code, of Agent for Service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share(1) Price Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common
Stock, Par
Value $0.50 1,500,000 $15.3125 $22,968,750 $6,960.23
Per Share shares
==========================================================================================================
</TABLE>
(1) Calculated pursuant to Rules 457(c) and 457(h)(1), based on the
average of the high and low sale prices ($15.3125 per share) of the
Common Stock of the Registrant on the New York Stock Exchange on
December 24, 1996.
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
* Information required by Part I to be contained in the Section
10(a) prospectus is omitted from the Registration Statement in
accordance with Rule 428 under the Securities Act of 1933 and the
Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(a) The Registrant's annual report for the fiscal year
ended June 28, 1996 filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act");
(b) All other reports filed pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the
Registrant's annual report referred to in (a) above; and
(c) The description of the Registrant's common stock, par
value $0.50 per share, which is contained in its registration statement on Form
10 filed under Section 12 of the Exchange Act, and the description of the
rights to purchase Common Stock, which is contained in its registration
statement on Form 8-A filed under Section 12 of the Exchange Act, including any
amendments or reports filed for the purpose of updating such descriptions.
All documents subsequently filed with the Commission by
the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act prior to the filing of a post-effective amendment to this Registration
Statement which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Mr. Eason, an executive officer of the Registrant, is also
a partner at the law firm of Paul, Hastings, Janofsky & Walker LLP, which firm
performs legal services for the Registrant. Mr. Eason receives a fixed salary
from the firm for work which he performs for clients of the firm other than the
Registrant, but has no interest in the firm's earnings and profits.
-2-
<PAGE> 3
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 14-2-850 through 14-2-859 of the Georgia Business
Corporation Code provide for the indemnification of officers and directors
under certain circumstances against reasonable expenses incurred in defending
against a claim and authorizes Georgia corporations to indemnify their officers
and directors under certain circumstances against reasonable expenses and
liabilities incurred in legal proceedings involving such persons because of
their being or having been an officer or director. The By-laws of the
Registrant provide for indemnification of its officers and directors to the
full extent authorized by such sections.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
The exhibits filed as part of this Registration Statement
are as follows:
Exhibit Number Description of Exhibit
4 1996 Employee Stock Option Plan
5 Opinion of Paul, Hastings, Janofsky & Walker LLP
as to the legality of the securities being
registered
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Paul, Hastings, Janofsky & Walker LLP
to the filing and use of their opinion relating
to the legality of the securities (contained in
opinion filed as Exhibit 5)
24 Power of Attorney authorizing James F. McDonald
and Harvey A. Wagner to sign amendments to this
Registration Statement on behalf of officers and
directors of the Registrant (contained on
Signature Page of Registration Statement)
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
-3-
<PAGE> 4
(4) That, for the purposes of determining any liability
under the Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
-4-
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Gwinnett County, State of Georgia, on this 12th
day of December, 1996.
SCIENTIFIC-ATLANTA, INC.
By:/s/James F. McDonald
------------------------------------
JAMES F. MCDONALD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James F. McDonald and Harvey
A. Wagner, jointly and severally, his or her attorneys-in-fact, each with power
of substitution for him or her in any and all capacities, to sign any
amendments to this Registration Statement, and to file the same, with the
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
/s/James F. McDonald December 12, 1996
- ----------------------------------------------- --------------------------
JAMES F. MCDONALD, PRESIDENT AND CHIEF Date
EXECUTIVE OFFICER AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
/s/Harvey A. Wagner December 12, 1996
- ----------------------------------------------- --------------------------
HARVEY A. WAGNER, SENIOR VICE PRESIDENT-FINANCE, Date
CHIEF FINANCIAL OFFICER AND TREASURER
(PRINCIPAL FINANCIAL OFFICER)
/s/Julian W. Eidson December 12, 1996
- ----------------------------------------------- --------------------------
JULIAN W. EIDSON Date
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
[Signatures continued on next page]
-5-
<PAGE> 6
[Signatures continued from preceding next page]
/s/Marion H. Antonini December 12, 1996
- ------------------------- -------------------------
MARION H. ANTONINI Date
DIRECTOR
/s/William E. Kassling December 12, 1996
- ------------------------- -------------------------
WILLIAM E. KASSLING Date
DIRECTOR
/s/Wilbur Branch King December 12, 1996
- ------------------------- -------------------------
WILBUR BRANCH KING Date
DIRECTOR
/s/Mylle Bell Mangum December 12, 1996
- ------------------------- -------------------------
MYLLE BELL MANGUM Date
DIRECTOR
/s/Alonzo L. McDonald December 12, 1996
- ------------------------- -------------------------
ALONZO L. MCDONALD Date
DIRECTOR
/s/David J. McLaughlin December 12, 1996
- ------------------------- -------------------------
DAVID J. MCLAUGHLIN Date
DIRECTOR
/s/James V. Napier December 12, 1996
- ------------------------- -------------------------
JAMES V. NAPIER Date
DIRECTOR
/s/Sidney Topol December 12, 1996
- ------------------------- -------------------------
SIDNEY TOPOL Date
DIRECTOR
-6-
<PAGE> 7
EXHIBIT INDEX
Exhibits
4. 1996 Employee Stock Ownership Plan
5. Opinion of Paul, Hastings, Janofsky & Walker LLP as
to the legality of the securities being registered
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Paul, Hastings, Janofsky & Walker LLP to
the filing and use of their opinion relating to the
legality of the securities (contained in opinion filed
as Exhibit 5)
24. Power of Attorney authorizing James F. McDonald and
Harvey A. Wagner to sign amendments to this Registration
Statement on behalf of officers and directors of the
Registrant (contained on Signature Page of Registration
Statement)
<PAGE> 1
nominees, Affiliates or Associates of an Acquiring Person to be fair and
otherwise in the best interest of the Company and its stockholders), each holder
of a Right will thereafter have the right to receive, upon exercise, Common
Stock (or, in certain circumstances, cash, property or other securities of the
Company), having a value equal to two times the Exercise Price of the Right. The
Exercise Price is the Purchase Price subject to adjustment in accordance with
the terms of the Rights Agreement. Notwithstanding any of the foregoing,
following the occurrence of the event set forth in this paragraph (the "Flip-In
Event"), all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by an Acquiring Person will be null
and void. However, Rights are not exercisable following the occurrence of the
Flip-In Event set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at an exercise price of $64.00 per Right not owned by an
Acquiring Person (or by certain related parties) following an event set forth in
the preceding paragraph would entitle its holder to purchase Common Stock with a
value of $128.00 (or other consideration, as noted above) for $64.00. Assuming
that the Common Stock has a per share value of $64.00 at such time, the holder
of each valid Right would be entitled to purchase 2.0 shares of Common Stock for
$64.00.
In the event that following the Stock Acquisition Date, (i) the Company is
acquired in a merger or consolidation in which the Company is not the surviving
corporation (other than a merger that follows a tender offer determined to be
fair to the stockholders of the Company, as described in the preceding
paragraph) or (ii) 50% or more of the Company's assets or earning power is sold
or transferred, each holder of a Right (except Rights which have previously been
voided as set forth above) shall thereafter have the right to receive, upon
exercise of the Right, Common Stock of the acquiring company having a value
equal to two times the Exercise Price of the Right.
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
23
<PAGE> 2
At any time until 10 days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right.
Under certain circumstances, the decision to redeem shall require the
concurrence of a majority of the Continuing Directors (as defined below).
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board of Directors prior to the adoption
of the Rights Plan and any person who is subsequently elected to the Board of
Directors if such person is recommended or approved by a majority of the
Continuing Directors, but shall not include an Acquiring Person, or an affiliate
or associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company as set
forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interest
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in certain circumstances. Accordingly, the existence of the Rights may deter
certain acquirers from making takeover proposals or tender offers. However, the
Rights are not intended to prevent a takeover, but rather are designed to
enhance the ability of the Board of Directors to renegotiate with an acquirer on
behalf of all of the shareholders.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to certain anti-takeover provisions that apply to a
public corporation organized under Florida law, unless the corporation has
elected to opt out of those provisions in its articles of incorporation or
bylaws. The Florida Business Corporation Act (the "FBCA") prohibits the voting
of shares in a publicly-held Florida corporation that are acquired in a "control
share acquisition" unless the holders of a majority of the corporation's voting
shares
24
<PAGE> 3
(exclusive of shares held by officers of the corporation, inside directors, or
the acquiring party) approve the granting of voting rights as to the shares
acquired in the control share acquisition. A "control share acquisition" is
defined as an acquisition that immediately thereafter entitles the acquiring
party to vote in the election of directors within each of the following ranges
of voting power: (i) one-fifth or more but less than one-third of such voting
power, (ii) one-third or more but less than a majority of such voting power, and
(iii) more than a majority of such voting power.
The Board of Directors may, however, exclude an acquisition from the
reach of the prohibition on the voting of shares acquired in a "control share
acquisition." The Company's Board of Directors has excluded such a transaction
by Pengo Securities Corp., Durian Securities, Energy Management Corporation,
and Mr. John Adams, certain of the Company's shareholders. These shareholders
may increase their aggregate holdings of the Company's Common Stock up to a
total of 25% of the Company's outstanding Common Stock, without triggering the
disenfranchisement of the voting rights of such shares pursuant to the FBCA.
The FBCA also contains an "affiliated transaction" provision that prohibits
a publicly-held Florida corporation from engaging in a broad range of business
combinations or other extraordinary corporate transactions with an "interested
shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the transaction is
approved by the holders of two-thirds of the corporation's voting shares other
than those owned by the interested shareholder. An "interested shareholder" is
defined as a person who together with affiliates and associates beneficially
owns more than 10% of the corporation's outstanding voting shares.
The above-described provisions may have certain anti-takeover effects. Such
provisions may make it more difficult for other persons, without the approval of
the Company's Board of Directors, to make a tender offer or acquisitions of
substantial amounts of the Common Stock or to launch other takeover attempts
that might result in the payment of a premium over market price for the Common
Stock held by such shareholder. See "Executive Compensation Severance Agreements
and Retention Bonuses".
PBGC SETTLEMENT AGREEMENT
On July 26, 1994, the Company entered into a Settlement Agreement (the
"PBGC Settlement Agreement") with the Pension Benefit Guaranty Corporation
("PBGC") pursuant to which it is obligated to make contributions to certain of
its underfunded pension plans. These contributions will be in addition to the
minimum statutory funding requirements with regard to such plans. Pursuant to
the PBGC Settlement Agreement, the Company made additional contributions of $6.0
million on August 2, 1994, $1.5 million quarterly thereafter through September
30, 1996, and is obligated to make quarterly payments of $1.5 million through
September 30, 1997.
25
<PAGE> 4
In addition, the PBGC Settlement Agreement restricts the Company's ability
to redeem the PIK Preferred Stock and contains certain other restrictive
covenants. Upon an event of default thereunder, the PBGC will have certain
rights, including the right to declare all additional contributions immediately
due and payable. The PBGC may also create a lien to secure any unpaid additional
contributions (regardless of whether the unpaid additional contributions were
accelerated) similar to the lien to which a plan is entitled under Section
412(n) of the Internal Revenue Code with respect to unpaid minimum statutory
contributions.
26
<PAGE> 5
ITEM 2. PROPERTIES
The Company's principal executive offices are located in leased space at
2502 North Rocky Point Drive, Suite 960, Tampa, Florida 33607. See "Item 13.
Certain Relationships and Related Transactions" for information concerning the
terms of the lease covering such premises. The principal properties of the
Company include its production facilities, all of which are owned by the Company
and its subsidiaries except for its real property in Ripley, Tennessee. The
Company also leases certain warehouse and distribution facilities and regional
sales offices that are not included among the Company's principal properties.
None of the leases is material to the Company's business as a whole or provides
any unique advantage. The Company believes that its facilities are suitable for
their current and foreseeable purposes. Capacity at any plant depends, among
other things, on the product mix, the processes and equipment used and tooling.
Capacity varies periodically, depending on customer demand. The Company
currently estimates that its automotive business plants generally operate at
between 60.0% and 100.0% of capacity on a five-day week basis, except for
certain Doehler-Jarvis facilities that operated during the 1996 fiscal year at
100.0% of capacity on a seven-day week basis. The Company has taken steps,
including cost reduction and capital investments to return its Doehler-Jarvis
facilities to operating on a five-day week basis. The Company believes that its
existing facilities are sufficient to meet its existing needs and its
anticipated growth requirements.
The following table sets forth certain information with respect to the
Company's principal properties:
<TABLE>
<CAPTION>
SUBSIDIARY OR
DIVISION LOCATION TYPE OF FACILITY SQ. FT.
- -------- -------- ---------------- -------
<S> <C> <C> <C>
Harvard Industries Farmington Hills, Michigan Automotive headquarters 70,000
Kingston-Warren Newfields, New Hampshire Manufacturing plant, office and warehouse 302,200
Kingston-Warren Wytheville, Virginia Manufacturing plant, office and warehouse 86,000
Kingston-Warren Church Hill, Tennessee Manufacturing plant, office and warehouse (1) 162,900
Harman Bolivar, Tennessee Manufacturing plant, warehouse and office 294,400
Hayes-Albion Albion, Michigan Manufacturing plant 458,300
Hayes-Albion Bridgeton, Missouri Manufacturing plant 128,300
Hayes-Albion Jackson, Michigan Manufacturing plant 218,600
Hayes-Albion Jackson, Michigan Administrative offices 15,600
Hayes-Albion Rock Valley, Iowa Manufacturing plant 86,000
Hayes-Albion Ripley, Tennessee Manufacturing plant (2) 100,000
Hayes-Albion Tiffin, Ohio Manufacturing plant 467,400
Trim Trends Division Kingston, Michigan Rental property 12,000
Trim Trends Division Deckerville, Michigan Manufacturing plant 74,900
Trim Trends Division Snover, Michigan Manufacturing plant 75,500
Trim Trends, Canada Dundalk, Ontario, Canada Manufacturing plant 80,000
Trim Trends Division Bryan, Ohio Manufacturing plant 141,500
Trim Trends Division Spencerville, Ohio Manufacturing plant 159,000
Doehler-Jarvis Toledo, Ohio Manufacturing plant and office building 542,000
Doehler-Jarvis Pottstown, Pennsylvania Manufacturing plant 470,000
Doehler-Jarvis Greeneville, Tennessee Manufacturing plant 256,000
Harvard Interiors St. Louis, Missouri Manufacturing plant, warehouse facility, and 349,800
office building
Harvard Interiors Arnold, Missouri Assembly plant 31,400
</TABLE>
(1) A portion of this facility is owned by a municipality pursuant to
industrial revenue bond financing.
(2) The land underlying this facility is leased through August 30,
1999.
27
<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
Various legal actions, governmental investigations and proceedings and
claims are pending or may be instituted or asserted in the future against the
Company and its subsidiaries. Included among the foregoing matters are the
following:
ESNA - Specialty Fasteners
As part of an overall restructuring of the Company, and the decision of
management to concentrate its resources on the Company's core automotive
businesses, the Company sold certain assets related to its then Elastic Stop
Nut Division ("ESNA") located in Union, New Jersey in March 1995, after having
sold ESNA's Pocahontas, Arkansas operations in December 1994. ESNA, which had
conducted business since 1934, was engaged primarily in the engineering, design
and manufacture of specialty fasteners for the aerospace, industrial and
commercial markets until manufacturing operations ceased in July 1995. Until
completion of such sales and cessation of ESNA's operations the Company
continued to operate ESNA in the ordinary course and reflected ESNA's operating
results as discontinued operations. After considering the length of time,
current market conditions and environmental cleanup costs to dispose of the
facility for residential and industrial use, the Company determined that it was
appropriate to reflect the value of the ESNA facility to the Company at a
nominal net realizable value, including cleanup costs, as of September 30,
1996. As a result, in the fourth quarter of 1996, the Company reflected a
$7,500,000 charge to discontinued operations, representing the write-down of
the ESNA facility, continuing carrying costs of the Union, N.J. facility and
the continuing costs associated with the Company's ongoing participation in the
Department of Defense Voluntary Disclosure Program. The Company anticipates
the receipt of certain royalties from the purchaser of its Union, New Jersey
aerospace operations over the next four years.
The Company determined in September 1993 that certain plated and non-plated
self-locking fasteners sold to the United States Government and other customers
for application in the construction of aircraft engines and airframes
manufactured at the Union, New Jersey facility of ESNA were not manufactured
and/or tested in accordance with applicable specifications. In connection
therewith, in September 1993, the Company notified the Department of Defense
(the "DoD") Office of Inspector General ("OIG") and, upon request, was admitted
into the Voluntary Disclosure Program (the "Program") of the DoD. The Company
also notified ESNA's customers, including the Defense Industrial Supply Center
("DISC"), of these matters and offered to retest and/or reprocess affected
parts. After disclosure was made, DISC indicated that it intended to scrap
flight safety critical parts which were in its inventory and also it suspended
ESNA's Union, New Jersey facility from two Qualified Products Lists ("QPLs"),
QPL-25027 and QPL-7873, in November and December 1993. This required ESNA to
suspend sales of parts covered by such QPLs to the United States Government
28
<PAGE> 7
and its contractors and undergo procedures to requalify for those QPLs. The
Company was notified by DISC in early May 1994 that it had requalified for those
QPLs and could resume shipments.
On February 23, 1994, the Company ascertained that certain fasteners
manufactured at ESNA's Pocahontas, Arkansas facility and sold to the United
States Government and other customers for applications in the manufacture of
automotive, marine and farm equipment products, as well as heavy trucks and
general commercial products, were not being tested in accordance with applicable
government and other customer specifications. The Company has notified the DoD
OIG and DISC of the testing samples from the affected lots identified at the
Pocahontas facility.
The Company also learned in 1994 that an additional test regarding the
measurement of fastener threads had not been performed at the Union and
Pocahontas facilities on every lot for which it was required by applicable
specifications since April 1993. The Company has notified the DoD OIG of this
matter in accordance with its participation in the Program. The Company
identified the lots affected by this deficiency, and notified, in December 1994
and January 1995, customers who purchased these lots and has taken other
appropriate corrective actions.
If it is ultimately determined that the deviations from specifications, and
certifications made in connection therewith, constitute violations of statutory
and regulatory provisions, the Company may, among other things, be subject to
criminal prosecution, treble damages and penalties under the Civil False Claims
Act as well as administrative sanctions such as debarment from future government
contracting. The Company may also be subject to civil damages which could result
from claims that have been or may be made by ESNA's other customers.
As a result of its admission into the Program based on its disclosures
regarding the Union facility, the Company expects to receive favorable
consideration from the Government with respect to whether or not criminal
charges should be brought, administrative sanctions should be imposed and civil
penalties should be sought in connection with the sales of affected parts to the
Government. The Company also expects to receive such treatment with respect to
its subsequent disclosures regarding the Pocahontas facility. In particular, the
Company believes that, in accordance with past practice under the Program, if
the Company maintains its status in the Program and complies fully with the
terms and conditions of the agreement entered into in connection with the
Company's admittance into the Program (i) the government probably will not seek
criminal sanctions against the Company, (ii) the Company probably will not be
suspended or debarred from government contracting, (iii) the government probably
will not seek Civil False Claims Act penalties against the Company and (iv) the
government probably will seek to resolve claims against the Company under the
Civil False Claims Act based upon double rather than treble damages. There is no
assurance, however, the Company will receive such treatment with respect to any
or all of these disclosures.
In carrying out its offer to retest and/or reprocess affected parts, the
Company engaged in such activities, including retesting, and/or reprocessing its
own parts inventory, from September 1993 until July 31, 1995, when such
activities terminated with respect to those parts which were returned by
customers. For those fasteners which had been
29
<PAGE> 8
destroyed during retesting, credits were issued to affected customers' accounts.
At September 30, 1996, the accrued costs totaled $6,830,000. which represented
costs such as severance pay, relating to this discontinued operation as well as
costs attributable to the Company's participation in the Program and related
matters which, in turn, cover, among other things, legal costs, fines and
penalties. However, ultimate costs are dependent upon future events, the
outcomes of which are not determinable at the present time. Such ultimate cost
could have a material effect on the Company's financial condition, results of
operations or liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - The Company-Liquidity and Capital
Resources - ESNA" and Note 4 to the Consolidated Financial Statements.
Environmental Matters
The Company may incur liability for alleged environmental damage associated
with past waste disposal practices. Generators of hazardous substances placed in
disposal sites at which environmental problems are alleged to exist, as well as
the owners of those sites and certain other classes of persons, are subject to
claims brought by state and federal regulatory agencies pursuant to statutory
authority. Since 1981, EPA has sought compensation and remedial action from
waste generators, site owners and operators, and others under CERCLA, which
authorizes such action by EPA regardless of fault or the legality of original
disposal. The Company's most significant involvement in CERCLA proceedings
relates to the Vega Alta and Alsco-Anaconda Superfund sites.
Vega Alta Site. The Company's Harman subsidiary was named as one of several
PRPs by EPA pursuant to CERCLA concerning environmental contamination at the
Vega Alta, Puerto Rico Superfund site (the "Vega Alta Site"). Other named PRPs
include subsidiaries of General Electric Company ("General Electric"), Motorola,
Inc. ("Motorola"), and The West Company, Inc. ("West Company") and the Puerto
Rico Industrial Development Corporation ("PRIDCO"). PRIDCO owns the industrial
park where the PRPs were operating facilities at the time of alleged discharges.
Another party, Unisys Corporation, was identified by General Electric as an
additional PRP at the Superfund Site as the successor to the prior operator at
one of the General Electric facilities. Unisys Corporation was not initially
designated as a PRP by EPA, although it was named as a PRP in conjunction with
settlement proceedings and consent decree.
There are currently two phases of administrative proceedings in progress.
The first phase, known as Operable Unit I ("OUI"), involves a Unilateral Order
by EPA that the named PRPs implement the Vega Alta Site remedy chosen by EPA,
consisting of the replacement of the drinking water supply to local residents
and installation and operation of a groundwater treatment system to remediate
groundwater contamination. In addition, EPA sought recovery of costs it had
expended at the Vega Alta Site.
Motorola, West Company and Harman completed construction of the OUI remedy
pursuant to a cost-sharing arrangement. As of September 30, 1996, Harman's
remaining share of costs pursuant to this cost sharing arrangement is
approximately $360,000 including reimbursement of the other two PRP's for
the construction cost of the OUI
30
<PAGE> 9
treatment system. Pursuant to the Company's Plan, Harman began payment against
these obligations (the "Plan Amounts") in 1995.
Effective June 30, 1993, the PRPs reached a settlement among themselves.
Harman, together with Motorola and West Company, have completed the agreed upon
work for the first phase of administrative proceedings, as outlined above, which
included final construction and initial testing of the cleanup system. In
addition, Harman, Motorola and West Company each agreed to pay General Electric
the sum of $800,000 in return for General Electric's agreement to assume
liability for, and indemnify and hold Harman and the others harmless against,
EPA's cost recovery claim, to undertake operation and maintenance of the OUI
cleanup system and to construct, operate and maintain any other proposed system
that may be required by EPA under OUII, and to conduct any further work required
under OUII investigatory and cleanup requirements concerning further phases of
work at the Vega Alta Site. Harman's settlement payment to General Electric is
being made in 20 equal quarterly installments, which commenced in January 1995,
with 9% interest per annum. Harman, West Company and Motorola retained liability
for any cleanup activities that may in the future be required by EPA at their
respective facilities due to their own actions, for toxic tort claims and for
natural resource damage claims. In light of the settlement, Harman, Motorola and
West Company have stipulated with the EPA to liability at the Vega Alta Site. In
the suit by the United States, a consent decree among all of the PRPs and the
United States was fully executed by all parties, and was entered by the federal
district court, finally resolving the cost recovery litigation.
Pursuant to a letter dated January 31, 1994 and subsequent notices since
that date, Harman and the other PRPs have been put on notice of potential claims
for damages, allegedly suffered by the owners and operators of farms located in
the vicinity of the Vega Alta Site. If Harman were to be found liable in any
future lawsuit, some of the alleged damages (e.g., personal injury, property and
punitive damages) would not be covered by the settlement agreement with General
Electric. In a letter to General Electric's counsel, counsel for the owners and
operators alleged estimated losses of approximately $400 million "based
primarily on lost income stream," purportedly based on certain assumptions
concerning the value of the property, its potential for development and
groundwater contamination issues. At this time, however, Harman, has no
information which would support such unindemnified claims, and believes the
claims to be speculative.
Alsco-Anaconda Site. Alsco Company, a predecessor of the Company, was the
former owner and operator of a manufacturing facility located in Gnadenhutten,
Ohio, The Alsco division of the Company was sold in August 1971 to the Anaconda
Company. Subsequently, Alsco became Alsco-Anaconda, Inc., a subsidiary of the
Anaconda Company. In January 1977, when the Atlantic Richfield Company ("ARCO")
purchased the Anaconda Company, the Gnadenhutten facility became a part of ARCO
Metals Company and was renamed Alsco. The facility, when acquired by ARCO,
consisted of an architectural manufacturing plant, office buildings, a
wastewater treatment plant, two sludge settling basins and a sludge pit. The
basins and pit were used for treatment and disposal of substances generated from
the manufacturing processes; they were proposed for inclusion on EPA's National
Priorities List in October 1984. The
31
<PAGE> 10
basins and pit were formally listed as the "Alsco-Anaconda Superfund Site" in
June 1986. ARCO sold the facility in 1986 to Pony Industries but retained
ownership of a 4.8 acre Superfund Site.
Under arrangements between the Company and ARCO, each has accepted that it
is a PRP with respect to the Site. The Company, however, maintained that under
the CERCLA statute its responsibility was limited to waste actually produced and
deposited on the Site during its period of ownership (1965-1971). Although it is
not possible to determine definitively the Company's ultimate exposure,
management believes that the Company's obligations will likely be limited to
those accepted under the settlement agreement with ARCO described in the next
sentence, which settlement was based upon an allocated percentage of total
anticipated remediation costs, which as alleged by ARCO, will aggregate $19.0
million to $21.5 million. The Company and ARCO reached a settlement in January
1995 whereby the Company has agreed to pay ARCO $6.25 million (as its share of
up to $25.0 million of the cleanup and environmental costs at the Site) in
twenty equal quarterly installments with accrued interest at the rate of 9% per
annum, of which seven installments have been paid through September 30, 1996. In
return, ARCO has assumed responsibility for cleanup activities at the Site and
is obligated to indemnify the Company from any environmental claims below the
cap. If cleanup costs should exceed $25.0 million, the parties will be in the
same position as if the litigation was not settled. Upon execution of the
Settlement Agreement, the matter was approved by the Delaware Bankruptcy Court.
American Littoral Society. By letter dated June 4, 1996, the American
Littoral Society, a public interest group operated through the Environmental Law
Clinic of the Widener University School of Law, sent a notice letter pursuant to
the Clean Water Act to the Company threatening suit based upon past and
anticipated future discharges to the Schuykill River in excess of the limits
established in the National Pollution Discharge Elimination System permit
("NPDES") for the Pottstown, Pennsylvania plant. The Pottstown plant has been
and is currently operating under an expired but still effective NPDES permit.
The plant's wastewater treatment system (or use "equipment") is not capable of
achieving routine compliance with certain discharge limitations, including
limits for phenol, oil and grease and total dissolved solids. The Pottstown
plant has been attempting to solve this problem by arranging to convey its
effluent to the Pottstown Publicly Owned Treatment Works ("Pottstown POTW").
This effort has been hampered by West Pottsgrove township, since the plant's
effluent must flow through a short section of the township's sewer lines in
order to be conveyed onto the Pottstown POTW. The township has been withholding
permission to send the plant's effluent through this short section of its sewer
line even though the Pottstown POTW is willing to accept the effluent. Potential
penalties under the Clean Water Act could be several million dollars. The
Company is holding discussions with the American Littoral Society in hopes of
settling this matter short of litigation.
Other Environmental Matters. As of September 30, 1996, and in addition to
the Vega Alta and Alsco-Anaconda Sites, and the notice from the American
Littoral Society, the Company has received information requests or notifications
alleging that the Company is a PRP pursuant to the provisions of CERCLA or
analogous state laws from EPA, state agencies, and private parties; or is
currently participating in the remedial investigation or closure activities at
23 other sites (including eight sites with respect to Doehler-Jarvis).
32
<PAGE> 11
In accordance with the Company's policies and based upon consultation with
legal counsel regarding pending environmental suits and claims, management of
the Company has provided accruals for environmental matters of $9,437,000 as of
September 30, 1996. The accrued amount includes approximately $313,000, with a
corresponding receivable, that the Company believes that it will be entitled to
from proceeds of insurance. See Note 15 to the Consolidated Financial
Statements.
While it is not feasible to predict the outcome of pending environmental
suits and claims, based upon the most recent review by management of these
matters and after consultation with legal counsel, management is of the opinion
that the ultimate disposition of these matters will not have a material effect
on the financial position or results of operations of the Company.
Other. In June 1995, a group of former employees of the Company's
subsidiary, Harman Automotive-Puerto Rico, Inc., commenced an action against the
Company and individual members of management in the Superior Court of the
Commonwealth of Puerto Rico seeking approximately $48.0 million in monetary
damages and unearned wages relating to the closure by the Company of the Vega
Alta, Puerto Rico plant previously operated by such subsidiary. Claims made by
the plaintiffs in such action include the following allegations: (i) such
employees were discriminated against on the basis of the national origin in
violation of the laws of Puerto Rico in connection with the plant closure and
that, as a result thereof, the Company is alleged to be obligated to pay
unearned wages until reinstatement occurs, or in lieu thereof, damages,
including damages for mental pain and anguish; (ii) during the years of service,
plaintiffs were provided with a one-half hour unpaid meal break, which is
alleged to violate the laws of Puerto Rico, providing for a one-hour unpaid meal
break and demand to be paid damages and penalties and request seniority which
they claim was suspended without jurisdiction; and (iii) plaintiffs were paid
pursuant to a severance formula that was not in accordance with the laws of
Puerto Rico, which payments were conditioned upon the plaintiff's executive
releases in favor of the Company, and that, as a result thereof, they allege
that they were discharged without just cause and are entitled to a statutory
severance formula.
Management believes that it has meritorious defenses to the action and is
vigorously defending its position. Although there can be no assurance as to the
ultimate outcome, based on advice by its local counsel in Puerto Rico, the
Company does not believe that the ultimate disposition of this matter will have
a material adverse effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1996, covered by this Annual
Report on Form 10-K.
33
<PAGE> 1
EXHIBIT 5
December 26, 1996
17528.49938
Scientific-Atlanta, Inc.
One Technology Parkway, South
Norcross, Georgia 30092
Re: Scientific-Atlanta, Inc.
1996 Employee Stock Option Plan
Registration Statement on Form S-8
Ladies and Gentlemen:
As counsel for Scientific-Atlanta, Inc., a Georgia corporation
(the "Company"), you have requested our opinion in connection with the
preparation and filing with the Securities and Exchange Commission of a
Registration Statement on Form S-8 (the "Registration Statement") registering
1,500,000 shares of the Company's common stock, $0.50 par value per share, for
issuance upon the exercise of options to be granted pursuant to the Company's
1996 Employee Stock Option Plan.
We have examined such records and documents and made such
examination of law as we have deemed relevant in connection with this opinion.
Based on the foregoing, we are of the opinion that the 1,500,000 shares covered
by said Registration Statement, when issued in accordance with the terms of the
1996 Employee Stock Option Plan, will be legally issued, fully-paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the above-referenced Registration Statement on Form S-8 of Scientific-Atlanta,
Inc.
Respectfully submitted,
Paul, Hastings, Janofsky & Walker LLP
<PAGE> 1
ARTHUR ANDERSEN LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in Scientific-Atlanta, Inc.'s Form S-8 Registration Statement of our
report dated August 5, 1996 (except with respect to the matter discussed in
Note 6, as to which the date is August 14, 1996), appearing on page 13 of
Scientific-Atlanta, Inc.'s Form 10-k for the year ended June 28, 1996.
/s/ Arthur Andersen LLP
Atlanta, Georgia
December 26, 1996
