<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1996
---------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------------- ----------------
COMMISSION FILE NUMBER 1-5517
SCIENTIFIC-ATLANTA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-0612397
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
ONE TECHNOLOGY PARKWAY, SOUTH
NORCROSS, GEORGIA 30092-2967
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
770-903-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
AS OF JANUARY 24, 1997, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 77,305,019
SHARES OF COMMON STOCK.
1
<PAGE>
PART I - FINANCIAL INFORMATION
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- ---------------------------
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $282,184 $261,100 $543,848 $503,293
COSTS AND EXPENSES
Cost of sales 196,847 193,383 379,741 374,499
Sales and administrative 37,624 33,663 73,057 66,389
Research and development 29,108 23,871 57,141 46,638
Interest expense 120 220 254 367
Interest (income) (1,112) (223) (1,651) (974)
Other (income) expense, net (626) 479 (815) 658
-------- -------- -------- --------
Total costs and expenses 261,961 251,393 507,727 487,577
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 20,223 9,707 36,121 15,716
PROVISION (BENEFIT) FOR
INCOME TAXES
Current 9,480 4,331 (734) 4,881
Deferred (3,009) (1,225) 12,293 148
-------- -------- -------- --------
NET EARNINGS FROM CONTINUING
OPERATIONS 13,752 6,601 24,562 10,687
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAX -- -- -- (1,038)
GAIN (LOSS) ON SALE OF
DISCONTINUED OPERATIONS,
NET OF TAX -- -- 3,400 (12,172)
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 13,752 $ 6,601 $ 27,962 $ (2,523)
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
CONTINUING OPERATIONS $ 0.18 $ 0.09 $ 0.32 $ 0.14
DISCONTINUED OPERATIONS -- -- 0.04 (0.17)
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 0.18 $ 0.09 $ 0.36 $ (0.03)
======== ======== ======== ========
FULLY DILUTED $ 0.18 $ 0.09 $ 0.36 $ (0.03)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES AND COMMON
EQUIVALENT SHARES OUTSTANDING
PRIMARY 77,907 76,379 77,788 76,699
======== ======== ======== ========
FULLY DILUTED 77,956 76,379 77,917 76,699
======== ======== ======== ========
DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.03 $ 0.03
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands
--------------------------
December 27, June 28,
1996 1996
------------ --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 96,021 $ 20,930
Receivables, less allowance for doubtful
accounts of $3,808,000 at December 27
and $3,826,000 at June 28 226,156 252,882
Inventories 178,580 215,767
Deferred income taxes 37,155 50,979
Other current assets 10,315 22,413
-------- --------
TOTAL CURRENT ASSETS 548,227 562,971
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and improvements 20,592 18,173
Buildings and improvements 37,790 38,628
Machinery and equipment 188,120 162,073
-------- --------
246,502 218,874
Less-Accumulated depreciation and amortization 83,942 68,275
-------- --------
162,560 150,599
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 5,816 6,191
-------- --------
OTHER ASSETS 53,160 43,561
-------- --------
TOTAL ASSETS $769,763 $763,322
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of long-term debt $ 250 $ 1,600
Accounts payable 97,629 106,542
Accrued liabilities 117,930 127,546
Income taxes currently payable 23,377 26,229
-------- --------
TOTAL CURRENT LIABILITIES 239,186 261,917
-------- --------
LONG-TERM DEBT, less current maturities 400 400
-------- --------
OTHER LIABILITIES 41,258 37,353
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 50,000,000 shares;
no shares issued -- --
Common stock, $0.50 par value, authorized
350,000,000 shares; issued 77,372,128 shares at
December 27 and 77,255,528 shares at June 28 38,686 38,628
Additional paid-in capital 162,405 163,143
Retained earnings 289,852 264,206
Accumulated translation adjustments 770 740
-------- --------
491,713 466,717
-------- --------
Less - Treasury stock, at cost (200,616 shares at
December 27 and 265,640 shares at June 28) 2,794 3,065
-------- --------
488,919 463,652
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $769,763 $763,322
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
December 27, December 29,
1996 1995
------------ ------------
<S> <C> <C>
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: $ 91,073 $(22,661)
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (29,626) (29,704)
Proceeds from sale of discontinued operations 18,369 --
Other 1,197 (1,973)
------- -------
Net cash used by investing activities (10,060) (31,677)
------- -------
FINANCING ACTIVITIES:
Net short-term borrowings (repayments) (1,350) 10,083
Principal payments on long-term debt -- (31)
Dividends paid (2,316) (2,299)
Issuance of common stock 717 1,487
Treasury shares acquired (2,973) (12,411)
------- -------
Net cash used by financing activities (5,922) (3,171)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 75,091 (57,509)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,930 80,311
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $96,021 $22,802
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 229 $ 306
======= =======
Income taxes paid, net $ 5,810 $ 3,580
======= =======
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
NOTES:
(Amounts in thousands except share data).
A. The accompanying consolidated financial statements include the accounts
of the company and all subsidiaries after elimination of all material
intercompany accounts and transactions. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed financial statements
should be read in conjunction with the consolidated financial statements
and related notes contained in the 1996 Form 10-K. The financial
information presented in the accompanying statements reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the periods indicated. All such adjustments are of a
normal recurring nature.
B. Earnings per share for the three and six months ended December 27, 1996
and December 29, 1995, were computed based on the weighted average number
of shares outstanding and equivalent shares derived from dilutive stock
options. See Exhibit 11.
C. Inventories consist of the following:
<TABLE>
<CAPTION>
December 27, June 28,
1996 1996
------------ --------
<S> <C> <C>
Raw materials and work-in-process.. $107,616 $131,762
Finished goods................. 70,964 84,005
-------- --------
Total inventory................ $178,580 $215,767
======== ========
</TABLE>
D. During the quarter ended September 29, 1995, the company decided to
discontinue its defense-related businesses in San Diego, California,
because these businesses were not aligned with the company's core
business strategies. A one-time charge of $12,172, net of a tax benefit
of $5,728, for the estimated loss on sale of discontinued operations was
recorded in the quarter ended September 29, 1995.
During the quarter ended September 27, 1996, the company completed
negotiations with a prime contractor, for whom the defense-related
businesses had performed work as a subcontractor, to settle issues
related to the pricing of unexercised options for additional products.
The company also completed the sale of its defense-related businesses to
Global Associates, Ltd. (Global) for cash of $13,142 and secured and
unsecured notes aggregating approximately $4,700. The net realizable
value of the assets of the defense-related businesses and the settlement
with the prime contractor were more favorable than the company had
anticipated when it decided to exit these businesses; accordingly, the
company recognized a pre-tax gain of $5,000 from these transactions in
the first quarter of fiscal 1997. At December 27, 1996, the company had
a reserve of approximately $7,700 for potential sales price adjustments,
indemnifications provided to Global, legal, severance and other
miscellaneous expenses related to the sale and the settlement with the
prime contractor.
5
<PAGE>
Sales and earnings (loss) from discontinued operations were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- -----------------------------
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Sales.............................. $ -- $7,425 $1,920 $12,445
Earnings (loss) from discontinued
operations, net of tax $ -- $ 259 $ (817) $ (779)
Tax expense (benefit).............. $ -- $ 122 $ (385) $ (366)
</TABLE>
At June 28, 1996, the net assets of the discontinued operations included
inventory, accounts receivable, machinery and equipment, accounts
payable, and accrued expenses and were included in other current assets
in the Consolidated Statement of Financial Position.
E. The company purchased 225,000 shares of its common stock at an aggregate
cost of $2,973 during the six months ended December 27, 1996, and
1,010,000 shares at an aggregate cost of $12,411 during the six months
ended December 29, 1995, under a stock buyback program for the purchase
of up to 5,000,000 shares of its common stock. The company re-issues
these shares under the company's stock option plan, 401(k) plan, employee
stock purchase plan and other stock-based employee compensation plans.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Scientific-Atlanta had stockholders' equity of $488.9 million and cash on
hand was $96.0 million at December 27, 1996. Cash increased $75.1 million
during the six months ended December 27, 1996 as cash generated from earnings,
accounts receivable collections, reductions in inventory levels and the sale of
discontinued operations exceeded expenditures for equipment, expansion of
manufacturing capacity and reductions in payables. The current ratio was 2.3:1
at December 27, 1996, compared to 2.1:1 at June 28, 1996. At December 27, 1996,
total debt was $0.6 million or less than one percent of total capital invested.
Short-term debt at June 28, 1996 consisted primarily of borrowings by the
company's international operations to support their working capital
requirements. There was no short-term debt at December 27, 1996. The company
believes that funds generated from operations, existing cash balances and its
available senior credit facility will be sufficient to support growth and
planned expansion of manufacturing capacity.
RESULTS OF OPERATIONS
- ---------------------
Sales for the quarter and six months ended December 27, 1996, were $282.2
million and $543.8 million, respectively, up 8 percent over the prior year.
Higher sales volume of transmission products was the primary factor in the year-
to-year sales increases. Sales volume of Sega game adapters declined as
compared to the prior year. Increased sales of satellite systems, primarily
PowerVu/TM/ digital video systems and VSAT (Very Small Aperture Terminal) data
networks, also contributed to the year-to-year increases. International sales
for the quarter increased by 13 percent over the prior year and accounted for 42
percent of total sales. International sales for the six months ended December
27, 1996, accounted for 38 percent of total sales, as compared to 37 percent of
total sales in the prior year.
Gross margins of 30.2 percent and 30.1 percent, for the three and six
months ended December 27, 1996, improved 4.3 and 4.6 percentage points,
respectively, over the prior year, reflecting the impact of internal programs to
improve quality and reduce cost, the ramp-up of the Juarez, Mexico manufacturing
facility, favorable exchange rates on Japanese yen compared to the prior year
and favorable product mix. The company expects gross margins during the second
half of fiscal 1997 to continue at approximately the same level as the first
half of fiscal 1997.
Certain material purchases are denominated in Japanese yen and,
accordingly, the purchase price in U.S. dollars is subject to change based on
exchange rate fluctuations. The company has forward exchange contracts to
purchase yen to hedge a portion of its exposure on purchase commitments for a
period of approximately twelve months.
Research and development costs increased $5.2 million and $10.5 million, or
22 percent, for the three and six months ended December 27, 1996, respectively,
over the comparable periods of the prior year reflecting the company's continued
investment in research and development programs to support new product
initiatives. The company plans to launch three major digital system categories
during fiscal 1997: high speed data including cable modems, cable telephony and
digital video including broadcast and interactive set-tops. The company expects
to continue significant research and development investments and anticipates
start-up costs as these new products are rolled out.
Selling and administrative expense increased $4.0 million, or 12 percent,
and $6.7 million, or 10 percent, for the three and six months ended December 27,
1996, respectively, over the comparable periods of the prior year. Increased
selling expenses reflect costs associated with higher sales volumes, ongoing
investments to support expansion into international markets and to support the
introduction of new products and a build-up in the infrastructure to handle the
growth the company is experiencing. Administrative expenses increased as higher
consulting fees, administrative expenses of ATx Telecom Systems, Inc. acquired
in June 1996 and other miscellaneous items more than offset cost reductions from
internal processes and systems improvements.
7
<PAGE>
Other (income) expense for the three and six months ended December 27, 1996
and December 29, 1995, included the results of foreign currency transactions and
partnership activities and net gains from rental income and other miscellaneous
items. There were no significant items in other (income) expense.
The company's effective income tax rate was 32 percent, unchanged from the
prior year.
Net earnings from continuing operations were $13.8 million for the quarter
ended December 27, 1996, up $7.2 million or 108 percent over the prior year.
Net earnings from continuing operations were $24.6 million for the six months
ended December 27, 1996, up $13.9 million or 130 percent over the prior year.
Higher sales volume and improved gross margins were offset partially by
increased research and development expenses and selling and administrative
expenses. Net earnings from continuing operations were $6.6 million and $10.7
million for the three and six months ended December 29, 1995, respectively. Net
earnings in the quarter and for the first half of fiscal 1996 were negatively
impacted by the exchange rate for the yen, higher spending for research and
development and investment in sales and marketing to support the company's
international growth.
The company periodically evaluates the contribution of its business units
and products to the company's overall strategic direction. During the quarter
ended September 29, 1995, the company decided to discontinue its defense-related
businesses in San Diego, California because these businesses were not aligned
with the company's core business strategy of being a provider of satellite and
terrestrial based networks and applications. In October 1995, the company
announced its intent to sell its defense-related businesses and recorded a one-
time, after-tax charge of $13.2 million in the quarter ended September 29, 1995.
During the quarter ended September 27, 1996, the company completed
negotiations with a prime contractor, for whom the defense-related businesses
had performed work as a subcontractor, to settle issues related to the pricing
of unexercised options for additional products. The company also completed the
sale of its defense-related businesses to Global Associates, Ltd. for cash of
$13.1 million and secured and unsecured notes aggregating approximately $4.7
million. The net realizable value of the assets of the defense-related
businesses and the settlement with the prime contractor were more favorable than
the company had anticipated when it decided to exit these businesses;
accordingly the company recognized a pre-tax gain of $5.0 million from these
transactions in the quarter ended September 27, 1996.
Net earnings for the three months ended December 27, 1996 were $13.8
million, up $7.2 million over the prior year. Net earnings for the six months
ended December 27, 1996 were $28.0 million, including an after-tax gain of $3.4
million related to the sale of discontinued operations, compared to a net loss
in the prior year of $2.5 million, which included an after-tax charge of $13.2
million related to discontinued operations.
Any of the above statements that are not statements about historical facts
are forward-looking statements. Such forward-looking statements are based upon
current expectations but involve risks and uncertainties. Investors are
referred to the Cautionary Statements contained in Exhibit 99 to this Form 10-Q
for a description of the various risks and uncertainties that could cause the
company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the company's forward-
looking statements. Such Exhibit 99 is hereby incorporated by reference into
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
PowerVu is a trademark of Scientific-Atlanta, Inc.
8
<PAGE>
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
The following information is furnished with respect to matters submitted
to a vote of security holders through the solicitation of proxies:
(a) The matters described below were submitted to a vote of security
holders at the Annual Meeting of Shareholders held on
November 13, 1996.
(b) Election of directors:
Votes For Withhold Authority
------------ ------------------
Marion H. Antonini 64,478,877 396,535
William E. Kassling 64,484,798 390,614
Mylle Bell Mangum 64,495,256 380,156
Wilbur B. King, Alonzo L. McDonald, James F. McDonald, David J.
McLaughlin, James V. Napier and Sidney Topol continue as directors.
(c) (i) Selection of Arthur Andersen LLP as independent auditors
Votes For Votes Against Abstain
---------- ------------- -------
64,038,116 672,978 164,318
Item 6 Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits.
Exhibit No. Description
----------- -----------
10.1 Long-Term Incentive Plan of Scientific-Atlanta,
Inc., as amended and restated by the Board on
November 13, 1996
10.2 Stock Plan for Non-Employee Directors, as amended
and restated by the Board on November 13, 1996
10.3 Scientific-Atlanta, Inc. 1992 Employee Stock Option
Plan, as amended and restated by the Board on
November 13, 1996
10.4 Amendment Number Two to the Non-Employee
Directors Stock Option Plan
10.5 Deferred Compensation Plan for Non-Employee
Directors of Scientific-Atlanta, Inc., as amended
and restated by the Board on November 13, 1996
10.6 Non-Qualified Stock Option Agreement between
Scientific-Atlanta, Inc. and James F. McDonald,
incorporated by reference to the registrant's Form
S-8 Registration Statement, filed on December 27,
1996, and amended by Post-Effective Amendment
No. 1, filed on January 7, 1997
11 Computation of Earnings Per Share
27 Financial Data Schedule
99 Cautionary Statements
(b) No reports on Form 8-K were filed during the quarter ended
December 27, 1996.
Date: February 7, 1997 /s/ Harvey A. Wagner
---------------- --------------------
Harvey A. Wagner
Senior Vice President, Finance
Chief Financial Officer and Treasurer
(Principal Financial Officer and duly
authorized signatory of the Registrant)
9
<PAGE>
EXHIBIT 10.1
LONG-TERM INCENTIVE PLAN
OF
SCIENTIFIC-ATLANTA, INC.
As adopted by the Board of Directors on
August 25, 1994,
by the stockholders on
November 11, 1994,
and as amended and restated by the Board on
November 8, 1995
and on
November 13, 1996
<PAGE>
LONG-TERM INCENTIVE PLAN
OF
SCIENTIFIC-ATLANTA, INC.
1. PURPOSE OF THE PLAN. This Long-Term Incentive Plan of Scientific
Atlanta, Inc., as adopted on August 25, 1994, and as amended and restated on
November 8, 1995 and November 13, 1996, is intended to encourage officers and
key employees of the Company and its Subsidiaries to acquire or increase their
ownership of common stock of the Company on reasonable terms, to provide
compensation opportunities for superior financial results and outstanding
personal performance, to foster in participants a strong incentive to put forth
maximum effort for the continued success and growth of the Company and its
Subsidiaries, and to assist in attracting and retaining the best available
individuals to the Company and its Subsidiaries.
2. DEFINITIONS. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Affiliate" means, with respect to any specified person or entity, a
person or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person or entity specified.
2.2 "Award" means an SAR, an Option, an Option granted in tandem with an
SAR, a Restricted Stock Award, a Performance Share, a Performance Unit, a
Performance Award, or any or all of them.
2.3 "Award Letter" means a written letter in such form as may from time
to time be hereafter approved by the Committee, which Award Letter shall set
forth the terms and conditions of an Award under the Plan.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change in Control" shall mean the occurrence of any of the
following events:
(a) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act of "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of
the combined voting power of the Company's then outstanding voting
securities (the "Voting Securities"), provided, however, that for
purposes of this paragraph (a), the Voting Securities acquired directly
from the Company by any Person shall be excluded from the determination
of such Person's Beneficial Ownership of Voting Securities (but such
Voting Securities shall be included in the calculation of the total
number of Voting Securities then outstanding); or
(b) The individuals who are members of the Incumbent Board cease for
any reason to constitute at least two-thirds of the Board; or
1
<PAGE>
(c) Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the Company
immediately before such merger or consolidation do not own, directly or
indirectly, immediately following such merger or consolidation, more than
eighty percent (80%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such merger or
consolidation in substantially the same proportion as their ownership of
the Voting Securities immediately before such merger or consolidation, or
(ii) a complete liquidation or dissolution of the Company or an agreement
for the sale or other disposition of all or substantially all of the
assets of the Company.
Notwithstanding anything in this Section 2.5 to the contrary, a Change in
Control shall not be deemed to occur solely because twenty percent (20%) or more
of the then outstanding Voting Securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
by the Company or any of its subsidiaries, or (ii) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.
Moreover, notwithstanding anything in this Section 2.5 to the contrary, a
Change in Control shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided, that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and reference to any specific provisions of the Code shall refer to the
corresponding provisions of the Code as it may hereafter be amended or replaced.
2.7 "Committee" means the Human Resources and Compensation Committee of
the Board or any other committee appointed by the Board whose members meet the
requirements for eligibility to serve set forth in Section 4 of the Plan and
which is vested by the Board with responsibility for the administration of the
Plan; provided, however, that only those members of the committee of the Board
who participate in decisions relative to Awards under this Plan shall be deemed
to be part of the "Committee" for purposes of this Plan.
2.8 "Company" means Scientific-Atlanta, Inc.
2.9 "Employees" means officers (including officers who are members of
the Board) and other key salaried employees of the Company or any of its
Subsidiaries.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and reference to any specific provisions of the Exchange Act
shall refer to the corresponding provisions of the Exchange Act as it may
hereafter be amended or replaced.
2
<PAGE>
2.11 "Fair Market Value" means, with respect to the Shares, the closing
price on the New York Stock Exchange - Composite Tape of such Shares on the
date(s) in question, or, if the Shares shall not have been traded on any such
date(s), the closing price on the New York Stock Exchange -Composite Tape on the
first day prior thereto on which the Shares were so traded or if the Shares are
not traded on the New York Stock Exchange, such other amount as may be
determined by the Committee by any fair and reasonable means. Fair Market Value
determined by the Committee in good faith shall be final, binding and conclusive
on all parties.
2.12 "Incumbent Board" means the individuals who as of August 20, 1990
were members of the Board and any individual becoming a director subsequent to
August 20, 1990 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; provided, however, that any individual who
is not a member of the Incumbent Board at the time he or she becomes a member of
the Board shall become a member of the Incumbent Board upon the completion of
two full years as a member of the Board; provided, further, however, that
notwithstanding the foregoing, no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office (i) as a result of
either an actual or threatened "election contest" (within the meaning of Rule
14a-11 promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest"), or (ii) with the approval of the other Board members,
but by reason of any agreement intended to avoid or settle a Proxy Contest.
2.13 "Incentive Stock Option" means an Option meeting the requirements
and containing the limitations and restrictions set forth in Section 422 of the
Code.
2.14 "Non-Qualified Stock Option" means an Option other than an Incentive
Stock Option.
2.15 "Option" means the right to purchase, at a price and for a term
fixed by the Committee in accordance with the Plan, and subject to such other
limitations and restrictions as the Plan and the Committee impose, the number of
Shares specified by the Committee. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
2.16 "Parent" means any corporation, other than the employer corporation,
in an unbroken chain of corporations ending with the Company if each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in the chain.
2.17 "Participant" means any Employee to whom a grant of an Award has
been made and is outstanding under the Plan.
2.18 "Performance Award" means Performance Units, Performance Shares or
either or both of them.
2.19 "Performance Objectives" means the specific targets and objectives
established by the Committee under the following four factors: earnings per
share of the Company's common stock, return on average stockholders' equity,
return on capital, and total stockholder returns of the Company compared to a
peer group of comparable companies established by the Committee. Earnings per
share, return on average stockholders' equity, return on capital and total
Company stockholder returns shall be determined and measured in accordance with
generally accepted accounting principles as utilized by the Company in its
reports filed under the Exchange Act.
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2.20 "Performance Period" means a period of time established by the
Committee for which Performance Objectives have been established, of not less
than one nor more than ten consecutive Company fiscal years.
2.21 "Performance Share" means a right, granted to a Participant under
Section 12 of the Plan, that may be paid out as a Share.
2.22 "Performance Unit" means a right, granted to a Participant under
Section 12 of the Plan, that may be paid entirely in cash, entirely in Shares,
or such combination of cash and Shares as the Committee in its sole discretion
shall determine.
2.23 "Plan" means this Long-Term Incentive Plan.
2.24 "Regulation T" means Part 220, Chapter II, Title 12 of the Code of
Federal Regulations, issued by the Board of Governors of the Federal Reserve
System pursuant to the Exchange Act, as amended from time to time, or any
successor regulation which may hereafter be adopted in lieu thereof.
2.25 "Restricted Stock Award" means the right to receive Shares, but
subject to forfeiture and/or other restrictions set forth in the related Award
Letter and the Plan. Restricted Stock Awards may be subject to restrictions
which lapse over time with or without regard to Performance Objectives as the
Committee in its sole discretion shall determine.
2.26 "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
of the Exchange Act (or any successor rule or regulation).
2.27 "SAR" means a stock appreciation right, which is a right to receive
an amount in cash, or Shares, or a combination of cash and Shares, as determined
or approved by the Committee in its sole discretion, no greater than the excess,
if any, of (i) the Fair Market Value of a Share on the date the SAR is
exercised, over (ii) the SAR Base Price.
2.28 "SAR Base Price" means the Fair Market Value of a Share on the date
an SAR was granted, or if the SAR was granted in tandem with an Option (whether
or not the Option was granted on a different date than the SAR), in the
Committee's discretion, the option price of a Share subject to the Option.
2.29 "Securities Act" means the Securities Act of 1933, as amended from
time to time, and reference to any specific provisions of the Securities Act
shall refer to the corresponding provisions of the Securities Act as it may
hereafter be amended or replaced.
2.30 "Share" or "Shares" means a share or shares of the Company's $0.50
par value common stock, any security of the Company issued in lieu of or in
substitution of such common stock or, if by reason of the adjustment provisions
contained herein any rights under an Award under the Plan pertain to any other
security, such other security.
2.31 "Subsidiary" or "Subsidiaries" means any corporation other than the
employer corporation in an unbroken chain of corporations beginning with the
employer corporation if each of the corporations other than the last corporation
in the unbroken chain owns stock possessing fifty percent(50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
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2.32 "Successor" means the legal representative of the estate of a
deceased Employee or the person or persons who shall acquire the right to
exercise an Award by bequest or inheritance or by reason of the death of the
Employee.
2.33 "Ten-Percent Stockholder" means an individual who "owns" as defined
in Section 425 of the Code, stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of: (i) the Company; (ii)
if applicable, a Subsidiary, or (iii) if applicable, the Parent.
2.34 "Term" means the period during which a particular Award may be
exercised.
3. STOCK SUBJECT TO THE PLAN.
3.1 MAXIMUM NUMBER OF SHARES TO BE AWARDED. The maximum number of
Shares in respect for which Awards may be granted under the Plan in each fiscal
year of the Company during any part of which the Plan is effective shall be one
and one-half percent (1-1/2%) of the number of Shares of the Company outstanding
as of the first day of such fiscal year; and commencing in the Company's 1995
fiscal year and in each fiscal year thereafter, subtracting from such maximum
number of Shares the number of Shares subject to options, if any, granted
pursuant to the Company's 1992 Employee Stock Option Plan. The maximum number
of Shares available for which Awards may be granted in any particular fiscal
year pursuant to the previous sentence may be increased by an amount of up to
one-half of one percent (.5%) of the number of Shares outstanding as of the
first day of such fiscal year, provided that the number of Shares which would
otherwise be available for Awards in the next fiscal year shall be decreased by
the increased number of Shares made available pursuant to this sentence. Such
Shares may be in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall have
been reacquired by the Company. Notwithstanding anything to the contrary
contained in this Section 3.1, in no event shall more than four million
(4,000,000) Shares be cumulatively available for Awards of Incentive Stock
Options under this Plan. The number of SARs payable in cash and the number of
units payable in cash under the Plan shall be counted when computing the total
number of Shares available for Awards under the Plan. Any unused portion of the
percentage limit for any year shall be carried forward and made available for
Awards in succeeding years.
3.2 CERTAIN LIMITATIONS. The maximum number of Shares with respect to
which Options and SARs payable in Shares which may be granted during any fiscal
year to any Employee shall not exceed 400,000. The maximum dollar value with
respect to which Awards (other than Options and SARs payable in Shares) that are
intended to qualify as performance-based compensation under Code Section
162(m)(4)(C) which may be paid to any Employee for any particular Performance
Period shall be Four Million Dollars ($4,000,000).
3.3 SHARES UNDERLYING EXPIRED, CANCELLED OR UNEXERCISED AWARDS. Any
Shares subject to issuance upon exercise of an Option or SAR, but which are not
issued because of a surrender, lapse, expiration or termination of any such
Option or SAR prior to issuance of the Shares, or any Shares subject to an SAR
paid in cash, shall once again be available for issuance in satisfaction of
Awards. Similarly, any Shares issued or issuable pursuant to a Restricted Stock
Award or Performance Award which are subsequently forfeited or not issued
pursuant to the terms of the grant shall once again be available for issuance in
satisfaction of Awards.
4. ADMINISTRATION OF THE PLAN. The Board shall appoint the Committee, which
shall consist of not less than two (2) members of the Board, each of whom is a
"Non-Employee Director" as defined in Rule 16b-3. Unless the Board determines
otherwise, the Committee shall be comprised solely of "outside" directors within
the meaning of Section 162(m)(4)(C)(i) of the Code. Subject to the provisions
of the Plan, the Committee shall have full authority, in its discretion, to
determine the Employees to whom
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Awards shall be granted, the number of Shares, units or SARs to be covered by
each of the Awards, and the terms (including restrictions) of any such Award; to
amend or cancel Awards (subject to Section 21 of the Plan); to accelerate the
vesting of Awards; to require the cancellation or surrender of any options,
stock appreciation rights, units or restricted stock awards (to the extent the
restrictions have not yet lapsed) previously granted under this Plan or any
other plans of the Company as a condition to the granting of an Award; to
interpret the Plan; and to prescribe, amend, and rescind rules and regulations
relating to it, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting of Awards
hereunder. The Board may, from time to time, appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall make such
rules and regulations for the conduct of its business as it shall deem
advisable. All determinations and decisions by the Committee in the exercise of
its powers shall be final, binding and conclusive. No member of the Committee
shall be liable, in the absence of bad faith, for any act or omission with
respect to his service on the Committee.
5. EMPLOYEES TO WHOM AWARDS MAY BE GRANTED. Awards may be granted in each
year or portion thereof while the Plan is in effect to such of the Employees as
the Committee, in its discretion, shall determine. In determining the Employees
to whom Awards shall be granted, the amount of the Award, the number of Shares
to be granted or subject to purchase under such Awards and the number of SARs to
be granted, the Committee shall take into account the duties of the respective
Employees, their present and potential contributions to the success of the
Company and its Subsidiaries, and such other factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan. No Award
shall be granted to any member of the Committee so long as his or her membership
on the Committee continues or to any member of the Board who is not also an
Employee.
6. STOCK OPTIONS.
6.1 TYPES OF OPTIONS. Options granted under this Plan may be (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii) a
combination of the foregoing. The Award Letter shall designate whether an
Option is an Incentive Stock Option or a Non-Qualified Stock Option. Any Option
which is designated as a Non-Qualified Stock Option shall not be treated by the
Company or the Participant to whom the Option is granted as an Incentive Stock
Option for federal income tax purposes.
6.2 OPTION PRICE. The option price per Share of any Option granted
under the Plan shall not be less than the Fair Market Value of the Shares
covered by the Option on the date the Option is granted. Notwithstanding
anything herein to the contrary, in the event an Incentive Stock Option is
granted to an Employee who, at the time such Incentive Stock Option is granted,
is a Ten-Percent Stockholder, then the option price per Share of such Incentive
Stock Option shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares covered by the Incentive Stock Option on the date the
Incentive Stock Option is granted.
6.3 TERM OF OPTIONS. Options granted hereunder shall be exercisable for
a Term of not more than ten (10) years from the date of grant and shall be
subject to earlier termination as hereinafter provided. Each Award Letter
issued hereunder shall specify the Term of the Option, which Term shall be
determined by the Committee in accordance with its discretionary authority
hereunder. Notwithstanding anything herein to the contrary, in the event an
Incentive Stock Option is granted to an Employee who, at the time such Incentive
Stock Option is granted, is a Ten-Percent Stockholder, then such Incentive Stock
Option shall not be exercisable more than five (5) years from the date of grant
and shall be subject to earlier termination as hereinafter provided.
7. LIMIT ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS. In any calendar
year, no Employee may be granted an Incentive Stock Option hereunder to the
extent that the aggregate fair market value (such fair market value being
determined as of the date of grant of the Option in
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question) of the Shares with respect to which Incentive Stock Options first
become exercisable by the Employee during any calendar year (under all such
plans of the Employee's employer corporation, its Parent, if any, and its
Subsidiaries, if any) exceeds the sum of One Hundred Thousand Dollars ($
100,000). For purposes of the preceding sentence, Options shall be taken into
account in the order in which they were granted. Any Option granted under the
Plan which is intended to be an Incentive Stock Option, but which exceeds the
limitation set forth in this Section 7, shall be a Non-Qualified Stock Option to
the extent that a portion of the Option exceeds this limitation.
8. STOCK APPRECIATION RIGHTS.
8.1 GRANT OF SAR. The Committee, in its discretion, may grant an
Employee an SAR in tandem with an Option or may grant an Employee an SAR on a
stand alone basis. The Committee, in its discretion, may grant an SAR in tandem
with an Option either at the time the Option is granted or at any time after the
Option is granted, so long as the grant of the SAR is made during the period in
which grants of SARs may be made under the Plan. The Committee, in its
discretion, may grant an SAR in tandem with an Option, which is exercisable
either in lieu of, or in addition to, exercise of the related Option.
8.2 LIMITATIONS ON EXERCISE. Each SAR granted in tandem with an Option
shall be exercisable to the extent, and only to the extent, the related Option
is exercisable and shall be for such Term as the Committee may determine (which
Term, which is not to exceed ten (10) years, may expire prior to the Term of the
related Option). Each SAR granted on a stand alone basis shall be exercisable
to the extent, and for such Term, as the Committee may determine. The SARs
shall be subject to such other terms and conditions as the Committee, in its
discretion, shall determine and which are not otherwise inconsistent with the
Plan. The terms and conditions may include Committee approval of the exercise
of the SAR, limitations on the time within which and the extent to which such
SAR shall be exercisable, and limitations, if any, on the amount of appreciation
in value which may be recognized with regard to such SAR. The Company's
obligation to any Participant exercising an SAR may be paid in cash or Shares,
or partly in cash or Shares, at the sole discretion of the Committee. The
Committee shall have at all times final control and authority over the form of
payment of any SAR. If, and to the extent that, Shares are issued in
satisfaction of amounts payable on exercise of an SAR, the Shares shall be
valued at their Fair Market Value on the date of exercise.
8.3 SARS IN TANDEM WITH INCENTIVE STOCK OPTIONS. With respect to SARs
granted in tandem with Incentive Stock Options, the following shall apply:
(a) No SAR shall be exercisable unless the Fair Market Value of the
Shares on the date of exercise exceeds the option price of the related
Incentive Stock Option.
(b) In no event shall any amounts paid pursuant to the SAR exceed the
difference between the Fair Market Value of the Shares on the date of
exercise and the option price of the related Incentive Stock Option.
(c) The SAR must expire no later than the last date the related
Incentive Stock Option can be exercised.
8.4 SURRENDER OF OPTION OR SAR GRANTED IN TANDEM. If the Award Letter
related to the grant of an SAR in tandem with an Option provides that the SAR
can only be exercised in lieu of the related Option, then, upon exercise of such
SAR, the related Option or portion thereof with respect to which such SAR is
exercised shall be deemed surrendered and shall not thereafter be exercisable
and, similarly, upon exercise of the Option, the related SAR or portion thereof
with respect to which such Option is exercised shall be deemed surrendered and
shall not thereafter be exercisable. If the Award Letter related to the grant of
an SAR in tandem with an Option provides that
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the SAR can be exercised in addition to the related Option, then, upon exercise
of such SAR, the related Option or portion thereof with respect to which such
SAR is exercised shall not be deemed surrendered and shall continue to be
exercisable and, similarly, upon exercise of the Option, the related SAR or
portion thereof with respect to which such Option is exercised shall not be
deemed surrendered and shall continue to be exercisable.
9. EXERCISE OF RIGHTS UNDER OPTION OR SAR AWARDS.
9.1 NOTICE OF EXERCISE. An Employee entitled to exercise an Option or
SAR may do so by delivery of a written notice to that effect specifying the
number of Shares with respect to which the Option or SAR is being exercised and
any other information the Committee may prescribe. Except as provided in Section
9.2 below, the notice shall be accompanied by payment in full of the purchase
price of any Shares to be purchased, which payment may be made in cash or, in
Shares valued at Fair Market Value at the time of exercise or, a combination
thereof. No Shares shall be issued upon exercise of an Option until full
payment has been made therefor. All notices or requests provided for herein
shall be delivered to the Company as determined by the Committee.
9.2 CASHLESS EXERCISE PROCEDURES. The Committee, in its sole
discretion, may establish procedures at the time of each grant of an Option or
SAR whereby an Employee, subject to the requirements of Rule 16b-3, Regulation
T, federal income tax laws, and other federal, state and local tax and
securities laws, can exercise an Option or a portion thereof without making a
direct payment of the option price to the Company. If the Committee so elects
to establish a cashless exercise program, the Committee shall determine, in its
sole discretion, and from time to time, such administrative procedures and
policies as it deems appropriate and such procedures and policies shall be
binding on any Employee wishing to utilize the cashless exercise program.
10. RIGHTS OF OPTION AND SAR HOLDERS. The holder of an Option or SAR shall
not have any of the rights of a stockholder with respect to the Shares subject
to purchase or issuance under such Award, except to the extent that one or more
certificates for such Shares shall be delivered to the holder upon due exercise
of the Option or SAR.
11. RESTRICTED STOCK AWARDS. Restricted Stock Awards granted under the Plan
shall be subject to such terms and conditions as the Committee may, in its
discretion, determine. Restricted Stock Awards issued under the Plan shall be
evidenced by an Award Letter in such form as the Committee may from time to time
determine. Restricted Stock Awards may be subject to restrictions which lapse
over time with or without regard to Performance Objectives for a specific
Performance Period. Unless the Committee decides otherwise in its sole and
absolute discretion based upon the circumstances existing at the time of the
grant of any Restricted Stock Award, Restricted Stock Awards which are subject
solely to time-based restrictions shall vest over a period of not less than
three years and Restricted Stock Awards which are subject to restrictions based
on Performance Objectives shall vest over a period of not less than one year.
11.1 RECEIPT OF SHARES. Each Award Letter shall set forth the number of
Shares issuable under the Restricted Stock Award evidenced thereby. Subject to
the restrictions of Sections 11.2, 11.3 and 11.4 of the Plan and as set forth in
the related Award Letter, the number of Shares granted under a Restricted Stock
Award shall be issued to the recipient Employee thereof on the date of grant of
such Restricted Stock Award or as soon as may be practicable thereafter and
deposited into escrow, if applicable. If the Committee determines that a
Restricted Stock Award is intended to qualify as performance-based compensation
under Code Section 162(m)(4)(C), then such Restricted Stock Award shall be
subject to the attainment of Performance Objectives for a Performance Period.
Such specific Performance Objectives shall be established in writing no later
than ninety (90) days after the commencement of the Performance Period to which
the Performance Objectives relate, but in no event after twenty-five percent
(25%) of the Performance Period has elapsed. In establishing the Performance
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Objective or Performance Objectives, the Committee shall also establish a
schedule or schedules setting forth the portion of the Award which will be
earned or forfeited based on the degree of achievement of the Performance
Objectives actually achieved or exceeded as determined by the Committee. The
Committee may at any time adjust the Performance Objectives and any schedules
and portions of payments related thereto, adjust the way Performance Objectives
are measured, or shorten any Performance Period if it determines that conditions
or the occurrence of events warrants such actions; provided, that this provision
shall not apply to any Restricted Stock Award that is intended to qualify as
performance-based compensation under Code Section 162(m)(4)(C) if and to the
extent that it would prevent the Award from so qualifying. The Committee shall
have the right to reduce or eliminate the Restricted Stock Award payable upon
the attainment of a Performance Objective, but shall not have the discretion to
increase an Award upon the attainment of a Performance Objective with respect to
a Participant whose compensation for the particular year is subject to the
limits on tax deductibility in Code Section 162(m).
11.2 RIGHTS OF RECIPIENT PARTICIPANTS. Shares received pursuant to
Restricted Stock Awards shall be duly issued or transferred to the Participant,
and a certificate or certificates for such Shares shall be issued in the
Participant's name. Subject to the restrictions in Section 11.3 of the Plan and
as set forth in the related Award Letter, the Participant shall thereupon be a
stockholder with respect to all the Shares represented by such certificate or
certificates and shall have all the rights of a stockholder with respect to such
Shares, including the right to vote such Shares and to receive dividends and
other distributions paid with respect to such Shares. As a condition to issuing
Shares, the Committee may require a Participant to execute an escrow agreement
and any other documents which the Committee may determine. In aid of such
restrictions, certificates for Shares awarded hereunder, together with a
suitably executed stock power signed by each recipient Participant, shall be
held by the Company in its control for the account of such Participant (i) until
the restrictions determined by the Committee, in its discretion, and as set
forth in the related Award Letter, lapse pursuant to the Plan or the Letter
Agreement, at which time a certificate for the appropriate number of Shares
(free of all restrictions imposed by the Plan or the Award Letter except those
established by the Committee at the time of grant of the Award) shall be
delivered to the Participant, or (ii) until such Shares are forfeited to the
Company and cancelled as provided by the Plan or the Award Letter.
11.3 NON-TRANSFERABILITY OF RESTRICTED STOCK AWARDS. Until such time as
the restrictions determined by the Committee or otherwise set forth in the
related Award Letter have lapsed, the Shares awarded to a Participant and held
by the Company pursuant to Section 11.2 of the Plan, and the right to vote such
Shares or receive dividends on such Shares, may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of; provided, however,
that, if so provided in the Award Letter, such Shares may be transferred upon
the death of the Participant to such of his legal representatives, heirs and
legatees as may be entitled thereto by will or the laws of intestacy.
11.4 RESTRICTIONS. Shares received pursuant to Restricted Stock Awards
shall be subject to the terms and conditions as the Committee may determine,
including, without limitation, restrictions on the sale, assignment, transfer or
other disposition of such Shares and the requirement that the Participant
forfeit such Shares back to the Company upon termination of employment for any
reason or for specified reasons.
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12. PERFORMANCE AWARDS.
12.1 PERFORMANCE PERIODS. The Committee shall establish Performance
Periods applicable to Performance Awards. There shall be no limitation on the
number of Performance Periods established by the Committee and more than one
Performance Period may encompass the same fiscal year.
12.2 PERFORMANCE OBJECTIVES. If the Committee determines that a
Performance Award is intended to qualify as performance-based compensation under
Code Section 162(m)(4)(C), then such Performance Award shall be subject to the
attainment of Performance Objectives for a Performance Period. Such specific
Performance Objectives shall be established in writing no later than ninety (90)
days after the commencement of the Performance Period to which the Performance
Objectives relate, but in no event after twenty-five percent (25%) of the
Performance Period has elapsed. In establishing the Performance Objective or
Performance Objectives, the Committee shall also establish a schedule or
schedules setting forth the portion of the Performance Award which will be
earned or forfeited based on the degree of achievement of the Performance
Objectives actually achieved or exceeded as determined by the Committee. The
Committee may at any time adjust the Performance Objectives and any schedules
and portions of payments related thereto, adjust the way Performance Objectives
are measured, or shorten any Performance Period if it determines that conditions
or the occurrence of events warrant such actions; provided, that this provision
shall not apply to any Performance Award that is intended to qualify as
performance-based compensation under Code Section 162(m)(4)(C) if and to the
extent that it would prevent the Award from so qualifying. The Committee shall
have the right to reduce or eliminate the compensation or Award payable upon the
attainment of a Performance Objective but shall not have the discretion to
increase an Award upon the attainment of a Performance Objective with respect to
a Participant whose compensation for the particular year is subject to the
limits on tax deductibility in Code Section 162(m).
12.3 GRANTS OF PERFORMANCE AWARDS. Performance Awards may be granted
under the Plan in such form and to such Employees as the Committee may from time
to time approve. Performance Awards may be granted alone, in addition to or in
tandem with other Awards under the Plan. Subject to the terms of the Plan, the
Committee shall determine the amount or number of Performance Awards to be
granted to a Participant and the Committee may impose different terms and
conditions on any particular Performance Award granted to any Participant. Each
grant of a Performance Award shall be evidenced by a written instrument stating
the number of Performance Shares or Performance Units granted, the Performance
Period, the Performance Objective or Performance Objectives, the proportion of
payments for performance between the minimum and full performance levels, if
any, restrictions applicable to Shares receivable in settlement, if any, and any
other terms, conditions, restrictions and rights with respect to such grant as
determined by the Committee. The Committee may determine that the Participant
forfeit such Performance Awards back to the Company upon termination of
employment for any reason or for specified reasons. The Committee may provide,
in its sole discretion, that during a Performance Period, a Participant shall be
paid cash amounts, with respect to each Performance Share or Performance Unit
held by such individual in the same manner, at the same time, and in the same
amount paid, as a dividend on any Share.
12.4 NON-TRANSFERABILITY OF PERFORMANCE AWARDS. Until such time as the
Performance Objectives as determined by the Committee have been met and until
any restrictions upon the Shares issued pursuant to any Performance Awards have
lapsed, Performance Awards and any rights related thereto may not be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of by any
Participant.
12.5 PAYMENT OF AWARDS. As soon as practicable after the end of the
applicable Performance Period as determined by the Committee, the Committee
shall determine the extent to which
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the Performance Objectives have been met and the extent to which Performance
Awards are payable. Payment and settlement of a Performance Award shall be as
follows:
(a) In the case of Performance Shares, one or more stock certificates
representing the number of Shares payable shall be delivered to the
Participant, free of all restrictions except those established by the
Committee at the time of the grant of the Performance Shares; and
(b) In the case of Performance Units, entirely in cash, entirely in
Shares, or in such combination of Shares and cash as the Committee may
determine, in its discretion, at any time prior to such payment. If
payment is to be made in the form of cash, the amount payable for each
Performance Unit earned shall be equal to the dollar value of each
Performance Unit (as determined by the Committee) times the number of
earned Performance Units.
13. AWARD TERMS AND CONDITIONS. Each Award Letter setting forth an Award
shall contain such other terms and conditions not inconsistent herewith as shall
be approved by the Board or by the Committee. The Committee shall from time to
time adopt policies and procedures applicable to Awards that will govern the
lapse or non-lapse of restrictions and the rights of Participants and
beneficiaries in the event of death, disability, termination of employment, or
retirement of Participants or upon the occurrence of any other event determined
by the Committee, in its sole discretion, to be appropriate. The Committee
shall have authority to define disability and retirement and other terms, and
the Committee's policies and procedures may differ with respect to Awards
granted at different times. A Participant's rights in the event of death,
disability, termination of employment, or retirement or such other events shall
be set forth in the Award Letter that evidences an Award to the Participant.
14. NONTRANSFERABILITY OF AWARDS. No Award under the Plan and no rights and
interests therein, including the right to any amounts or Shares payable, may be
assigned, pledged, hypothecated or otherwise transferred by a Participant except
to the extent so permitted under the terms of the Award Letter. During the
lifetime of a Participant, Options and SARs are exercisable only by, and
payments in settlement of Awards will be payable only to, the Participant or his
or her legal representative.
15. VESTING OF AWARDS. The Committee may, in its sole discretion, grant
Awards which vest over time and/or are based upon satisfaction of Performance
Objectives. The Committee may, in its discretion, modify or change any
Performance Objectives concerning any Award or accelerate the vesting of any
Award; provided that the Committee shall not modify or change any Performance
Objective or accelerate the vesting of any Award that is intended to qualify as
performance-based compensation under Code Section 162(m)(4)(C) if and to the
extent that such modification, change or acceleration would prevent the Award
from so qualifying.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in
all of the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations, or exchanges of
shares, separations, reorganizations or liquidations or similar events or in the
event of extraordinary cash or non-cash dividends being declared with respect to
outstanding Shares or other similar transactions, the number and class of Shares
available under the Plan in the aggregate, the number and class of Shares
subject to Awards theretofore granted, the number of SARs therefore granted,
applicable purchase prices, applicable Performance Objectives for the
Performance Periods not yet completed and performance levels and portion of
payments related thereto, and all other applicable provisions, shall, subject to
the provisions of the Plan, be equitably adjusted by the Committee. The
foregoing adjustment and the manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional Share which might
otherwise become subject to an Award.
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17. CHANGE IN CONTROL.
17.1 EFFECT ON AWARDS. In the event of a Change in Control, then (i) all
Options, SARs and Options in tandem with SARs then outstanding shall become
fully exercisable as of the date of the Change in Control, whether or not then
exercisable, (ii) all restrictions and conditions of all Restricted Stock Awards
then outstanding shall be deemed satisfied as of the date of the Change in
Control, and (iii) all Performance Shares and Performance Units shall be deemed
to have been fully earned as of the date of the Change in Control. Moreover, the
Committee, in its sole discretion, may at any time, and subject to the terms and
conditions as it may impose: (a) grant Awards that become exercisable only in
the event of a Change in Control, (b) provide for Awards to be exercised
automatically and only for cash in the event of a Change in Control, and (c)
provide in advance or at the time of a Change in Control for cash to be paid in
settlement of any Award in the event of a Change in Control.
17.2 TERMINATION OF EMPLOYMENT. Notwithstanding anything contained in
this Plan to the contrary, in the event a Change in Control takes place and a
Participant's employment is terminated prior to the Change in Control and the
Participant reasonably demonstrates that such termination (i) was at the request
of a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates the Change in
Control or (ii) otherwise occurred in connection with or in anticipation of a
Change in Control which actually occurs, then for all purposes of this Plan, the
date of the Change in Control in respect of such Participant shall mean the date
immediately prior to the date of termination of such Participant's employment.
18. FORM OF AWARDS. Nothing contained in the Plan nor any resolution adopted
or to be adopted by the Board or the stockholders of the Company shall
constitute the granting of any Award. An Award shall be granted hereunder at
such date or dates as the Committee may determine, subject to the Plan. Whenever
the Committee determines to grant an Award, the Secretary or the President of
the Company, or such other person as the Committee appoints, shall send notice
thereof to the Employee, in such form as the Committee approves, stating the
number of Shares, units and SARs subject to the Award, its Term, and the other
provisions, restrictions and conditions thereof. The notice shall be
accompanied by a written Award Letter (and, in the case of a Restricted Stock
Award, by a blank stock power and/or escrow agreement for execution by the
Employee) which shall have been duly executed by or on behalf of the Company.
If the surrender of previously issued Awards is made a condition of the grant,
the notice shall set forth the pertinent details of such condition. Execution
of an Award Letter by the recipient in accordance with the provisions of the
Plan shall be a condition precedent to the exercise or settlement of any Award.
19. WITHHOLDING FOR TAXES.
19.1 COMPANY'S RIGHT TO PAYMENT FOR TAXES REQUIRED TO BE WITHHELD. The
Company shall, before any payment is made or a certificate for any Shares is
delivered or any Shares are credited to any brokerage account, deduct or
withhold from any payment under the Plan any Federal, state, local or other
taxes, including transfer taxes, required by law to be withheld or to require
the Participant or his beneficiary or estate, as the case may be, to pay any
amount, or the balance of any amount, required to be withheld. The Company may
elect to deduct such taxes from any amounts payable then or any time thereafter
in cash to the Employee and, in the Employee's sole discretion, the payment of
such taxes may be made from Shares previously held by such Employee. If the
Employee disposes of Shares acquired pursuant to an Incentive Stock Option in
any transaction considered to be a disqualifying transaction under Sections 421
and 422 of the Code, the Employee must give the Company written notice of such
transfer and the Company shall have the right to deduct any taxes required by
law to be withheld from any amounts otherwise payable to the Employee.
19.2 EMPLOYEE ELECTION TO WITHHOLD SHARES. An Employee, in his sole
discretion, may elect to satisfy his or her tax liability with respect to the
exercise, vesting or settlement
12
<PAGE>
of an Award, by having the Company withhold Shares otherwise issuable upon the
exercise, vesting or settlement of the Award.
20. TERMINATION OF PLAN. The Plan shall terminate ten (10) years from the
date hereof, and an Award shall not be granted under the Plan after that date
although the terms of any Awards may be amended at any date prior to the end of
its Term in accordance with the Plan. Any Awards outstanding at the time of
termination of the Plan shall continue in full force and effect according to the
terms and conditions of the Award and this Plan.
21. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time
to time by the Board, but no amendment without the approval of the stockholders
of the Company shall be made if stockholder approval under Section 422 of the
Code or Rule 16b-3 would be required. Notwithstanding the previous sentence, no
amendment to the Plan shall be made without the approval of the stockholders of
the Company which would change the material terms of performance goals that were
previously approved by the Company's stockholders within the meaning of Proposed
Treasury Regulation Section 1.162-27(e)(4)(vi) or a successor provision, unless
the Board determines that such approval is not necessary to avoid loss of a
deduction under Section 162(m) of the Code, such approval will not avoid such a
loss of deduction or such approval is not advisable. Notwithstanding the
discretionary authority granted to the Committee in Section 4 of the Plan, no
amendment of the Plan or any Award granted under the Plan shall impair any of
the rights of any Participant, without his or her consent, under any Award
theretofore granted under the Plan.
22. GOVERNING LAW; REGULATIONS AND APPROVALS.
22.1 GOVERNING LAW. This Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance of the laws of the
State of Georgia without giving effect to the conflicts of laws principles
thereof, except to the extent that such laws are preempted by federal law.
22.2 DELIVERY OF SHARES. The obligation of the Company to issue, sell
and deliver Shares with respect to any Awards granted under this Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
22.3 SECURITIES ACT REQUIREMENTS. No award shall be granted and no
certificates for Shares pursuant to the grant or exercise of an Award shall be
delivered pursuant to this Plan if the grant or delivery would, in the opinion
of counsel for the Company, violate the Securities Act or any other Federal or
state statutes having similar requirements as may be in effect at that time. As
a condition of the issuance of any Shares pursuant to the grant or exercise of
an Award under this Plan, the Committee may require the recipient to furnish a
written representation that he or she is acquiring the Shares for investment and
not with a view to distribution to the public. In the event that the
disposition of Shares acquired pursuant to the Plan is not covered by a then
current registration statement under the Securities Act, as amended, and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 of the
Securities Act or the regulations hereunder.
22.4 LISTING AND REGULATORY REQUIREMENTS. Each Award is subject to the
further requirements that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Shares
subject to the Award is required by any securities exchange or under any
applicable law or the rule of any regulatory body, or is necessary or desirable
as a condition of, or in connection with, the granting of such Award or the
issuance of Shares thereunder, such Award will not be granted or exercised and
the Shares may not be issued unless and until such listing,
13
<PAGE>
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
22.5 SECTION 16. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision under the Plan or action by the Committee fails to so
comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Committee.
22.6 PERFORMANCE-BASED COMPENSATION. The Plan is intended to give the
Committee the authority, in its discretion, to grant Awards that qualify as
performance-based compensation under Code Section 162(m)(4)(C).
23. DEFERRAL ELECTIONS. The Committee may, pursuant to the terms of an Award
Letter, permit any Participant receiving an Award to elect to defer his or her
receipt of a payment of cash or the delivery of Shares that would be otherwise
due such individual by virtue of the exercise, settlement, vesting or lapse of
restrictions regarding any Award made under the Plan. If any such election is
permitted, the Committee shall establish rules and procedures for such payment
deferrals and include such rules and procedures in the Award Letter, including
the possible payment or crediting of reasonable interest on such deferred
amounts credited in cash and the payment or crediting of dividend equivalents in
respect of deferrals credited in Shares.
24. MISCELLANEOUS.
24.1 EMPLOYMENT RIGHTS. Neither the Plan nor any action taken hereunder
shall be construed as giving any Employee the right to participate under the
Plan, and a grant of an Award under the Plan shall not be construed as giving
any recipient of the grant any right to be retained in the employ of the
Company.
24.2 NO TRUST OR FUND CREATED. Neither the Plan nor any grant made
hereunder shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company and any recipient of a
grant of an Award or any other person. To the extent that any person acquires a
right to receive payments from the Company pursuant to a grant under the Plan,
such right shall be no greater than the right of any unsecured general creditor
of the Company. Nothing herein shall prevent or prohibit the Company from
establishing a trust or other arrangement for the purpose of providing for the
payment of the benefits payable under the Plan.
24.3 FEES AND COSTS. The Company shall pay all original issue taxes on
the exercise of any Award granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith .
24.4 AWARDS TO FOREIGN NATIONALS. Without amending the Plan, Awards may
be granted to participants who are foreign nationals or who are employed outside
the United States or both, on such terms and conditions different than those
specified in the Plan as may, in the judgment of the Committee, be necessary or
desirable to further the purpose of the Plan.
24.5 OTHER PROVISIONS. As used in the Plan, and in Awards and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Awards and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
14
<PAGE>
25. EFFECTIVENESS OF THE PLAN. The Plan shall become effective when approved
by the Board. The Plan shall thereafter be submitted to the Company's
stockholders for approval and unless the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of all
shares represented at a meeting duly held in accordance with Georgia law within
twelve (12) months after being approved by the Board, the Plan and all Awards
made under it shall be void and of no force and effect.
To record the adoption of the Plan (as amended and restated) by the Board on
November 13, 1996, the Company has caused its authorized officers to affix the
corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Name: Brian C. Koenig
--------------------------------
Title: Vice President Human Resources
--------------------------------
By: /s/ William E. Eason, Jr.
------------------------------------
Name: William E. Eason, Jr.
--------------------------------
Title: Secretary
--------------------------------
[Seal]
15
<PAGE>
EXHIBIT 10.2
SCIENTIFIC-ATLANTA, INC.
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
As Amended on November 13, 1996
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.
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<PAGE>
(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.
(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.
2
<PAGE>
(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 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 in effect as to Quarterly Compensation payable for services rendered during
the fiscal quarter of the Company covered by the election. The Committee shall,
prior to the receipt by a Non-employee Director of shares under an Elective
Grant, approve the issuance of such shares by resolution; however, if the
Committee fails to adopt such an approving resolution, such shares may be issued
to the electing Non-employee Director, but such shares cannot be sold or
otherwise transferred by such Non-employee Director prior to the date which is
six (6) months after the date of such issuance of shares.
(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) 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.
3
<PAGE>
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.
(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
4
<PAGE>
Company shall, before delivery of a stock certificate evidencing an Award,
require the recipient to make arrangements satisfactory to the Company to
satisfy such withholding requirement, if any. A Non-employee Director receiving
an Award may satisfy such withholding requirement by having the Company withhold
Shares otherwise issuable to the director if such director makes a written
election to do so, which election must be delivered to the Secretary of the
Company.
(b) The right to receive any Shares under this Plan, at the election of
the Non-employee Director recieving an Award (without need for Committee
approval), 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
5
<PAGE>
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 Eligible Directors as defined herein, or
(v) disqualify a Non-employee Director from being a "Non-Employee Director"
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.
6
<PAGE>
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.
To record the adoption of the Plan by the Board on August 24, 1995, and by the
shareholders on November 8, 1995, and to record the amendment of the Plan by the
Board on November 13, 1996, the Company has caused its authorized officers to
execute this Plan and affix the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Name: Brian C. Koenig
--------------------------------
Title: Vice President Human Resources
--------------------------------
By: /s/ William E. Eason, Jr.
------------------------------------
Name: William E. Eason, Jr.
--------------------------------
Title: Secretary
--------------------------------
[Seal]
7
<PAGE>
EXHIBIT 10.3
SCIENTIFIC-ATLANTA, INC.
1992 EMPLOYEE STOCK OPTION PLAN
As adopted by the Board of Directors on
September 15, 1992
and by the stockholders on
November 11, 1992,
and as amended by the Board of Directors on
November 13, 1996.
<PAGE>
SCIENTIFIC-ATLANTA, INC.
------------------------
1992 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. PURPOSE.
-------
This Plan is intended to provide incentive to key Employees of the
Corporation and its Subsidiaries, to encourage proprietary interest in the
Corporation by its Employees, to encourage such key Employees to remain in the
employ of the Corporation and its Subsidiaries, and to attract new Employees
with outstanding qualifications.
2. DEFINITIONS.
-----------
Unless otherwise defined herein or the context otherwise requires, the
capitalized terms used herein shall have the following meanings:
(a) "Administrator" shall mean the officer of the Corporation
-------------
appointed by the Committee pursuant to Section 4 hereof.
(b) "Board" shall mean the Board of Directors of the Corporation.
-----
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" shall mean the Human Resources and Compensation
---------
Committee, a committee appointed by the Board.
(e) "Common Stock" shall mean, unless otherwise specifically provided,
------------
the common stock of the Corporation and any class of common shares of the
Corporation into which such common stock may hereafter be converted,
exchanged or reclassified.
(f) "Corporation" shall mean Scientific-Atlanta, Inc., a Georgia
-----------
corporation.
(g) "Disability" shall mean the condition of an individual who is
----------
unable to engage in any substantial gainful activity by reason of any
physical or mental impairment which is classified as a disability in the
Corporation's Long Term Disability Plan.
(h) "Employee" shall mean an individual who is employed (within the
--------
meaning of Section 3401 of the Code and the regulations thereunder) by the
Corporation or a Subsidiary (i.e., an individual with respect to whom
----
income taxes must be withheld from compensation).
<PAGE>
(i) "Exercise Price" shall mean the price per Share of Common Stock,
--------------
determined by the Committee, at which an Option may be exercised.
(j) "Fair Market Value" shall mean the value of one (1) Share of
-----------------
Common Stock, and shall be equal to the closing sale price as reported on
the New York Stock Exchange on the date of valuation or, if no sale
occurred on that date, then the mean between the closing bid and asked
prices on such exchange on such date. If the Common Stock ceases to be
listed on the New York Stock Exchange, then the Fair Market Value on the
date of valuation shall be determined in good faith by the Committee, and
such determination shall be conclusive and binding on all persons. If the
date of valuation is not a business day, the price on the last business day
preceding the date of valuation shall be utilized.
(k) "Incentive Stock Option" shall mean an option described in Section
----------------------
422(b) of the Code.
(l) "Non-Qualified Stock Option" shall mean an option not described in
--------------------------
Section 422(b), 423(b) or 424(b) of the Code.
(m) "Option" shall mean any stock option granted pursuant to this
------
Plan. All Options shall be granted on the date the Committee takes the
necessary action to approve the grant. However, if the minutes or other
action of the Committee provide that an Option is to be granted as of
another date, the date of grant shall be such other date.
(n) "Option Agreement" shall mean a written stock option agreement
----------------
evidencing a particular Option.
(o) "Optionee" shall mean an Employee who has received an Option.
--------
(p) "Plan" shall mean this Scientific-Atlanta, Inc. 1992 Employee
----
Stock Option Plan, as it may be amended from time to time.
(q) "Purchase Price" shall mean the Exercise Price times the number of
--------------
Shares with respect to which an Option is exercised.
(r) "Retirement" shall mean the voluntary cessation of employment by
----------
an Employee after qualifying for early or normal retirement under any
pension plan or profit sharing or stock bonus plan of the Corporation or
any Subsidiary. If an Employee is not covered by any such plan,
"Retirement" shall mean voluntary termination of employment after the
Employee either has attained age sixty-five (65) or has attained age fifty-
five (55) and has attained the tenth (10th) anniversary of his or her
seniority date.
(s) "Share" shall mean one (1) share of Common Stock, adjusted in
-----
accordance with Section 10 of this Plan (if applicable).
-2-
<PAGE>
(t) "Subsidiary" shall mean any corporation at least fifty percent
----------
(50%) of the total combined voting power of which is owned by the
Corporation or by another Subsidiary.
3. EFFECTIVE DATE.
--------------
This Plan was adopted by the Board effective September 15, 1992, subject to
the approval of the Corporation's stockholders pursuant to Section 14 hereof.
This Plan shall terminate as provided in Section 9 below.
4. ADMINISTRATION.
--------------
(a) Committee. Unless otherwise determined by the Board from time to
---------
time, Option grants under this Plan shall be made by the Committee. Acts of
a majority of the Committee at a meeting at which a quorum is present, or
acts reduced to or approved in writing by the unanimous consent of the
members of the Committee, shall be the valid acts of the Committee.
The Committee shall from time to time at its discretion select the
Employees who are to be granted Options, determine the number of Shares to
be optioned to each Optionee and designate such Options as Incentive Stock
Options or Non-Qualified Stock Options. No member of the Committee shall be
liable for any action or determination made in good faith with respect to
this Plan or any Option granted hereunder.
(b) Administrator. The Committee shall appoint an officer of the
-------------
Corporation as the Administrator of the Plan. The Administrator shall have
full authority to construe, interpret and administer the Plan, and, except
as to matters which are expressly reserved herein for determination by the
Board or the Committee, the Administrator's decisions and determinations in
the administration of the Plan shall be final, conclusive and binding on
all persons, including, without limitation, the Corporation, the
shareholders and directors of the Corporation and any persons having any
interests in any Options granted under this Plan.
5. PARTICIPATION.
-------------
The Optionees shall be those key Employees of the Corporation or the
Subsidiaries to whom Options may be granted from time to time by the Committee.
6. STOCK.
-----
The stock subject to Options granted under this Plan shall be Shares of the
Corporation's authorized but unissued or reacquired Common Stock. The aggregate
number of Shares which may be issued upon exercise of Options under this Plan
shall not exceed One Million Five Hundred Thousand (1,500,000). The number of
Shares subject to Options outstanding at any time shall not exceed the number of
Shares remaining available for issuance under this Plan. Whenever an Optionee's
rights to exercise an Option as to any Shares shall cease for any reason
-3-
<PAGE>
before he or she has exercised such Option as to such Shares, the Option shall
be deemed terminated to that extent and such Shares shall again be available for
issuance under this Plan. The limitations established by this Section 6 shall
be subject to adjustment in the manner provided in Section 10 hereof upon the
occurrence of an event specified in Section 10.
7. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) Stock Option Agreements. Options shall be evidenced by written
-----------------------
Option Agreements in such form as the Committee shall from time to time
determine. Such Option Agreements shall comply with and be subject to the
terms and conditions set forth herein. Each Option shall state whether it
is an Incentive Stock Option or a Non-Qualified Stock Option.
(b) Optionee's Undertaking. Each Optionee shall agree to remain in the
----------------------
employ of the Corporation or a Subsidiary and to render services for a
period as shall be determined by the Committee, from the date of the
granting of the Option, but such agreement shall not impose upon the
Corporation or its Subsidiaries any obligation to retain the Optionee in
their employ for any period. Except as otherwise provided in this Plan,
Options held by an Optionee may be exercised only while the Optionee is
employed by the Corporation or a Subsidiary.
(c) Number of Shares. Each Option shall state the number of Shares to
----------------
which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 10 hereof.
(d) Exercise Price. Each Option shall state the Exercise Price, which
--------------
shall not be less than the Fair Market Value on the date of grant. The
Exercise Price shall be subject to adjustment as provided in Section 10
hereof.
(e) Medium and Time of Payment. Upon the exercise of any Option, the
--------------------------
Purchase Price shall be paid in full in United States dollars by certified
check or other form of payment acceptable to the Administrator; provided,
however, that if the applicable Option Agreement so provides, or the
Committee, in its sole discretion otherwise approves thereof, the Purchase
Price may be paid, (i) by the surrender of Shares, in good form for
transfer, owned by the person exercising the Option and having a Fair
Market Value on the date of exercise equal to the Purchase Price, or (ii)
in any combination of cash and Shares, as long as the sum of the cash so
paid and the Fair Market Value of the Shares so surrendered equals the
Purchase Price.
In the event the Corporation determines that it is required to
withhold state or Federal income tax as a result of the exercise of an
Option, as a condition to the exercise thereof an Optionee must make
arrangements satisfactory to the Administrator to enable it to satisfy such
withholding requirements. Payment of such withholding requirements may be
made, at
-4-
<PAGE>
the election of the Optionee, (i) in cash, (ii) by delivery of Shares registered
in the name of Optionee, which Shares have a Fair Market Value at the time of
exercise equal to the amount to be withheld, (iii) by the Corporation
withholding Shares subject to the Option, which Shares have a Fair Market Value
at the time of exercise equal to the amount to be withheld, or (iv) any
combination of (i), (ii) and (iii) above.
(f) Term and Time for Exercise. Each Option shall state the time or times
--------------------------
when all or part thereof becomes exercisable. No Option shall be exercisable
more than ten (10) years (or less, in the discretion of the Committee) from the
date it was granted. If the Committee does not determine otherwise, any Option
granted under this Plan:
(1) Shall be exercisable as to not more than 25% of the total number of
Shares covered by the Option immediately upon, and during the year
following, the date of the grant;
(2) Shall be exercisable as to not more than 50% of the total number of
Shares covered by the Option on, and during the year following, the first
anniversary of the date of grant;
(3) Shall be exercisable as to not more than 75% of the total number of
Shares covered by the Option on, and during the year following, the second
anniversary of the date of grant;
(4) Shall be fully exercisable on the third anniversary of the date of
grant and thereafter prior to expiration of the Option.
If the Committee does not determine otherwise with respect to any Option
granted hereunder, in the event that the employment of the Optionee by the
Corporation or any Subsidiary of the Corporation terminates for any reason
whatsoever, other than death or Retirement, prior to the Option(s) held by that
person becoming fully exercisable as provided above, such Option(s) shall
automatically expire with respect to the unexercisable portion on the date of
termination of employment without any further action or documentation.
(g) Non-transferability of Options. During the lifetime of the Optionee,
------------------------------
the Option shall be exercisable only by the Optionee and shall not be assignable
or transferable. In the event of the Optionee's death, the Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution. Any other attempted alienation, assignment, pledge,
hypothecation, attachment, execution or similar process, whether voluntary or
involuntary, with respect to all or any part of any Option or right hereunder,
shall be null and void and, at the Corporation's option, shall cause all of the
Optionee's rights under the Option to terminate.
-5-
<PAGE>
(h) Change in Control of the Corporation.
------------------------------------
(1) Contrary Provisions. Notwithstanding anything contained in this
-------------------
Plan to the contrary, in the event of a Change in Control, the provisions
of this Subsection 7(h) shall govern and supersede any inconsistent terms
or provisions of this Plan.
(2) Change in Control. For purposes of this Plan, a "Change in Control"
-----------------
shall mean any of the following events:
(a) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty percent (20%) or more of the combined
voting power of the Corporation's then outstanding voting securities
(the "Voting Securities"), provided, however, that for purposes of this
-------- -------
Subsection 7(h)(2)(a), the Voting Securities acquired directly from the
Corporation by any Person shall be excluded from the determination of
such Person's Beneficial Ownership of Voting Securities (but such
Voting Securities shall be included in the calculation of the total
number of Voting Securities then outstanding); or
(b) The individuals who are members of the Incumbent Board (as
hereinafter defined), cease for any reason to constitute at least two-
thirds of the Board for purposes of this Subsection 7(h)(2)(b). The
"Incumbent Board" shall include the individuals who as of August 20,
1990 are members of the Board and any individual becoming a director
subsequent to August 20, 1990 whose election, or nomination for
election by the Corporation's stockholders, was approved by a vote of
at least two-thirds of the directors then comprising the Incumbent
Board; provided, however, that any individual who is not a member of
-------- -------
the Incumbent Board at the time he or she becomes a member of the Board
shall become a member of the Incumbent Board upon the completion of two
full years as a member of the Board; provided, further, however, that
-------- ------- -------
notwithstanding the foregoing, no individual shall be considered a
member of the Incumbent Board if such individual initially assumed
office (i) as a result of either an actual or threatened "election
contest" (within the meaning of Rule 14a-11 promulgated under the 1934
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a "Proxy Contest"),
or (ii) with the approval of the other Board members, but by reason
-6-
<PAGE>
of any agreement intended to avoid or settle a Proxy Contest; or
(c) Approval by stockholders of the Corporation of (i) a merger or
consolidation involving the Corporation if the stockholders of the
Corporation immediately before such merger or consolidation do not own,
directly or indirectly, immediately following such merger or
consolidation, more than eighty percent (80%) of the combined voting
power of the outstanding voting securities of the corporation resulting
from such merger or consolidation in substantially the same proportion
as their ownership of the Voting Securities immediately before such
merger or consolidation, or (ii) a complete liquidation or dissolution
of the Corporation or an agreement for the sale or other disposition of
all or subsequently all of the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because twenty percent (20%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the Corporation or any of its subsidiaries, or (ii) any
corporation which, immediately prior to such acquisition, is owned
directly or indirectly by the stockholders of the Corporation in the
same proportion as their ownership of stock in the Corporation
immediately prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Corporation which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided, that if a Change in
--------
Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Corporation, and
after such share acquisition by the Corporation, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
Notwithstanding anything contained in this Plan to the contrary, if
a Change in Control takes place and an Optionee's employment is
terminated prior to the completed Change in Control and the Optionee
reasonably demonstrates that such
-7-
<PAGE>
termination (i) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control and who effectuates a Change in Control or (ii) otherwise
occurred in connection with or in anticipation of a Change in Control
which actually occurs, then for all purposes of this Plan, the date of
a Change in Control in respect of such Optionee shall mean the date
immediately prior to the date of termination of such Optionee's
employment.
(3) Time for Exercise Upon a Change in Control. Upon a Change in
------------------------------------------
Control, all options granted under this Plan that are held by Employees at
the time of such Change in Control shall become immediately exercisable in
full, without regard to the years that have elapsed from the date of grant.
(4) Termination of Employment Following Change in Control. If an
-----------------------------------------------------
Optionee's employment terminates following a Change in Control other than
for "cause" (as hereinafter defined), the applicable provisions of
Subsection 7(i) of this Plan shall apply except that as of and after the
date of the Change in Control, the Administrator shall not make any
determination or take any action in connection with an Optionee's
termination of employment which would cause any option granted under this
Plan (i) to not be exercisable in full or (ii) to expire earlier than the
latest date allowable under Subsection 7(i) as applicable.
(5) Amendment or Termination.
------------------------
(a) Subsection 7(h) of this Plan shall not be amended or
terminated at any time.
(b) Any amendment or termination of this Plan prior to a Change in
Control which (1) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control, or (2) otherwise arose in connection with or in anticipation
of a Change in Control, shall be null and void and shall have no effect
whatsoever.
(i) Cessation of Employment; etc. After an Optionee ceases to be an
----------------------------
Employee, his or her rights to exercise any unexercised Option then held by the
Optionee shall be determined as provided in this Subsection 7(i). No Option may
be exercised after its term expires or the Option is otherwise cancelled.
(1) Retirement. If an Optionee ceases to be an Employee because of
----------
Retirement (and not on account of termination for "cause" (as hereinafter
defined)), such Optionee may exercise the Option immediately with respect
to (i) the Shares which he or she could have purchased at the time of
Retirement, and (ii) any Shares which would
-8-
<PAGE>
have become available for purchase under the Option if the Optionee's
employment had continued for one year after the date of Retirement. To the
extent unexercised, the Option shall expire two (2) years after the date of
Retirement or the date of expiration of the Option as shown in the
applicable Option Agreement, whichever shall occur first.
(2) Death. If the Committee does not determine otherwise with respect
-----
to any Option, upon the death of an Employee who at the time of his or her
death holds an Option, the Option shall be exercisable immediately (by the
executor or the administrator of the deceased Optionee's estate or by a
person who acquired the right to exercise the option by bequest or
inheritance or by reason of such death) with respect to (i) the Shares
which could have been purchased by the deceased Optionee at the time of his
or her death, and (ii) any Shares which would have become available for
purchase under the Option if the Optionee's employment had continued for
one year after the date of death. To the extent unexercised, the Option
shall expire (i) one year after the date of such death, or (ii) in the
event of death following termination of employment by reason of Retirement
as described in Subsection 7(i)(1) immediately above, the expiration date
of the Option after Retirement, whichever occurs last. Notwithstanding the
foregoing, the Committee may, in a special case, permit a longer period for
exercise of an Option after death of an Optionee, but in no event shall
such period extend beyond the date of expiration of the Option as set forth
in the Option Agreement.
(3) Disability. If an Optionee ceases active service as an Employee by
----------
reason of Disability, such Optionee shall have the right to exercise the
Option at any time within twelve (12) months after such cessation of
employment, but except as provided in the applicable Option Agreement, only
to the extent that, at the date of such cessation of employment, the
Optionee's right to exercise such Option had accrued pursuant to the terms
of the applicable Option Agreement and had not previously been exercised.
(4) Termination for Cause. If an Optionee's employment is terminated
---------------------
for "cause" (as hereinafter defined), such Optionee's Option(s) shall
expire immediately upon the giving to such Optionee of the notice of such
termination. "Cause," for purposes of this Subsection 7(h), shall mean
dishonest or fraudulent conduct which would normally be considered as
sufficient basis for discharging an employee from a management and/or a
supervisory position, or negligence, inaction or misconduct which
constitutes failure by the Optionee to meet such Optionee's obligations and
perform such Optionee's duties of employment.
(5) Other Reasons. If an Optionee ceases to be an Employee for any
-------------
reason other than those mentioned above in
-9-
<PAGE>
Subsections (1), (2), (3) or (4), the Optionee shall have the right to
exercise the Option at any time within thirty (30) days following such
cessation, discharge or termination, but, except as otherwise provided in
the applicable Option Agreement, only to the extent that, at the date of
cessation, discharge or termination, the Optionee's right to exercise such
Option had accrued pursuant to the terms of the applicable Option Agreement
and had not previously been exercised.
(6) Leave of Absence. An Optionee's employment with the Corporation
----------------
shall not be considered as having been terminated while the Optionee is on
military or sick leave or other bona fide leave of absence (such as
temporary employment by the Government) if the period of such leave does
not exceed ninety (90) days, or, if longer, so long as the Optionee's right
to re-employment with the Corporation is guaranteed either by statute or by
contract. Where the period of such leave exceeds ninety (90) days and where
the Optionee's rights to re-employment is not guaranteed either by statute
or by contract, the Optionee's employment will be deemed to have terminated
on the ninety-first (91st) day of such leave.
Notwithstanding the extended exercise periods permitted by the Plan in
event of Retirement or death, an Incentive Stock Option will continue to qualify
as such only if it is exercised within three (3) months after the date of
Retirement or death. Any Option exercised more than three (3) months after the
date of Retirement or death will be treated as a Non-Qualified Stock Option.
(j) Rights as a Stockholder. No one shall have rights as a stockholder
-----------------------
with respect to any Shares covered by his or her Option until the date of the
issuance of a stock certificate for such Shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 10
hereof.
(k) Modification, Extension and Renewal of Options. Within the limitations
----------------------------------------------
of this Plan, the Committee may modify, extend or renew outstanding Options or
accept the cancellation of outstanding Options (to the extent not previously
exercised) for the granting of new Options in substitution therefor. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
Option previously granted.
(l) Other Provisions. The Option Agreements authorized under this Plan may
----------------
contain such other provisions not inconsistent with the terms of this Plan as
the Committee shall deem advisable (including, without limitation, restrictions
upon the exercise of the Option or subjecting the Shares issued pursuant to the
exercise of an Option to rights of repurchase by the Corporation).
-10-
<PAGE>
(m) Substitution of Option. Notwithstanding any inconsistent provisions or
----------------------
limits under this Plan, in the event the Corporation acquires (whether by
purchase, merger or otherwise) all or substantially all of the outstanding
capital stock or assets of another corporation by any reorganization or other
transaction qualifying under Section 425 of the Code, the Committee may, in
accordance with the provisions of that Section, substitute options under this
Plan for options under the plan of the acquired company provided (i) the excess
of the aggregate Fair Market Value of the Shares subject to an Option
immediately after the substitution over the aggregate Option Price of such
Shares is not more than the similar excess immediately before such substitution
and (ii) the new Option does not give persons additional benefits, including any
extension of the exercise period.
8. LIMITATION ON ANNUAL AWARDS.
---------------------------
The aggregate Fair Market Value (determined as of the date the Option is
granted) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
this Plan and all other plans maintained by the Corporation and its parent and
subsidiary corporations, shall not exceed $100,000.
9. TERM OF PLAN.
------------
Options may be granted pursuant to this Plan until the expiration of this
Plan on September 14, 2002.
10. RECAPITALIZATIONS.
-----------------
Subject to any required action by stockholders, the number of Shares
covered by this Plan as provided in Section 6 hereof, the number of Shares
covered by each outstanding Option and the Exercise Price thereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or the payment of
a stock dividend (but only of Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Corporation.
Unless provisions are made for the continuance of this Plan or the
assumption by, or the substitution for outstanding Options of new options
covering the stock of, a successor employer corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in the event of any merger, consolidation, reorganization,
liquidation or dissolution of the Corporation, or any exchange of Shares, each
outstanding Option shall automatically be deemed to pertain to the securities
and other property to which a holder of the number of Shares covered by the
Option would have been entitled to receive in connection with any such event,
and shall no longer pertain to the Shares. A dissolution or liquidation of the
Corporation shall cause each outstanding Option to terminate.
-11-
<PAGE>
To the extent that the foregoing adjustments relate to securities of the
Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 10, the Optionee shall have no
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Corporation of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to this Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
11. SECURITIES LAW REQUIREMENTS.
---------------------------
(a) Securities Act Requirements. No Option granted pursuant to this Plan
---------------------------
shall be exercisable in whole or in part, and the Corporation shall not be
obligated to sell any Shares subject to any such Option, if such exercise and
sale would, in the opinion of counsel for the Corporation, violate the
Securities Act of 1933 (or other Federal or State statutes having similar
requirements) as it may be in effect at that time.
As a condition to the issuance of any Shares upon exercise of an Option
under this Plan, the Administrator may require the Optionee to furnish a written
representation that he is acquiring the shares for investment and not with a
view to distribution to the public. Such representations shall be required in
cases where, in the opinion of the Administrator, they are necessary to enable
the Corporation to comply with the provisions of the Securities Act of 1933, and
any shareholder who gives such representation shall be released from it at such
a time as the shares to which it applies are registered pursuant to the
Securities Act of 1933.
(b) Listing and Regulatory Requirements. Each Option shall be subject to
-----------------------------------
the further requirements that if at any time the Committee shall determine in
its discretion that the listing or qualification of the shares of stock subject
to such Option under any securities exchange requirements or under any
applicable law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of such Option or the issue of Shares thereunder, such Option may not be
exercised in whole or in part unless and until such listing, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
-12-
<PAGE>
12. AMENDMENT OF THIS PLAN.
----------------------
The Board may from time to time, with respect to any Shares at the time not
subject to Options, suspend or discontinue this Plan or revise or amend it in
any respect whatsoever except that, without the approval of the Corporation's
stockholders, no such revision or amendment shall:
(a) Materially increase the benefits accruing to participants under
this Plan;
(b) Increase the number of Shares which may be issued under this Plan;
(c) Materially modify the designation in Section 5 hereof with respect
to the classes of persons eligible to receive Options; or
(d) Amend this Section 12 to defeat its purpose.
13. APPLICATION OF FUNDS.
--------------------
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option will be used for general corporate
purposes.
14. APPROVAL OF STOCKHOLDERS.
------------------------
This Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding Shares present and entitled to vote at
the first annual meeting of stockholders of the Corporation following the
adoption of this Plan, and in no event later than January 1, 1993. Prior to
such approval, Options may be granted but shall not be exercisable.
15. EXECUTION.
---------
To record the adoption of this Plan by the Board on September 15, 1992, and
the amendment of this Plan by the Board on November 13, 1996, the Corporation
has caused its authorized officer to affix the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Brian C. Koenig,
Vice President-Human Resources
[Seal]
-13-
<PAGE>
EXHIBIT 10.4
AMENDMENT NUMBER TWO TO THE
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
WHEREAS, Section 10 of Scientific-Atlanta, Inc.'s (the "Corporation's") Non-
Employee Directors Stock Option Plan (the "Option Plan") empowers the Board to
make amendments to the Option Plan of the type set forth below;
NOW, THEREFORE, Section 5(b) of the Option Plan is hereby amended to delete the
last sentence thereof which sentence currently reads as follows:
"Notwithstanding the foregoing, shares acquired by the exercise of an
Option under this Plan may not be transferred to the Company in full or in
partial payment of the option price of shares purchased upon the exercise
of an Option under this Plan unless and until such previously-acquired
shares have been owned by the option holder for at least 365 days."
All other sections and provisions of the Option Plan shall remain in full force
and effect as written, without further amendment.
To record the adoption of this Amendment by the Board on November 13, 1996, the
Company has caused its authorized officers to execute this Amendment and affix
the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Name: Brian C. Koenig
--------------------------------
Title: Vice President Human Resources
--------------------------------
By: /s/ William E. Eason, Jr.
------------------------------------
Name: William E. Eason, Jr.
--------------------------------
Title: Secretary
--------------------------------
[Seal]
<PAGE>
EXHIBIT 10.5
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS OF SCIENTIFIC-ATLANTA, INC.
---------------------------------------------------
As Amended November 13, 1996
ARTICLE I - INTRODUCTION
- ------------------------
1.1 Name of the Plan
-----------------
This Plan shall be known as the Deferred Compensation Plan for Non-Employee
Directors of Scientific-Atlanta, Inc.
1.2 Purpose of Plan
---------------
The purpose of the Plan is to provide non-employee directors of Scientific-
Atlanta, Inc. the opportunity to defer receipt of cash compensation and
compensation in the form of stock payable to them for services to Scientific-
Atlanta, Inc. as directors.
1.3 Restatement of Plan
-------------------
This document amends and restates the Plan effective as of November 13,
1996. All deferral elections made on or after November 13, 1996, shall be
governed by the terms of the Plan as amended and restated herein. In addition,
deferral elections made before November 13, 1996, by an individual who is a non-
employee member of the Board on November 13, 1996, shall be governed
prospectively by the terms of the Plan as amended and restated herein.
ARTICLE II - DEFINITIONS
- ------------------------
For purposes of this Plan the following words and phrases shall have the
meanings and applications set forth below:
2.1 Plan
----
This Deferred Compensation Plan for Non-Employee Directors of Scientific-
Atlanta, Inc., as amended from time to time.
<PAGE>
2.2 Participant
-----------
A non-employee member of the Board of Directors of Scientific-Atlanta, Inc.
who elects to participate in this Plan.
2.3 Plan Year
---------
The period beginning on the first day of July of each calendar year and
ending on and including the last day of June of the next calendar year. The
first Plan Year began on July 1, 1993, and ended on June 30, 1994.
2.4 Compensation
------------
The total of a Participant's Awards granted, and a Participant's Annual
Retainer, Meeting Fees, and Committee Chair Retainer payments paid to the
Participant, by Scientific-Atlanta, Inc. during a Plan Year.
2.5 Annual Retainer
---------------
The amount paid each year, in quarterly payments, to non-employee members
of the Board of Directors of Scientific-Atlanta, Inc.
2.6 Meeting Fees
------------
The amounts paid to a non-employee member of the Board of Directors of
Scientific-Atlanta, Inc. for each meeting of the Board and each meeting of a
standing or special committee he or she attends.
2.7 Committee Chair Retainer
------------------------
The amount paid each year, in quarterly payments to a non-employee director
who chairs a standing or special committee of the Board of Directors.
2.8 Awards
------
The right to receive shares of Scientific-Atlanta Common Stock, granted
under a stock award or elective grant made pursuant to the Scientific-Atlanta,
Inc. Stock Plan for Non-Employee Directors.
2.9 Election Form
-------------
The form completed by a Participant in order to make one or more
Compensation Deferral Elections for the next Plan Year.
2
<PAGE>
2.10 Compensation Deferral Election
------------------------------
Each election made by a Participant to defer a portion of his or her
Compensation by executing and submitting an Election Form.
2.11 Deferred Benefit Account
------------------------
An account maintained pursuant to and in accordance with the terms and
conditions set forth in Article V hereof by or on behalf of Scientific-Atlanta,
Inc. for each Compensation Deferral Election made by a Participant under this
Plan.
2.12 Deferred Benefit Commencement Date
----------------------------------
The date irrevocably designated by a Participant with respect to each
Compensation Deferral Election entered on an Election Form as the date on which
the payment of the Deferred Benefits that accumulate as a result of each
respective election is to begin.
2.13 Beneficiary
-----------
A person or entity designated in accordance with the terms and conditions
of this Plan to receive benefits upon the death of a Participant.
2.14 Election Amount
---------------
The compensation amount (and right to a certain number of shares of
Scientific-Atlanta Common Stock, if applicable) to be deferred pursuant to a
single Compensation Deferral Election.
2.15 Service Termination Date
------------------------
The last day of the month immediately preceding the date of a Participant's
Retirement, termination of service, determination of Total Disability, or death,
whichever is applicable.
2.16 Retirement
----------
The discontinuation of service on the Board of Directors by a Participant
who is fifty-five years of age or older with at least three years of Board
service.
2.17 Total Disability
----------------
A physical or mental condition which is expected to be totally and
permanently disabling as determined in accordance with the terms and conditions
of the long-term disability insurance plan currently or most recently maintained
by Scientific-Atlanta, Inc. for the benefit of its employees claiming to be
totally disabled.
3
<PAGE>
2.18 Plan Committee
--------------
The Human Resources and Compensation Committee of the Board of Directors of
Scientific-Atlanta, Inc.
2.19 Determination Date
------------------
The last day of each Plan Year.
2.20 Plan Interest Rate
------------------
An annual rate of interest that shall be determined by the Plan Committee
prior to the start of each Plan Year and credited to a Participant's Deferred
Benefit Account during the Plan Year.
2.21 Deferred Benefits
-----------------
The amounts (and right to a certain number of shares of Scientific-Atlanta
Common Stock, if applicable) payable to a Participant or to his or her
Beneficiary or estate following the Participant's Retirement, termination of
service as a non-employee member of the Board, determination of Total
Disability, or death.
2.22 Scientific-Atlanta Common Stock
-------------------------------
The common stock of Scientific-Atlanta, Inc.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
- -------------------------------------------
3.1 Eligibility
-----------
Directors who are not employees of Scientific-Atlanta, Inc. and who are
actively serving on the Board of Directors of Scientific-Atlanta, Inc. shall be
eligible to participate in this Plan.
3.2 Participation
-------------
The Plan Committee shall notify in writing each director who becomes
eligible to participate in this Plan of his or her eligibility. Eligible
directors may participate in this Plan by completing an Election Form on or
before the end of the month immediately preceding the month in which he or she
wants to begin deferring Compensation. If timely received, such election to
participate shall be effective on the first day of the succeeding month.
4
<PAGE>
ARTICLE IV - COMPENSATION DEFERRAL
- ----------------------------------
4.1 Compensation Deferral Election
------------------------------
A Participant shall effect a Compensation Deferral Election by executing
and submitting to the Plan Committee an Election Form. Subsequently,
Scientific-Atlanta, Inc. shall defer Election Amounts deferred from the
Participant's Awards, Annual Retainer, Committee Chair Retainer or Meeting Fees
at the time cash compensation would have been paid (or at the time the right to
receive shares of Scientific-Atlanta Common Stock was granted, as applicable).
Each Election Amount shall be deferred for the Deferral Period specified with
respect to the particular Compensation Deferral Election in the Election Form.
All Compensation Deferral Elections shall apply solely to Compensation which
will be paid (or granted) to a Participant beginning with the first day of the
month commencing subsequent to the month in which the Compensation Deferral
Election is received. Any Compensation Deferral Election will apply only to
Compensation paid (or granted) during the Plan Year in which the election
becomes effective.
4.2 Election Amounts
----------------
Each Election Amount specified by a Participant on an Election Form with
respect to any Plan Year shall state in percentages the amount (and, to the
extent applicable, the right to receive a specific number of shares of
Scientific-Atlanta Common Stock), if any, which the Participant wishes to defer.
An election to defer Compensation must equal a minimum of five percent up to a
maximum of one hundred percent, in increments of five percentage points, of the
Annual Retainer and/or Committee Chair Retainer and/or Meeting Fees and/or
Awards which the Participant may be paid during the Plan Year. As to Awards,
the election must be in whole shares, with no right to receive fractional shares
being deferred.
4.3 Investment Election
-------------------
A Participant shall specify in his or her Compensation Deferral Election
the percentage of the Election Amount to be credited to an Interest Sub-Account,
a Phantom Stock Sub-Account or a Split-Dollar Insurance Sub-Account, and the
number of shares to be credited to an Award Sub-Account.
4.4 Deferral Period
---------------
With the exception of any amounts deposited into a Split-Dollar Insurance
Sub-Account, a Participant shall irrevocably specify in his or her Compensation
Deferral Election a Deferred Benefit Commencement Date for all of the Election
Amount to be deferred pursuant to such Compensation Deferral Election, which
date shall be (i) a set date which is no earlier than July 1 of the calendar
year following the end of the Plan Year in which the Election Amount is
deferred; (ii) the Participant's Retirement; or (iii) a date which is either the
fifth or the tenth anniversary following the date of the Participant's
Retirement.
5
<PAGE>
4.5 Deferred Benefit Commencement Date; Method of Payment and Issuance
------------------------------------------------------------------
Except as otherwise provided in Article VI hereof, the Election Amounts
that accumulate in a Deferred Benefit Account as a result of a Participant's
making a Compensation Deferral Election will be paid (or issued, in the case of
deferred Awards) by Scientific-Atlanta, Inc. to the Participant in the manner
and commencing on the Deferred Benefit Commencement Date designated with respect
to the Compensation Deferral Election in an Election Form.
(a) Method of Cash Payments: Except as otherwise provided in Article VI
-----------------------
hereof, the Participant may elect to receive payment of the Deferred
Benefits held in the form of cash, which Deferred Benefits are
attributable to a Compensation Deferral Election and which are held in an
Interest Sub-Account, a Phantom Stock Sub-Account or an Award Sub-Account,
pursuant to one of the following methods:
(1) Annual, semi-annual or quarterly installments payable over a five,
ten or fifteen year period, and commencing on the respective Deferred
Benefit Commencement Date; or
(2) A single lump sum payment of the entire balance of the respective
Deferred Benefit Account, determined as of and payable on the Deferred
Benefit Commencement Date.
(b) Method of Issuance of Shares: Except as otherwise provided in
----------------------------
Article VI hereof, the Participant may elect to receive issuance of the
Deferred Benefits held in the form of shares of Scientific-Atlanta Common
Stock, which Deferred Benefits are attributable to a Compensation Deferral
Election and which are held in an Award Sub-Account, pursuant to one of
the following methods:
(1) Annual, semi-annual or quarterly issuance of shares of Scientific-
Atlanta Common Stock from an Award Sub-Account over a five, ten or
fifteen year period, and commencing on the respective Deferred Benefit
Commencement Date; provided, however, that no fractional shares of
-------- -------
Scientific-Atlanta Common Stock will be issued; or
(2) A single issuance of all shares subject to the specific Award Sub-
Account, determined as of and payable on the Deferred Benefit
Commencement Date.
(c) Change in Payment or Issuance Method. A Participant may change the
------------------------------------
method of payment (or issuance of shares) selected with respect to a
Compensation Deferral Election by submitting a request in writing to the
Plan Committee on or before the December 31 immediately preceding the
Deferred Benefit Commencement Date.
6
<PAGE>
4.6 Designation of Beneficiaries
----------------------------
A Participant shall designate a Beneficiary with respect to each
Compensation Deferral Election and may change the Beneficiary designation with
respect to any Compensation Deferral Election at any time by submitting to the
Plan Committee a revised Beneficiary designation in writing reflecting the
change.
ARTICLE V - DEFERRED BENEFIT ACCOUNTS
- -------------------------------------
5.1 Deferred Benefit Accounts
-------------------------
Scientific-Atlanta, Inc. shall cause to be established and maintained a
separate Deferred Benefit Account, and within each such Deferred Benefit Account
an Interest Sub-Account, a Phantom Stock Sub-Account, a Split-Dollar Insurance
Sub-Account and an Award Sub-Account with respect to each Compensation Deferral
Election. Scientific-Atlanta, Inc. shall credit the Election Amount deferred
pursuant to each such election to the Participant's appropriate Deferred Benefit
Account, and to the Interest Sub-Account, Phantom Stock Sub-Account, a Split-
Dollar Insurance Sub-Account and Award Sub-Account as specified in the
Election, as of the date deferred from Participant's Compensation as provided in
Section 4.1 hereof.
5.2 Interest Sub-Account
--------------------
Except as otherwise provided by Section 6.2(a) hereof, interest shall
accrue at the Plan Interest Rate on any amounts credited to an Interest Sub-
Account from the date on which the amount is credited.
5.3 Phantom Stock Sub-Account
-------------------------
If a Participant elects all or a portion of the Election Amount to be
credited to the Phantom Stock Sub-Account, the amount so credited shall, solely
for purposes of determining the value of the Phantom Stock Sub-Account, be
deemed to be a number of shares of Scientific-Atlanta Common Stock determined as
follows:
(a) Conversion into Scientific-Atlanta Common Stock: The amount credited to
-----------------------------------------------
the Phantom Stock Sub-Account shall be converted on the date of such credit
into an equivalent number of hypothetical shares of Scientific-Atlanta
Common Stock (including hypothetical fractional shares) by dividing the
amount credited by the average closing price of Scientific-Atlanta Common
Stock, as reported on the composite tape of New York Stock Exchange issues,
for the 20 business days immediately preceding the last day of the month in
which such amount is credited.
(b) Deemed Reinvestment of Dividends: The number of hypothetical shares of
--------------------------------
Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock
Sub-Account shall be increased on each date that a dividend is paid on
Scientific-Atlanta Common Stock.
7
<PAGE>
The number of additional hypothetical shares of Scientific-Atlanta Common
Stock credited to a Participant's Phantom Stock Sub-Account as a result of
such increase shall be determined, first, by multiplying the total number
of hypothetical shares of Scientific-Atlanta Common Stock credited to such
Sub-Account immediately before such increase by the amount of the dividend
paid per share of Scientific-Atlanta Common Stock on the dividend payment
date, and, then, by dividing the product so determined by the closing sale
price of Scientific-Atlanta Common Stock on the composite tape of New York
Stock Exchange issues on the dividend payment date (or if there was no
reported sale of Scientific-Atlanta Common Stock on such date, on the next
preceding day on which there was such a reported sale).
(c) No Rights as Shareholder: At no time shall the hypothetical shares
------------------------
credited to a Phantom Stock Sub-Account be considered as actual shares of
Scientific-Atlanta Common Stock, and a Participant shall have no rights as
a shareholder of Scientific-Atlanta, Inc. by virtue of such hypothetical
shares.
5.4 Award Sub-Account
-----------------
If a Participant elects that an Award be deferred and credited to an Award
Sub-Account, such Award will remain in such Award Sub-Account until the
Deferred Benefit Commencement Date related to such Award Sub-Account
occurs. No interest will accrue on the Award in such Award Sub-Account, but
amounts equivalent to the dividends that would have been paid if the shares
had been issued will accrue on such Awards ("Accrued Dividends"). A
Participant shall not have any rights as a shareholder of Scientific-
Atlanta, Inc. while an Award is held in an Award Sub-Account.
5.5 Split-Dollar Insurance Sub-Account
----------------------------------
Amounts credited to a Split-Dollar Insurance Sub-Account shall be used to
pay premiums on life insurance insuring the life of the Participant, or, at
the Participant's election, the lives of the Participant and his or her
spouse on a joint and survivor basis, pursuant to such policies of
insurance, and with such insurers, as the Plan Committee may determine from
time to time. Scientific-Atlanta, Inc. shall be the owner of such insurance
policy or policies, and the proceeds thereof shall be payable as provided
in an Endorsement Split-Dollar Agreement to be entered into between the
Participant and Scientific-Atlanta, Inc.
5.6 Determination of Account Balance
--------------------------------
(a) As of each Determination Date, the current balance of a Participant's
Deferred Benefit Account shall be the sum of (i) the balance credited to
the Interest Sub-Account as of the immediately preceding Determination
Date, plus any Compensation deferred by such Participant and credited to
such Interest Sub-Account since the previous Determination Date, plus the
amount of interest credited to such Interest Sub-Account since the
preceding Determination Date, plus (ii) the value of the hypothetical
----
shares of Scientific-Atlanta
8
<PAGE>
Common Stock, determined as set forth in Section 5.5(a) above, in the
Phantom Stock Sub-Account at that time, including deferred amounts credited
to that Sub-Account since the last Determination Date and deemed
reinvestment, if any, of dividends since the last Determination Date, plus
----
(iii) the number of shares the Participant has the right to receive under
Awards credited to the Award Sub-Account and the total Accrued Dividends
credited to the Award Sub-Account, as of the immediately preceding
Determination Date, plus the number of shares the Participant has the right
to receive under additional Awards and additional Accrued Dividends
credited to such Award Sub-Account since the previous Determination Date,
minus any payments to or withdrawals by the Participant from the Deferred
-----
Benefit Account since the previous Determination Date.
(b) The dollar value of the hypothetical shares of Scientific-Atlanta
Common Stock credited to a Participant's Phantom Stock Sub-Account on any
date shall be determined by multiplying the number of hypothetical shares
of Scientific-Atlanta Common Stock credited to such Sub-Account on that
date by the average closing price of Scientific-Atlanta Common Stock, as
reported on the composite tape of New York Stock Exchange issues for the 12
months immediately preceding that date, or for that number of whole months
for which the hypothetical shares have been credited to such sub-account,
if less than 12 months.
(c) Effect of Recapitalization: In the event of a transaction or event
--------------------------
described in this paragraph (c), the number of hypothetical shares of
Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock
Sub-Account and the number of shares of Scientific-Atlanta Common Stock
subject to Awards credited to a Participant's Award Sub-Account shall be
adjusted in such a manner as the Plan Committee deems equitable. A
transaction or event is described in this paragraph (c) if and only if (i)
it is a dividend or other distribution (whether in the form of cash,
shares, other securities, or other property), extraordinary cash dividend,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, re-purchase, or exchange of
shares or other securities, the issuance of warrants or other rights to
purchase shares or other securities, or other similar corporate transaction
or event, and (ii) the Plan Committee determines that such transaction or
event affects the shares of Scientific-Atlanta Common Stock, such that an
adjustment pursuant to this paragraph (c) is appropriate to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under this Plan.
5.7 Statement of Accounts
---------------------
Within ninety (90) days after each Determination Date, the Plan Committee
shall submit to each Participant a statement in such form as the Plan Committee
shall deem desirable, setting forth a summary of the Compensation Deferral
Elections made and the current balances of the Deferred Benefit Accounts and
related Sub-Accounts maintained for the Participant as of the Determination
Date.
9
<PAGE>
ARTICLE VI - PAYMENT (AND ISSUANCE) OF DEFERRED BENEFITS
- --------------------------------------------------------
6.1 General
-------
Except as otherwise provided herein, Deferred Benefits credited to the
Interest Sub-Account, the Phantom Stock Sub-Account or the Award Sub-Account
shall be payable (and issued, if applicable) to a Participant upon the Deferred
Benefit Commencement Date and pursuant to the manner of payment (or issuance, if
applicable) selected by the Participant on the applicable Compensation Deferral
Election or any permitted modification thereof. If the Participant has elected
to receive such Deferred Benefits in installments, the amount payable in the
first year of such installments shall be an amount that will fully amortize the
balance in the Participant's Deferred Benefit Account determined as of the
Deferred Benefit Commencement Date over the five, ten or fifteen year period,
based on assumed interest earnings at the Plan Interest Rate (to the extent
applicable) in effect for such first year. Thereafter, the amount payable (or to
be issued) in each succeeding year shall be adjusted to an amount that will
fully amortize the remaining balance in such Deferred Benefit Account over the
remaining years in the aforesaid five, ten, or fifteen year installment period
based on the Plan Interest Rate (to the extent applicable) for such succeeding
year. Proceeds of life insurance purchased with amounts credited to the Split-
Dollar Insurance Sub-Account shall be payable as provided in the respective
policy or policies and the applicable Endorsement Split-Dollar Agreement.
6.2 Service Termination
-------------------
Deferred Benefits shall be paid (or issued, as appropriate) to a
Participant after his or her termination, as follows:
(a) Upon termination of service as a director by a Participant prior to the
Participant's attaining fifty-five years of age:
(1) the amounts in each of the Participant's Deferred Benefit Accounts
shall cease to earn interest (to the extent applicable) and the balance
of each Deferred Benefit Account shall be determined in accordance with
Article V hereof, and
(2) Scientific-Atlanta, Inc. shall pay (or issue, as appropriate) to
the Participant the balance of each of the Participant's Deferred
Benefit Accounts not according to the Participant's elections as
specified in his or her Election Forms but in a lump sum, to be paid
within sixty days of the termination.
(b) For purposes of this Plan, termination of service as a director by a
Participant who is fifty-five years or older with at least three years of
Board Service will in all instances be construed to be and will be treated
as Retirement by such a Participant, and Scientific-Atlanta, Inc. will pay
(or issue) to such a Participant all amounts in his or her Deferred Benefit
Accounts in accordance with Section 6.1 hereof.
10
<PAGE>
6.3 Total Disability
----------------
Deferred Benefits shall be paid (or issued, as appropriate) to a
Participant after his or her becoming Totally Disabled, as follows:
(a) Upon the determination that a Participant is Totally Disabled, no
further deferrals will be made from his or her Compensation, and Scientific
Atlanta, Inc. shall pay (or issue, as appropriate) to the Participant the
balance in each of the Participant's Deferred Benefit Accounts as follows:
(1) the date of Total Disability shall be deemed to be (i) the Deferred
Benefit Commencement Date, if the Deferred Benefit Commencement Date
for one or more Deferred Benefit Accounts is a set date prior to the
Participant's fifty-fifth birthday and the Total Disability occurs
before such date, or (ii) the Participant's Retirement, for those
Deferred Benefit Accounts, if any, for which the Deferred Benefit
Commencement Date is the Participant's Retirement or later;
(2) following Total Disability, the amounts in his or her Interest Sub-
Account shall continue to earn interest, and the hypothetical shares in
the Phantom Stock Sub-Account shall continue to earn dividends, as
provided in the Plan, until paid out to the Participant as provided
herein; and
(3) the amount (including shares of Scientific-Atlanta Common Stock) in
any Deferred Benefit Account shall be payable (or issued) to the
Participant on the Deferred Benefit Commencement Date which applies to
such Deferred Benefit Account, taking into consideration the aforesaid
deemed dates (Section 6.3(a)(1)(i) and (ii)) pursuant to the method(s)
requested by the Participant in his or her Election Form.
(b) For purposes of this Plan, once a Participant is determined to be
Totally Disabled, he or she will continue to be deemed Totally Disabled
irrespective of the Participant's ceasing to be considered Totally Disabled
for purposes of any other plan maintained by Scientific-Atlanta, Inc.
(c) In the event that a Totally Disabled Participant resumes service with
the Board following his or her Service Termination Date, such Totally
Disabled Participant may resume participation in this Plan at the
discretion of the Plan Committee; provided, however, that in any event the
-------- -------
Totally Disabled Participant shall continue to receive payments of Deferred
Benefits pursuant to the terms of this Plan.
11
<PAGE>
6.4 Death
-----
Deferred Benefits shall be paid (or issued, as appropriate) after the death
of a Participant, as follows:
(a) After the death of a Participant, Scientific-Atlanta, Inc. shall pay
the amounts (or issue shares of Scientific-Atlanta Common Stock, if
applicable) in each of the Participant's Deferred Benefit Accounts to the
Beneficiary designated by the Participant with respect to each Compensation
Deferral Election in each of his or her respective Election Forms, or, if
the Participant fails to so designate a Beneficiary, to his or her estate.
(b) If the Participant dies prior to Retirement, Scientific-Atlanta, Inc.
shall pay to each respective Beneficiary or to the Participant's estate, as
the case may be, the amounts in each of the Participant's respective
Deferred Benefit Accounts (or issue the shares held in the Award Sub-
Account), in the same manner as set forth in Section 6.3(a).
(c) If the Participant dies following Retirement or being determined to be
Totally Disabled but prior to his or her receiving the full payment of all
Deferred Benefits payable to him or her, Scientific-Atlanta, Inc. shall pay
(or issue, if appropriate) to the respective Beneficiaries or to the
Participant's estate, as the case may be, the same Deferred Benefits in the
same manner as it otherwise would have paid (or issued) to the Participant
as if the Participant had not died, unless the Participant has specified in
his or her Election Form a different manner of payment to a Beneficiary.
(d) Notwithstanding the other provisions of Section 6.4, a Beneficiary may
request a different payment schedule than what has been elected by the
Participant, if such change does not further defer the scheduled payout, by
submitting a request in writing to the Plan Committee. The granting of any
such request shall be within the discretion of the Plan Committee.
(e) If a Beneficiary who is receiving Deferred Benefits pursuant to this
Plan dies, the remainder of the Deferred Benefits to which such Beneficiary
was entitled at the time of his or her death shall continue to be payable
to the Beneficiary or to beneficiaries designated by such Beneficiary in
writing to the Plan Committee (or to the Beneficiary's estate or heirs if
he or she fails to designate a beneficiary or beneficiaries).
ARTICLE VII - PLAN ADMINISTRATION
- ---------------------------------
7.1 Plan Committee
--------------
This Plan and all matters related to it shall be administered by the Plan
Committee. The Plan Committee shall have the authority to interpret the
provisions of this Plan and to determine all questions arising in the
administration, interpretation and application of this Plan. The Plan
12
<PAGE>
Committee may, in its sole discretion, delegate any or all of its
responsibilities relative to administration of this Plan to such officers of
Scientific-Atlanta, Inc. as it designates.
ARTICLE VIII - PARTICIPANT'S RIGHTS
- -----------------------------------
8.1 Ineligibility to Participate in Plan
------------------------------------
In the event that the Plan Committee determines that a Participant has
become ineligible to continue to participate in this Plan, the Plan Committee
may terminate Participant's participation in this Plan upon ten (10) days' prior
written notice to the Participant. In such event, the Participant will not be
entitled to make further Compensation Deferral Elections, but all current
Compensation Deferral Elections shall continue in effect. All Deferred Benefit
Accounts shall be payable as otherwise provided in Article VI hereof.
8.2 Termination of Plan
-------------------
The Board of Directors of Scientific-Atlanta, Inc. may terminate this Plan
at any time, and termination of this Plan shall be effective upon ten (10) days'
written notice to all Participants in the Plan. Upon such termination of this
Plan, Scientific-Atlanta, Inc. shall pay all active Participants their Deferred
Benefits as provided in Section 6.1 as if each such Participant had actually
reached the Deferred Benefit Commencement Date for all of his or her Deferred
Benefit Accounts.
8.3 Participant's Rights
--------------------
The right of a Participant or his or her Beneficiary or estate to receive
any benefits under this Plan shall be solely that of an unsecured creditor of
Scientific-Atlanta, Inc. Any asset acquired or held by Scientific-Atlanta, Inc.
or funds allocated by Scientific-Atlanta, Inc. in connection with the
liabilities assumed by Scientific-Atlanta, Inc. pursuant to this Plan shall not
be deemed to be held under any trust for the benefit of any Participant or of
any of Participant's Beneficiaries or to be security for the performance of
Scientific Atlanta, Inc.'s obligations hereunder but shall be and remain a
general asset of Scientific-Atlanta, Inc.
8.4 Spendthrift Provision
---------------------
Neither a Participant nor any person claiming through a Participant shall
have the right to commute, sell, assign, transfer, pledge, mortgage or otherwise
encumber, transfer, hypothecate or convey any Deferred Benefit payable hereunder
or any part thereof in advance of its actually having been received by a
Participant or other appropriate recipient under this Plan, and the right to
receive all such Deferred Benefits is expressly declared to be non-assignable
and non-transferable. Prior to the actual payment (or issuance, if appropriate)
thereof, no part of the Deferred Benefits payable hereunder shall be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any person claiming through a
Participant
13
<PAGE>
or be transferable by operation of law in the event of a Participant's or any
such other person's bankruptcy or insolvency.
8.5 Cooperation
-----------
Each Participant will cooperate with Scientific-Atlanta, Inc. by furnishing
any and all information reasonably requested by Scientific-Atlanta, Inc. in
order to facilitate the payment of Deferred Benefits hereunder and by taking any
such other actions as Scientific-Atlanta, Inc. or the Plan Committee may
reasonably request.
ARTICLE IX - MISCELLANEOUS
- --------------------------
9.1 Amendments and Modifications
----------------------------
The Board of Directors of Scientific-Atlanta, Inc. may amend this Plan in
any respect at any time. In addition, the Plan Committee may authorize the
following types of amendments to the Plan without Board approval: (a) amendments
required by law; (b) amendments that relate to the administration of the Plan
and that do not materially increase the cost of the Plan; and (c) amendments
that are designed to resolve possible ambiguities, inconsistencies or omissions
in the Plan and that do not materially increase the cost of the Plan. All
authorized amendments shall be effective upon ten (10) days' written notice to
the Participants. If any such amendment affects a Participant's Deferred
Benefits, such affected Participant may, within ninety (90) days after the
effective date of such amendment, elect to terminate his or her participation in
the Plan pursuant to this Section 9.1, in which event the date of such election
shall be deemed to be such Participant's Deferred Benefit Commencement Date.
9.2 Inurement
---------
This Plan shall be binding upon and shall inure to the benefit of
Scientific-Atlanta, Inc. and each Participant hereto, and their respective
beneficiaries, heirs, executors, administrators, successors and assigns.
9.3 Governing Law
-------------
This Plan is made in accordance with and shall be governed in all respects
by the laws of the state of Georgia.
9.4 Tax Withholding
---------------
All payments (and issuances of shares) 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 Plan Committee shall,
before delivery of a cash payment or a stock certificate, require the
Participant to make arrangements satisfactory to the Plan Committee to satisfy
such
14
<PAGE>
withholding requirements. A Participant receiving shares of Scientific-Atlanta,
Inc. Common Stock may elect to satisfy such withholding requirements by having
the Plan Committee withhold shares otherwise issuable to the Participant, with
the Participant's election being made by delivering to the Plan Committee a
written election stating his or her desire to so satisfy such withholding
requirements.
To record the adoption of the Plan (as amended and restated) by the Board
on November 13, 1996, the Company has caused its authorized officers to execute
this Plan and affix the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Name: Brian C. Koenig
--------------------------------
Title: Vice President Human Resources
--------------------------------
By: /s/ William E. Eason, Jr.
------------------------------------
Name: William E. Eason, Jr.
--------------------------------
Title: Secretary
--------------------------------
[Seal]
15
<PAGE>
Exhibit 11
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- --------------------------
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 77,205 76,379 77,166 76,699
Add - Additional shares of common stock assumed
issued upon exercise of options using the "treasury stock"
method as it applies to the computation of primary
earnings per share 702 969 622 1,297
------- ------- ------- -------
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 77,907 77,348 77,788 77,996
Add - Additional shares of common stock assumed
issued upon exercise of options using the "treasury
stock" method as it applies to the computation of
fully diluted earnings per share 49 50 129 20
------- ------- ------- -------
NUMBER OF SHARES OUTSTANDING
ASSUMING FULL DILUTION 77,956 77,398 77,917 78,016
======= ======= ======= =======
NET EARNINGS (LOSS) FOR PRIMARY
AND FULLY DILUTED COMPUTATION
Continuing Operations $13,752 $ 6,601 $24,562 $10,687
======= ======= ======= =======
Discontinued Operations -- -- 3,400 (13,210)
======= ======= ======= =======
Net Earnings (Loss) $13,752 $ 6,601 $27,962 $(2,523)
======= ======= ======= =======
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
Continuing Operations $ 0.18 $ 0.09 $ 0.32 $ 0.14
Discontinued Operations -- -- 0.04 (0.17)
------- ------- ------- -------
Net Earnings (Loss) $ 0.18 $ 0.09 $ 0.36 $ (0.03)
======= ======= ======= =======
FULLY DILUTED
Continuing Operations $ 0.18 $ 0.09 $ 0.32 $ 0.14
Discontinued Operations -- -- 0.04 (0.17)
------- ------- ------- -------
Net Earnings (Loss) $ 0.18 $ 0.09 $ 0.36 $ (0.03)
======= ======= ======= =======
</TABLE>
Note: In the three and six months ended December 29, 1995 the dilutive effect
of equivalent shares derived from stock options was less than 3 percent
and therefore, the equivalent shares were not included in the computation
of earnings per share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 27, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> JUN-29-1996
<PERIOD-END> DEC-27-1996
<CASH> 96,021
<SECURITIES> 0
<RECEIVABLES> 229,964
<ALLOWANCES> 3,808
<INVENTORY> 178,580
<CURRENT-ASSETS> 548,227
<PP&E> 246,502
<DEPRECIATION> 83,942
<TOTAL-ASSETS> 769,763
<CURRENT-LIABILITIES> 239,186
<BONDS> 400
0
0
<COMMON> 38,686
<OTHER-SE> 450,233
<TOTAL-LIABILITY-AND-EQUITY> 769,763
<SALES> 543,848
<TOTAL-REVENUES> 543,848
<CGS> 379,741
<TOTAL-COSTS> 379,741
<OTHER-EXPENSES> 57,141
<LOSS-PROVISION> 153
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> 36,121
<INCOME-TAX> 11,559
<INCOME-CONTINUING> 24,562
<DISCONTINUED> 3,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,962
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
<PAGE>
Exhibit 99
CAUTIONARY STATEMENTS
From time to time, the company may publish, verbally or in written form,
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. In fact, this
Form 10-Q (or any other periodic reporting documents required by the 1934 Act)
may contain forward-looking statements reflecting the current views of the
company concerning potential future events or developments. The Private
Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor"
for forward-looking statements. These Cautionary Statements are being made
pursuant to the provisions of the Act and with the intention of obtaining the
benefits of the "safe harbor" provisions of the Act. In order to comply with the
terms of the "safe harbor," the company cautions investors that any forward-
looking statements made by the company are not guarantees of future performance
and that a variety of factors could cause the company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the company's forward-looking statements. The risks
and uncertainties which may affect the operations, performance, development and
results of the company's business include, but are not limited to, the
following: uncertainties relating to the development and ownership of
intellectual property; uncertainties relating to the ability of the company and
other companies to enforce their intellectual property rights; uncertainties
relating to economic conditions; uncertainties relating to government and
regulatory policies; uncertainties relating to customer plans and commitments;
the company's dependence on the cable television industry and cable television
spending; signal security; the pricing and availability of equipment, materials
and inventories; technological developments; performance issues with key
suppliers and subcontractors; governmental export and import policies; global
trade policies; worldwide political stability and economic growth; regulatory
uncertainties; delays in testing of new products; rapid technology changes; the
highly competitive environment in which the company operates; the entry of new,
well-capitalized competitors into the company's markets; changes in the
financial markets relating to the company's capital structure and cost of
capital; and uncertainties inherent in international operations and foreign
currency fluctuations. The words "believe," "expect," "anticipate," "project,"
"plan" and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
