<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 April 2, 1999
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 jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Technology Parkway, South
Norcross, Georgia 30092-2967
(Address of principal executive offices) (Zip Code)
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 April 30, 1999, Scientific-Atlanta, Inc. had outstanding 76,479,753
shares of common stock.
1 of 12
<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 Nine Months Ended
---------------------------------- -----------------------------------
April 2, March 27, April 2, March 27,
1999 1998 1999 1998
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
SALES $ 320,019 $ 288,714 $ 888,244 $ 877,739
COSTS AND EXPENSES
Cost of sales 228,635 197,442 638,669 610,222
Sales and administrative 37,589 39,761 119,261 120,047
Research and development 27,914 27,316 86,967 80,717
Interest expense 209 101 731 370
Interest income (1,702) (1,315) (5,641) (3,650)
Other (income) expense, net (2,360) 928 (30,309) 814
------- -------- -------- -------
Total costs and expenses 290,285 264,233 809,678 808,520
EARNINGS BEFORE INCOME TAXES 29,734 24,481 78,566 69,219
PROVISION (BENEFIT) FOR INCOME TAXES
Current 4,060 8,549 25,772 21,565
Deferred 4,860 (1,205) (2,202) (799)
------- -------- -------- -------
NET EARNINGS $ 20,814 $ 17,137 $ 54,996 $ 48,453
======= ======== ======== =======
EARNINGS PER COMMON SHARE
BASIC $ 0.27 $ 0.22 $ 0.71 $ 0.62
======= ======== ======== =======
DILUTED $ 0.27 $ 0.22 $ 0.71 $ 0.62
======= ======== ======== =======
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING
BASIC 75,859 78,725 76,783 78,619
======= ======== ======== =======
DILUTED 78,226 79,664 78,302 79,913
======= ======== ======== =======
DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.045 $ 0.045
======= ======== ======== =======
</TABLE>
SEE ACCOMPANYING NOTES
2 of 12
<PAGE>
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands
----------------------------------------
April 2, June 26,
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 174,623 $ 175,392
Marketable securities 61,043 95,947
Receivables, less allowance for doubtful
accounts of $9,804,000 at April 2
and $10,052,000 at June 26 283,571 254,419
Inventories 178,178 159,545
Deferred income taxes 16,665 18,062
Other current assets 23,817 13,133
---------- ----------
TOTAL CURRENT ASSETS 737,897 716,498
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and improvements 21,467 20,621
Buildings and improvements 35,867 37,316
Machinery and equipment 197,787 193,894
---------- ----------
255,121 251,831
Less-Accumulated depreciation and amortization 90,275 91,804
---------- ----------
164,846 160,027
---------- ----------
COST IN EXCESS OF NET ASSETS ACQUIRED 8,125 8,825
---------- ----------
OTHER ASSETS 63,937 54,792
---------- ----------
TOTAL ASSETS $ 974,805 $ 940,142
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 444 $ 726
Accounts payable 111,408 103,629
Accrued liabilities 137,289 139,011
Income taxes currently payable 10,049 15,302
---------- ----------
TOTAL CURRENT LIABILITIES 259,190 258,668
---------- ----------
LONG-TERM DEBT, less current maturities 612 983
---------- ----------
OTHER LIABILITIES 55,437 48,495
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 50,000,000 shares;
no shares issued -- --
Common stock, $0.50 par value, authorized
350,000,000 shares; issued 79,616,712 shares at
April 2 and 79,207,004 shares at June 26 39,808 39,604
Additional paid-in capital 212,767 195,446
Retained earnings 451,214 399,678
Accumulated other comprehensive income (loss) 371 (204)
---------- ----------
704,160 634,524
Less - Treasury stock, at cost (3,196,246 shares at April 2
and 122,418 shares at June 26) 44,594 2,528
---------- ----------
659,566 631,996
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 974,805 $ 940,142
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
3 of 12
<PAGE>
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
April 2, March 27,
1999 1998
------------ ---------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 14,800 $ 46,211
--------- -------
INVESTING ACTIVITIES:
Proceeds from the sale of marketable securities 64,450 --
Purchases of property, plant, and equipment (41,360) (29,967)
Proceeds from the sale of a business unit -- 27,059
Other 298 (28)
--------- -------
Net cash provided (used) by investing activities 23,388 (2,936)
--------- -------
FINANCING ACTIVITIES:
Principal payments on long-term debt (653) (552)
Dividends paid (3,460) (3,538)
Issuance of common stock 30,384 11,472
Treasury shares acquired (65,228) (7,511)
--------- -------
Net cash used by financing activities (38,957) (129)
--------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (769) 43,146
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 175,392 107,143
--------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 174,623 $ 150,289
========= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 678 $ 320
========= =======
Income taxes paid, net $ 22,642 $ 19,294
========= =======
</TABLE>
SEE ACCOMPANYING NOTES
4 of 12
<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 company's 1998
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. The company's fiscal year ends on the Friday closest to June 30 of
each year. Fiscal 1999 includes fifty-three weeks. The three and nine
months ended April 2, 1999 include thirteen and forty weeks,
respectively.
C. Basic earnings per share were computed based on the weighted average
number of shares outstanding. Diluted earnings per share were computed
based on the weighted average number of dilutive shares of common
stock outstanding. See Exhibit 11.
D. Other (income) expense for the quarter ended April 2, 1999 included a
gain of $1,375 from the adjustment of the company's investment in
Broadcom Corp (Broadcom) to market value as required by generally
accepted accounting principles.
Other (income) expense for the nine months ended April 2, 1999
included a $39,750 gain from the adjustment of the company's
investment in Broadcom to market value, a $10,880 loss on the sale of
one million shares of the company's investment in Broadcom, and a gain
of $6,250 from the cancellation of a contract under which the company
was obligated to supply equipment which, upon resale, the company had
estimated losses would be incurred. In addition, during the nine
months ended April 2, 1999, the company decided to dispose of a
business unit, Control Systems, which produces devices to monitor and
manage utility service usage, because the business unit did not fit
with the company's core strategy. The company recorded a charge of
$6,225 to adjust the carrying value of the assets to be sold to fair
value, less costs to sell, to adjust the estimated profitability on
certain contracts to allow the purchaser to achieve reasonable
margins, to provide for indemnification to the purchaser and to
provide for other miscellaneous expenses associated with the sale.
There have been no charges to the reserve through April 2, 1999. The
company anticipates completing the sale of Control Systems during the
first half of fiscal 2000.
Other (income) expense for the quarter ended March 27, 1998 included a
gain from the sale of certain assets of the interdiction business unit
and charges from the discontinuance of development of coaxiom systems.
During the quarter ended March 27, 1998, the company sold the
inventory, manufacturing assets and intellectual property of the
interdiction business to Blonder Tongue Laboratories, Inc. (Blonder
Tongue) for $19,000 cash, Blonder Tongue stock valued at $1,000 and an
option to acquire additional shares of Blonder Tongue stock, and the
company recorded a pre-tax gain of approximately $9,080. At April 2,
1999, the company had a reserve of approximately $3,618 for potential
post-closing sales price adjustments and other miscellaneous expenses
related to the sale.
During fiscal 1997, the company decided to decrease its research and
development efforts related to coaxiom products because the markets
for these products had not developed as quickly as the company
previously anticipated. During the quarter ended March 27, 1998, the
company decided to discontinue its efforts to develop coaxiom systems
and recorded a pre-tax charge of approximately $9,000. The charge
related to the disposal of inventory and fixed assets which were
associated with the development of coaxiom systems, research and
development costs incurred during fiscal 1998 and other miscellaneous
expenses. At April 2, 1999, the company had disposed of the fixed
assets and anticipates disposal of the inventory by the end of the
1999 fiscal year. The company had a reserve of approximately $1,030
related to the discontinuance of coaxiom products at April 2, 1999.
The company will continue to develop applications and technology for
telephony on cable using IP (Internet protocol) telephony which will
be used in the company's networks and Explorer(R) 2000 digital
interactive set-tops.
5 of 12
<PAGE>
NOTES:
(Amounts in thousands, except share data)
There were no other significant items in other (income) expense for
the three and nine months ended March 27, 1998.
Other (income) expense for the three and nine months ended April 2,
1999 and March 27, 1998 also included the results of foreign currency
transactions and partnership activities and net gains from rental
income and other miscellaneous items.
E. Inventories consist of the following: April 2, June 26,
1999 1998
---------- ----------
Raw materials and work-in-process $ 116,785 $ 113,703
Finished goods 61,393 45,842
---------- ----------
Total inventory $ 178,178 $ 159,545
========== ==========
F. During fiscal 1997, the company decided to dispose of two business
units, microwave and mobile, because these businesses were not aligned
with the company's core business strategies and recorded a pre-tax
charge of $5,526. During the nine months ended March 27, 1998, the
company sold the majority of the net assets of the microwave business
unit for $8,059 of cash. No gain or loss was recognized on the
transaction. At April 2, 1999, the company had a reserve of
approximately $3,428 to adjust the carrying amount of the net assets
of the mobile business unit and for potential losses on contracts of
the microwave business which were retained by the company, severance
costs, and other miscellaneous expenses related to the sale of the
microwave business unit. The company anticipates disposal of the net
assets of the mobile business by the end of this fiscal year.
G. During the nine months ended April 2, 1999, the company acquired
4,648,000 shares of its common stock pursuant to a stock buyback
program for an aggregate cost of $65,228 and acquired an additional
75,880 shares from the payment in stock rather than cash by employees
of tax withholdings on restricted stock which vested and the
cancellation of unvested, restricted stock. During the nine months
ended March 27, 1998, the company purchased 500,000 shares of its
common for an aggregate cost of $7,511. The company obtained an
additional 73,240 shares of its common stock, primarily from the
cancellation of unvested, restricted stock grants. The company re-
issues these shares under the company's stock option plans, 401(k)
plan, employee stock purchase plan and other stock-based employee
compensation arrangements.
H. The company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income" in fiscal 1999. SFAS No. 130
requires the reporting of a measure of all changes in equity of an
entity that result from recognized transactions and other economic
events other than transactions with owners in their capacity as
owners. Other comprehensive income (loss) for each period presented
includes only foreign currency translation adjustments. The
calculation of comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
April 2, March 27, April 2, March 27,
1999 1998 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net earnings $ 20,814 $ 17,137 $ 54,996 $ 48,453
Other comprehensive income (loss) (1,219) (79) 575 (349)
-------- ------- ------- --------
Comprehensive income $ 19,595 $ 17,058 $ 55,571 $ 48,104
======== ======= ======= ========
</TABLE>
I. During the fourth quarter of fiscal 1999, the company sold its
remaining one million share investment in Broadcom and realized a gain
of $12,459. The company also exercised warrants during the fourth
quarter of fiscal 1999 to purchase 720,000 shares of common stock of
Harmonic Inc. simultaneously sold the 720,000 shares of Harmonic
Inc. and realized a gain of $16,646.
6 of 12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Scientific-Atlanta had stockholders' equity of $660.0 million and cash on
hand was $174.6 million at April 2, 1999. Cash decreased $0.8 million from June
26, 1998 as expenditures for the acquisition of shares of the company's common
stock, increases in inventory levels and accounts receivable and expenditures
for equipment exceeded proceeds from the sale of marketable securities and cash
generated from earnings, increases in payables and the issuance of common stock.
The current ratio was 2.8:1 at April 2, 1999, approximately the same as June 26,
1998. At April 2, 1999, total debt was $1.5 million or less than one percent of
total capital invested. 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
in the company's Juarez, Mexico facility.
RESULTS OF OPERATIONS
- ---------------------
Sales for the quarter ended April 2, 1999, were $320.0 million, up 11
percent over the prior year. Strong North American sales growth in Transmission
Network Systems' and Subscriber Systems' products and services were offset in
part by declines in sales of Satellite products. The growth in Transmission
Network Systems was driven by the North American rebuild cycle. The significant
increase in sales of digital products was the primary factor in the year-to-year
increase in Subscriber Systems. Satellite sales declined in fiscal 1999 as this
sector, which relies significantly on international markets, continues to be
impacted by the weak economic conditions in Eastern Europe and the Asia Pacific
region. International sales were 22 percent of total sales in the quarter ended
April 2, 1999 as compared to 25 percent of total sales for the same quarter last
year.
Sales for the nine months ended April 2, 1999 were $888.2 million, up
slightly over the prior year. The strong growth in North American sales of
Transmission Network Systems' and Subscriber Systems' products described in the
preceding paragraph was offset partially by continued weak economic conditions
in the Asia Pacific, Eastern Europe and Latin American regions, which negatively
impacted Satellite sales. International sales were 22 percent of total sales in
the nine months ended April 2, 1999 as compared to 35 percent of total sales
last year.
As anticipated and announced previously, sales of analog set-tops declined
in response to the introduction of two-way digital technology. The company
expected a decline in analog sales as cable operators establish the ideal mix of
analog and digital services in each cable system.
The GainMaker(TM) product was previously announced as being available for
purchase in the third fiscal quarter of 1999, but such product is now expected
to be available for purchase in the fourth fiscal quarter of 1999.
Gross margins were 28.6 percent and 28.1 percent for the three and nine
months ended April 2, 1999, 3.0 percentage points and 2.4 percentage points
lower than the comparable periods of the prior year. Margins on digital set-
tops, which were lower than the company average, offset gains from cost
reductions from the transfer of RF (radio frequency) production to Juarez,
Mexico from Norcross, Georgia.
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.
Increases in operating expenses relative to last year are due in part to
the fact that the nine months ended April 2, 1999 included forty weeks, as
compared to the normal thirty-nine week period in the prior year.
Research and development expenses were $27.9 million and $87.0 million for
the three and nine months ended April 2, 1999, respectively, reflecting the
company's continued investment in research and development programs to support
new product initiatives, particularly digital products. The company capitalized
software development costs of $1.0 million and $2.4 million during the three and
nine months ended April 2, 1999, respectively. There were no non-recurring
engineering costs capitalized during the nine months ended April 2, 1999. During
the three and nine months ended March 27, 1998, the company capitalized software
development costs of $0.4 million and $1.8 million and capitalized non-recurring
engineering costs of $6.2 million during the nine months ended March 27, 1998.
Research and development spending, including capitalized software development
costs and non-recurring engineering, was approximately $30 million in each of
the three month periods ended April 2, 1999 and March 27, 1998 and
approximately $90 million in each of the nine month periods ended April 2, 1999
and March 27, 1998.
7 of 12
<PAGE>
Sales and administrative expenses were $2.2 million lower in the three
months ended April 2, 1999 as compared to the same quarter of the prior year due
primarily to the benefits realized in the third quarter of fiscal 1999 from the
previously announced re-sizing of the Satellite businesses. These lower expenses
were offset partially by increased marketing efforts related to digital video
products and Prisma(TM) Digital Transport products. Sales and administrative
expenses for the nine months ended April 2, 1999 were flat as compared to the
prior year. Benefits from the re-sizing of the Satellite businesses were offset
by increased marketing efforts related to digital video products and Prisma
Digital Transport products and an additional week in the nine month period ended
April 2, 1999 as compared to the prior year.
Other (income) expense for the quarter ended April 2, 1999 included a gain
of $1.4 million from the adjustment of the company's investment in Broadcom Corp
(Broadcom) to market value as required by generally accepted accounting
principles.
Other (income) expense for the nine months ended April 2, 1999 included a
$39.7 million gain from the adjustment of the company's investment in Broadcom
to market value, a $10.9 million loss on the sale of one million shares of the
company's investment in Broadcom, and a gain of $6.2 million from the
cancellation of a contract under which the company was obligated to supply
equipment which, upon resale, the company had estimated losses would be
incurred. In addition, during the nine months ended April 2, 1999, the company
decided to dispose of a business unit, Control Systems, which produces devices
to monitor and manage utility service usage, because the business unit did not
fit with the company's core strategy. The company recorded a charge of $6.2
million to adjust the carrying value of the assets to be sold to fair value,
less costs to sell, to adjust the estimated profitability on certain contracts
to allow the purchaser to achieve reasonable margins, to provide for
indemnification to the purchaser and to provide for other miscellaneous expenses
associated with the sale. There have been no charges to the reserve through
April 2, 1999. The company anticipates completing the sale of Control Systems
during the first half of fiscal 2000.
Other (income) expense for the quarter ended March 27, 1998 included a gain
from the sale of certain assets of the interdiction business unit and charges
from the discontinuance of development of coaxiom systems.
During the quarter ended March 27, 1998, the company sold the inventory,
manufacturing assets and intellectual property of the interdiction business to
Blonder Tongue Laboratories, Inc. (Blonder Tongue) for $19.0 million cash,
Blonder Tongue stock valued at $1.0 million and an option to acquire additional
shares of Blonder Tongue stock, and the company recorded a pre-tax gain of
approximately $9.1 million. At April 2, 1999, the company had a reserve of
approximately $3.6 million for potential post-closing sales price adjustments
and other miscellaneous expenses related to the sale.
During fiscal 1997, the company decided to decrease its research and
development efforts related to coaxiom products because the markets for these
products had not developed as quickly as the company previously anticipated.
During the quarter ended March 27, 1998, the company decided to discontinue its
efforts to develop coaxiom systems and recorded a charge of approximately $9.0
million. The charge related to the disposal of inventory and fixed assets which
were associated with the development of coaxiom systems, research and
development costs incurred during fiscal 1998 and other miscellaneous expenses.
At April 2, 1999, the company had disposed of the fixed assets and anticipates
disposal of the inventory by the end of the fiscal year. The company had a
reserve balance of approximately $1.0 million related to the discontinuance of
coaxiom products at April 2, 1999. The company will continue to develop
applications and technology for telephony on cable using IP (Internet protocol)
telephony which will be used in the company's networks and Explorer(R) 2000
digital interactive set-tops.
There were no other significant items in other (income) expense for the
three and nine months ended March 27, 1998.
Other (income) expense for the three and nine months ended April 2, 1999
and March 27, 1998 also included the results of foreign currency transactions
and partnership activities and net gains from rental income and other
miscellaneous items.
During fiscal 1997, the company decided to dispose of two business units,
microwave and mobile, because these businesses were not aligned with the
company's core business strategies and recorded a pre-tax charge of $5.5
million. During the nine months ended March 27, 1998, the company sold the
majority of the net assets of the microwave business unit for $8.1 million of
cash. No gain or loss was recognized on the transaction. At April 2, 1999, the
company had a reserve of approximately $3.4 million to adjust the carrying
amount of the net assets of the mobile business unit and for potential losses on
contracts of the microwave business which were retained by the company,
severance, and other miscellaneous expenses related to the sale of the microwave
business unit. The company anticipates disposal of the net assets of the mobile
business by the end of this fiscal year.
8 of 12
<PAGE>
In the fourth quarter of fiscal 1998, the company recorded charges of $23.4
million in connection with a restructuring plan. These charges included $10.2
million and $3.2 million for fixed assets to be abandoned and expenses related
to the cancellation of leases, respectively, as a result of the consolidation of
operations, $5.2 million for severance, and $4.8 million for impairment of
certain assets and other miscellaneous expenses. The company began
implementation of the restructuring plan during fiscal 1998. The company
incurred severance costs of $1.0 million and other miscellaneous expenses of
$0.2 million related to the restructuring plan which were charged to the reserve
in the fourth quarter of fiscal 1998.
During fiscal 1999, the company continued the implementation of its
restructuring plan. Production of the RF amplifier was transferred to the
company's high volume, low cost manufacturing facility in Juarez, Mexico from
Norcross, Georgia; the consolidation of the production of headend equipment from
Vancouver, British Columbia to Norcross, Georgia was substantially completed.
The Melbourne, Florida satellite services Network Operations Center (NOC) and
research and development facility were relocated to Norcross, Georgia; Satellite
Networks and Communications and Tracking Systems business units were combined
and re-sized downward, and the consolidation of operations in Norcross, Georgia
was substantially completed. During fiscal 1999, the company incurred expenses
of $0.7 million related to the cancellation of leases, severance costs of $3.0
million, and $1.4 million of miscellaneous expenses related to the
implementation of its restructuring plan. These expenses were charged to the
restructuring reserves recorded in the fourth quarter of fiscal 1998. The
company had a balance of $4.7 million related to the restructuring plan at April
2, 1999. The company anticipates that the restructuring plan will be
substantially completed by the end of fiscal 1999.
The company's effective income tax rate was 30 percent for the quarter and
nine months, unchanged from the prior year.
Net earnings for the three months ended April 2, 1999 were $20.8 million,
up $3.7 million over the prior year. Higher sales volume and lower operating
expenses year-over-year were offset in part by lower gross margins on digital
products. Net earnings for the nine months ended April 2, 1999 were $55.0
million, up $6.5 million over the prior year. An after-tax gain of $20.2 million
from the company's investment in Broadcom was partially offset by lower gross
margin rates and increased operating expenses.
YEAR 2000
- ---------
The company, like most other major companies, is currently addressing a
universal problem commonly referred to as "Year 2000 Compliance," which relates
to the ability of computer programs and systems to properly recognize and
process date sensitive information before and after January 1, 2000. The
following discussion is based on information currently available to the company.
The company has analyzed and continues to analyze its internal information
technology ("IT") systems ("IT systems") to identify any computer programs that
are not Year 2000 compliant and implement any changes required to make such
systems Year 2000 compliant. The company believes that its critical IT systems
currently are capable of functioning without substantial Year 2000 Compliance
problems. Of the non-critical, but important, IT systems that are not currently
Year 2000 Compliant, the company believes such IT systems will be Year 2000
compliant in a time frame that will avoid any material adverse effect on the
company. Also, the company does not believe that the expenditures related to
replacing or upgrading any of its IT systems to make them Year 2000 compliant
will have a material adverse effect on the financial condition of the company.
The company has identified only two IT systems (E-mail and electronic calendar)
that must be replaced due to Year 2000 concerns, and the company already had
plans to replace these IT systems with one system providing increased
functionality.
The company has evaluated its critical equipment and critical systems that
contain embedded software, such as microcontrollers ("Non-IT systems"), and the
company believes that all of its critical Non-IT systems are capable of
functioning without substantial Year 2000 Compliance problems.
The company commenced testing of its IT systems and Non-IT systems in the
first calendar quarter of 1999. To date, such testing has not revealed any
significant Year 2000 issues.
Certain products currently sold by the company contain computer programs
that perform date functions or date calculations. The company has evaluated its
products and is continuing to evaluate its products, and, based on its
investigation to date, the company believes that the products it currently sells
(except third party software included in the company's digital network control
system) are Year 2000
9 of 12
<PAGE>
compliant, provided that they are upgraded to include all recommended and
available engineering changes. However, the company's products are often used by
its customers in systems that contain third party products or products supplied
by the company in prior years. Therefore, even though the company's current
products may be Year 2000 compliant, the failure of such third party products or
historical company-supplied products to be Year 2000 compliant, or to properly
interface with the company's current products, may result in a system failure.
Certain products that the company no longer offers for sale are not Year 2000
compliant, and the company has no plans to upgrade them. However, the company
does have a plan for helping its customers upgrade their System Manager products
and related components to System Release 4.6 (and higher versions) software
which is currently available for purchase. Additionally, the company is actively
working with its third party software provider to remedy the Year 2000 issues in
the software included in the company's digital network control system. Such
System Release 4.6 (and higher versions) software is expected to remedy the Year
2000 problems of System Manager products historically sold by the company to its
customers. Because some customers may be using obsolete versions of the System
Manager products, they may also need to purchase equipment to solve their Year
2000 problems. A customer's failure to upgrade its System Manager products and
related equipment to System Release 4.6 (or higher version) software and related
equipment may result in such customer having critical Year 2000 problems. Under
certain limited circumstances, the company may incur expense to help remedy such
customer's critical Year 2000 failure.
The company is investigating each of its significant vendors, suppliers,
financial service organizations, service providers and customers to confirm that
the company's operations will not be materially adversely affected by the
failure of any such third party to have Year 2000 compliant computer programs.
Regardless of the responses that the company receives from such third parties,
the company is establishing contingency plans to reduce the company's exposure
resulting from the non-compliance of third parties. First, the company plans to
build inventories of critical and/or important components prior to January 1,
2000, and thereby decrease the company's dependence on suppliers that are not
Year 2000 compliant. Second, the company plans to send hard copies of "Schedules
of Ordered Products and Delivery Dates" to its major customers, commencing in
the third calendar quarter of 1999. Such Schedules should enable customers to
accept ordered products after January 1, 2000, even if their internal computer
systems are not operating properly.
The company expects the costs related to remediating Year 2000 issues not
to be material. All of such expenditures are included in the budgets of the
various departments of the company tasked with various aspects of the Year 2000
project. No IT projects have been deferred due to IT's Year 2000 efforts.
The company has approached the Year 2000 project in phases. Phase I of the
project involved identification of all software used or sold by the company,
identification of all significant vendors, and establishment of a senior
management committee (composed of the General Counsel, the Chief Financial
Officer and the Chairman of the Corporate Operating Committee) to oversee the
project. Phase I was completed in the second calendar quarter of 1998. Phase II
of the project involves (a) evaluation of each significant vendor and evaluation
of major customers through letters and questionnaires (b) communication with
customers concerning any products currently or recently sold by the company that
have Year 2000 issues, and (c) evaluating the company's most reasonably likely
worst case Year 2000 scenarios and contingency planning related thereto. Phase
II is almost completed and is expected to be totally completed during the second
calendar quarter of 1999. Phase III involves testing of the company's IT systems
and Non-IT systems to confirm Year 2000 compliance and/or discover any
overlooked Year 2000 problems. Phase III is under way and is expected to be
completed in the second or third calendar quarter of 1999. Last, Phase IV
involves implementation of the company's contingency plans. Several contingency
plans are currently being implemented and will continue to be implemented
through the remainder of calendar year 1999.
The company does not currently believe that any of the foregoing will have
a material adverse effect on its financial condition or its results of
operations. However, the process of evaluating the company's products and third
party products and systems is ongoing. Although not expected, failures of
critical suppliers, critical customers, critical IT systems, critical Non-IT
systems, or products sold by the company (including any delay in the deployment
of software releases related to either the System Manager upgrades or the
upgrade of the third party software included in the digital network control
system) could have a material adverse effect on the company's financial
condition or results of operations. As widely publicized, Year 2000 Compliance
has many issues and aspects, not all of which the company is able to accurately
forecast or predict. There is no way to assure that Year 2000 Compliance will
not have adverse effects on the company, some of which could be material.
Many of the company's statements related to Year 2000 are forward-looking
statements and actual results could differ materially from those anticipated
above. The company is relying on the investigations and statements of many
employees, consultants and third parties in making the above forward-looking
statements and such investigations or statements may not be accurate.
10 of 12
<PAGE>
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.
Prisma and GainMaker are trademarks of Scientific-Atlanta, Inc. and Explorer is
a registered trademark of Scientific-Atlanta, Inc.
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
- ------- ---------------------------------------------------------
The company enters into foreign exchange forward contracts to hedge certain
firm commitments and assets denominated in currencies other than the U.S.
dollar, primarily Japanese yen. These contracts are for periods consistent with
the exposure being hedged and generally have maturities of one year or less. To
qualify as a hedge, the item to be hedged must expose the company to inventory
pricing or asset devaluation risk and the related contract must reduce that
exposure and be designated by the company as a hedge. Gains and losses on
foreign exchange forward contracts, including cost of the contracts, are
deferred and recognized in income in the same period as the hedged transactions.
The company's foreign exchange forward contracts do not subject the company's
results of operations to risk due to exchange rate fluctuations because gains
and losses on these contracts generally offset losses and gains on the exposure
being hedged. The company does not enter into any foreign exchange forward
contracts for speculative trading purposes. If a foreign exchange forward
contract did not meet the criteria for a hedge, the company would recognize
unrealized gains and losses as they occur.
Firmly committed purchase exposure and related derivative contracts through
April 2, 2000 are as follows:
Japanese Canadian
Yen Dollar
--------- --------
(In thousands, except per dollar amounts)
Firmly committed purchase
contracts 5,000,000 3,920
Notional amount of forward
exchange contracts 3,976,000 3,920
Average contract amount
(Foreign currency/
United States dollar) 119.79 1.494
The company has no derivative exposure beyond April 2, 2000.
11 of 12
<PAGE>
PART II - OTHER INFORMATION
Item 4
- ------
Item 6 Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits.
Exhibit No. Description
----------- -----------
3.1 By-Laws of Scientific-Atlanta, Inc.
10.1 Scientific-Atlanta, Inc. 1996
Employee Stock Option Plan
10.2 Long-Term Incentive Plan
of Scientific-Atlanta, Inc.
10.3 Form of First Amendment to
Severance Protection Agreement
by and between Scientific-Atlanta, Inc.
and Certain Executives
10.4 Scientific-Atlanta, Inc. Retirement
Plan for Non-Employee Directors
10.5 Scientific-Atlanta, Inc. Annual
Incentive Plan for Key Employees
10.6 Scientific-Atlanta, Inc. Senior
Officer Annual Incentive Plan
10.7 Deferred Compensation Plan for
Non-Employee Directors of Scientific-
Atlanta, Inc.
10.8 1985 Executive Deferred Compensation
Plan of Scientific-Atlanta, Inc.
10.9 Scientific-Atlanta Executive Deferred
Compensation Plan
10.10 Scientific-Atlanta, Inc. Supplemental
Executive Retirement Plan
10.11 Letter Amendment to Credit and Investment
Agreement among Scientific-Atlanta, Inc.,
Wachovia Bank, N.A. and Wachovia Capital
Markets, Inc.
10.12 Amendment to Credit and Investment Agreement
among Scientific-Atlanta, Inc., Wachovia
Bank, N.A. and Wachovia Capital
Markets, Inc.
10.13 Second Amendment to Credit and Investment
Agreement among Scientific-Atlanta, Inc.,
Wachovia Bank, N.A. and Wachovia Capital
Markets, Inc.
10.14 Fourth Amendment to Credit Agreement between
Scientific-Atlanta, Inc. and NationsBank,
N.A. and other lenders
10.15 Non-Employee Directors Stock Option Plan
10.16 First Amendment to Lease Agreement between
Scientific-Atlanta, Inc. and Wachovia
Capital Markets, Inc.
10.17 Second Amendment to Lease Agreement between
Scientific-Atlanta, Inc. and Wachovia
Capital Markets, Inc.
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
April 2, 1999.
Date: May 17, 1999
-------------
/s/ Wallace G. Haislip
-------------------------------------
Wallace G. Haislip
Senior Vice President - Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer and duly
authorized signatory of the
Registrant)
12 of 12
<PAGE>
EXHIBIT 3.1
BY-LAWS
OF
SCIENTIFIC-ATLANTA, INC.
(as amended November 12, 1997)
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office shall be in the state
-----------------
of Georgia, County of Gwinnett.
Section 2. Other Offices. The corporation may also have offices at such
-------------
other places both within and without the state of Georgia as the board of
directors may from time to time determine and the business of the corporation
may require or make desirable.
ARTICLE II
SHAREHOLDERS' MEETINGS
----------------------
Section 1. Annual Meetings. The annual meeting of the shareholders of the
---------------
corporation shall be held at such place and time in the United States as may be
determined by the board of directors, for the purpose of electing directors and
transacting such other business as may properly be brought before the meeting.
To be properly brought before the meeting, business must be either (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a shareholder. In addition to any other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation, no earlier than 90 days and no later than 60 days
prior to the date of such meeting, regardless of any postponements, deferrals or
adjournments of such meeting to a later date; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made, notice by a holder of record must, to be timely, be so delivered
or received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting is mailed or the day on
which such public disclosure was made; provided that, in the case of an annual
meeting, notice by a holder of record, to be timely, must be so delivered or
received not later than the close of business 60 days prior to the anniversary
of the date of the previous year's annual meeting. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief
1
<PAGE>
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business, (iii) the class
and number of securities of the corporation which are beneficially owned by the
shareholder, and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 1, provided, however, that nothing in this Section 1 shall
-------- -------
be deemed to preclude discussion by any shareholder of any business properly
brought before the annual meeting.
The presiding officer at an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 1, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 2. Special Meetings. (a) Special meetings of the shareholders
----------------
shall be held at the principal office of the corporation or at such other place
in the United States as may be designated in the notice of such meetings, and
shall be called by the chief executive officer or the secretary only when so
directed by the board of directors or when so requested in writing by the
holders of at least 75 percent of the issued and outstanding capital stock of
the corporation entitled to vote in an election of directors.
(b) Anything in these by-laws to the contrary notwithstanding, the
following procedures shall apply to the call of any special meeting of
shareholders, or a special meeting in lieu of the annual meeting of
shareholders, at the request of holders of the outstanding capital stock of
the corporation:
(i) Every written request for the call of a special meeting
shall bear the signature and date of signature of each
shareholder who signs the request and shall state the purpose or
purposes for which the meeting is to be called.
(ii) The record date for the determination of shareholders
entitled to request the corporation to call a special meeting
shall be the date which is 45 calendar days prior to the date
(the "Filing Date") that written requests complying with the
requirements of law and these by-laws signed by a sufficient
number of record holders to request a special meeting in
accordance with this Section 2 have been received by the
corporation (the "Minimum Request Condition").
(iii) Promptly after receipt of a written request or requests for
the call of a special meeting, the corporation shall engage
nationally recognized independent inspectors of election for the
purpose of determining the validity of the request or requests
and any revocations thereof. Within 15
2
<PAGE>
calendar days of the Filing Date, such independent inspectors
shall deliver to the corporation a written report stating whether
the Minimum Request Condition has been satisfied. If such written
report states that the Minimum Request Condition has been
satisfied, or if no report is delivered by independent inspectors
within 15 calendar days of the Filing Date, the chief executive
officer or the secretary of the corporation shall call the
special meeting by mailing notice thereof not later than 45
calendar days after the Filing Date.
(iv) The date, time and place of the special meeting shall be
determined by the board of directors and shall be set forth in
the notice of meeting, which notice shall comply with the
provisions of Section 3 of this Article II.
(v) The record date for the determination of shareholders
entitled to notice of and to vote at the special meeting shall be
set by the board of directors in accordance with the provisions
of Section 4 of Article V of these by-laws.
Section 3. Notice of Meetings. Written notice of every meeting of
------------------
shareholders, stating the place, date and hour of the meeting, shall be given
personally or by mail to each shareholder of record entitled to vote at such
meeting not less than 10 nor more than 60 days before the date of the meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage thereon prepaid (except as
hereinafter provided) addressed to the shareholder at his address as it appears
on the corporation's record of stockholders. The corporation may utilize a class
of mail other than first class if the notice of the meeting is mailed, with
adequate postage prepaid, not less than 30 days before the date of the meeting.
Attendance of a shareholder at a meeting of shareholders (1) waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (2) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when it
is presented. Notice need not be given to any shareholder who signs a waiver of
notice either before or after the meeting.
Section 4. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at all meetings
of the shareholders except as otherwise provided by statute, by the articles of
incorporation, or by these by-laws. If a quorum is not present or represented at
any meeting of the shareholders, the holders of a majority of the voting shares,
present in person or represented by proxy, may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than 120 days, or if a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each shareholder of record
entitled
3
<PAGE>
to vote at the meeting.
Section 5. Voting. When a quorum is present at any meeting, action on a
------
matter (other than the election of directors) is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
question is one upon which by express provision of law, of the articles of
incorporation or of these by-laws, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
Except as otherwise required by the Articles of Incorporation, each shareholder
shall at every meeting of the shareholders be entitled to one vote in person or
by proxy for each share of the capital stock having voting power registered in
his name on the books of the corporation, but no proxy shall be voted or acted
upon after eleven months from its date, unless otherwise provided in the proxy.
Section 6. Consent of Shareholders. Any action required or permitted to
-----------------------
be taken at any meeting of the shareholders may be taken without a meeting if
all of the shareholders consent thereto in writing, setting forth the action so
taken, and such writing is delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Such consent shall have the same
force and effect as a unanimous vote of shareholders.
Section 7. List of Shareholders. The corporation shall keep at its
--------------------
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving their names
and addresses and the number, class and series, if any, of the shares held by
each. The officer who has charge of the stock transfer books of the corporation
shall prepare and make, before every meeting of shareholders or any adjournment
thereof, a complete list of the shareholders entitled to vote at the meeting or
any adjournment thereof, arranged in alphabetical order, with the address of and
the number and class and series, if any, of shares held by each. The list shall
be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the whole time of the meeting
for the purposes thereof. The said list may be the corporation's regular record
of shareholders if it is arranged in alphabetical order or contains an
alphabetical index.
ARTICLE III
DIRECTORS
---------
Section 1. Powers. Except as otherwise provided or authorized by law, the
------
property, affairs and business of the corporation shall be managed and directed
by its board of directors, which may exercise all powers of the corporation and
do all lawful acts and things which are not by law, by any legal agreement among
shareholders or by the articles of incorporation, directed or required to be
exercised or done by the shareholders.
Section 2. Meetings and Notice. The board of directors of the corporation
-------------------
may hold meetings, both regular and special, either within or without the state
of Georgia. Regular meetings of the board of directors may be held without
notice at such time and place as shall from time to time be determined by
resolution of the board. Special meetings of the board may be called by the
chairman of the board or the chief executive officer or by any three directors
on
4
<PAGE>
one day's oral, telegraphic or written notice duly given or served on each
director personally, or three days' notice deposited, first class postage
prepaid, in the United States mail. Such notice shall state a reasonable time,
date and place of meeting, but the purpose need not be stated therein. Notice
need not be given to any director who signs a waiver of notice either before or
after the meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting and waiver of all objections to the place and
time of the meeting, or the manner in which it has been called or convened,
except when the director states, at the beginning of the meeting, any such
objection or objections to the transaction of business.
Section 3. Quorum. At all meetings of the board a majority of directors
------
shall constitute a quorum for the transaction of business, and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board, except as may be otherwise specifically provided
by law, by the articles of incorporation, or by these by-laws. If a quorum shall
not be present at any meeting of the board, a majority of the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4. Consent of Directors. Unless otherwise restricted by the
--------------------
articles of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, setting forth the action so taken, and
the writing or writings are delivered to the corporation for inclusion in the
minutes of the proceedings of the board or committee or filing with the
corporate records. Such consent shall have the same force and effect as a
unanimous vote of the board.
Section 5. Committees. The board of directors may by resolution designate
----------
from among its members one or more committees, each committee to consist of one
or more directors. The board may designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
such committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise all of the authority of the board of directors in
the management of the business and affairs of the corporation, except that it
shall have no authority to (1) approve or propose to shareholders action which
the Georgia Business Corporation Code requires to be approved by shareholders;
(2) fill vacancies on the board of directors or any of its committees; (3) amend
the articles of incorporation; (4) adopt, amend or repeal by-laws; or (5)
approve a plan of merger not requiring shareholder approval. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. The provisions of Sections 2
and 3 of this Article III shall apply to committees and their members as well as
to the board of directors. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
Section 6. Compensation of Directors. Directors shall be entitled to such
-------------------------
reasonable compensation for their services as directors or members of any
committee of the board as shall be fixed from time to time by resolution adopted
by the board, and shall also be entitled to
5
<PAGE>
reimbursement for any reasonable expenses incurred in attending any meeting of
the board or any such committee.
Section 7. Nominations of Directors. Nominations of candidates for
------------------------
election at any meeting of the shareholders of the corporation as directors of
the corporation may be made (i) by, or at the direction of, the board of
directors or (ii) by any holder of record entitled to vote at such meeting in an
election of directors who complies with the notice procedures set forth in this
Section 7.
Nominations, other than those made by, or at the direction of, the board of
directors, shall be made pursuant to timely notice in writing to the secretary
of the corporation as set forth in this Section 7. To be timely, any such notice
must be delivered to, or mailed and received at, the principal executive offices
of the corporation not less than 60 days nor more than 90 days prior to the date
of such meeting, regardless of any postponements, deferrals or adjournments of
such meeting to a later date; provided, however, that if less than 70 days'
notice or prior public disclosure of the date of the meeting is given or made,
notice by a holder of record must, to be timely, be so delivered or received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting is mailed or the day on which such public
disclosure was made; provided that, in the case of an annual meeting, notice by
a holder of record, to be timely, must be so delivered or received not later
than the close of business 60 days prior to the anniversary of the date of the
previous year's annual meeting. Such notice by a holder of record must set
forth (i) as to each person whom such holder proposes to nominate for election
as a director, all information relating to such person that would be required to
be disclosed, or otherwise required, pursuant to Sections 13 or 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), in connection with any acquisition
of shares and the solicitations of proxies with respect to nominees for election
of directors pursuant to the Exchange Act, regardless of whether such person is
subject to such provisions of such Exchange Act, and (ii) as to the holder of
record giving such notice, (a) the name and address, as they appear on the
records of the corporation, of such holder, together with the name and address
of any other shareholder of the corporation who is a record or beneficial owner
of securities of the corporation and who is known by such holder to be
supporting such nominee(s) and (b) the class and number of securities which are
beneficially owned and owned of record by such holder on the date of such
holder's notice and the class and number of securities of the corporation
beneficially owned and owned of record by any person known by such holder to be
supporting such nominee(s). At the request of the board of directors, any person
nominated by, or at the direction of, the board of directors for election as a
director shall furnish to the secretary of the corporation that information that
would be required to be set forth in any holder's notice of nomination
pertaining to such nominee. Ballots bearing the names of all the persons who
have been nominated for election as directors at any meeting of shareholders in
accordance with the procedures set forth in this Section 7 shall be provided for
use at such meeting.
The board of directors of the corporation may reject any nomination by a
holder of record not timely made in accordance with the procedures set forth in
this Section 7. If the board of directors determines that the information
provided in a holder's notice of nomination does not
6
<PAGE>
satisfy the informational requirements of this Section 7 in any material
respect, the secretary of the corporation shall promptly notify such holder of
the deficiency in such notice. The holder shall have an opportunity to cure the
deficiency by providing additional information to the secretary within such
period of time, not to exceed five days, from the date such notice of deficiency
is given to such holder, as the board of directors shall determine. If the
deficiency is not cured within such period, or if the board of directors
reasonably determines that the additional information provided by such holder,
together with previously provided information, does not satisfy the requirements
of this Section 7 in any material respect, then the board of directors may
reject such holder's nomination. The secretary of the corporation shall notify
in writing any holder making a nomination whether such nomination has been made
in accordance with the time and informational requirements of this Section 7.
Notwithstanding the procedures set forth herein, if the board of directors does
not make a determination as to the validity of any nomination by a holder of
record, the presiding officer at the meeting of shareholders shall determine and
declare at such meeting whether a nomination was or was not made in accordance
with the procedures set forth in this Section 7. If the presiding officer
determines that a nomination was not made in accordance with the procedures set
forth in this Section 7, he shall so declare at such meeting of shareholders and
the defective nomination shall be disregarded.
ARTICLE IV
OFFICERS
--------
Section 1. Number. The officers of the board of directors shall be chosen
------
by the board of directors and shall consist of a chairman of the board and, if
the board of directors desires, a vice chairman. The officers of the
corporation shall be chosen by the board of directors and shall consist of a
chief executive officer, a vice president, a secretary, and a treasurer. The
board of directors may also choose additional vice presidents, one or more
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 2. Compensation. The salaries of all officers and agents of the
------------
corporation shall be fixed by the board of directors or a committee or officer
appointed by the board. As used herein the term "salaries" shall include any
bonus, incentive payments, or other plans or programs involving remuneration to
officers.
Section 3. Term of Office. Unless otherwise provided by resolution of the
--------------
board of directors, the officers of the board of directors and the principal
officers of the corporation shall be chosen annually by the board at the first
meeting of the board following the annual meeting of shareholders of the
corporation, or as soon thereafter as is conveniently possible. Subordinate
officers may be elected from time to time. Each officer shall serve until his
successor shall have been chosen and qualified, or until his death, resignation
or removal.
Section 4. Removal. Any officer may be removed from office at any time,
-------
with or
7
<PAGE>
without cause, by the board of directors whenever in its judgment the best
interest of the corporation will be served thereby.
Section 5. Vacancies. Any vacancy in an office resulting from any cause
---------
may be filled by the board of directors.
Section 6. Powers and Duties. Except as hereinafter provided, the
-----------------
officers of the corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the board of directors. At the annual meeting
at which officers are elected, the board shall by resolution designate a chief
executive officer, who will be responsible to the board for the general
management of the company.
(a) Chairman of the Board. The chairman of the board shall preside at
---------------------
all meetings of the stockholders and directors, and shall see that all
orders and resolutions of the board are carried into effect. He shall have
such powers and perform all such other duties as the board may direct. The
chairman of the board of directors may delegate to any other officer of the
corporation the power to preside at any meeting of the shareholders.
(b) Vice Chairman of the Board. The vice chairman shall have such
--------------------------
duties, responsibilities and authority as the board of directors may
prescribe, subject to the limitations expressed or implied by these by-
laws. In the absence of the chairman or in the event of his inability or
incapacity to act, the vice chairman shall perform the duties and exercise
the powers of the chairman.
(c) President and Chief Executive Officer. The president and chief
-------------------------------------
executive officer shall be responsible for the operation and management of
the company and shall be responsible for the proper utilization and
security of the company's assets and resources. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, within such limitations as the board by resolution may
establish. The president and chief executive officer may delegate his
powers to other officers and agents of the company; provided, however, that
such delegation shall be reported to the board of directors no less
frequently than once a year at the annual meeting, or at such other time as
a significant change is made to a previously reported delegation.
(d) Vice Presidents. The vice presidents shall have such duties,
---------------
responsibilities and authority as the chief executive officer shall
delegate, subject to any limitations imposed by the board and subject to
the limitations expressed or implied by these by-laws. The Board may
designate one or more vice presidents as senior vice president. In the
absence of the chief executive officer or in the event of his inability or
incapacity to act, the person designated as the Chairman of the Operating
Committee shall perform the duties of the chief executive officer and, when
so acting, shall have all the powers of and be subject to all the
restrictions upon the chief executive officer.
8
<PAGE>
(e) Secretary. The secretary shall attend all meetings of the board
---------
of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of
directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the shareholders and special
meetings of the board of directors, and shall perform such other duties as
may be prescribed by the board of directors or chief executive officer,
under whose supervision he shall be. He shall have custody of the corporate
seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
(f) Assistant Secretary. The assistant secretary, or if there be more
-------------------
than one, the assistant secretaries in the order determined by the board of
directors (or, if there be no such determination, then in the order of
their election), shall, in the absence of the secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
(g) Treasurer. The treasurer shall, subject to the direction of a
---------
vice president designated by the chief executive officer, have general
custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all monies and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the board of directors. The treasurer shall disburse the
funds of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements. If required by the board of
directors, the treasurer shall give the corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful
performance of the duties of the treasurer's office and for the restoration
to the corporation, in case of death, resignation, retirement, or removal
from office, of all books, papers, vouchers, money, and other property of
whatever kind in the possession or under control of the treasurer and
belonging to the corporation.
(h) Assistant Treasurer. The assistant treasurer, or if there shall
-------------------
be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
(i) Controller. The controller shall be the chief accounting officer
----------
of the corporation. Subject to the direction of a vice president designated
by the chief executive
9
<PAGE>
officer, the controller shall maintain adequate records of all assets,
liabilities, and transactions of the corporation in the conduct of its
business. The controller shall require reports from the other officers and
agents of the corporation who receive or disburse funds for its account, at
such time and in such form as the controller may deem advisable. The
controller shall compile and maintain such accounting and statistical
records and data as may be required, and shall prepare and submit to the
executive officers, including the treasurer, and to the board of directors
such periodical and special financial statements as may be called for by
them. In conjunction with other officers and heads of divisions, the
controller shall initiate and enforce rules and regulations, budgets, and
other measures and procedures for the purpose of enhancing the efficiency,
economy, and profit with which the business of the corporation is
conducted. The controller shall see that adequate internal audits of the
financial records of the corporation are currently and accurately made.
Section 7. Staff and Operating Unit Officers. The chief executive
---------------------------------
officer may from time to time designate one or more "officers" for any function
or operating unit, but such persons shall not be officers of the corporation.
Any such appointee shall serve at the pleasure of the chief executive officer.
Section 8. Voting Securities of the Corporation. Unless otherwise ordered
------------------------------------
by the board of directors, the chief executive officer shall have full power and
authority on behalf of the corporation to attend and to act and vote at any
meetings of security holders of corporations in which the corporation may hold
securities, and at such meetings shall possess and may exercise any and all
rights and powers incident to the ownership of such securities which the
corporation might have possessed and exercised if it had been present. The chief
executive officer from time to time may delegate like powers upon any other
officer or agent of the corporation.
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Form of Certificate. Every holder of fully-paid stock in the
-------------------
corporation shall be entitled to have a certificate in such form as the board of
directors may from time to time prescribe.
Section 2. Lost Certificates. A new certificate may be issued in place of
-----------------
any certificate theretofore issued by the corporation and alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed. When
issuing such new certificate, the officer of the corporation responsible for
such issuance may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as he shall require and/or to give the corporation a bond in such sum as he may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
10
<PAGE>
Section 3. Transfers.
---------
(a) Transfers of shares of the capital stock of the corporation shall
be made only on the books of the corporation by the registered holder
thereof, or by his duly authorized attorney, or with a transfer clerk or
transfer agent appointed as in Section 5 of this Article provided, and on
surrender of the certificate or certificates for such shares properly
endorsed and the payment of all taxes thereon.
(b) The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and for all other purposes, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
law.
(c) Shares of capital stock may be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on
the back of the certificates or by separate written power of attorney to
sell, assign and transfer the same, signed by the record holder thereof, or
by his duly authorized attorney in fact, but no transfer shall affect the
right of the corporation to pay any dividend upon the stock to the holder
of record as the holder in fact thereof for all purposes, and no transfer
shall be valid, except between the parties thereto, until such transfer
shall have been made upon the books of the corporation as herein provided.
(d) The board may, from time to time, make such additional rules and
regulations as it may deem expedient, not inconsistent with these by-laws
or the articles of incorporation, concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the
corporation.
Section 4. Record Date. In order that the corporation may determine the
-----------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than 70 days prior to the date on which the particular
action requiring such determination of shareholders is to be taken. If no record
date is fixed for the determination of shareholders entitled to notice of and to
vote at any meeting of shareholders, the record date shall be at the close of
business on the day next preceding the day on which the notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. If no record date is fixed for determining
shareholders entitled to take action without a meeting, the record date shall be
the date the first shareholder signs the consent. If no record date is fixed for
other purposes, the record date shall be at the close of business on the day on
which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
11
<PAGE>
board of directors shall fix a new record date for the adjourned meeting.
Section 5. Transfer Agent and Registrar. The board of directors may
----------------------------
appoint one or more transfer agents or one or more transfer clerks and one or
more registrars, and may require all certificates of stock to bear the signature
or signatures of any of them.
ARTICLE VI
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the articles of incorporation, if any,
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock, subject to the provisions of the articles of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by resolution of the board of directors.
Section 3. Seal. The corporate seal shall have inscribed thereon the name
----
of the corporation, the year of its organization and the words "Corporate Seal"
and "Georgia." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. In the event it is inconvenient
to use such a seal at any time, the signature of the corporation followed by the
word "Seal" enclosed in parentheses shall be deemed the seal of the corporation.
Section 4. Annual Statements. Not later than four months after the close
-----------------
of each fiscal year, and in any case prior to the next annual meeting of
stockholders, the corporation shall prepare:
(1) A balance sheet showing in reasonable detail the financial
condition of the corporation as of the close of its fiscal year, and
(2) A profit and loss statement showing the results of its operations
during its fiscal year.
Upon written request the corporation promptly shall mail to any shareholder
of record a copy of the most recent such balance sheet and profit and loss
statement.
Section 5. Fair Price to Shareholders; Business Combinations. All of the
-------------------------------------------------
12
<PAGE>
requirements of Part 2 of Article 11 and all of the requirements of Part 3 of
Article 11 of the Georgia Business Corporation Code shall be applicable to the
corporation.
Section 6. Inspection of Records by Shareholders. A shareholder of the
-------------------------------------
corporation may not inspect and copy the records described in Section 14-2-
1602(c) of the Georgia Business Corporation Code, or a successor or replacement
subsection, unless such shareholder owns more than two percent (2%) of the
shares of the company's common stock outstanding on the date of receipt by the
corporation of a request from such shareholder.
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. Definitions. As used in this Article, the term
-----------
(a) "change of control", for purposes of this Article VII, means (1)
an acquisition by a person of beneficial ownership of 20% or more of the
combined voting power of the corporation's then outstanding voting
securities, provided that any such securities acquired directly from the
corporation shall be excluded from the determination of such person's
beneficial ownership (but shall be included in calculating total
outstanding securities); or (2) the individuals who are members of the
incumbent board (as defined below) cease for any reason to constitute two-
thirds of the Board of Directors; or (3) approval by the shareholders of
the corporation of (i) a merger or consolidation involving the corporation
if the shareholders of the corporation, immediately before such merger or
consolidation, do not own, immediately following such merger or
consolidation, more than 80% of the combined voting power of the
outstanding voting securities of the corporation in substantially the same
proportion as their ownership of voting securities immediately before such
merger or consolidation or (ii) a complete liquidation or dissolution of
the corporation or an agreement for the sale or other disposition of all or
substantially all of the assets of the corporation.
Notwithstanding the foregoing, a change of control shall not be deemed
to occur solely because twenty percent (20%) or more of the then
outstanding voting securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the corporation or any of its subsidiaries or (ii) any
corporation which, immediately prior to such acquisition, is owned directly
or indirectly by the shareholders of this corporation in the same
proportion as their ownership of shares in this corporation immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a change of control shall not
be deemed to occur solely because any person (the "Subject Person")
acquired beneficial ownership of more than the permitted amount of the
outstanding voting securities as a result of the acquisition of voting
securities by the corporation which, by reducing the number of voting
securities outstanding increases the proportional number of shares
beneficially owned by the Subject Person, provided, that if a change of
--------
control would occur (but for
13
<PAGE>
the operation of this sentence) as a result of the acquisition of voting
securities by the corporation, and after such share acquisition by the
corporation, the Subject Person becomes the beneficial owner of any
additional voting securities which increases the percentage of the then
outstanding voting securities beneficially owned by the Subject Person,
then a change of control shall occur.
(b) "corporation" includes any domestic or foreign predecessor entity
of the corporation or a corporation in a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
(c) "director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is
or was serving at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise. A director is considered to be serving an employee
benefit plan at the corporation's request if his duties to the corporation
also impose duties on, or otherwise involve services by, him to the plan or
to participants in or beneficiaries of the plan. Director includes, unless
the context requires otherwise, the estate or personal representative of a
director.
(d) "expenses" include attorneys' fees.
(e) "incumbent board" includes the individuals who as of May 11, 1994
are members of the Board of Directors and any individual becoming a
director subsequent to May 11, 1994 whose election, or nomination for
election by the corporation's shareholders was approved by a vote of at
least two-thirds of the directors then comprising the Incumbent Board;
provided, however, that any individual who is not a member of the incumbent
-------- -------
board at the time he or she becomes a member of the Board of Directors
shall become a member of the incumbent board upon the completion of two
full years as a member of the Board of Directors; provided further,
-------- -------
however, that notwithstanding the foregoing, no individual shall be
-------
considered a member of the incumbent board if such individual initially
assumed office (1) as a result of either an actual threatened "election
contest" (within the meaning of Rule 14a-11 promulgated under the 1934 Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board of Directors (a "Proxy Contest") or
(2) with the approval of the other members of the Board of Directors, but
by reason of any agreement intended to avoid or settle a Proxy Contest.
(f) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a
proceeding.
(g) "party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
14
<PAGE>
(h) "proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 2. Indemnification of Directors, Officers and Employees -
------------------------------------------------------
General.
(a) Subject to the terms and conditions of this Article VII, the
corporation shall indemnify an individual made a party to a proceeding
because he is or was a director or officer of the corporation against
liability incurred in connection with a proceeding to the fullest extent
permitted by the Georgia Business Corporation Code (the "GBCC"), as the
same now exists or may hereafter be amended (but only to the extent any
such amendment permits the corporation to provide broader indemnification
rights than the GBCC permitted the corporation to provide prior to such
amendment).
(b) The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent is not,
of itself, determinative that the director or officer did not meet the
standard of conduct set forth in the GBCC.
(c) To the extent that a director or officer has been successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party, or in defense of any claim, issue, or matter therein, because he is
or was a director or officer of the corporation, the corporation shall
indemnify the director or officer against reasonable expenses incurred by
him in connection therewith regardless of whether the director or officer
has met the standards set forth in the GBCC and without any action or
determination under Section 4 of this Article VII.
(d) Subject to the approval of the chief executive officer and the
general counsel for the corporation, the officers of the corporation may
indemnify an individual who is an employee of the corporation and who is
made a party to a proceeding because he is or was an employee of the
corporation against liability incurred in connection with a preceding to
the fullest extent permitted under the GBCC, as the same now exists or may
hereafter be amended (but only to the extent any such amendment permits the
corporation to provide broader indemnification rights than the GBCC
permitted the corporation to provide prior to such amendment).
Section 3. Advance for Expenses.
--------------------
(a) The corporation shall pay for or reimburse the reasonable
expenses incurred by a director or officer who is a party to a proceeding
in advance of final disposition of the proceeding if:
(1) The director or officer furnishes the corporation a written
15
<PAGE>
affirmation of his good faith belief that he has met the standard of
conduct set forth in the GBCC; and
(2) The director or officer furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay any
advances if it is ultimately determined that he is not entitled to
indemnification under this Article
(b) The undertaking required by paragraph (2) of subsection (a) of
this Section 3 must be an unlimited general obligation of the director or
officer but need not be secured and may be accepted without reference to
financial ability to make repayment.
Section 4. Limitations on Indemnification.
------------------------------
(a) The corporation shall not indemnify a director under Section 2 of
this Article VII unless a determination has been made in the specific case
that indemnification of the director is permissible in the circumstances
because he has met the standard of conduct set forth in the GBCC.
(b) The corporation shall indemnify an officer under Section 2 of
this Article VII unless a determination has been made in the specific case
that indemnification of the officer is precluded in the circumstances
because he has failed to meet the standard of conduct set forth in the
GBCC.
(c) In either paragraph (a) or (b) above, such determination shall be
made within 60 days of the request for indemnification:
(i) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(ii) If a quorum cannot be obtained under paragraph (i) of this
subsection, by majority vote of a committee duly designated by the
Board of Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the
time parties to the proceeding;
(iii) By special legal counsel:
(A) Selected by the Board of Directors or its committee in
the manner prescribed in paragraph (i) or (ii) of this
subsection; or
(B) If a quorum of the Board of Directors cannot be
obtained under paragraph (i) of this subsection and a committee
cannot be designated under paragraph (ii) of this subsection,
selected by majority vote of the full Board of Directors (in
which selection directors who are parties may participate); or
16
<PAGE>
(iv) By the shareholders, but the shares owned by or voted under
the control of the officers and directors who are at the time parties
to the proceeding may not be voted on the determination;
provided, however, that following a change of control of the corporation,
with respect to all matters thereafter arising out of acts, omissions or
events prior to the change of control of the corporation concerning the
rights of any person seeking indemnification under this Article VII, such
determination shall be made by special legal counsel selected by such
person and approved by the Board of Directors or its committee in the
manner described in Section 4(c)(iii) above (which approval shall not be
unreasonably withheld), which counsel has not otherwise performed services
(other than in connection with similar matters) within the five years
preceding its engagement to render such opinion for such person or for the
corporation or any affiliates (as such term is defined in Rule 405 under
the Securities Act of 1933, as amended) of the corporation (whether or not
they were affiliates when services were so performed) ("Independent
Counsel"). Unless such person has theretofore selected Independent Counsel
pursuant to this Section 4 and such Independent Counsel has been approved
by the corporation, legal counsel approved by a resolution or resolutions
of the Board of Directors of the corporation prior to a change of control
of the corporation shall be deemed to have been approved by the corporation
as required. Such Independent Counsel shall determine as promptly as
practicable whether and to what extent such person would be permitted to be
indemnified under applicable law and shall render its written opinion to
the corporation and such person to such effect. In making a determination
under this Section 4, the special legal counsel and Independent Counsel
referred to above shall determine that indemnification is permissible
unless clearly precluded by this Article VII or the applicable provisions
of the GBCC. The corporation agrees to pay the reasonable fees of the
Independent Counsel referred to above and to fully indemnify such
Independent Counsel against any and all expenses, claims, liabilities and
damages arising out of or relating to this Article or its engagement
pursuant hereto.
(d) Authorization of indemnification or an obligation to indemnify
and evaluation as to reasonableness of expenses shall be made as set forth
in paragraph (c) above.
(e) Indemnification under this Article VII in connection with a
proceeding by or in the right of the corporation shall be limited to
reasonable expenses incurred in connection with the proceeding.
Section 5. Enforceability. The provisions of this Article shall be
--------------
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. This Article shall be deemed to
grant each person who is entitled to indemnification hereunder rights against
the corporation to enforce the
17
<PAGE>
provisions of this Article, and any repeal or other modification of this Article
or any repeal or modification of the GBCC or any other applicable law shall not
limit any rights of indemnification then existing or arising out of events,
acts, omissions, circumstances occurring or existing prior to such repeal or
modification, including, without limitation, the right to indemnification for
proceedings commenced after such repeal or modification to enforce this Article
with regard to acts, omissions, events or circumstances occurring or existing
prior to such repeal or modification.
Section 6. Severability. If this Article or any portion hereof shall be
------------
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director or officer of the
corporation as to liabilities incurred in connection with any proceeding,
including an action by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 7. Statements to Shareholders. If the corporation indemnifies or
--------------------------
advances expenses to an officer or director under this Article VII in connection
with a proceeding by or in the right of the corporation, the corporation shall
report the indemnification or advance in writing to the shareholders with or
before the notice of the next shareholders' meeting.
18
<PAGE>
EXHIBIT 10.1
SCIENTIFIC-ATLANTA, INC.
1996 EMPLOYEE STOCK OPTION PLAN
As amended by the Board of Directors on
November 11, 1998
<PAGE>
SCIENTIFIC-ATLANTA, INC.
------------------------
1996 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), but who is not an
officer of the Corporation.
(i) "Exercise Price" shall mean the price per Share of Common Stock,
--------------
determined by the Committee, at which an Option may be exercised.
<PAGE>
(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 Composite 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 closing
price as reported on the New York Stock Exchange Composite on the last
business day preceding the date of valuation shall be utilized.
(k) "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.
(l) "Option Agreement" shall mean a written stock option agreement
----------------
evidencing a particular Option.
(m) "Optionee" shall mean an Employee who has received an Option.
--------
(n) "Plan" shall mean this Scientific-Atlanta, Inc. 1996 Employee
----
Stock Option Plan, as it may be amended from time to time.
(o) "Purchase Price" shall mean the Exercise Price times the number
--------------
of Shares with respect to which an Option is exercised.
(p) "Retirement" shall mean voluntary termination of employment
----------
after the date on which the Employee (i) has completed five (5) years of
service with the Corporation, and (ii) the sum of the Employee's age and
years of service with the Corporation is equal to sixty-five (65).
(q) "Share" shall mean one (1) share of Common Stock, adjusted in
-----
accordance with Section 9 of this Plan (if applicable).
(r) "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 November 13, 1996. This Plan
shall terminate as provided in Section 8 below.
2
<PAGE>
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 set the terms of the 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 Three Million (3,000,000). 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 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 9 hereof upon the occurrence of
an event specified in Section 9.
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.
3
<PAGE>
(b) Option Exercisable. 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.
(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
9 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 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;
4
<PAGE>
(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; and
(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.
(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
5
<PAGE>
(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 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 substantially 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
6
<PAGE>
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 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.
7
<PAGE>
(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
canceled.
(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
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
8
<PAGE>
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(i), 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 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.
(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 9 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.
9
<PAGE>
(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).
(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. TERM OF PLAN.
------------
Options may be granted pursuant to this Plan until the expiration of this
Plan on November 13, 2001.
9. RECAPITALIZATIONS.
-----------------
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.
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.
10
<PAGE>
Except as expressly provided in this Section 9, 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.
10. 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.
11. 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.
11
<PAGE>
12. 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.
13. EXECUTION.
---------
To record the adoption of this Plan by the Board on November 13, 1996, and
its most recent amendment on November 11, 1998, the Corporation has caused this
Plan to be executed by its authorized officers.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
--------------------------------
Brian C. Koenig,
Senior Vice President - Human Resources
By: /s/ William E. Eason, Jr.
--------------------------------
William E. Eason, Jr.
Senior Vice President, General Counsel and
Corporate Secretary
12
<PAGE>
EXHIBIT 10.2
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
most recently on
November 11, 1998
<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 most
recently on November 11, 1998, 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 sale price of such Shares on the New York Stock Exchange Composite on
the date(s) in question, or, if the Shares shall not have been traded on any
such date(s), the closing sale price on the New York Stock Exchange Composite 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.
3
<PAGE>
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.
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
4
<PAGE>
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
5
<PAGE>
determine the Employees to whom 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.
6
<PAGE>
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 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
7
<PAGE>
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 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
8
<PAGE>
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
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.
9
<PAGE>
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.
10
<PAGE>
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 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
11
<PAGE>
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.
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
12
<PAGE>
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 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
13
<PAGE>
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, 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
14
<PAGE>
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.
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 11, 1998, 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: Senior Vice President-Human Resources
------------------------------------------
By: /s/ William E. Eason, Jr.
---------------------------------------------
Name: William E. Eason, Jr.
-------------------------------------------
Title: Senior Vice President, General Counsel
------------------------------------------
and Corporate Secretary
------------------------------------------
[Seal]
15
<PAGE>
EXHIBIT 10.3
FORM OF
FIRST AMENDMENT TO
SEVERANCE PROTECTION AGREEMENT
BY AND BETWEEN
SCIENTIFIC-ATLANTA, INC.
AND
(NAME_OF_EXECUTIVE)
This First Amendment (this "Amendment") is entered into this ____ day of
January, 1999, by and between Scientific-Atlanta, Inc. ("S-A") and
(Name_of_Executive) ("Executive").
WHEREAS, S-A and Executive entered into that certain Severance Protection
Agreement, dated (Date) (the "Agreement"); and
WHEREAS, S-A and Executive desire to amend the Agreement;
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth
below, the parties agree as follows:
1. Section 2.3 of the Agreement is hereby amended to read in its entirety as
follows:
2.3 Disability. For purposes of this Agreement, "Disability" shall
----------
mean (i) a physical or mental infirmity which has been determined to be a
total and permanent disability under and in accordance with the provisions
of the Company's Long Term Disability Plan (the "LTD Plan") or (ii) in the
event the Company does not maintain the LTD Plan at the time of the
determination of the Executive's Disability, a physical or mental infirmity
which impairs the Executive's ability to substantially perform duties of
the type performed by the Executive prior to the onset of the infirmity,
which impairment continues for a period of at least one hundred eighty
(180) consecutive days.
2. Section 3.2(b)(ii) of the Agreement is hereby amended to read in its
entirety as follows:
(ii) except if the Executive's employment with the Company shall
be terminated by the Executive for Good Reason by reason of relocation as
described in Section 2.4(a)(3) and such relocation is in connection with a
relocation affecting more than one-half of the employees employed at the
same metropolitan area as the Executive ("Good Reason for Company
Relocation"), the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to the Termination
Date, in a single payment an amount in cash (the "Severance Amount") equal
to two (2) times the sum of (A) the highest rate of the Executive's annual
base salary as in effect at any time within ninety (90) days preceding a
Change in Control or at any time thereafter ("Base Salary"), (B) the "Bonus
Amount" (as defined below) and (C) the "Perquisite Amount" (as defined
below). If the Executive's employment with the Company shall be terminated
by the Executive for Good Reason for Company Relocation, the Severance
Amount shall equal one (1) times the sum of (A) Base Salary, (B) the Bonus
Amount and (C) the Perquisite Amount. The term "Bonus Amount" shall
<PAGE>
mean the highest of the total cash bonuses earned by the Executive pursuant
to the Annual Plan in any of the three fiscal years of the Company
immediately preceding the fiscal year in which the Termination Date occurs
(or such lesser number of full fiscal years during which the Executive was
employed by the Company); provided, that the Bonus Amount shall not be less
--------
than an amount equal to the Executive's target bonus pursuant to the Annual
Plan for the fiscal year in which the Termination Date occurs. The
"Perquisite Amount" shall equal the highest amount paid to the Executive in
the calendar year ending prior to the Change in Control or in any calendar
year thereafter in respect of perquisites provided to the Executive,
including, but not limited to, car allowance, financial counseling, annual
physical examination and airline membership clubs and shall be in lieu of
the Company providing such perquisites to the Executive.
3. Section 3.2(b)(iii) of the Agreement is hereby amended to read in its
entirety as follows:
(iii) for a number of months equal to 24 (12 if the Executive's
employment with the Company shall be terminated by the Executive for Good
Reason for Company Relocation) (the "Continuation Period"), the Company
shall at its expense continue on behalf of the Executive and his dependents
and beneficiaries (to the same extent provided to the dependents and
beneficiaries prior to the Change in Control) the life insurance,
disability, medical, dental and hospitalization benefits provided (x) to
the Executive at any time within ninety (90) days preceding a Change in
Control or at any time thereafter, or (y) to other similarly situated
executives who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 3.2(b)(iii) during the Continuation Period
shall be no less favorable to the Executive and his dependents and
beneficiaries, than the most favorable of such coverages and benefits
during any of the periods referred to in clauses (x) and (y) above. The
Company's obligation hereunder with respect to the foregoing benefits shall
be limited to the extent that the Executive obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is required to provide
the Executive hereunder as long as the aggregate coverages and benefits of
the combined benefit plans is no less favorable to the Executive than the
coverages and benefits required to be provided hereunder. This Subsection
(iii) shall not be interpreted so as to duplicate any benefits to which the
Executive or his dependents may be entitled (without having to pay
additional charges) under any of the Company's employee benefit plans,
programs or practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance benefits.
4. Section 3.2(b)(iv) of the Agreement is hereby amended to read in its
entirety as follows:
(iv) the Company shall pay in a single payment an amount in cash
equal to the excess of (A) the actuarial equivalent of the aggregate
retirement benefit the Executive would have been entitled to receive under
the SERP, the Scientific-Atlanta, Inc. Retirement Plan and Trust (the
"Retirement Plan") and the Scientific-Atlanta, Inc. Restoration Retirement
Plan (the "Restoration Plan") had (w) the Executive remained employed by
the Company for an additional two (2) complete years of credited service
<PAGE>
(one (l) complete year of credited service if the Executive's employment
with the Company shall be terminated by the Executive for Good Reason for
Company Relocation) and his age had increased by the such two (2) years
(one (1) year if the Executive's employment is terminated by the Executive
for Good Reason for Company Relocation), (x) he retired at such increased
age, (y) his annual compensation during such period been equal to his Base
Salary and the Bonus Amount (but only to the extent that the bonuses which
are included in the Bonus Amount are includible in compensation for
purposes of the Retirement Plan, the SERP and the Restoration Plan), and
(z) he been fully (100%) vested in his benefit under each such retirement
plan, over (B) the actuarial equivalent of the aggregate retirement benefit
the Executive is actually entitled to receive under such retirement plans.
For purposes of this Subsection (iv), "actuarial equivalent" shall be
determined as of the Executive's date of termination of employment, based
on the 1983 Unloaded Group Annuity Mortality Table weighted 50% male and an
interest rate of 8.0%.
5. Section 6 of the Agreement is hereby amended to read in its entirety as
follows:
6. Gross-Up.
---------
(a) Whether or not the Executive becomes entitled to the
Severance Amount, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (such payments or
benefits, excluding the Gross-Up Payment, being hereinafter referred to as
the "Total Payments") will be subject to any excise tax (the "Excise Tax")
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal,
state and local income and employment taxes and Excise Tax upon the Gross-
Up Payment, shall be equal to the Total Payments.
(b) For purposes of determining whether any of the Total Payment
will be subject to the Excise Tax and the amount of such Excise Tax, (i)
all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive and
selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), such
payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A) of the Code, (ii)
all "excess parachute payments" within the meaning of section 280G(b)(4)(1)
of the Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments ( in whole or in
part) represent reasonable compensation for services actually rendered
(within the meaning of section 280G(b)(4)(B) of the Code) in excess of the
"base amount" (as defined in section 280G(b)(3) of the Code) allocable to
such
<PAGE>
reasonable compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income tax at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the
Termination Date (or if there is no Termination Date, then the date on
which the Gross-Up Payment is calculated for purposes of this Section 6),
net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined to be
less than the amount taken into account hereunder in calculating the Gross-
Up Payment, the Executive shall repay to the Company, within five (5)
business days following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the
Executive), to the extent that such repayment results in a reduction in the
Excise Tax and a dollar-for-dollar reduction in the Executive's taxable
income and wages for the purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of
the rate provided in section 1274(b)(2)(B) of the Code. In the event that
the Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) within five
(5) business days following the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Total Payments.
(d) In the event that the Company is party to a transaction
which is otherwise intended to qualify for "pooling of interests"
accounting treatment, then (i) this Section 6 shall, to the extent
practicable, be interpreted so as to permit such accounting treatment, and
(ii) to the extent that this Section 6 disqualifies the transaction as a
"pooling" transaction, this Section 6 shall be null and void as of the date
hereof and the Board shall make all reasonable efforts to establish an
alternative method of providing the Executive with the same benefit
provided in this Section 6 (or a lesser benefit, if the same benefit is not
feasible). All determinations under this Section 6(d) shall be made by the
accounting firm whose opinion with respect to "pooling of interests" is
required as a condition to the consummation of such transaction.
6. Capitalized terms used in the Amendment but not defined herein shall have
the meanings
<PAGE>
ascribed to them in the Agreement.
7. Except as set forth above, all other provisions of the Agreement, remain in
full force and effect as if this Amendment had never been executed.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
as of the date first set forth above.
EXECUTIVE SCIENTIFIC-ATLANTA, INC.
By:_______________________ By:____________________________
(Name_of_Executive)
Title:_________________________
<PAGE>
EXHIBIT 10.4
SCIENTIFIC-ATLANTA, INC.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
------------------------------------------
As Amended, Effective February 6, 1999
1. PURPOSE
The purpose of this plan ("Plan") is to enhance the ability of Scientific-
Atlanta, Inc. ("Company") to attract and retain the service of experienced, able
and knowledgeable persons to serve as members of the Company's board of
directors ("Board") over a substantial period of years during which the full
benefit of their capabilities can be realized to further the growth and
profitability of the Company and return to the shareholders.
2. ADMINISTRATION
The Plan shall be administered by a Plan Administrator, who shall be
appointed by the Board. In addition to the duties stated elsewhere in the Plan,
the Plan Administrator shall have full authority, consistent with the Plan, to
interpret the Plan and to make all determinations necessary or desirable for the
administration of the Plan.
3. ELIGIBLE PARTICIPANTS
Each person who is or becomes a member of the Board on or after the
effective date of this Plan but before January 1, 1997, and who has never been a
participant in an employee retirement plan of the Company shall be deemed a
participant in this Plan after having been a member of the Board for thirty-six
consecutive months (a "Participant"). Each person who was a Participant in the
Plan as of January 1, 1997 (the "Conversion Date"), and who was not already
receiving retirement benefits under the Plan as of the Conversion Date, shall,
on or before September 1, 1997, make an election as to whether he or she desires
(a) to continue as a Participant under this Plan, or (b) to discontinue
participation in this Plan and to receive in lieu thereof (1) annual grants of
retirement awards (currently 1,500 shares of the Company's common stock), under
the terms of the Stock Plan for Non-Employee Directors, and (2) a lump sum
---
distribution equal to the greater of either (i) the present value, actuarially
------
determined by the Company as of the Conversion Date, of the retirement benefits
of such Participant under this Plan through the Conversion Date, reduced by the
----------
present value, actuarially determined by the Company, as of the Conversion Date,
of the stream of annual grants of retirement awards described under clause (1)
above through such Participant's Normal Retirement Date, or (ii) an amount equal
--
to the value of 750 shares of the Company's common stock. $.50 par value (at the
closing price on the Conversion Date) multiplied by such Participant's total
-------------
years of service as a director, as of the Conversion Date, which lump sum
distribution shall be converted, under the terms of the Stock Plan for Non-
Employee Directors, into shares of the Company's common stock, $.50 par value,
at the fair market value on the Conversion Date. Participants electing to
receive a lump sum distribution shall be also entitled to receive a further
distribution in the form
<PAGE>
of shares to be issued under the Stock Plan for Non-Employee Directors, upon the
death of such Participant, such further distribution to be equal to the
difference, if any, between (a) the value of the spousal benefits otherwise
payable to the spouse of a Participant under the provisions of paragraph 7
below, and (b) the assumed value (as defined in the assumptions approved by the
---
Board) of the lump sum distribution to such Participant described above plus the
----
annual retirement awards granted to such Participant under the Stock Plan for
Non-Employee Directors prior to his or her death. Except to the extent otherwise
provided in the preceding sentence, individuals who are Participants under this
Plan as of the Conversion Date, and who elect on or before September 1, 1997, to
receive the lump sum distribution described above, shall cease to be
Participants under this Plan, effective as of the Conversion Date.
4. RETIREMENT DATES
(a) A Participant's "Normal Retirement Date" is the first day of the
calendar month in which a Participant attains the age of sixty-five (65) years
and is no longer a member of the Board or any subsequent month designated by a
Participant in accordance with paragraph 6 below.
(b) A Participant's "Early Retirement Date" is the first day of the
calendar month designated by a Participant in accordance with paragraph 6 below,
prior to the Normal Retirement Date, on or after the month in which a
Participant attains the age of fifty-five (55) years.
5. RETIREMENT BENEFIT
(a) The annual retirement benefit payable to any Participant who retires on
the Normal Retirement Date, or any date thereafter, will be an amount equal to
(i) the regular annual retainer paid by the Company to each director for the
last fiscal year of the Company that the Participant served as a director, plus
(ii) the value, as of the date of grant, of the shares of the Company's Common
Stock granted to the Participant as a "Stock Award" under the Company's Stock
Plan for Non-Employee Directors during the last fiscal year of the Company that
the Participant served as a director. The "regular annual retainer" as used in
the preceding sentence means the annual retainer received by each director of
the Company, excluding any committee chair annual retainer, meeting fees and
other fees received by a director; and, if the Participant elects to receive all
or a portion of his or her annual retainer in the form of shares of the
Company's common stock under the Company's Stock Plan for Non-Employee
Directors, any portion of such annual retainer received in shares shall be
included in the definition of "regular annual retainer."
2
<PAGE>
(b) The annual early retirement benefit payable to any Participant who
retires on the Early Retirement Date will be the amount specified in 5(a) above,
reduced by the following early retirement factors:
Age at Commencement Factor
------------------- ------
64 .933
63 .867
62 .800
61 .733
60 .667
59 .633
58 .600
57 .567
56 .533
55 .500
If a Participant's age at the Early Retirement Date falls between any two
of these ages, these factors shall be adjusted by straight-line interpolation.
(c) No retirement benefit will be payable to any person who is a member of
the Board for less than thirty-six (36) consecutive months.
6. BENEFIT PAYMENTS
A Participant may retire by written notice to the Plan Administrator or the
Secretary of the Company, designating a retirement date in accordance with
paragraph 4 above. Retirement benefit payments will be payable on the first day
of each calendar quarter following retirement or in accordance with such other
schedule of payments as may be requested by the Participant and approved by the
Board. Benefit payments will continue to be paid to the Participant for the
remainder of the Participant's life. Notwithstanding the foregoing, in lieu of
the normal form of payment otherwise provided under this Plan, the Plan
Administrator may direct, in its sole and absolute discretion, that benefits
shall be paid in a single sum that is the Actuarial Equivalent of the annual
benefit payable to the Participant or, in the event of the Participant's death,
to his or her surviving spouse.
7. SPOUSAL BENEFITS
Should a Participant die before retirement benefits have begun to be paid
to the Participant under this Plan, the Participant shall be deemed to retire on
the later of (i) the day before his/her death, or (ii) the first day of the
first calendar month thereafter in which the Participant would have attained the
age of fifty-five (55), and the Participant's surviving spouse, if any, shall be
entitled to a benefit equal to the benefit that would have been paid to the
3
<PAGE>
Participant. If the Participant dies after retirement benefits have commenced,
the Participant's surviving spouse shall be entitled to annual benefit payments
equal to the annual benefit previously payable to the Participant. In each
case, the benefit shall continue for the lesser of (i) ten years or (ii) a
number of years equal to the number of years that the Participant was a member
of the Board; provided, however, that payments shall not continue after the
death of the spouse.
8. DISABILITY
Should a Participant become totally and permanently disabled prior to
retirement for a period of six (6) consecutive months while a member of the
Board and the Board determines that such disability will continue, the
Participant will be deemed to have retired on the first day of the calendar
month following the month in which the Board makes such determination and the
age of the Participant on such retirement date shall be deemed the older of (i)
fifty-five (55), or (ii) the Participant's actual age on that date. Payments
will be made on the same basis as described in Sections 5, 6, and 7 above.
9. CHANGE OF CONTROL
Notwithstanding anything contained in this Plan to the contrary, the
provisions of this paragraph 9 shall apply to any Participant whose membership
on the Board ends before a Change of Control occurs or who is a member of the
Board on the date that a Change of Control occurs and who ceases within twenty-
four (24) months after a Change of Control to be a member of the Board for any
reason.
(a) Each such Participant shall be immediately vested in his or her
retirement benefit payable under this Plan.
(b) The Company shall contribute to the trust maintained pursuant to the
Scientific-Atlanta, Inc. Benefits Protection Trust Agreement a lump sum amount
equal to the Actuarial Equivalent of the Participant's retirement benefit. This
lump sum payment to the trust shall be due on the later of (i) the date when
the Change of Control occurs or (ii) the date the Participant ceases to be a
member of the Board. The retirement benefit of a Participant who ceases to be a
member of the Board within twenty-four (24) months after a Change of Control
shall be computed as if the Participant would retire on the first day that he or
she is eligible to retire (whether an Early Retirement Date or a Normal
Retirement Date) following the Change of Control and the end of his or her
membership on the Board. Any retirement benefits to which the Participant is
entitled under the terms of this Plan shall be payable from the trust, except to
the extent that the benefits are paid from the general assets of the Company.
(c) Notwithstanding the foregoing, in lieu of the form of payment otherwise
provided for in this paragraph 9, the Plan Administrator may direct, in its sole
and absolute discretion, that upon a Change of Control benefits under this Plan
shall be paid in a single lump sum that is the
4
<PAGE>
Actuarial Equivalent of the annual benefits payable to the Participant or, in
the event of the Participant's death, to his or her surviving spouse.
(d) "Change of Control" means a change of twenty-five percent (25%) or more
of the membership of the Board (excluding membership changes resulting from
normal retirement of directors) within a twenty-four (24) month period following
the acquisition of beneficial ownership by any person or entity, or group of
persons or entities and their affiliates acting in concert, of twenty percent
(20%) or more of the voting securities of the Company. "Affiliates" and
"beneficial ownership" shall be defined in accordance with Rules 12b-2 and 13d-3
of the Securities and Exchange Commission, as the same may from time to time be
amended.
(e) "Actuarial Equivalent" means the present value of future payments based
on the 1983 Unloaded Group Annuity Mortality Table weighted 50% male and an
interest rate of 8%.
10. TERMINATION AND AMENDMENT OF THE PLAN
The Board may terminate the Plan at any time and may amend the Plan from
time to time but no such termination and amendment shall adversely affect the
rights of Participants under the Plan, which shall be deemed fully vested and
irrevocable on the date that a director becomes a Participant in accordance with
paragraph 3 above.
11. EFFECTIVE DATE
The effective date of this Plan was February 15, 1989.
To record the adoption of the Plan (as amended and restated) by the Board,
effective as of February 6, 1999, 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: Senior Vice President - Human
Resources
By: /s/ William E. Eason, Jr.
-------------------------
Name: William E. Eason, Jr.
Title: Senior Vice President, General
Counsel and Corporate Secretary
5
<PAGE>
EXHIBIT 10.5
SCIENTIFIC-ATLANTA, INC.
ANNUAL INCENTIVE PLAN FOR KEY EMPLOYEES
AS AMENDED AND RESTATED ON FEBRUARY 6, 1999
<PAGE>
SCIENTIFIC-ATLANTA, INC.
ANNUAL INCENTIVE PLAN FOR KEY EMPLOYEES
1. PURPOSE OF THE PLAN. The purpose of this Plan is to improve the return to
the Company's stockholders by providing incentive compensation awards to
selected Key Employees of the Company for superior performance and by
attracting and retaining individuals of outstanding skills, experience and
ability. Quantitative and qualitative objectives, i.e., standards of
performance, are set at such a level as to require the key employees to
excel in order to attain them. To these ends, the Plan provides a means of
rewarding those who contribute through their individual performance to the
objectives of the Company.
2. DEFINITIONS. When used herein, the following terms shall have the meaning
set forth below:
2.1 "Board" - The Board of Directors of the Company.
2.2 "Business Unit" - An organizational unit, i.e., business unit, region,
function, division, group or sector.
2.3 "Company" - Scientific-Atlanta, Inc. and its subsidiaries or
affiliates.
2.4 "Committee" - The Human Resources and Compensation Committee of the
Board of Directors.
2.5 "Key Employee" - A corporate officer or other executive employee of
the Company who has a significant impact, directly or indirectly, on
profits and Company performance, as determined by the Company and
approved by the Committee.
2.6 "Participant" - A Key Employee selected in accordance with paragraph 4
of the Plan to receive an incentive compensation award in accordance
with this Plan.
2.7 "Plan" - This Annual Incentive Plan for Key Employees.
2.8 "Plan Year" - A fiscal year of the Company.
2.9 "Retire" - Voluntary termination of employment with the Company by a
Participant after the date on which: (i) the Participant has
completed five (5) years of Credited Service under the Retirement
Plan, and (ii) the sum of such Participant's age and years of Credited
Service equal sixty-five (65).
2.10 "Retirement Plan" - The Scientific-Atlanta, Inc. Retirement Plan and
Trust.
2.11 "Target" - Incentive compensation award, expressed as a percentage of
Participant's base salary, payable to a Participant upon meeting: (i)
one hundred percent (100%) of quantitative and qualitative objectives
and (ii) all other eligibility criteria under the Plan.
1
<PAGE>
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN. The Committee shall have
the sole and exclusive discretionary power to (i) approve eligible
Participants, (ii) approve awards and payments under the Plan, (iii)
interpret and construe the Plan, (iv) adopt, amend and rescind rules and
regulations relating to the Plan, and (v) make all other determinations and
take all other actions necessary or desirable for the Plan's
administration. The Committee may delegate any of these powers to the
Chief Executive Officer of the Company or to other officers of the Company
in the Committee's discretion.
The decision of the Committee on any question concerning the interpretation
and administration of the Plan shall be final and conclusive. The
Committee's determinations may differ in the Committee's sole discretion
between different Participants, irrespective of whether they are similarly
situated. Subject to paragraph 7, nothing in the Plan shall give any
employee, his/her legal representative or assigns, any right to a payment
or otherwise to participate in the Plan, except as the Committee may
determine after the conclusion of a Plan Year.
4. ELIGIBLE PARTICIPANTS.
4.1 DESIGNATION AND APPROVAL. Participants will be designated from the
Key Employees by the Chief Executive Officer of the Company and
approved by the Committee in order to be eligible to receive an
incentive compensation award under the Plan; provided, however, that
-------- -------
if a Change in Control (as defined in paragraph 7) occurs prior to the
time Participants are determined for the Plan Year in which the Change
in Control occurs, all persons who were Participants in the prior Plan
Year and who are active employees of the Company as of the date of the
Change in Control shall be Participants for such Plan Year.
4.2 REQUIREMENT OF ACTIVE EMPLOYMENT AS OF DATE WHICH COMMITTEE APPROVES
AWARDS. Except as the Committee may otherwise determine or as
provided in paragraph 7, in order to be eligible to earn and receive
an incentive compensation award under the Plan, a Participant for any
Plan Year must be an active employee of the Company on the date which
the Committee meets and approves incentive compensation awards under
this Plan after the end of the Plan Year. Accordingly, if a
Participant voluntarily terminates his/her employment or if the
Company involuntarily terminates a Participant's employment prior to
the date upon which the Committee meets after the end of the Plan Year
to approve incentive compensation awards for that Plan Year, the
Participant does not earn and is not eligible to receive an incentive
compensation award under the Plan.
4.3 PRORATED AWARDS. The Committee may decide to award a prorated award
to a Participant who is newly hired during the Plan Year or who is
transferred from one Business Unit within the Company to another
during a Plan Year, based on each Business Unit's results. Prorated
awards may also be given to Participants who Retire during a Plan Year
and to the estates of Participants who die during a Plan Year.
2
<PAGE>
5. DETERMINATION OF INCENTIVE COMPENSATION AWARDS
5.1 TARGETS. Each Participant will have a Target established for him/her
by the Company for the Plan Year.
5.2 FACTORS TO BE USED IN DETERMINATION OF AWARDS. Incentive Compensation
awards under the Plan shall be calculated using a quantitative factor
and a qualitative factor. These factors will be established as early
in the Plan Year as practicable.
5.2.1 The quantitative factor shall be determined using Company,
Business Unit or Function results, as appropriate.
5.2.2 The qualitative factor shall be determined by assessing the
Participant's individual accomplishment of qualitative
objectives established for the Participant for the Plan Year.
The following procedure will be used in making appraisals of
individual performance:
(a) At the beginning of the Plan Year, each person eligible to
be a Participant and his superior will mutually establish
individual performance objectives. These objectives should
be specific and committed to writing. Copies of agreed-to
objectives for all Participants should be forwarded to the
respective Human Resources Director or the Senior Vice
President of Human Resources.
(b) If during the year objectives are modified, deleted or
added, an amended list of objectives should be prepared,
agreed and forwarded to the office of the respective Human
Resources Director or the Senior Vice President of Human
Resources.
(c) At the end of the Plan Year, eligible Participants and
their superiors will be asked to assess the degree to
which the stated performance objectives were achieved.
These assessments will be combined with the quantitative
performance results and translated into incentive
compensation awards to be recommended by the Chief
Executive Officer of the Company and approved by the
Committee. The Committee reserves the authority to
exercise its judgment and approve justifiable exceptions
to award levels determined solely by strict application of
weightings and calculations under Plan provisions.
5.3 WEIGHTING OF FACTORS. The weighting of the quantitative and
qualitative objectives for any fiscal year in which the Plan is in
effect will be determined by the Company in its discretion.
3
<PAGE>
6. PAYMENT OF INCENTIVE COMPENSATION AWARDS. Except as provided in paragraph
7, incentive compensation awards under this Plan will be fully paid in cash
within ninety (90) days after the end of the Plan Year, or deferred in
whole or in part based on a written request for deferral submitted by the
Participant and approved by the Company in accordance with procedures
established by the Company.
7. CHANGE IN CONTROL OF THE COMPANY
7.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan
to the contrary, the provisions of this paragraph 7 shall govern and
supersede any inconsistent terms or provisions of the Plan.
7.2 CHANGE IN CONTROL. For purposes of the Plan, Change in Control shall
mean any of the following events:
7.2.1 The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "1934
Act")) of "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of twenty percent (20%)
or more of the combined voting power of the Company's then
outstanding voting securities (the "Voting Securities");
provided, however, that for purposes of this paragraph 8(b)(1),
-------- -------
the Voting Securities acquired directly from the Company by any
Person shall be excluded from the determination of such
Person's beneficial Ownership of Voting Securities (but such
Voting Securities shall be included in the calculation of the
total number of Voting Securities then outstanding); or
7.2.2 The individuals who are members of the Incumbent Board (as
defined below) cease for any reason to constitute at least two-
thirds (2/3) of the Board. The "Incumbent Board" shall include
the individuals who as of August 23, 1993 are members of the
Board and any individual becoming a director subsequent to
August 23, 1993 whose election, or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then 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 (2) full years as a member of
the Board; provided, further, however, that notwithstanding the
-------- ------- -------
foregoing, no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office (i)
as a result of either an actual or threatened "election
contest" (within the meaning of Rule 14a-11 promulgated under
the 1934 Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") or (ii) with the approval of the
other Board members, but by reason of any agreement intended to
avoid or settle a Proxy Contest; or
4
<PAGE>
7.2.3 Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the
Company, immediately before such merger or consolidation, do
not own, directly or indirectly immediately following such
merger or consolidation, more than eighty percent (80%) of the
combined voting power of the outstanding voting securities of
the Company 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.
7.2.4 Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because twenty percent (20%) or more of
the then outstanding Voting Securities is acquired by (i) a
trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or (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.
7.2.5 Moreover, notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned
by the Subject Person, provided, that if a Change in Control
--------
would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company,
and after such share acquisition by the Company the Subject
Person becomes the Beneficial Owner of any additional Voting
Securities which increases the Percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
7.2.6 Notwithstanding anything contained in this Plan to the
contrary, if a Participant's employment is terminated prior to
a 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 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 Participant shall mean the
date immediately prior to the date of termination of such
Participant's employment.
5
<PAGE>
7.3 PAYMENT UPON A CHANGE IN CONTROL. Upon a Change in Control, the
following incentive compensation awards shall be paid:
7.3.1 Upon a Change in Control, the incentive compensation award for
a Plan Year ending prior to the date of the Change in Control
for which payment has not previously been made shall be
unconditionally payable in cash to each Participant.
7.3.2 If a Change in Control occurs with approval of the Board
granted prior to any such Change in Control, incentive
compensation awards for the Plan Year during which the Change
in Control occurs shall be unconditionally payable to each
Participant, such awards to be the Target percentage of each
Participant's base salary or such higher percentage as may be
approved by the Committee.
7.3.3 If a Change in Control occurs without approval of the Board
granted prior to any such Change in Control, incentive
compensation awards for the Plan Year during which the Change
in Control occurs shall be unconditionally payable to each
Participant, such awards to be two (2) times the Target
percentage of each Participant's base salary; provided,
--------
however, that in any case, if a Change in Control occurs before
-------
Target percentages shall have been established for a Plan Year,
the Target percentages for such Plan Year shall be no less
favorable to the Participants than the Target percentages for
the prior Plan Year.
Unless the Committee directs an earlier payment, incentive
compensation awards payable in accordance with this paragraph 7.3
shall be paid in cash on or before the earlier of the date which is
five (5) days following the date of the Change of Control or the date
determined in accordance with paragraph 6 above.
7.4 CONTINUATION OF THE PLAN. For a period of two (2) Plan Years
following the Plan Year in which a Change of Control occurs, the Plan
shall not be terminated or amended in any way (including, but not
limited to, restricting or limiting the right to participate in the
Plan of any person who is a Participant on the day prior to the date
of the Change in Control), nor shall the manner in which the Plan is
administered be changed in a way that adversely affects the level of
participation or reward opportunities of any Participant; provided,
--------
however, that the Plan shall be amended as necessary to make
-------
appropriate adjustments for (i) any negative effect that the costs of
expenses incurred by the Company in connection with the Change in
Control may have on the benefits payable under the Plan and (ii) any
changes to the Company (including, but not limited to, changes in
corporate structure or capitalization, acquisitions or dispositions
and increased interest expense as a result of the incurrence or
assumption by the Company of acquisition indebtedness) following the
Change in Control so as to preserve the reward opportunities and
performance targets for comparable performance under the Plan as in
effect on the date immediately prior to the Change in Control.
6
<PAGE>
7.5 NO AMENDMENT OR TERMINATION OF CHANGE IN CONTROL PROVISION. This
paragraph 7 shall not be amended or terminated at any time. Any
amendment or termination of the Plan prior to a Change in Control
which (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 or (ii) otherwise arose in connection with or in anticipation
of a Change in Control shall be null and void and shall have no effect
whatsoever.
7.6 TRUST ARRANGEMENT. All benefits under the Plan shall be paid by the
Company. The Plan shall be unfunded, and the benefits hereunder shall
be paid only from the general asset of the Company; provided, however,
-------- -------
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.
8. NON-ASSIGNABILITY. No payment awarded under this Plan nor any right or
benefit under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void
and shall not be recognized or given effect by the Company.
9. AMENDMENT OF PLAN. Subject to the restrictions set forth in Section 7.5,
the Committee has the authority to amend or modify this Plan at any time in
its discretion.
10. TERMINATION OF PLAN. Subject to the restrictions set forth in Section 7.5
and in this Section 10, the Committee also has the authority to terminate
this Plan at any time. At its August meeting in each Plan Year, the
Committee may terminate the Plan for that Plan Year in its discretion. In
the event of termination at the August meeting, no Participant will be
entitled to any incentive compensation award under the Plan for that Plan
Year. If the Committee terminates the Plan at any time other than the
August meeting, such termination may only be prospective and Participants
will be entitled to receive a pro-rata incentive compensation award
calculated under the terms and conditions of the Plan for the Plan Year in
which the termination occurs.
11. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any notice of award
pursuant to the Plan shall confer upon any person the right to continue in
the employment of the Company nor affect the Company's right to terminate
the employment of any person.
12. GOVERNING LAW. This Plan and the rights of all persons claiming rights
under the Plan shall be governed by and interpreted in accordance with the
laws of the State of Georgia, excluding its provisions regarding conflicts
of laws.
7
<PAGE>
To record adoption of this amended and restated Plan by the Board on February 6,
1999, the Company has caused its authorized officers to execute this Plan in the
space designated below.
Scientific-Atlanta, Inc.
By: /s/ Brian C. Koenig
---------------------------
Brian C. Koenig
Senior Vice President
Human Resources
By: /s/ William E. Eason, Jr.
---------------------------
William E. Eason, Jr.
Senior Vice President,
General Counsel and
Corporate Secretary
8
<PAGE>
EXHIBIT 10.6
SCIENTIFIC-ATLANTA, INC.
SENIOR OFFICER ANNUAL INCENTIVE PLAN
As adopted by the Board of Directors
on June 22, 1994
and by the Stockholders
on October 3, 1994
and amended by the Board of Directors
on August 20, 1998
and on February 6, 1999
<PAGE>
SCIENTIFIC-ATLANTA, INC.
SENIOR OFFICER ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to improve the return to the Company's stockholders
by providing incentive compensation to the Chief Executive Officer (and any
other Plan Participants) of the Company for superior performance. Performance
Objectives, i.e., standards of performance, are set at such a level as to
require the Participants to excel in order to attain them. To these ends, the
Plan provides a means of rewarding the Participants for contributing through
their individual performance to the objectives of the Company.
2. DEFINITIONS. When used herein, the following terms shall have the meaning
set forth below:
2.1 "Board" - The Board of Directors of the Company.
2.2 "Business Unit" - An organizational unit, i.e., business unit, region,
function, division, group or sector.
2.3 "Code" - 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.
2.4 "Company" - Scientific-Atlanta, Inc. and its subsidiaries and
affiliates.
2.5 "Committee" - The Human Resources and Compensation Committee of the
Board of Directors or any other committee appointed by the Board whose
members meet the requirements for eligibility to serve set forth in
paragraph 3 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 Human Resources and Compensation
Committee of the Board who participate in decisions relative to
Performance Objectives and awards and payments under this Plan shall
be deemed to be part of the "Committee" for purposes of this Plan.
2.6 "Exchange Act" - The Securities Exchange Act of 1934, as amended.
2.7 "Participant" - A person selected in accordance with paragraph 4 of
the Plan to receive an incentive compensation award in accordance with
this Plan.
2.8 "Performance Objectives" - The specific targets and objectives
established by the Committee under any or all of the following four
categories: profit before taxes, return on net assets, revenue growth
and gross margin. Performance Objectives 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.
1
<PAGE>
2.9 "Plan" - This Senior Officer Annual Incentive Plan.
2.10 "Plan Year" - A fiscal year of the Company.
2.11 "Retire" - Voluntary termination of employment with the Company by a
Participant after the date on which: (i) the Participant has
completed five (5) years of Credited Service under the Retirement
Plan, and (ii) the sum of such Participant's age and years of
Credited Service equal sixty-five (65).
2.12 "Retirement Plan" - The Scientific-Atlanta, Inc. Retirement Plan and
Trust.
2.13 "Target" - Incentive compensation award, expressed as a percentage of
Participant's base salary, payable to a Participant upon meeting: (i)
one hundred percent (100%) of quantitative and qualitative objectives
and (ii) all other eligibility criteria under the Plan.
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN. The Board shall appoint the
Committee, which shall consist of not less than two (2) members of the
Board. 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. The Committee shall have the power to (i)
approve eligible Participants, (ii) approve awards and payments under the
Plan, (iii) interpret and construe the Plan, (iv) adopt, amend and rescind
rules and regulations relating to the Plan, and (v) make all other
determinations and take all other actions necessary or desirable for the
Plan's administration.
The decision of the Committee on any question concerning the interpretation
and administration of the Plan shall be final and conclusive. Subject to
paragraph 7 hereof, nothing in the Plan shall give any employee, his/her
legal representatives or assigns, any right to a payment or otherwise to
participate in the Plan, except as the Committee may determine after the
conclusion of a Plan Year.
4. ELIGIBLE PARTICIPANTS.
4.1 DESIGNATION AND APPROVAL. Participants will be the Chief Executive
Officer and any other senior officers who are designated and are
approved by the Committee to receive an incentive compensation award
under the Plan, provided, however, that if a Change in Control (as
-------- -------
defined in paragraph 7) occurs prior to the time Participants are
determined for the Plan Year in which the Change in Control occurs,
all persons who were Participants in the prior Plan Year and who are
active employees of the Company as of the date of the Change in
Control shall be Participants for such Plan Year.
4.2 REQUIREMENT OF ACTIVE EMPLOYMENT AS OF DATE WHICH COMMITTEE APPROVES
AWARDS. Except as the Committee may otherwise determine or as
provided in paragraph 7, in order to be eligible to earn and receive
an incentive compensation award under the Plan, a Participant for any
Plan Year must be an active employee of the Company on the date which
the
2
<PAGE>
Committee meets and approves incentive compensation awards under
this Plan after the end of the Plan Year. Accordingly, if a
Participant voluntarily terminates his/her employment or if the
Company involuntarily terminates a Participant's employment prior to
the date upon which the Committee meets after the end of the Plan
Year to approve incentive compensation awards for that Plan Year, the
Participant does not earn and is not eligible to receive an incentive
compensation award under the Plan.
4.3 PRORATED AWARDS. The Committee may decide to award a prorated award
to a Participant who is newly hired during the Plan Year. Prorated
awards may also be given to Participants who Retire during a Plan
Year and to the estates of Participants who die during a Plan Year.
5. DETERMINATION OF INCENTIVE COMPENSATION AWARDS.
5.1 TARGETS. Each Participant will have a Target established for him/her
by the Company for the Plan Year.
5.2 PERFORMANCE OBJECTIVES. The Committee shall establish one or more
specific Performance Objectives for a Plan Year, and such Performance
Objectives shall be established within ninety (90) days of the
beginning of the Plan Year. The Committee shall also establish a
schedule or schedules setting forth the amount to be paid based on
the extent to which the Performance Objectives are actually achieved
as determined by the Committee. The Committee may at any time adjust
the Performance Objectives and any schedules of payments related
thereto or adjust the way Performance Objectives are measured,
provided that this provision shall not apply to any payment 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
payment from so qualifying. The Committee shall have the right to
reduce or eliminate the compensation payable upon the attainment of a
Performance Objective but shall not have the discretion to increase a
payment upon the attainment of a Performance Objective.
6. PAYMENT OF INCENTIVE COMPENSATION AWARDS
6.1 TIME OF PAYMENT. Except as provided in paragraph 7, incentive
compensation awards under this Plan will be fully paid in cash within
ninety (90) days after the end of the Plan Year, or deferred in whole
or in part based on a written request for deferral submitted by the
Participant and approved by the Company in accordance with procedures
established by the Company.
6.2 TREATMENT OF AWARD AS COMPENSATION. Any amounts paid as incentive
compensation under this Plan shall be considered as compensation to
the Participant for purposes of the Retirement Plan and disability
and life insurance programs, unless and to the extent that such
compensation is expressly excluded by the provisions of the
Retirement Plan or the instruments establishing such programs, but
such amounts shall not be considered as compensation for purposes of
any other incentive plan or other benefits unless
3
<PAGE>
the written instrument establishing such other plan or benefits
expressly includes compensation paid under this Plan.
6.3 MAXIMUM AWARD. The maximum dollar value with respect to payments
under this Plan to any Participant in any single Plan Year shall be
$600,000.
7. CHANGE IN CONTROL OF THE COMPANY
7.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan
to the contrary, the provisions of this paragraph 7 shall govern and
supersede any inconsistent terms or provisions of the Plan.
7.2 CHANGE IN CONTROL. For purposes of the Plan, Change in Control shall
mean any of the following events:
7.2.1 The acquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) of "Beneficial Ownership" (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of twenty percent
(20%) or more of the combined voting power of the Company's
then outstanding voting securities (the "Voting Securities");
provided, however, that for purposes of this paragraph
-------- -------
8(b)(1), the Voting Securities acquired directly from the
Company by any Person shall be excluded from the determination
of such Person's beneficial Ownership of Voting Securities
(but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then
outstanding); or
7.2.2 The individuals who are members of the Incumbent Board (as
defined below) cease for any reason to constitute at least
two-thirds (2/3) of the Board. The "Incumbent Board" shall
include the individuals who as of August 20, 1990 are members
of the Board and any individual becoming a director subsequent
to August 20, 1990 whose election, or nomination for election
by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) 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 (2) full years as a
member of the Board; provided, further, however, that
-------- ------- -------
notwithstanding the foregoing, no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office (i) as a result of either an actual
or threatened "election contest" (within the meaning of Rule
14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board (a "Proxy Contest") or (ii)
with the approval of the other Board members, but by reason of
any agreement intended to avoid or settle a Proxy Contest; or
4
<PAGE>
7.2.3 Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the
Company, immediately before such merger or consolidation, do
not own, directly or indirectly immediately following such
merger or consolidation, more than eighty percent (80%) of the
combined voting power of the outstanding voting securities of
the Company 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.
7.2.4 Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because twenty percent (20%) or more
of the then outstanding Voting Securities is acquired by (i) a
trustee or other fiduciary holding securities under one or
more employee benefit plans maintained by the Company or (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.
7.2.5 Moreover, notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided, that if a
--------
Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities
by the Company, and after such share acquisition by the
Company the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the Percentage of
the then outstanding Voting Securities Beneficially Owned by
the Subject Person, the a Change in Control shall occur.
7.2.6 Notwithstanding anything contained in this Plan to the
contrary, if a Participant's employment is terminated prior to
a 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 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 Participant
shall mean the date immediately prior to the date of
termination of such Participant's employment.
5
<PAGE>
7.3 PAYMENT UPON A CHANGE IN CONTROL. Upon a Change in Control, the
following incentive compensation awards shall be paid:
7.3.1 Upon a Change in Control, the incentive compensation award for
a Plan Year ending prior to the date of the Change in Control
for which payment has not previously been made shall be
unconditionally payable in cash to each Participant.
7.3.2 If a Change in Control occurs with approval of the Board
granted prior to any such Change in Control, incentive
compensation awards for the Plan Year during which the Change
in Control occurs shall be unconditionally payable to each
Participant, such awards to be the Target percentage of each
Participant's base salary or such higher percentage a may be
approved by the Committee.
7.3.3 If a Change in Control occurs without approval of the Board
granted prior to any such Change in Control, incentive
compensation awards for the Plan Year during which the Change
in Control occurs shall be unconditionally payable to each
Participant, such awards to be two (2) times the Target
percentage of each Participant's base salary; provided,
--------
however, that in any case, if a Change in Control occurs before
-------
Target percentages shall have been established for a Plan Year,
the Target percentages for such Plan Year shall be no less
favorable to the Participants than the Target percentages for
the prior Plan Year.
Unless the Committee directs an earlier payment, incentive
compensation awards payable in accordance with this paragraph 7.3
shall be paid in cash on or before the earlier of the date which is
five (5) days following the date of the Change of Control or the date
determined in accordance with paragraph 6 above.
7.4 CONTINUATION OF THE PLAN. For a period of two (2) Plan Years
following the Plan Year in which a Change of Control occurs, the Plan
shall not be terminated or amended in any way (including, but not
limited to, restricting or limiting the right to participate in the
Plan of any person who is a Participant on the day prior to the date
of the Change in Control), nor shall the manner in which the Plan is
administered be changed in a way that adversely affects the level of
participation or reward opportunities of any Participant; provided,
--------
however, that the Plan shall be amended as necessary to make
-------
appropriate adjustments for (i) any negative effect that the costs of
expenses incurred by the Company in connection with the Change in
Control may have on the benefits payable under the Plan and (ii) any
changes to the Company (including, but not limited to, changes in
corporate structure or capitalization, acquisitions or dispositions
and increased interest expense as a result of the incurrence or
assumption by the Company of acquisition indebtedness) following the
Change in Control so as to preserve the reward opportunities and
performance targets for comparable performance under the Plan as in
effect on the date immediately prior to the Change in Control.
6
<PAGE>
7.5 NO AMENDMENT OR TERMINATION OF CHANGE IN CONTROL PROVISION. This
paragraph 7 shall not be amended or terminated at any time. Any
amendment or termination of the Plan prior to a Change in Control
which (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 or (ii) otherwise arose in connection with or in anticipation
of a Change in Control shall be null and void and shall have no effect
whatsoever.
7.6 TRUST ARRANGEMENT. All benefits under the Plan shall be paid by the
Company. The Plan shall be unfunded, and the benefits hereunder shall
be paid only from the general asset of the Company; provided, however,
-------- -------
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.
8. NON-ASSIGNABILITY. No payment awarded under this Plan nor any right or
benefit under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void
and shall not be recognized or given effect by the Company.
9. AMENDMENT OF THE PLAN. This Plan may be amended at any time and from time
to time by the Board, provided that no amendment to the Plan 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
shall be made without the approval of the stockholders of the Company,
unless the Board determines that such approval: (i) is not necessary to
avoid loss of a deduction under Section 162(m) of the Code, (ii) will not
avoid such a loss of deduction or (iii) is not advisable.
10. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any notice of award
pursuant to this Plan shall confer upon any person the right to continue in
the employment of the Company or affect the Company's right to terminate
the employment of any person.
11. PERFORMANCE-BASED COMPENSATION. This Plan is intended to give the
Committee the authority, in its discretion, to make payments that qualify
as performance-based compensation under Code Section 162(m)(4)(C).
12. GOVERNING LAW. This Plan and the rights of all persons claiming rights
under the Plan shall be governed by and interpreted in accordance with the
laws of the State of Georgia, excluding its provisions regarding conflicts
of laws.
7
<PAGE>
To record the adoption of this amended and restated Plan by the Board on
February 6, 1999, the Company has caused its authorized officers to execute this
Plan in the space designated below.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
-----------------------------------------
Brian C. Koenig
Senior Vice President - Human Resources
By: /s/ William E. Eason, Jr.
-----------------------------------------
William E. Eason, Jr.
Senior Vice President, General
Counsel and Corporate Secretary
8
<PAGE>
EXHIBIT 10.7
DEFERRED COMPENSATION PLAN FOR
[LOGO] NON-EMPLOYEE DIRECTORS OF SCIENTIFIC-ATLANTA, INC.
---------------------------------------------------
As Amended and Restated, Effective May 12, 1999
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 Company") the opportunity to defer receipt of cash
compensation and compensation in the form of stock payable to them for services
to the Company as directors.
1.3 Restatement of Plan
-------------------
This document amends and restates the Plan effective as of February 6,
1999. All deferral elections made before or after February 6, 1999, shall be
governed 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.
2.2 Participant
-----------
A non-employee member of the Board of Directors of the Company who elects
to participate in this Plan.
1
<PAGE>
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.
2.4 Compensation
------------
The total of a Participant's Annual Retainer, Meeting Fees, and Committee
Chair Retainer payments paid to the Participant, by the Company 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 the Company.
2.6 Meeting Fees
------------
The amounts paid to a non-employee member of the Board of Directors of the
Company 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, an Elective Grant, a Retirement Award, or a Lump Sum
Distribution made pursuant to the Stock Plan for Non-Employee Directors, as such
terms are defined in that plan.
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, as the same may be
amended or revised as herein permitted.
2.10 Compensation Deferral Election
------------------------------
Each election made by a Participant to defer a portion of his or her
Compensation and/or Awards by executing and submitting an Election Form.
2
<PAGE>
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 the Company for each
Compensation Deferral Election made by a Participant under this Plan.
2.12 Deferred Benefit Commencement Date
----------------------------------
The date 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 amount of Compensation (and right to a certain number of shares of
Scientific-Atlanta Common Stock under an Award, 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 plan currently or most recently maintained by the
Company for the benefit of its employees who are totally disabled.
2.18 Plan Committee
--------------
The Human Resources and Compensation Committee of the Board of Directors
of the Company
3
<PAGE>
2.19 Determination Date
------------------
The last day of each Plan Year.
2.20 Plan Interest Rate
------------------
An annual rate of interest equal to the average of Moody's Long Term
Industrial Bond Rate for the ninety (90) day period ending on the March 1st
preceding the commencement of each Plan Year (rounded to the next highest one-
half (1/2) percentage point), plus 1%, which shall be credited to a
Participant's Deferred Benefit Accounts during such 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 $.50 par value common stock of the Company
2.23 Deferral Period
---------------
The period commencing on the date that an Election Form becomes effective
for a Compensation Deferral Election and continuing until the Deferred Benefit
Commencement Date.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
- -------------------------------------------
3.1 Eligibility
-----------
Directors who are not employees of the Company and who are actively
serving on the Board of Directors of the Company 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 quarter immediately preceding the quarter 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 quarter.
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, the
Company shall defer Election Amounts deferred from the Participant's Awards and
Compensation at the time Compensation would have been paid (or at the time the
right to receive shares of Scientific-Atlanta Common Stock was granted, as
applicable). Awards may only be deferred into an Award Sub-Account and
Compensation may not be deferred into an Award Sub-Account. Each Election
Amount shall be deferred for the Deferral Period specified with respect to the
particular Compensation Deferral Election in the Election Form, provided,
however, that the Participants shall not be entitled to defer Retirement Awards
or Lump Sum Distributions (as such terms are defined in the Stock Plan for Non-
Employee Directors) for Deferral Periods that are shorter than the minimum
Deferral Periods for such Awards that are set forth in the Stock Plan for Non-
Employee Directors. All Compensation Deferral Elections shall apply solely to
Compensation and/or Awards which will be paid (or granted) to a Participant
beginning with the first day of the calendar quarter commencing subsequent to
the calendar quarter in which the Compensation Deferral Election is received;
provided, however, the Participant must submit the Election Form at least thirty
- -------- -------
(30) days prior to the quarter in which the Participant desires to commence a
deferral. Any Compensation Deferral Election will apply only to Compensation
and/or Awards paid (or granted) during the Plan Year in which the election
becomes effective. A Participant may revise or change any election contained in
any Election Form, other than the Election Amount, by submitting to the Plan
Committee a request for such a revision or change and obtaining the Plan
Committee's approval of such revision or change at least ninety (90) days prior
to the effective date of such revision or change.
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
Compensation 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. Awards may only be
credited into an Award Sub-Account, and Compensation may not be credited into an
Award Sub-Account.
5
<PAGE>
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. In the case of Awards which have minimum Deferral Periods that are
required under the terms of the Stock Plan for Non-Employee Directors, the above
limitations shall apply, and the Participant shall also be required to elect a
Deferral Period that complies with the minimum Deferral Periods required under
the Stock Plan for Non-Employee Directors.
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 the Company 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 or a Phantom Stock 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
6
<PAGE>
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 method of issuance of shares) selected, which method
was selected pursuant to the terms of subsection (a) or subsection (b)
above, as applicable, with respect to a Compensation Deferral Election by
submitting a request in writing to the Plan Committee. Prior to a change
in the method of payment or a change in the method of issuance of shares
becoming effective, the Plan Committee must approve such change.
Participants may not move Deferred Benefits from one Sub-Account to another
Sub-Account, except that Participants may move Deferred Benefits from an
Interest Sub-Account to a Split-Dollar Insurance Sub-Account by notifying
the Plan Committee in writing and designating in such notification the date
upon which such Deferred Benefits are to be moved.
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
-------------------------
The Company 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. The Company 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 until it is paid to the
Participant, and shall be credited and compounded weekly.
7
<PAGE>
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 the New York Stock
Exchange, for the 20 business days immediately preceding the last day of
the month prior to 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. 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 the New York Stock Exchange
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 the Company 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"). Upon accrual, such Accrued
Dividends will be placed in an Interest Sub-Account. A Participant shall not
have any rights as a shareholder of the Company while an Award is held in an
Award Sub-Account.
8
<PAGE>
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. The Company
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 the Company.
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 Common Stock, determined as set forth in
Section 5.3(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
9
<PAGE>
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.
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, pursuant to Section 4.5(c)
hereof. 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:
10
<PAGE>
(a) Upon termination of service as a director prior to the Participant's
Retirement:
(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) the Company 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) Upon termination of service as a director on the date of the
Participant's Retirement, the Company will pay (or issue) to such a
Participant all amounts in his or her Deferred Benefit Accounts in
accordance with Section 6.1 hereof.
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 the
Company 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.
11
<PAGE>
(b) For purposes of this Plan, once a Participant is determined to be
Totally Disabled, he or she will continue to be deemed Totally Disabled
irrespective of the Participant's ceasing to be considered Totally Disabled
for purposes of any other plan maintained by the Company.
(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.
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, the Company 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, the Company 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, the Company 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
12
<PAGE>
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.
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 the Company may terminate this Plan at any time,
and termination of this Plan shall be effective upon ten (10) days' written
notice to all Participants in the Plan. Upon such termination of this Plan, the
Company shall pay all Participants their Deferred Benefits as provided in
Section 6.1 and in the Participant's Election Form; provided, however, if this
-----------------
Plan is terminated within two (2) years after a Change in Control (as defined in
Section 9.4 hereof), each Participant's Deferred Benefits shall be paid in
accordance with either (a) each Participant's "Change in Control Election Form"
(as defined in Section 9.3 hereof), provided such Participant has completed and
submitted such Change in Control Election Form, as required by Section 9.3
hereof, or (b) Participant's original Election Form and in accordance with
Section 6.1 hereof, but only if a Participant has not validly completed and
submitted a Change in Control Election Form. Upon termination of the Plan,
amounts credited to the Deferred Benefit Accounts of each Participant shall
continue to earn interest at the Plan Interest Rate until such amounts are paid
to the Participant.
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
the Company. Any asset acquired or held by the Company or funds allocated by
the Company in connection with the liabilities
13
<PAGE>
assumed by the Company pursuant to this Plan shall not be deemed to be held
under any trust for the benefit of any Participant or of any of Participant's
Beneficiaries or to be security for the performance of the Company's obligations
hereunder but shall be and remain a general asset of the Company.
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 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 the Company by furnishing any and all
information reasonably requested by the Company in order to facilitate the
payment of Deferred Benefits hereunder and by taking any such other actions as
the Company or the Plan Committee may reasonably request.
ARTICLE IX - CHANGE IN CONTROL
- ------------------------------
9.1 Applicability
-------------
Notwithstanding any provision in this Plan to the contrary, the terms of
this Article IX shall apply to any Participant, whether active or inactive.
9.2 Effect of Change in Control
---------------------------
Upon a Change in Control the following shall immediately occur:
(a) The Company shall contribute to the trust maintained pursuant to the
Scientific-Atlanta, Inc. Benefits Protection Trust Agreement a lump sum
amount equal to each Participant's Deferred Benefit Accounts. The Company
shall assign to such trust (i) any split-dollar life insurance policies
held by the Company, pursuant to Section 5.5 hereof, for the benefit of a
Participant's beneficiaries; and (ii) any Endorsement Split-Dollar
Agreements between the Company and a Participant.
(b) All Participants shall be deemed to have satisfied the age and service
requirements in the definition of Retirement in this Plan.
14
<PAGE>
(c) For any Participant who is a member of the Board on the date that a
Change in Control occurs and who ceases, within twenty-four (24) months
after a Change in Control, to be a member of the Board for any reason, the
Company shall pay such Participant his or her Deferred Benefits in
accordance with such Participant's Change in Control Election Form, if
completed and returned pursuant to Section 9.3. If a Participant has not
completed and returned such Change in Control Election Form, such
Participant's Deferred Benefits shall be paid in accordance with his
original Election Form and Article VI hereof.
(d) All amounts held in an Interest Sub-Account shall remain in such
Interest Sub-Account and shall earn interest at the Plan Interest Rate
until all amounts in such Interest Sub-Account are fully paid.
(e) All amounts held in a Participant's Phantom Stock Sub-Account shall be
valued as of the date of the Change in Control, based on the conversion
method utilized in Section 5.3(a) hereof, and such amounts shall be
automatically transferred to an Interest Sub-Account for such Participant
(and shall earn interest in accordance with Section 9.2(d)).
(f) All Awards held in an Award Sub-Account shall be automatically
converted into the cash value of such Awards on the date of the Change in
Control and such cash value shall be automatically transferred to the
Interest Sub-Account (and earn interest in accordance with Section 9.2(d)).
The cash value of such Awards on the date of the Change in Control shall be
determined by multiplying the closing price of one (1) share of Scientific-
Atlanta Common Stock on the business day immediately prior to the date of
the Change in Control times the number of shares of Scientific-Atlanta
-----
Common Stock that the Participant has a deferred right to receive under his
Award Sub-Account.
(g) All amounts, if any, held in a Participant's Split-Dollar Insurance
Sub-Account shall be automatically transferred to an Interest Sub-Account
for such Participant (and shall earn interest in accordance with Section
9.2(d)). The trust described in Section 9.2(a) shall withdraw from a
Participant's Interest Sub-Account the amounts required to pay the premiums
for the split-dollar life insurance held by the trust (pursuant to Section
9.2(a)) for the benefit of such Participant's beneficiaries.
9.3 Change in Control Election Form
-------------------------------
At any time at least ninety (90) days prior to a Change in Control, each
Participant may elect to have his Deferred Benefits paid out after a Change in
Control in a manner different from the manner he previously elected in his
original Election Form. Each Participant may complete and submit a Change in
Control Election Form and thereby elect to have his or her Deferred Benefits
paid as follows if the Plan is terminated or a Participant's service on the
Board is terminated, within twenty-four (24) months after a Change in Control:
(a) have his Deferred Benefits paid as a lump sum payment, payable within five
(5) days after the date of termination of the Plan or the date of Participant's
termination of service on the Board (whichever occurs
15
<PAGE>
first); or (b) have his Deferred Benefits paid as though his Deferred Benefit
Commencement Date were the date of termination of the plan or the date of
Participant's termination of service on the Board (whichever occurs first); or
(c) have his Deferred Benefits paid as of a specified date (the "Change in
Control Election Form"). As with the original Election Form, Participant may
elect, in his Change in Control Election Form, to have his Deferred Benefits
paid in a lump sum, or in installments over a 5-year period, a 10-year period,
or a 15-year period. For a Change in Control Election Form to be validly
submitted by a Participant, it must be received by the Corporate Secretary of
the Company prior to the deadline specified in the first sentence of this
Section 9.3.
9.4 Definition of Change in Control
-------------------------------
For purposes of this Plan, a Change in Control shall mean any of the
following events:
(a) The acquisition in one or more transactions by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty percent (20%) or more of the combined voting power
of the Company's then outstanding voting securities (the "Voting
Securities"); provided, however, that for purposes of this Section 8.4, the
-------- -------
Voting Securities acquired directly from the Company by any Person shall be
excluded from the determination of such Person's Beneficial Ownership of
Voting Securities (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then outstanding); or
(b) The individuals who are members of the Incumbent Board (as defined
below) cease for any reason to constitute at least two-thirds (2/3) of the
Board. The "Incumbent Board" shall include the individuals who as of
August 20, 1990, are members of the Board and any individual becoming a
director subsequent to August 20, 1990, whose election, or nomination for
election, by the Company stockholders was approved by a vote of at least
two-thirds (2/3) 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 (2) full years as
a member of the board; provided, further, however, that notwithstanding the
-------- -------- -------
foregoing, no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office (i) as a result of either
an actual or threatened "election contest" (within the meaning of Rule 14a-
11 promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board (a "Proxy Contest") or (ii) with the approval of the other Board
members, but by reason of any agreement intended to avoid or settle a Proxy
Contest; or
(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
16
<PAGE>
merger or consolidation, more than eight percent (80%) of the combined
voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation in substantially the same
proportion as their ownership of the Voting Securities immediately before
such merger or consolidation or (ii) a complete liquidation or dissolution
of the Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty percent (20%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
subsidiaries or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company,
which acquisition, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person, provided that if, after a Change in Control would occur (but for the
--------
operation of this sentence) as a result of such acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional Voting Securities,
which increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
ARTICLE X - MISCELLANEOUS
- -------------------------
10.1 Amendments and Modifications
----------------------------
The Board of Directors of the Company may amend this Plan in any respect
at any time, except that the Board of Directors may not amend this Plan for the
two (2) year period commencing on the date of a Change in Control. 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.
17
<PAGE>
10.2 Inurement
---------
This Plan shall be binding upon and shall inure to the benefit of the
Company and each Participant hereto, and their respective beneficiaries, heirs,
executors, administrators, successors and assigns.
10.3 Governing Law
-------------
This Plan is made in accordance with and shall be governed in all respects
by the laws of the state of Georgia.
10.4 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 withholding requirements. A Participant receiving shares of Scientific-
Atlanta 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 May 12, 1999, the Company has caused its authorized officers to execute this
Plan.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
----------------------------------
Name: Brian C. Koenig
Title: Senior Vice President - Human
Resources
By: /s/ William E. Eason, Jr.
---------------------------------
Name: William E. Eason, Jr.
Title: Corporate Secretary
18
<PAGE>
EXHIBIT 10.8
1985 EXECUTIVE DEFERRED COMPENSATION PLAN
OF
SCIENTIFIC-ATLANTA, INC.
As Amended Through April 1, 1992
This Plan is adopted by Scientific-Atlanta, Inc. as of December 1,
1985, in order to provide specified benefits to certain selected key executive
employees who contribute materially to the success of the Company and its
subsidiaries.
Article 1 - Definitions
-----------------------
The following definitions apply to this Plan:
1.1 "Administrator" means a person designated by the Company to administer
the performance of the Plan and Plan Agreements.
1.2 "Basic Compensation" means the total of (i) a Participant's annual
gross salary payable in regular, equal, bi-weekly increments, before
any deductions for amounts deferred under this Plan or other
deductions whatsoever and (ii) a Participant's annual cash bonus, if
any. Bonuses based on multi-year criteria, commissions, and other
extraordinary payments, whether discretionary or pursuant to a Company
plan, are not considered as part of Basic Compensation for the
purposes of this Plan.
1.3 "Beneficiary" means the person or persons designated in accordance
with paragraph 5.3 hereof to receive benefits under this Plan upon
the death of a Participant.
1.4 "Committee" means the Human Resources and Compensation Committee of
the Board of Directors of the Company or such other committee as may
from time to time be authorized by the Company to manage and interpret
this Plan.
1.5 "Company" means Scientific-Atlanta, Inc. and any subsidiary of
Scientific-Atlanta, Inc. that adopts this Plan by resolution of the
subsidiary's board of directors.
1.6 "Deferral Period" means the four Plan Years specified in the Plan
Agreement, which must be within the first seven Plan Years following
the date of the Plan Agreement, during which a portion of
Participant's Basic Compensation is to be deferred.
1
<PAGE>
1.7 "Deferred Compensation Account" or "DCA" means the account established on
the books of the Company for each Participant showing the cumulative
deferred compensation and interest equivalent credited to him or her.
1.8 "Effective Date of Plan" or "EDP" means December 1, 1985.
1.9 "Participant" means any executive employee with whom the Company has
entered into a written Plan Agreement and who has not withdrawn from the
Plan or received all amounts which he or she is entitled to receive in
accordance with the provisions of the Plan Agreement and this Plan.
1.10 "Plan" means the Scientific-Atlanta, Inc. Executive Deferred Compensation
Plan evidenced by this instrument, as it may be amended in writing from
time to time.
1.11 "Plan Agreement" means the written agreement entered into by and between
the Company and a Participant providing for a portion of a Participant's
Basic compensation to be deferred pursuant to this Plan.
1.12 "Plan Year" means each calendar year beginning on January 1.
1.13 "Retirement Plan" means the Company's Retirement Plan and Trust in effect
on EDP, as it may be amended, and any successor plan as it may be amended.
1.14 "Total Disability" means the inability of a Participant to engage in any
substantial gainful activity by reason of a medically determinable physical
or mental impairment. The Committee shall have full and absolute discretion
to determine whether a Participant is totally disabled and may secure such
medical and other evidence as the Committee considers necessary or
appropriate.
Article 2 - Eligibility
-----------------------
2.1 The Committee shall have full and absolute discretion to select the key
executive employees of the Company who will be offered an opportunity to
become Participants in the Plan.
2.2 In order to become a Participant, a selected person must execute and return
to the Administrator a Plan Agreement in the form tendered by the Company
and otherwise comply with conditions established by the Committee.
2
<PAGE>
Article 3 - Deferral Commitments
--------------------------------
3.1 The amount to be deferred shall be determined by agreement of the Company
and the Participant. However, no Plan Agreement shall provide for less than
$5,000 nor more than 50% of Basic Compensation to be deferred for each Plan
Year in a Deferral Period.
3.2 A Participant may make a written request to the Committee to increase the
portion of the Participant's Basic Compensation to be deferred for future
services but any such increase shall be at least $5,000 per future Plan
Year. If approved by the Committee, the increase shall be reflected in a
written amendment to the Plan Agreement which shall be executed by the
Participant and the Company.
3.3 A Participant may make a written request to the Committee to reduce future
deferrals or withdraw from participation in the Plan. Any request to reduce
deferrals that, if granted, would result in less than $5,000 being deferred
in each Plan Year of the Deferral Period shall be deemed a request to
withdraw from participation in the Plan. Committee approval shall be
required for the reduction or withdrawal to be effective.
Article 4 - Deferred Compensation Account
-----------------------------------------
4.1 Each Participant's deferred compensation and the interest equivalent
provided for in paragraph 4.2 below shall be credited on the books of the
Company to his or her Deferred Compensation Account ("DCA"). Except as
provided in the following sentences of this paragraph 4.1, a prorata
portion of the Participant's annual deferred compensation shall be credited
to the Participant's DCA as of each regular bi-weekly payday. A Participant
may elect to have all or a portion of his or her deferred compensation for
a Plan Year withheld from any annual cash bonus awarded to the Participant
during the year. If the entire amount specified in a Plan Agreement to be
deferred in a Plan Year has not been credited to a Participant's DCA on or
before the second regular bi-weekly payday in September of that year, the
amount yet to be deferred shall be deducted from the Participant's current
compensation and credited to the Participant's DCA in prorata increments as
of each regular bi-weekly payday during the remainder of the Plan Year.
4.2 As of the last day of each Plan Year, the amount in a Participant's DCA
shall be increased by an interest equivalent equal to 14% of the amount in
such account; provided, however, that if a Participant's employment by
Scientific-Atlanta or participation in the Plan terminates within less than
thirty-six (36) months after the
3
<PAGE>
commencement of the Deferral Period for any reason other than death or
retirement under a Retirement Plan of the Company, the interest equivalent
credited to that Participant's account shall be reduced for each Plan Year
to the applicable percentage specified below:
(a) Twelve percent (12%) if such termination or withdrawal occurs
after twenty-four (24) months and prior to thirty-six (36) months of the
Deferral Period;
(b) Ten percent (10%) if such termination or withdrawal occurs after
twelve (12) months but prior to twenty-four (24) months of the Deferral
Period;
(c) Zero percent (0%) if such termination or withdrawal occurs within
the first twelve (12) months of the Deferral Period.
4.3 The interest equivalent percentage shall not be reduced if termination of
employment occurs because of death or retirement under a Retirement Plan of
the Company.
Article 5 - Payments
--------------------
5.1 Subject to paragraph 5.2 below, the amount in a Participant's DCA shall be
paid in approximately equal semi-annual installments following the Deferred
Payment Commencement Event ("DPCE") specified below or in accordance with
such other payment schedule, such as monthly or quarterly, as may be
specified in a Plan Agreement or requested in writing by Participant and
approved by the Committee:
(a) If the Participant retires under the Company's Retirement Plan,
the DPCE (Deferred Payment Commencement Event) shall be (i) the
Participant's actual retirement date, (ii) the date that deferred payments
are actually made from the Company's Retirement Plan, (iii) the
Participant's tenth anniversary of participation in the Plan or (iv) the
Participant's 65th birthday.
(b) If the Participant's employment is terminated for any reason
other than retirement under the Company's Retirement Plan and such
termination occurs after the end of the Deferral Period, the DPCE shall be
the first to occur of (i) the Participant's death, (ii) the Participant's
sixty-fifth (65th) birthday or (iii) the date following the Participant's
fifty-fifth (55th) birthday on which Participant retires from his or her
principal occupation or employment (which date shall be established on the
basis of an
4
<PAGE>
affidavit executed by Participant and such other supporting documentation
as the Company may reasonably request).
(c) If a Participant withdraws from the Plan or if the Participant's
employment is terminated for any reason other than retirement under the
Company's Retirement Plan and such withdrawal or termination occurs before
the end of the Deferral Period, the DPCE shall be the effective date of
such withdrawal or termination.
5.2 After the occurrence of the Participant's DPCE, the Company shall make
payments as follows until the entire amount in the Participant's DCA is
paid:
(a) If the total amount in the DCA is less than $10,000 on the date
of the DPCE, the entire amount shall be paid in a lump sum;
(b) If the total amount in the DCA on the date of the DPCE is $10,000
or more but less than $25,000, equal payments shall be made over a five-
year period.
(c) If the total amount in the DCA on the DPCE is $25,000 or more but
less than $50,000, equal payments shall be made over a ten-year period.
(d) If the total amount in the DCA on the DPCE is $50,000 or more,
equal payments shall be made over a fifteen-year period.
Balances remaining in a Participant's DCA on the last day of each calendar
year shall continue to be credited with an interest equivalent as provided
herein.
5.3 In the event the Participant dies before receiving the entire amount
credited to the Participant's DCA, the balance of the DCA at the time of
his or her death shall be paid to the Participant's Beneficiary. A
Participant's Beneficiary shall be the person or persons designated by
written notice, in a form acceptable to the Committee, delivered to the
Company prior to Participant's death. A Participant may change a
designation of Beneficiary from time to time by subsequent written notices
to the Company, in a form acceptable to the Committee, delivered prior to
Participant's death. If the Participant is an employee of the Company or a
retiree under the Company's Retirement Plan at the time of his or her death
and has not designated a Beneficiary pursuant to this Agreement, the
Beneficiary under this Agreement shall be deemed to be the same as
5
<PAGE>
the beneficiary under the Company-provided life insurance then covering
Participant as a Scientific-Atlanta employee or retiree. In the absence of
such designation, payment shall be made to the Participant's personal
representative for distribution as an asset of Participant's estate in
accordance with applicable law. The time and form of payments specified
elsewhere herein shall not be altered on account of Participant's death,
provided, however, that at the request of Participant's Beneficiary or
-------- -------
personal representative, the Committee may authorize and direct an
acceleration of such payments, including a lump sum payment, if it should
choose in its absolute discretion to do so.
Article 6 - Death Benefits
--------------------------
6.1 If a Participant dies while an employee of the Company and prior to
withdrawal from the Plan, or after retirement under the Company's
Retirement Plan and prior to the receipt of any payments under Article 5
above, the Participant's DCA will be credited as of the date of his or her
death with an amount, if any, necessary to cause the balance in the DCA
after such credit to be equal to five times the average of the four annual
amounts specified in the Participant's Plan Agreement to be deferred during
the Deferral Period; provided, however, that if the deceased Participant's
employment by the Company had terminated by reason of Participant's
retirement under the Company's Retirement Plan prior to the end of the
Deferral Period, the amount credited under this Article 6 shall not exceed
five times the Participant's annual average compensation actually deferred
pursuant to this Plan during the Plan Years preceding the termination of
Participant's employment.
6.2 No amount will be credited to the Participant's DCA under this Article 6
if:
(a) the balance in the Participant's DCA on the date of his or her
death is equal to or exceeds five times the average of the four annual
amounts specified in the Participant's Plan Agreement to be deferred during
the Deferral Period;
(b) prior to death, the Participant had withdrawn from the Plan, the
employment of Participant had been terminated by the Company for any reason
other than retirement under the Company's Retirement Plan, or payments
under Article 5 above have commenced;
6
<PAGE>
(c) the Participant's death is the result of suicide within two years
after execution of the Plan Agreement:
(d) the Participant's death is determined to have resulted from a
bodily or mental cause or causes, information about which was withheld,
knowingly concealed, or falsely provided by the Participant in response to
a request by the Company to furnish evidence of good health; or
(e) proof of death in a form determined acceptable by the Committee
is not furnished.
Article 7 - Total Disability
----------------------------
7.1 If a Participant has entered into a Plan Agreement prior to his or her
sixtieth (60th) birthday and becomes Totally Disabled while an employee of
the Company and prior to withdrawal from the Plan or the receipt of any
payments under Article 5 of the Plan, the Participant shall be entitled to
receive under the Plan, for so long as such Total Disability shall
continue, annual disability benefits at a rate equal to one and one-half
(1-1/2) times the average of the four annual amounts specified in the
Participant's Plan Agreement to be deferred during the Deferral Period;
provided, however, that the disability benefit shall not continue after the
Participant's sixty-fifth (65th) birthday.
7.2 During the continuation of a Participant's Total Disability that commences
prior to termination of Participant's employment for any reason, a
Participant who has not requested withdrawal from the Plan shall continue
to be deemed a Participant and an employee of the Company and the Company
shall continue to credit the Participant's DCA with the applicable amount
of deferred compensation in accordance with the Plan Agreement at each pay
period as if the Participant were not Totally Disabled.
Article 8 - Leave of Absence
----------------------------
8.1 If a Participant is authorized by the Company for any reason to take a
temporary leave of absence with Basic Compensation continuation throughout
the period of absence, the Plan Agreement shall continue in full force and
effect as if the Participant were not on leave of absence.
8.2 If a Participant is authorized by the Company for any reason to take a
temporary leave of absence without pay at any time during
7
<PAGE>
the Deferral Period, the Plan Year in which the leave of absence begins and
the Deferral Period shall be deemed suspended and no amounts shall be
credited to the Participant's DCA during such leave of absence. The
calendar year in which the Participant returns to regular employment by the
Company shall be deemed a resumption of the Plan Year in which the leave of
absence began and during the balance of that year a sufficient amount of
the Participant's Basic Compensation shall be deferred, in approximately
equal increments on each regular pay day, to cause the amount deferred for
the Plan Year, as so continued, to be equal to the amount specified in the
Plan Agreement for that Plan Year. Notwithstanding the foregoing, the
Company may deem the Participant to have withdrawn from the Plan at such
time as (i) the Participant's leave of absence continues beyond the period
authorized by the Company; or (ii) the Company determines that the Deferral
Period will not be completed within the first seven Plan Years after
execution of the Plan Agreement.
8.3 For the purposes of this Plan, a Participant's employment by the Company
shall be deemed to continue throughout the authorized period of any leave
of absence, paid or unpaid.
Article 9 - Termination of the Plan
-----------------------------------
9.1. The Company shall have the right to terminate this Plan and any Plan
Agreement at any time by written notice to each Participant to that effect;
provided, however, that no such termination shall affect the rights of any
Participant who is Totally Disabled on the effective date of termination
nor the entitlement of any Beneficiary to receive a benefit payable on
account of the death of any Participant occurring prior to the effective
date of termination.
9.2 The termination of this Plan or a Plan Agreement by the Company shall be
deemed a Deferred Payment Commencement Event within the meaning of Article
5 above.
Article 10 - Restriction on Alienation of Benefits
--------------------------------------------------
10.1 No right or benefit under this Plan or a Plan Agreement shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge,
and any attempt to anticipate, alienate, sell, assign, pledge, encumber or
charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to the debts, contracts, liabilities, or
torts of the person entitled to such benefit.
8
<PAGE>
Article 11 - Limitation of Rights and Obligations
-------------------------------------------------
11.1 A Participant's rights and the Company's sole obligations to a
Participant or the Participant's Beneficiaries with respect to this
Plan are as expressly set forth in this Plan and the Plan Agreement
entered into between the Company and the Participant. No other rights
or obligations shall be inferred.
11.2 The Participant and Beneficiaries must cooperate with the Company in
furnishing all information requested by the Company related to the
payment of benefits or any other action within the scope of the
Company's responsibilities under this Plan. Such information may
include the taking of a physical examination by Participant.
Article 12 - Unsecured General Creditor
---------------------------------------
12.1 Amounts payable to a Participant shall be paid from the general assets
of the Company exclusively; provided, however, 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.
Article 13 - Administration of the Plan
---------------------------------------
13.1 The general administration of this Plan, as well as construction and
interpretation thereof, shall be vested in the Committee, the members
of which shall be appointed from time to time by, and serve at the
pleasure of, the Board of Directors of the Company. An administrator
designated by the Company will assist the Committe.
13.2 Subject to the Plan, the Committee shall from time to time establish
rules, forms and procedures for the administration of the Plan. Except
as otherwise expressly provided, the Committee shall have the
exclusive right to interpret the Plan and to decide any and all
matters arising thereunder. The Committee's decisions shall be
conclusive and binding upon all persons having or claiming to have any
right or interest under the Plan.
13.3 No member of the Committee shall be liable for any act of omission of
any other member of the Committee, nor for any act or omission
9
<PAGE>
on his own part, excepting his own wilful misconduct. The Company
shall indemnify and save harmless the Administrator and each member of
the Committee against any and all expenses and liabilities arising out
of or related to his or her acts and omissions related to this Plan,
with the exception of expenses and liabilities arising out of his or
her own wilful misconduct.
13.4 To enable the Committee to perform its functions, the Company and, on
request, each Participant shall supply full and timely information to
the Committee on all matters relating to the compensation of
Participants, their retirement, death or other cause for termination
of employment, and such other pertinent facts as the Committee may
require.
13.5 The Administrator, the members of the Committee and the officers and
directors of the Company shall be entitled to rely on all certificates
and reports made by any duly appointed accountants and on all opinions
given by any duly appointed legal counsel. Such legal counsel may be
counsel for the Company.
13.6 In addition to the powers hereinabove specified, the Committee shall
have the power to compute and certify under the Plan the amount and
kind of benefits from time to time payable to Participants and their
Beneficiaries and to authorize all disbursements for such purposes.
Article 14 - General and Miscellaneous
--------------------------------------
14.1 Nothing in this Plan or in any Plan Agreement shall be construed as a
contract of continuing employment or as obligating a Participant in
any way to continue in the employ of Company or the Company to
continue to employ a Participant.
14.2 Any notice permitted or required under this Plan or a Plan Agreement
shall be in writing and shall be effective when actually received by
the Participant or the Secretary of the Company or on the third
business day after posting in the United States mails, postage
prepaid, by certified mail, return receipt requested, addressed as
follows:
TO PARTICIPANT: TO COMPANY:
Most recent Human Resources and
address shown in Compensation Committee
Company's personnel c/o Corporate Secretary
records. Scientific-Atlanta, Inc.
P.O. Box 105600
Atlanta, Georgia 30348
10
<PAGE>
Notice of address changes shall be effective as aforesaid.
14.3 This Plan and Plan Agreements shall be binding upon the Company, its
successors and assigns and upon Participant and Participant's
Beneficiaries, assigns, heirs executors and administrators.
14.4 This Plan and all Plan Agreements shall be interpreted in accordance
with and governed by the laws of the State of Georgia; provided,
however, that nothing in this paragraph shall be construed as limiting
the discretion of the Committee or its power to render final and
binding judgments and interpretations as provided herein and in Plan
Agreements.
14.5 The Article headings are set forth only for convenience and are
entitled to no weight in interpreting this Plan. The gender of
pronouns used in this Plan has no significance. Singular pronouns
shall be deemed to include plural pronouns.
14.6 If any provision of this Plan should be deemed illegal or invalid for
any reason, the remaining provisions of the Plan shall remain in full
force and effect and the Plan shall be construed and administered as
if the illegal or invalid provision had never been included; provided,
however, that if the essential purpose of the Plan would be frustrated
by the invalidity or illegality of any provision, the Company may, by
written notice to Plan Participants, add a replacement provision that
is valid, conforms to applicable law and has a substantially similar
effect to the provision determined to be invalid but if the Company
deems the addition of such a replacement provision to be impossible,
the Company shall terminate the Plan.
Article 15 Change in Control
----------------------------
15.1 Contrary Provisions. Nothwithstanding anything contained in the Plan
-------------------
to the contrary, the provisions of this Article 15 shall govern and
supersede any inconsistent terms or provisions of the Plan.
15.2 Change in Control. For purposes of this Plan, a "Change in Control"
-----------------
shall mean any of the following events:
(a) The aquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Section
11
<PAGE>
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) of "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more
of the combined voting power of the Company's then outstanding voting
securities (the "Voting Securities"), provided, however, that for
-------- -------
purposes of this Paragraph 15.2(a), the Voting Securities acquired
directly from the Company by any Person's shall be excluded from the
determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then
outstanding); or
(b) The individuals who are members of the Incumbent Board (as
defined below), cease for any reason to constitute at least two-thirds
of the Board. The "Incumbent Board" shall include the individuals who
as of August 20, 1990 are members of the Board and any individual
becoming a director subsequent to August 20, 1990 whose election, or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the directors then comprising the
Incumbent Board; provided, however, that any individual who is not a
-------- -------
member of the Incumbent Board at the time he or she becomes a member
of the Board shall become a member of the Incumbent Board upon the
completion of two full years as a member of the Board; provided,
--------
further, however, that notwithstanding the foregoing, no individual
------- -------
shall be considered a member of the Incumbent Board if such individual
initially assumed office (i) as a result of either an actual or
threatened "election contest" (within the meaning of Rule 14a-11
promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") or (ii) with the approval of the
other Board members, but by reason of any agreement intended to avoid
or settle a Proxy Contest; or
(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
12
<PAGE>
dissolution of the Company or an agreement for the sale or other
disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty percent (20%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its subsidiaries or (ii) any
corporation which, immediately prior to such acquisition, is owned
directly or indirectly by the stockholders of the Company in the same
proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided, that if a Change
--------
in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
Notwithstanding anything contained in this Plan to the contrary, if a
Participant's employment is terminated prior to a 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 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 Participant
shall mean the date immediately prior to the date of termination of
such Participant's employment.
No act, nor failure to act, on the Participant's part, shall be
considered "willful" unless the Participants has acted, or failed to
13
<PAGE>
act, with an absence of good faith and without a reasonable belief
that action or failure to act was in the best interest of the Company.
15.3 Termination of Employment. Notwithstanding any other provision of this
-------------------------
Plan to the contrary, if a Participant's employment with the Company
or participation in the Plan terminates other than for Cause (as
defined in paragraph 15.4), and such termination occurs within two
years following a Change in Control or 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 or (ii) otherwise occurs in
connection with or in anticipation of a Change in Control:
(a) The interest equivalent credited to such Participant's DCA
shall equal fourteen percent (14%) of the amount in his DCA at the
close of each Plan Year ending prior to such termination plus a pro
rata interest equivalent at such rate for the portion of the Plan Year
in which such termination occurs based on the number of days elapsed
through the date of termination. This paragraph 15.3(a) shall not be
applicable if a Paritcipant's employment with the Company or
participation in the Plan is terminated for Cause and the provisions
of paragraph 4.2 shall govern the interest equivalent payable to such
Participant.
(b) The amount in the Participant's DCA including the interest
equivalent determined under paragraph 15.3(a) shall be unconditionally
payable in cash to the Participant. Unless the Committee directs as
earlier payment, such amount shall be paid in cash on or before the
date which is five (5) days following the Termination Date.
15.4 Cause. For purpose of this Plan, a termination for "Cause" is a
-----
termination evidenced by a resolution adopted in good faith by two-
thirds of the Board that the Participant (i) has been convicted of a
felony, or (ii) has engaged in conduct which constitutes (A) willful
neglect in carrying out his duties to the Company or (B) willful
misconduct, in either case, which is demonstrably and materially
injurious to the Company monetarily or otherwise.
15.5 Continuation of the Plan. For a period of two (2) Years following a
------------------------
Change of Control, The Plan shall not be terminated or
14
<PAGE>
amended in any way (including, but not limited to, restricting or
limiting the right to participate in the Plan of any person who is a
Participant on the day prior to the date of the Change of Control),
nor shall the manner in which the Plan is administered be changed in a
way that adversely affects the level of participation or the benefits
accruing to any Participant.
15.6 Amendment or Termination.
------------------------
(i) This Article 15 shall not be amended or terminated at any time.
(ii) Any amendment or termination of the Plan prior to a Change in
Control which (l) 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.
To record the adoption of the Plan (as amended and restated) by the Board,
effective as of February 6, 1999, the Company has caused its authorized officers
to execute this Plan.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig By: /s/ William E. Eason, Jr.
-------------------- -------------------------
Name: Brian C. Koenig Name: William E. Eason, Jr.
Title: Senior Vice President- Title: Senior Vice President
Human Resources and General Counsel
15
<PAGE>
EXHIBIT 10.9
SCIENTIFIC-ATLANTA
EXECUTIVE DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED MAY 12, 1999
Article I - Introduction
------------------------
1.1 Name of the Plan
----------------
This Plan shall be known as the Scientific-Atlanta Executive Deferred
Compensation Plan.
1.2 Purpose of Plan
---------------
The purpose of the Plan is to provide eligible executives of Scientific-
Atlanta, Inc., a Georgia corporation, and its subsidiaries the opportunity to
defer cash compensation payable to them for services to Scientific-Atlanta, Inc.
and its subsidiaries.
1.3 Date of Plan
------------
This Scientific-Atlanta Executive Deferred Compensation Plan was originally
made at Norcross, Georgia, on the 19th day of May, 1993, for the benefit of
certain employees of Scientific-Atlanta, Inc. and its subsidiaries.
Article II - Definitions
------------------------
For purposes of this Plan, the following words and phrases shall have the
meanings and applications set forth below:
2.1 Annual Incentive Plan Payment
-----------------------------
The short-term executive incentive payment, if any, earned by a Participant
in the year preceding a Plan Year and payable by the Employer to the Participant
in the Plan Year.
2.2 Beneficiary
-----------
A person or entity designated in accordance with the terms and conditions
of this Plan to receive benefits upon the death of a Participant.
1
<PAGE>
2.3 Compensation Deferral Election
------------------------------
Each election made by a Participant to defer a portion of his or her
Compensation by executing and submitting an Election Form.
2.4 Compensation
------------
The total of a Participant's Salary, Annual Incentive Plan Payment, Long-
Term Incentive Plan Payments, any other incentive payments approved by the Plan
Committee ("Other Incentive Compensation"), amounts to be received by the
Participant under the Executive Deferred Compensation Plan of Scientific-
Atlanta, Inc. originally adopted on December 1, 1985 ("1985 Plan Payments") and
any amounts to be received by the Participant under any Severance Protection
Agreement with, or Severance Protection Plan of, Scientific-Atlanta, Inc.
("Severance Payments"), which are payable to the Participant by the Employer
during a Plan Year. Compensation shall be calculated before reduction for taxes
or for compensation deferred pursuant to this Plan.
2.5 Deferred Benefit Account
------------------------
An account maintained pursuant to and in accordance with the terms and
conditions set forth in Article V hereof by or on behalf of the Employer for
each Compensation Deferral Election made by a Participant under this Plan.
2.6 Deferred Benefit Commencement Date
----------------------------------
The date irrevocably designated by a Participant with respect to each
Compensation Deferral Election as the date on which the payment of the Deferred
Benefits that accumulate as a result of such elections are to begin.
2.7 Deferred Benefits
-----------------
The amounts payable pursuant to this Plan to a Participant or to his or her
Beneficiary or estate following the Participant's termination of employment, the
Deferred Benefit Commencement Date, determination of Total Disability, or death.
2.8 Determination Date
------------------
The last day of each Plan Year.
2.9 Election Amount
---------------
The amount of Salary, Annual Incentive Plan Payment, Long-Term Incentive
Plan Payment, Other Incentive Compensation, 1985 Plan Payments or Severance
Payments to be
2
<PAGE>
deferred pursuant to a single Compensation Deferral Election.
2.10 Election Form
-------------
The form completed by a Participant in order to make one or more
Compensation Deferral Elections, as the same may be amended or revised as herein
permitted.
2.11 Employer
--------
Scientific-Atlanta, Inc. or any of its majority owned subsidiaries.
2.12 Employment Termination Date
---------------------------
The date of a Participant's termination of employment, determination of
Total Disability, or death, whichever is applicable.
2.13 Long-Term Incentive Plan Payment
--------------------------------
The long-term performance payment, if any, earned by a Participant during
the performance period immediately preceding the Plan Year and payable by the
Employer to the Participant in the Plan Year.
2.14 Participant
-----------
An employee of the Employer who is eligible to participate in this Plan
according to the criteria adopted from time to time by the Plan Committee and
who elects to participate in this Plan.
2.15 Plan
----
This Scientific-Atlanta Executive Deferred Compensation Plan, as amended
from time to time.
2.16 Plan Committee
--------------
The Human Resources and Compensation Committee of the Board of Directors of
Scientific-Atlanta, Inc. or such other committee as shall be designated by the
Board of Directors from time to time.
2.17 Plan Year
---------
The period beginning on the first day of July of each calendar year and
ending on and including the last day of June of the next calendar year.
3
<PAGE>
2.18 Plan Interest Rate
------------------
An annual rate of interest equal to the average of Moody's Long Term
Industrial Bond Rate for the ninety (90) day period ending on the March 1st
preceding the commencement of each Plan Year (rounded to the next highest one-
half (1/2) percentage point), plus 1%, which shall be credited to a
Participant's Deferred Benefit Accounts during such Plan Year. Provided,
however, that with respect to any 1985 Plan Payments deferred under this Plan,
the Plan Interest Rate to be credited to each Deferred Benefit Account
established for any such deferral shall be 14% per annum.
2.19 Salary
------
The base salary, including any raises in salary, earned by a Participant in
connection with his or her employment with the Employer and payable to a
Participant by the Employer in a Plan Year.
2.20 Total Disability
----------------
A physical or mental condition which is expected to be totally and
permanently disabling as determined in accordance with the terms and conditions
of the long-term disability insurance plan currently or most recently maintained
by the Employer for the benefit of the Participant claiming to be totally
disabled.
Article III - Eligibility and Participation
-------------------------------------------
3.1 Eligibility
-----------
Employees who are eligible to participate in this Plan will be identified
by the Plan Committee according to criteria adopted from time to time by the
Plan Committee. Such identification shall be conclusive and binding upon all
persons.
3.2 Participation
-------------
The Plan Committee shall notify in writing each employee who becomes
eligible to participate in this Plan of his or her eligibility. Eligible
employees may participate in this Plan by submitting an Election Form in
accordance with Section 4.1 hereof. Such election to participate shall be
effective upon the receipt and acceptance by the Plan Committee of such Election
Form.
3.3 Additional Compensation
-----------------------
A Participant shall receive the Deferred Benefits provided for herein in
addition to any compensation or other benefits paid or provided to the
Participant by the Employer. In the event
4
<PAGE>
that a Participant's participation in this Plan shall cause the Participant to
receive a reduced benefit under any pension plan maintained by the Employer for
the benefit of the Participant, then the Employer shall pay the Participant, at
the same time and in the same manner as would have been paid under such pension
plan, the additional pension benefits that the Participant would have received
under such pension plan if the Participant had not participated in this Plan,
unless the Participant is entitled to receive such additional pension benefits
under some other plan maintained by the Employer for the benefit of the
Participant.
Article IV - Compensation Deferral
----------------------------------
4.1 Compensation Deferral Election
------------------------------
A Participant shall make a Compensation Deferral Election by executing and
submitting to the Plan Committee an Election Form. The Election Form shall
specify the Election Amount, the Deferred Benefit Commencement Date, the manner
of payment of the Deferred Benefits attributable to the election, the
Beneficiary selected by the Participant to receive such Deferred Benefits in the
event of the Participant's death and any optional payment instructions for
involuntary termination of employment, disability and death. An election to
defer future Salary may be made either before or during the Plan Year, provided,
however, that any such election must be submitted to the Plan Committee at least
thirty (30) days prior to the applicable fiscal quarter and must apply to at
least the entire fiscal quarter. An election to defer all or a portion of the
payment of any Annual Incentive Plan Payment, a Long-Term Incentive Plan
Payment, Other Incentive Compensation, 1985 Plan Payments or Severance Payments
must be made at least ninety (90) days prior to the date the Participant is
entitled to receive such payment. A Participant may revise or change any
election or instruction contained in any Election Form, other than the Election
Amount, by submitting to the Plan Committee a revised Election Form at least
ninety (90) days prior to the effective date of such revision or change.
4.2 Election Amounts
----------------
Each Election Amount shall be selected as follows:
(a) With respect to Salary, a participant may defer a specified percentage
of the Salary which the Participant will earn and receive during the balance of
the Plan Year, provided, however, that no deferral election with respect to the
current Plan Year may be made after March 31. Percentage deferral must be an
increment of five percentage points and shall not exceed fifty percent.
(b) With respect to an Annual Incentive Plan Payment, a Long-Term
Incentive Plan Payment, Other Incentive Compensation, 1985 Plan Payments or
Severance Payments, a Participant may defer either a specified percentage of the
entire payment or a specified percentage of the payment above a stated dollar
amount; provided, however, that any such percentage must be an increment of five
percentage points.
5
<PAGE>
4.3 Reduction of Compensation
-------------------------
The Employer shall deduct Election Amounts deferred from a Participant's
Salary ratably over each remaining pay period in the Plan Year. The Employer
shall deduct Election Amounts deferred from an Annual Incentive Plan Payment, a
Long-Term Incentive Plan Payment, Other Incentive Compensation, 1985 Plan
Payments or Severance Payments at the time such payment is otherwise payable.
4.4 Deferred Benefit Commencement Date
----------------------------------
Except as otherwise provided in Article VI hereof, a Participant may elect
to defer receipt of an Election Amount until the Deferred Benefit Commencement
Date selected by the Participant. The permissible Deferred Benefit Commencement
Dates are (i) a set date which is no earlier than July 1 of the calendar year
following the end of the Plan Year in which the Election Amount is deferred;
(ii) the Participant's Employment Termination Date, or (iii) a date which is
either the fifth or tenth anniversary of the Participant's Employment
Termination Date. The term "Retirement" used as a designation on any Election
Form for a Deferred Benefit Commencement Date shall mean the Participant's
Employment Termination Date.
4.5 Manner of Payment
-----------------
Except as otherwise provided in Article VI hereof, the Participant may
elect to receive payment of the Deferred Benefits attributable to a Compensation
Deferral Election pursuant to one of the following methods:
(a) Annual, semiannual or quarterly installments payable over a five, ten
or fifteen year period, and commencing on the respective Deferred Benefit
Commencement Date; or
(b) A single lump sum payment of the entire balance of the respective
Deferred Benefit Account, determined as of and payable on the Deferred Benefit
Commencement Date.
4.6 Designation of Beneficiaries
----------------------------
A Participant shall designate a Beneficiary with respect to each
Compensation Deferral Election and may change the Beneficiary designation with
respect to any Compensation Deferral Election at any time by submitting a
revised Beneficiary designation in writing reflecting the change to the Plan
Committee.
Article V - Deferred Benefit Accounts
-------------------------------------
5.1 Deferred Benefit Accounts
-------------------------
The Employer shall cause to be established and maintained a separate
Deferred Benefit Account with respect to each Compensation Deferral Election.
The Employer shall credit the
6
<PAGE>
Election Amount deferred pursuant to each such election to the Participant's
appropriate Deferred Benefit Account as of the date deferred from the
Participant's Compensation as provided in Section 4.3 hereof. The amount
credited to a Participant's Deferred Benefit Account shall equal the Election
Amount deferred reduced by the amount, if any, that the Employer may be required
from time to time to withhold from such Election Amount pursuant to any federal,
state or local law.
5.2 Accrual of Interest
-------------------
Except as otherwise provided by Section 6.2(b) hereof, interest shall
accrue, at the Plan Interest Rate in effect from time to time, on any amounts
credited to a Deferred Benefit Account from the date on which the amount is
credited until it is paid to the Participant, and shall be credited and
compounded weekly.
5.3 Determination of Account Balance
--------------------------------
As of each Determination Date, the current balance of a Participant's
Deferred Benefit Account shall equal (A) the sum of (i) the balance of such
Deferred Benefit Account as of the immediately preceding Determination Date,
(ii) any Compensation deferred by such Participant to such Deferred Benefit
Account since the previous Determination Date and (iii) the amount of interest
credited to such Deferred Benefit Account since the preceding Determination
Date, minus (B) any payments to or withdrawals by the Participant from the
Deferred Benefit Account since the previous Determination Date.
5.4 Statement of Accounts
---------------------
Within ninety (90) days after each Determination Date, the Plan Committee
shall submit to each Participant a statement in such form as the Plan Committee
shall deem desirable, setting forth a summary of the Compensation Deferral
Elections made and the current balances of the Deferred Benefit Accounts
maintained for the Participant as of the Determination Date.
Article VI - Payment of Deferred Benefits
-----------------------------------------
6.1 General
-------
Except as otherwise provided herein, Deferred Benefits in each Deferred
Benefit Account shall be payable to a Participant upon the Deferred Benefit
Commencement Date for such Account and pursuant to the manner of payment
selected by the Participant on the applicable Election Form or any permitted
modification thereof. If the Participant has elected to receive such Deferred
Benefits in installments, the amount payable in the first year of such
installments shall be an amount that will fully amortize the balance in the
Participant's Deferred Benefit Account determined as of the Deferred Benefit
Commencement Date over the five, ten, or fifteen year period, based on assumed
interest earnings at the Plan Interest Rate in effect for such first year.
Thereafter, the amount payable in each succeeding year shall be adjusted to an
amount that will fully amortize the remaining balance in such Deferred Benefit
Account over the remaining
7
<PAGE>
years in the aforesaid five, ten, or fifteen year installment period based on
the Plan Interest Rate for such succeeding year.
6.2 Termination of Employment
-------------------------
Deferred benefits shall be paid to a Participant upon his or her
termination of employment, as follows:
(a) Upon the involuntary termination of a Participant's employment by the
Employer, the amount in each Deferred Benefit Account shall be payable to the
Participant either (i) in the manner specified by the Participant in his or her
Election Form to apply in the event of his or her involuntary termination by the
Employer; or (ii) if no such specification is made, on the Deferred Benefit
Commencement Date that applies to such Deferred Benefit Account, pursuant to the
method requested by the Participant in his or her Election Form.
(b) Upon the voluntary termination of employment by a Participant prior to
attaining fifty-five years of age:
(1) the amounts in each of the Participant's Deferred Benefit Accounts
shall cease to earn interest and the balance of each Deferred Benefit Account
shall be determined as of the nearest pay date following the Participant's
Employment Termination Date determined in accordance with Article V hereof;
and
(2) the Employer shall pay the Participant the balance of each such
Deferred Benefit Account not according to the Participant's elections as
specified in his or her Election Forms but in a lump sum, to be paid within
sixty (60) days of the Participant's voluntary termination.
(c) Upon the voluntary termination of employment with the Employer by a
Participant who is fifty-five years or older the Employer will pay out to such
Participant all amounts in his or her Deferred Benefit Account in accordance
with the instructions in the applicable Election Form.
(d) Other provisions of this Plan to the contrary notwithstanding, in the
event that a Participant's employment with the Employer is terminated for any
reason, voluntarily or involuntarily, within two (2) years after a "Change in
Control" of Scientific-Atlanta, Inc., the Employer shall pay the Participant the
amounts in the Participant's Deferred Benefit Accounts according to the terms of
Section 6.2(a) hereof as if the Participant had been terminated involuntarily.
For purposes of this Plan, a "Change in Control" shall mean any of the following
events:
(1) The acquisition in one or more transactions by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty
percent (20%) or more of the combined voting power of the
8
<PAGE>
Company's then outstanding voting securities (the "Voting Securities"),
provided, however, that for purposes of this Section 6.2(d)(1), the Voting
Securities acquired directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(2) The individuals who are members of the Incumbent Board (as defined
below), cease for any reason to constitute at least two-thirds of the Board.
The "Incumbent Board" shall include the individuals who as of August 20, 1990
are members of the Board and any individual becoming a director subsequent to
August 20, 1990 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; provided, however, that any individual who
is not a member of the Incumbent Board at the time he or she becomes a member of
the Board shall become a member of the Incumbent Board upon the completion of
two full years as a member of the Board; provided, further, however, that
notwithstanding the foregoing, no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office (i) as a result of
either an actual or threatened "election contest" (within the meaning of Rule
14a-11 promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") or (ii) with the approval of the other Board members,
but by reason of any agreement intended to avoid or settle a Proxy Contest; or
(3) Approval by stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty percent (20%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
subsidiaries or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
9
<PAGE>
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 be deemed to have occurred.
(e) Other provisions of this Plan to the contrary notwithstanding, this
Plan may not be modified, amended or terminated within two (2) years after a
Change in Control.
6.3 Total Disability
----------------
Deferred Benefits shall be paid to a Participant upon his or her becoming
Totally Disabled, as follows:
(a) Upon the determination that a Participant is Totally Disabled.
(1) No further deferrals will be made from his or her Compensation: and
(2) the Employer shall pay the Participant the balance in each of the
Participant's Deferred Benefit Accounts as if the Participant had been
terminated involuntarily, as set forth in Section 6.2(a), unless the Participant
has specified in his or her Election Form a different manner of payment.
(b) For purposes of this Plan, once a Participant is determined to be
Totally Disabled, he or she will continue to be deemed Totally Disabled
irrespective of the Participant's ceasing to be considered Totally Disabled for
purposes of any other plan maintained by the Employer.
(c) In the event that a Totally Disabled Participant recovers and resumes
active employment with the Employer such Totally Disabled Participant may resume
participation in this Plan at the discretion of the Plan Committee; provided,
however, that in any event the Totally Disabled Participant shall continue to
receive payments of Deferred Benefits that are then being paid pursuant to the
terms of this Plan.
6.4 Death
-----
Deferred Benefits shall be paid upon the death of a Participant, as
follows:
(a) Upon the death of a Participant, the Employer shall pay the amounts in
each of the Participant's Deferred Benefit Accounts to the Beneficiary
designated by the Participant with respect to each Compensation Deferral
Election in each of his or her respective Election Forms, or, if the Participant
fails to so designate a Beneficiary, to his or her estate.
(b) If the Participant dies prior to his or her Employment Termination
Date, the
10
<PAGE>
Employer shall pay to each respective Beneficiary or to the Participant's
estate, as the case may be, the amounts in each of the Participant's respective
Deferred Benefit Accounts, in the same manner as for the Participant who has
been terminated involuntarily, as set forth in Section 6.2(a).
(c) If the Participant dies following his or her Employment Termination
Date but prior to his or her receiving the full payment of all Deferred Benefits
payable to him or her, the Employer shall pay to each of the respective
Beneficiaries or to the Participant's estate, as the case may be, the same
Deferred Benefit in the same manner as it otherwise would have paid 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 beneficiaries designated by such Beneficiary in writing to the
Plan Committee (or to the Beneficiary's estate or heirs if he or she fails to
designate a beneficiary or beneficiaries).
Article VII - Hardship Withdrawals
----------------------------------
7.1 Hardship Withdrawals. A participant may request a Hardship Withdrawal
---------------------
of all or a portion of his or her Deferred Benefits before the Deferred Benefit
Commencement Date, as follows:
(a) The request for withdrawal must be to meet an "unforeseeable
emergency."
(b) For purposes of this Article VII, an unforeseeable emergency is a
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or a dependent of the
Participant, loss of Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances that will constitute
an unforeseeable emergency will depend upon the facts of each case, but, in any
case, a hardship withdrawal may not be made to the extent that such hardship is
or may be relieved:
(1) Through reimbursement or compensation by insurance or otherwise,
(2) By liquidation of the participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship, or
11
<PAGE>
(3) By cessation of deferrals under the Plan.
(c) The request for a Hardship Withdrawal must be made in writing to the
Plan Committee and shall state the amount requested, the unforeseeable emergency
to which the amount will be applied and shall also affirm that no other assets
are reasonably available to meet the emergency.
(d) The Plan Committee shall consider applicable regulatory standards in
assessing whether to grant a request for a Hardship Withdrawal.
Article VIII - Plan Administration
----------------------------------
8.1 Plan Committee
--------------
This Plan and all matters related to it shall be administered by the Plan
Committee. The Plan Committee shall have the authority to interpret the
provisions of this Plan and to resolve all questions arising in the
administration, interpretation and application of this Plan. Any such
determination by the Plan Committee shall be conclusive and binding on all
persons.
8.2 Claim Procedures
----------------
Any Participant or Beneficiary claiming a benefit, or requesting an
interpretation, any information, or a ruling under this Pan shall present the
request, in writing, to the Plan Committee, which shall respond in writing
within thirty (30) days from the date on which it receives the claim or request.
Article IX - Participant's Rights
---------------------------------
9.1 Ineligibility to Participate in Plan
------------------------------------
In the event that the Plan Committee determines that a Participant has
become ineligible to continue to participate in this Plan, the Plan Committee
may terminate Participant's participation in this Plan upon ten (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.
9.2 Termination of Plan
-------------------
Subject to the provisions of Section 6.2(e) of this Plan, the Board of
Directors of Scientific-Atlanta, Inc. may terminate this Plan at any time, and
termination of this Plan shall be effective upon ten (10) days' written notice
to all Participants in the Plan. Upon such termination of this Plan, the
Employer shall pay all active Participants their Deferred Benefits as provided
in Section 6.2(a) as if the employment of the Participant by the Company had
been involuntarily
12
<PAGE>
terminated. Upon termination of the Plan, amounts credited to the Deferred
Benefit Accounts of each Participant shall continue to earn interest at the Plan
Interest Rate until such amounts are paid to the Participant.
9.3 Participant's Rights
--------------------
The right of a Participant or his or her Beneficiary or estate to receive
any benefits under this Plan shall be solely that of an unsecured creditor of
the Employer. Any asset acquired or held by the Employer or funds allocated by
the Employer in connection with the liabilities assumed by the Employer pursuant
to this Plan shall not be deemed to be held under any trust for the benefit of
any Participant or of any of Participant's Beneficiaries or to be security for
the performance of the Employer's obligations hereunder but shall be and remain
a general asset of the Employer. Provided, however, that nothing herein shall
affect the rights of the Participant with regard to this Plan under that certain
Benefits Protection Trust, between Scientific-Atlanta, Inc. and Wachovia Bank &
Trust Co., N.A., dated February 13, 1991, as amended from time to time.
9.4 Spendthrift Provision
---------------------
Neither a Participant nor any person claiming through a Participant shall
have the right to commute, sell, assign, transfer, pledge, mortgage or otherwise
encumber, transfer, hypothecate or convey any Deferred Benefit payable hereunder
or any part thereof in advance of it actually having been received by a
Participant or other appropriate recipient under this Plan, and the right to
receive all such Deferred Benefits is expressly declared to be non-assignable
and non-transferable. Prior to the actual payment thereof, no part of the
Deferred Benefits payable hereunder shall be subject to seizure or sequestration
for the payment of any debts, judgments, alimony or separate maintenance owed by
a Participant or any person claiming through a Participant or be transferable by
operation of law in the event of a Participant's or any such other person's
bankruptcy or insolvency.
9.5 Plan Not An Employment Agreement
--------------------------------
This Plan shall not be deemed to constitute an employment agreement between
the Employer and any Participant, and no provision hereof shall restrict the
right of the Employer to discharge a Participant as an employee of the Employer
or the right of a Participant to voluntarily terminate his or her employment
with the Employer.
9.6 Cooperation
-----------
Each Participant will cooperate with the Employer by furnishing any and all
information reasonably requested by the Employer in order to facilitate the
payment of Deferred Benefits hereunder and by taking any such other actions as
the Employer or the Plan Committee may reasonably request.
13
<PAGE>
9.7 Offset
------
If a Participant or his or her Beneficiary, as the case may be, shall be
indebted to the Employer at any time that Deferred Benefits are to be paid to a
Participant or his or her Beneficiary under this Plan, then the Employer may
reduce such Deferred Benefits by the amount of such indebtedness prior to the
payment of the Deferred Benefits.
Article X - Miscellaneous
-------------------------
10.1 Amendments and Modifications
----------------------------
Subject to the provisions of Section 6.2(e) of this Plan, the Board of
Directors of Scientific-Atlanta, Inc. may amend this Plan in any respect at any
time. In addition, the Plan Committee may authorize the following types of
amendments to the Plan without Board approval:
(a) amendments required by law;
(b) amendments that relate to the administration of the Plan and that do
not materially increase the cost of the Plan; and
(c) amendments that are designed to resolve possible ambiguities,
inconsistencies or omissions in the Plan and that do not materially increase the
cost of the Plan.
All authorized amendments shall be effective upon ten (10) days' written
notice to the Participants. If any such amendment materially adversely affects
a Participant's Deferred Benefits, such affected Participant may, within ninety
(90) days after the effective date of such amendment, elect to terminate his or
her participation in the Plan pursuant to this Section 10.1 in which event the
date of such election shall be deemed to be such Participant's Deferred Benefit
Commencement Date.
10.2 Inurement
---------
This Plan shall be binding upon and shall inure to the benefit of the
Employer and each Participant hereto, and their respective beneficiaries, heirs,
executors, administrators, successors and assigns.
10.3 Governing Law
-------------
This Plan shall be interpreted and administered in accordance with the
Employee Retirement Income Security Act of 1974, as amended. To the extent that
state law is applicable, however, the laws of the State of Georgia shall apply.
14
<PAGE>
To record the adoption of the Plan (as amended and restated) by the Board
on May 12, 1999, the Company has caused its authorized officers to execute this
Plan.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
----------------------------
Name: Brian C. Koenig
Title: Senior Vice President - Human
Resources
By: /s/ William E. Eason, Jr.
----------------------------
Name: William E. Eason, Jr.
Title: Corporate Secretary
15
<PAGE>
EXHIBIT 10.10
SCIENTIFIC-ATLANTA, INC.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
Amended and Restated on February 6, 1999
<PAGE>
SCIENTIFIC-ATLANTA, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
--------
This Scientific-Atlanta, Inc. Supplemental Executive Retirement Plan is
designed to provide supplemental retirement benefits to certain key executive
employees of Scientific-Atlanta, Inc. and its subsidiaries (the "Company").
This Plan is not intended to qualify under Section 401(a) of the Internal
Revenue Code, but is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees. The Plan constitutes an unfunded, unsecured contractual
obligation of the Company to pay certain retirement benefits to Participants out
of the general assets of the Company.
ARTICLE I
DEFINITIONS
For purposes of this Plan, each term defined below, when capitalized, shall
have the meaning specified below:
1.1 "Accrue" shall mean the rate at which the benefits under this Plan are
credited to a Participant. Benefits which Accrue under this Plan do not Vest in
the employee except as provided in Section 3.3 and Articles VII and VIII hereof.
1.2 "Accrued Benefit" shall mean that percentage of a Participant's Final
Average Earnings which has Accrued pursuant to Section 3 hereof, as determined
from time to time. Accrued Benefits are not earned by or payable to a
Participant unless such Benefits have Vested as provided in Section 3.3 and
Articles VII and VIII hereof.
1.3 "Cause" shall have the meaning set forth in Section 1.17.
1.4 "Change in Control" shall have the meaning set forth in Section 8.4
hereof.
1.5 "Committee" shall mean the Human Resources and Compensation Committee
of the Board of Directors of Scientific-Atlanta, Inc.
1.6 "Company" shall mean Scientific-Atlanta, Inc. and any of its majority-
owned subsidiaries.
1
<PAGE>
1.7 "Compensation" shall mean a Participant's base salary and any bonus
payments received by the Participant pursuant to the Scientific-Atlanta, Inc.
Annual Incentive Plan and the Senior Officer Annual Incentive Plan.
Compensation shall include any amounts deferred under the Scientific-Atlanta,
Inc. Executive Deferred Compensation Plan. The year that such deferred amounts
will be included in compensation for purposes of this Plan will be the year in
which the amount would have been paid but for the deferral election.
1.8 "Continuous Service" shall mean the period of time during which a
Participant is continuously employed by the Company. A Participant shall be
credited with a month of Continuous Service if he or she is employed by the
Company on any day during a calendar month. In addition, if an employee is re-
employed by the Company after a break in service, the employee's prior service
shall be treated as Continuous Service if the break in service was less than
twelve (12) months or if service prior to the break was of a longer duration
than the break in service.
1.9 "Early Retirement Date" shall mean either (a) the first day of the
calendar month in which a Participant is at least fifty-five (55) years of age
and has completed ten (10) years of Continuous Service, or (b) the first day of
the calendar month in which the Participant is at least sixty (60) years of age,
regardless of years of service.
1.10 "Eligible Employee" shall have the meaning set forth in Section 2.1
1.11 "Final Average Earnings" shall mean the average annual Compensation
of a Participant for each of the three (3) calendar years in which such
Compensation was the highest during each of the ten (10) calendar years
preceding and including the calendar year in which the date of the Participant's
retirement, death or termination of employment occurs.
1.12 "Normal Retirement Date" shall mean the first day of the calendar
month in which a Participant is at least sixty-five (65) years of age and has
completed ten (10) years of Continuous Service.
1.13 "Participant" shall mean any Eligible Employee selected to
participate in the Plan pursuant to Section 2.2 hereof.
1.14 "Plan" shall mean the Scientific-Atlanta, Inc. Supplemental Executive
Retirement Plan, as it may be amended from time to time.
1.15 "Reduced Retirement Benefit" shall have the meaning set forth in
Section 4.2.
1.16 "Reduced Service Period" shall mean, in the case of a Participant who
is first employed by the Company after the first day of the month in which the
Participant attains forty-five (45) years of age, the period between the first
day of the calendar month during which the
2
<PAGE>
Participant's employment commences and the first day of the calendar month
during which the Participant would attain age sixty-five (65), provided,
--------
however, that if the Participant is fifty-five years of age or older at the date
- -------
of his employment, the Reduced Service Period shall mean the ten (10) year
period commencing on the first day of the calendar month during which the
Participant's employment commences.
1.17 "retire" or "retirement" shall include any voluntary termination of
the Participant's employment by the Participant or any involuntary termination
of the Participant's employment by the Company without "Cause." For purposes of
this Plan, a termination for "Cause" is a termination evidenced by a resolution
adopted in good faith by two-thirds (2/3) of the Board of Directors of the
Company that the Participant (i) has been convicted of a felony, or (ii) has
engaged in conduct which constitutes (A) willful neglect in carrying out his
duties to the Company or (B) willful misconduct, in either case which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however, that no termination of the Participant's employment shall be
- -------- -------
for Cause as set forth in clause (ii) above until (x) there shall have been
delivered to the Participant a copy of the written notice setting forth that the
Participant was guilty of the conduct set forth in clause (ii) and specifying
the particulars thereof in detail, and (y) the Participant shall have been
provided an opportunity to be heard by the Board (with the assistance of the
Participant's counsel if the Participant so desires). No act, or failure to
act, on the Participant's part shall be considered "willful" unless he has
acted, or failed to act, with an absence of good faith and without a reasonable
belief that this action or failure to act was in the best interest of the
Company. Notwithstanding anything contained in this Plan to the contrary, no
benefits shall be paid under this Plan to any Participant when such
Participant's employment is terminated by the Company for Cause.
1.18 "Vest" shall mean that the benefits Accrued under this Plan for a
Participant are payable to the Participant at the times and in the amounts
provided for herein. Benefits under this Plan Vest only as provided in Section
3.3 and Articles VII and VIII hereof.
ARTICLE II
PARTICIPATION
2.1 Eligible Employees.
------------------
The class of eligible employees from which Participants may be
selected is limited to officers, both elected and appointed, and other key
executives of the Company ("Eligible Employees").
2.2 Selection of Participants.
-------------------------
From time to time, the Committee shall select from among the class of
Eligible Employees one or more individuals for admission to the Plan. The
Committee's determinations
3
<PAGE>
shall be made in its sole discretion and shall be conclusive and binding on all
persons. The Committee shall notify in writing each Participant of his or her
selection as a Participant.
ARTICLE III
BENEFIT ACCRUALS AND VESTING
3.1 General.
-------
Except as provided in Sections 3.2 and 4.2 hereof, benefits shall
Accrue under this Plan at an annual rate of three and one-half percent (3 1/2%)
of Final Average Earnings for each of the Participant's first ten (10) years (or
partial years computed on a monthly basis (expressed in decimal form)) of
Continuous Service and at an annual rate of one and one-half percent (1 1/2%)
of Final Average Earnings for each of the next ten (10) years (or partial years
computed on a monthly basis (expressed in decimal form)) of Continuous Service.
The maximum Accrued Benefit to which a Participant may be entitled under the
Plan shall be equal to fifty percent (50%) of the Participant's Final Average
Earnings.
3.2 Reduced Service Period.
----------------------
In the event a Participant is first employed by the Company after the
first day of the month in which the Participant attains the age of forty-five
(45) years, benefits shall Accrue under this Plan over the Participant's Reduced
Service Period as follows:
(a) For each full or partial year of Continuous Service during the
first half of the Reduced Service Period, benefits shall Accrue under this Plan
at an annual rate determined by dividing thirty-five percent (35%) of Final
Average Earnings by one-half ( 1/2) of the number of years (including any
partial year computed on a monthly basis (expressed in decimal form)) contained
in the Reduced Service Period; and
(b) For each full or partial year of Continuous Service during the
second half of the Reduced Service Period, benefits shall Accrue under this Plan
at an annual rate determined by dividing fifteen percent (15%) of Final Average
Earnings by one-half ( 1/2) of the number of years (including any partial year
computed on a monthly basis (expressed in decimal form)) contained in the
Reduced Service Period.
3.3 Vesting.
-------
Except as provided in Articles VII and VIII hereof, a Participant
shall Vest in his or her Accrued Benefit hereunder on the earlier of the
completion of ten (10) years of Continuous Service or the attainment of age
sixty (60), regardless of service. Notwithstanding the foregoing, a Participant
who (a) terminates employment with the Company prior to completing ten (10)
years of Continuous Service and (b) has not vested in any of his or her Accrued
Benefit as a
4
<PAGE>
result of a Change in Control, shall be vested in an amount equal to the benefit
he or she would be entitled to receive if he or she had participated in the
Scientific-Atlanta, Inc. Restoration Retirement Plan during the period he or she
was a Participant in this Plan.
ARTICLE IV
RETIREMENT BENEFITS
4.1 Normal Retirement.
------------------
A Participant who retires from the Company on or after his or her
Normal Retirement Date shall be entitled to receive an annual retirement benefit
(the "Normal Retirement Benefit") for life, equal to the excess of:
(a) the Participant's Accrued Benefits determined under Sections 3.1
or 3.2 hereof; over
(b) the sum of:
(i) the annual retirement benefits payable to the Participant
as a life annuity pursuant to the defined benefit retirement plan of the Company
(as such plan might be amended, supplemented or superseded from time to time)
which is the actuarial equivalent (as defined in Section 5.3) of such
Participant's Pension Equity Account as defined in such plan;
(ii) the annual retirement benefits payable to the Participant
pursuant to any employer-funded defined benefit plan maintained by a prior
employer of the Participant, assuming that such benefits are payable in the form
of a single life annuity for the life of the Participant; and
(iii) the Participant's annual primary insurance amount under the
Federal Social Security Act as in effect on the Participant's Normal Retirement
Date or, if applicable, his date of death. In determining such amount under
Section 4.2 below for a Participant who severs from service prior to his Normal
Retirement Date, it shall be assumed that the Participant will continue to
receive, until his Normal Retirement Date, annual compensation (which would be
treated as wages for purposes of the Federal Social Security Act) at the same
rate which is in effect immediately prior to his termination of employment.
4.2 Early Retirement.
----------------
(a) A Participant who retires from the Company on or after his or her
Early Retirement Date but prior to his or her Normal Retirement Date shall be
entitled to receive his or her Normal Retirement Benefit commencing on the date
of his or her retirement; provided, however, that such date of commencement may,
-------- -------
at the election of the Participant pursuant to
5
<PAGE>
Section 4.3 (or, if the Participant has not made an election, at the election of
the Committee), be deferred to the date that the Participant attains age sixty
(60). If the Participant retires prior to age sixty (60) and begins to receive
benefits under this Plan prior to age sixty (60), such Participant shall be
entitled to receive only a Reduced Retirement Benefit (determined as hereinafter
provided) commencing at his or her date of retirement. "Reduced Retirement
Benefit" shall mean the amount equal to that percentage of the Participant's
Normal Retirement Benefit determined by subtracting from one hundred percent
(100%) the aggregate of 6.67% for each year (prorated over any partial year
based on completed months of service) between the Participant's retirement date
and the date on which the Participant would reach age sixty (60). If a
Participant retires prior to age sixty (60) but does not begin receiving
benefits under this Plan until he or she is at least age sixty (60), there shall
be no reduction in the Participant's Normal Retirement Benefit. For purposes of
determining the amount of the Normal Retirement Benefit or the Reduced
Retirement Benefit, as the case may be, for a Participant who retires after
August 1, 1996, and prior to age sixty-five (65), each of the offset amounts
under paragraphs (i), (ii) and (iii) of Section 4.1(b) shall be calculated by:
(i) determining the value of the projected amount such Participant would receive
if he or she began receiving the benefits described in such paragraphs beginning
on the earliest date such benefits become payable and (ii) converting this
amount to an actuarially equivalent (determined in accordance with Section 5.3)
single life annuity beginning on the date such Participant begins receiving
benefits under this Plan.
(b) If a Participant retires prior to his or her Early Retirement
Date, the Participant shall be entitled to receive any of his or her Normal
Retirement Benefit which is then Vested. Such Normal Retirement Benefit shall
be payable, at the election of the Participant pursuant to Section 4.3 (or, if
the Participant has not made an election, at the election of the Committee), as
follows: (1) beginning at the time the Participant becomes age fifty-five (55)
(or at Participant's current age if he is age fifty-five (55) or older), with a
Reduced Retirement Benefit determined as provided in subparagraph (a) above, or
(2) beginning at the time the Participant becomes age sixty (60), with no
reduction in the Normal Retirement Benefit, or (3) if Participant is under
fifty-five (55) years of age when he or she retires, as a single lump sum
payment at the time of retirement equal to the present value of his or her
Normal Retirement Benefit, determined using the actuarial equivalent, as defined
in Section 5.3.
4.3 Elections Related to Early Retirement.
-------------------------------------
For a Participant retiring after his Early Retirement Date but prior
to his Normal Retirement Date pursuant to Section 4.2(a), he may elect, by a
written election delivered to the Corporate Secretary of the Company at least
thirty (30) days prior to his retirement, whether he wishes to receive: (1) a
Reduced Retirement Benefit which will begin being paid immediately pursuant to
the payment terms of Article V (not applicable if Participant is age sixty (60)
or older), or (2) a Normal Retirement Benefit that will not begin being paid
until age sixty (60) (or his current age if he is age sixty (60) or older). For
a Participant retiring prior to his Early Retirement Date pursuant to Section
4.2(b), he may elect, by a written election delivered to the Corporate Secretary
of the Company at least thirty (30) days prior to his retirement, whether he
6
<PAGE>
wishes to receive: (1) a Reduced Retirement Benefit which will become payable,
per the payment terms of Article V, at age fifty-five (55) (or his current age
if he is age fifty-five (55) or older), or (2) a Normal Retirement Benefit which
will become payable, per the payment terms of Article V, at age sixty (60), or
(3) if a Participant is under age fifty-five (55), the actuarial equivalent,
determined in accordance with Section 5.3, of his Normal Retirement Benefit,
paid as a lump sum payment. For each Participant electing either option (1) or
option (2) above, such Participant may elect an optional form of payment under
the terms of Section 5.4.
ARTICLE V
FORM OF PAYMENT
5.1 Normal Form of Payment.
----------------------
Unless an optional form of payment is elected by the Participant in
accordance with Section 5.4 (or by the Committee in accordance with Section 4.2
or Section 5.2 hereof), all retirement benefits payable pursuant to this Plan
will be paid in the form of a single life annuity, payable monthly, for the life
of the Participant. Except as otherwise provided in this Plan, the first
monthly payment shall be made on the first day of the calendar month following
the Participant's retirement date.
5.2 Other Forms of Payment.
----------------------
Each Participant may elect, pursuant to Section 5.4, to receive
payment of his retirement benefits via one of the following optional forms of
payment, rather than via the form of payment described in Section 5.1:
(a) A one hundred percent (100%) joint and survivor annuity, pursuant
to which an annuity is payable for the life of the Participant with a survivor's
annuity for the life of the Participant's spouse, which annuity is equal to one
hundred percent (100%) of the amount of the annuity payable during the joint
lives of the Participant and his or her spouse.
(b) A fifty percent (50%) joint and survivor annuity, pursuant to
which an annuity is payable for the life of the Participant with a survivor's
annuity for the life of the Participant's spouse, which annuity is equal to
fifty percent (50%) of the amount of the annuity payable during the joint lives
of the Participant and his or her spouse.
(c) A ten (10) year certain installment payment, pursuant to which a
fixed monthly benefit is payable to the Participant for the lesser of ten (10)
years or the life of the Participant, with the continuation of the same benefit
to the Participant's designated beneficiary for any remaining portion of the ten
(10) year certain period if the Participant dies prior to the end of such
period.
7
<PAGE>
(d) A five (5) year certain installment payment, pursuant to which a
fixed monthly benefit is payable to the Participant for the lesser of five (5)
years or the life of the Participant, with the continuation of the same benefit
to the Participant's designated beneficiary for any remaining portion of the
five (5) year certain period if the Participant dies prior to the end of such
period.
(e) A single lump sum payment.
If a Participant does not make a timely election to receive payment of
his retirement benefits via one of the optional forms of payment described in
Subsections (a) through (e) above, the Committee may elect one of the above-
described optional forms of payment for such Participant, but only with his
written consent.
5.3 Actuarial Equivalent.
--------------------
Any optional form of payment described in Section 5.2 shall be the
actuarial equivalent of the normal form of payment specified in Section 5.1
hereof. All determinations of actuarial equivalency will be based on the 1983
Unloaded Group Annuity Mortality Table weighted fifty percent (50%) male and an
interest rate of eight percent (8.0%). The lump sum amount will equal the
present value of future payments under this Plan, assuming payment of benefits
commenced immediately (or age fifty-five (55) for a Vested termination on or
before the Participant's 55th birthday).
5.4 Election of Form of Payment.
----------------------------
If a Participant does not make a written election to the contrary at
least thirty (30) days prior to his retirement, such Participant's retirement
benefits under this Plan shall be payable in the form of a single life annuity,
paid pursuant to the terms of Section 5.1, unless the Committee (with the
consent of such Participant) elects to pay the retirement benefits pursuant to
one of the other forms of payment set forth in Section 5.2. If a Participant
makes a written election at least thirty (30) days prior to his retirement, he
may elect one of the forms of payment described in Sections 5.2(a) through
5.2(e), and the Committee must comply with such payment election. Participant
may modify his election at any time by making another written election, provided
such written election is received by the Company's Corporate Secretary at least
thirty (30) days prior to his retirement. For a written election to be validly
made, Participant must deliver such a written election to the Corporate
Secretary of the Company and such election shall be deemed made on the date on
which the Corporate Secretary receives it.
8
<PAGE>
ARTICLE VI
SPOUSAL BENEFIT
In the event a Participant who is Vested shall die while actively employed,
or after his or her Early Retirement Date but prior to the commencement of
payment of retirement benefits, the Participant shall be deemed to have retired
for purposes of this Plan on the later of (i) the day immediately preceding his
or her death, or (ii) the first day of the first calendar month thereafter in
which the Participant would have attained age fifty-five (55), and the
Participant's surviving spouse, if any, shall be entitled to a benefit equal to
fifty percent (50%) of the retirement benefit the Participant would have
received if he or she had actually retired on such deemed retirement date. Such
benefit shall be payable in the form of a single life annuity for the life of
the surviving spouse.
ARTICLE VII
DISABILITY
In the event a Participant becomes disabled and is eligible for benefits
under the Scientific-Atlanta, Inc. Long Term Disability Plan, such Participant
shall continue to receive credit, for Vesting purposes only, toward the
Participant's years of Continuous Service during the period of such disability.
ARTICLE VIII
CHANGE IN CONTROL
8.1 Immediate Vesting and Continued Vesting.
---------------------------------------
In the event of a Change in Control of the Company, a Participant
shall be immediately Vested in his Accrued Benefits hereunder as of the date of
such Change in Control. Participant also shall be automatically vested in any
Accrued Benefits that are accrued after a Change in Control, regardless of the
terms of Section 3.3.
8.2 Termination Following Change in Control.
---------------------------------------
If a Participant's employment with the Company is terminated by the
Company or by the Participant following a Change in Control for any reason other
than Cause, the Participant shall receive retirement benefits in accordance with
the terms of Articles III, IV and V of this Plan.
9
<PAGE>
8.3 Continuation of the Plan
------------------------
For a period of two (2) years following a Change in Control, the Plan
shall not be terminated or amended in any way nor shall the manner in which the
Plan is administered be changed in a way that adversely affects the level of
retirement benefits received by a Participant under the Plan.
8.4 Definition of Change in Control.
-------------------------------
For purposes of this Plan, a Change in Control shall mean any of the
following events:
(a) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities (the "Voting Securities"); provided, however, that
-------- -------
for purposes of this Section 8.4, the Voting Securities acquired directly from
the Company by any Person shall be excluded from the determination of such
Person's Beneficial Ownership of Voting Securities (but such Voting Securities
shall be included in the calculation of the total number of Voting Securities
then outstanding); or
(b) The individuals who are members of the Incumbent Board (as defined
below) cease for any reason to constitute at least two-thirds (2/3) of the
Board. The "Incumbent Board" shall include the individuals who as of August 20,
1990, are members of the Board and any individual becoming a director subsequent
to August 20, 1990, whose election, or nomination for election, by the Company
stockholders was approved by a vote of at least two-thirds (2/3) 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 (2) full years as a member of the board; provided,
--------
further, however, that notwithstanding the foregoing, no individual shall be
- -------- -------
considered a member of the Incumbent Board if such individual initially assumed
office (i) as a result of either an actual or threatened "election contest"
(within the meaning of Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board (a "Proxy Contest") or (ii) with the approval of the
other Board members, but by reason of any agreement intended to avoid or settle
a Proxy Contest; or
(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 eight
percent (80%) of the combined voting power of the outstanding
10
<PAGE>
voting securities of the corporation resulting from such merger or consolidation
in substantially the same proportion as their ownership of the Voting Securities
immediately before such merger or consolidation or (ii) a complete liquidation
or dissolution of the Company or an agreement for the sale or other disposition
of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty percent (20%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company or
any of its subsidiaries or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company,
which acquisition, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person, provided that if, after a Change in Control would occur (but for the
--------
operation of this sentence) as a result of such acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional Voting Securities,
which increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
ARTICLE IX
PLAN ADMINISTRATION
9.1 Committee.
---------
This Plan and all matters related to it shall be administered by the
Committee. The Committee shall have the authority to interpret the provisions
of this Plan and to resolve all questions arising in the administration,
interpretation and application of this Plan. Any such determination by the
Committee shall be conclusive and binding on all persons.
9.2 Claim Procedures.
----------------
Any Participant claiming a benefit, or requesting an interpretation,
any information, or a ruling under this Plan, shall present the request, in
writing, to the Committee, which shall respond in writing within thirty (30)
days from the date on which it receives the claim or request.
11
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 Termination or Amendment of the Plan.
------------------------------------
Except as provided in Section 8.3 hereof, the Committee may, at any
time and from time to time, modify, amend, suspend or terminate the Plan in any
respect; provided, however, that any modification, amendment, suspension, or
-------- -------
termination of the Plan shall not reduce or otherwise adversely affect any
Participant's Vested rights under any terms, provisions or conditions of the
Plan on the date of any modification, amendment, suspension or termination,
without the consent of the Participant.
10.2 Non-Assignability.
-----------------
No benefit payable pursuant to this Plan, nor any other right under
this Plan, shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge the same shall be void and shall not be
recognized or given effect by the Company.
10.3 No Right to Employment.
----------------------
Nothing in the Plan shall confer upon any Participant the right to
continue in the employment of the Company nor does participating in the Plan
obligate the Participant to continue in the employ of the Company.
10.4 Effective Date.
--------------
The Plan became effective on June 21, 1993, and Participants may be
designated at any time on and after that date.
10.5 Governing Law.
-------------
This Plan is made in accordance with and shall be governed in all
respects by the laws of the state of Georgia, to the extent not preempted by
federal law.
12
<PAGE>
The Company has caused the following officers to execute this Plan to
evidence that this Plan, as amended and restated by the Board on February 6,
1999, accurately reflects the Plan approved by the Board.
Scientific-Atlanta, Inc.
By: /s/ Brian C. Koenig
--------------------------------
Brian C. Koenig
Senior Vice President-
Human Resources
By: /s/ William E. Eason, Jr.
--------------------------------
William E. Eason, Jr.
Senior Vice President,
General Counsel &
Corporate Secretary
13
<PAGE>
EXHIBIT 10.11
As of September 30, 1997
Scientific-Atlanta, Inc.
One Technology Parkway, South,
Norcross, Georgia 30092-2967
RE: Credit and Investment Agreement dated as of July 30, 1997 (the
"Credit Agreement"; capitalized terms have the meanings given in the
Credit Agreement unless otherwise defined herein)
Dear Sirs:
The undersigned Agent, Lessor and the Company, by their signatures below,
hereby agree that the reference to "September 30, 1997," contained in the last
paragraph of Section 6.03 of the Credit Agreement is amended to be "October 10,
1997."
Except as set forth expressly hereinabove, all terms of the Credit
Agreement and the other Operative Documents shall be and remain in full force
and effect, and shall constitute the legal, valid, binding and enforceable
obligations of the Company, the Agent and the Lessor. The Agent, the Company and
the Lessor each restates, ratifies and reaffirms each and every term, covenant
and condition to which it is obligated under the terms of the Credit Agreement
and the other Operative Documents effective as of the date hereof. This letter
agreement may be executed in multiple counterparts constituting one agreement.
Yours truly,
WACHOVIA BANK, N.A.,
as Agent
By: /s/ Karen H. McClain
-----------------------------
Title: Senior Vice President
WACHOVIA CAPITAL MARKETS, INC., (SEAL)
as the Lessor
By: /s/ Joseph J. Thomas
-----------------------------
Title: Senior Vice President
AGREED TO AS OF THE
DATE FIRST WRITTEN ABOVE:
SCIENTIFIC-ATLANTA, INC.,
as the Company
By: /s/ Harvey A. Wagner (SEAL)
---------------------------
Harvey A. Wagner
Title: Senior Vice President,
-----------------------
Chief Financial Officer
-----------------------
and Treasurer
-----------------------
<PAGE>
EXHIBIT 10.12
AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT
THIS AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT (this "Amendment") is
dated as of the 30th day of November, 1997 among SCIENTIFIC-ATLANTA, INC. (the
"Company"), WACHOVIA BANK, N.A. (the "Agent"), and WACHOVIA CAPITAL MARKETS,
INC., (the "Lessor");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, the Agent and the Lessor executed and delivered that
certain Credit and Investment Agreement, dated as of the 30th day of July, 1997
(the "Credit Agreement");
WHEREAS, the Company has requested and the Agent and the Lessor have agreed
to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged by the parties hereto, the Company, the Agent and the Lessor hereby
covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
-----------
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Amendments to Schedule 1.02. (a) The definition of "Basic Rent"
---------------------------
contained in Schedule 1.02 to the Credit Agreement is amended in its entirety as
set forth below:
"Basic Rent": (a) for any Rental Period (1) during the Lease Term from
----------
the Commencement Date up to and including January 30, 1999, or (2) after
July 30, 2004, if any, the sum of (i) all liabilities of the Lessor for
interest on the Loans and LI Yield (excluding Accrued Construction Period
LI Yield but including, without limitation, all LI Yield accruing during
the Basic Term on the Lessor Investment) accruing during such Rental Period
pursuant to and in accordance with the Credit Agreement, and (ii) all
liabilities for fees accruing during such Rental Period pursuant to the
Credit Agreement, and (b) for each Rental
<PAGE>
Period commencing on and after January 31, 1999 and ending on or before
July 30, 2004, (i) all LI Yield (excluding Accrued Construction Period LI
Yield but including, without limitation, all LI Yield accruing during the
Basic Term on the Lessor Investment) accruing at the Fixed Funding Rate
during such Rental Period, and (ii) all liabilities for fees accruing
during such Rental Period pursuant to the Credit Agreement.
(b) The following new definition is added to Schedule 1.02 to the Lease in
proper alphabetical order:
"Fixed Funding Rate": (x) a per annum fixed rate equal to 6.51%, plus
------------------
(y) the Applicable Margin for the Adjusted LIBO Rate.
3. Restatement of Representations and Warranties. The Company hereby
---------------------------------------------
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Operative Documents as fully as if
made on the date hereof and with specific reference to this Amendment and all
other Operative Documents executed and/or delivered in connection herewith.
4. Effect of Amendment. Except as set forth expressly hereinabove and in
-------------------
that certain Second Amendment to Lease Agreement of even date herewith (the
"Lease Agreement"), all terms of the Credit Agreement and the other Operative
Documents shall be and remain in full force and effect, and shall constitute the
legal, valid, binding and enforceable obligations of the Company. The amendments
contained herein shall be deemed to have prospective application only, unless
otherwise specifically stated herein.
5. Ratification. The Company hereby restates, ratifies and reaffirms each
------------
and every term, covenant and condition set forth in the Credit Agreement and the
other Operative Documents effective as of the date hereof.
6. Counterparts. This Amendment may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
7. Section References. Section titles and references used in this
------------------
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
2
<PAGE>
8. No Default. To induce the Agent and the Lessor to enter into this
----------
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Company hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Company arising out of or with respect to any of the Loans or
other obligations of the Company owed to the Lessor under the Credit Agreement.
9. Further Assurances. The Company agrees to take such further actions
------------------
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Company.
10. Governing Law. This Amendment shall be governed by and construed and
-------------
interpreted in accordance with, the laws of the State of Georgia.
11. Conditions Precedent. This Amendment shall become effective only
--------------------
upon execution and delivery (i) of this Amendment by each of the parties hereto,
and (ii) of the Lease Amendment.
IN WITNESS WHEREOF, each of the Company, the Agent and the Lessor has
caused this Amendment to be duly executed, under seal, by its duly authorized
officer as of the day and year above written.
COMPANY:
SCIENTIFIC-ATLANTA, INC.
By: /s/ Harvey A. Wagner
------------------------------------
Printed Name: Harvey A. Wagner
---------------------------
Printed Title: Senior Vice President,
--------------------------
Chief Financial Officer
--------------------------
& Treasurer
--------------------------
[CORPORATE SEAL]
LESSOR:
WACHOVIA CAPITAL MARKETS, INC.
By: /s/ Joseph J. Thomas
----------------------------------------
Printed Name: Joseph J. Thomas
------------------------------
Printed Title: Senior Vice President
----------------------------
3
<PAGE>
AGENT:
WACHOVIA BANK, N.A.
By: /s/ Karen H. McClain
---------------------------------
Printed Name: Karen H. McClain
-----------------------
Printed Title: Senior Vice President
----------------------
4
<PAGE>
EXHIBIT 10.13
SECOND AMENDMENT TO
CREDIT AND INVESTMENT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT dated as of
November 9, 1998, by and among SCIENTIFIC-ATLANTA, INC. (the "Company"), each of
the financial institutions party hereto (the "Lenders"), WACHOVIA BANK, N.A., as
agent for the Lenders (the "Agent"), and WACHOVIA CAPITAL INVESTMENTS, INC.,
formerly known as WACHOVIA CAPITAL MARKETS, INC., as Lessor (the "Lessor").
WHEREAS, the Company, the Lenders, the Agent and the Lessor are parties to
that certain Credit and Investment Agreement dated as of July 30, 1997, as
amended prior to the date hereof (the "Credit Agreement"); and
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
Section 1. Specific Amendment to Credit Agreement. The definition of the
--------------------------------------
term "Consolidated Net Income" contained in Schedule 1.02 of the Credit
Agreement is hereby deleted in its entirety and the following substituted in its
place:
"Consolidated Net Income" means, with respect to the Company and its
-----------------------
Subsidiaries for any period of computation thereof, the net income (or
loss) of the Company and its Subsidiaries on a consolidated basis for such
period, provided, however, that the following shall be excluded when
-------- -------
determining Consolidated Net Income: (i) any item of gain or loss resulting
from sale, conversion or other disposition of assets other than in the
ordinary course of business; (ii) net gains or losses on the acquisition,
retirement, sale or other disposition of capital stock and other securities
of, or owned by, the Company and its Subsidiaries; (iii) net gains or
losses on the collection of proceeds of life insurance policies; (iv) any
write-up or write-down of any investment in equity securities; (v) any
write-up of any asset other than investments in equity securities; and (vi)
any other net gains or losses of an extraordinary nature as determined in
accordance with GAAP. The one-time charge in the amount of $76,233,000 to
the Company's earnings taken in the fourth fiscal quarter of the Company's
1998 Fiscal Year shall be disregarded when determining Consolidated Net
Income.
<PAGE>
Section 2. Representations of Company. The Company represents and
--------------------------
warrants to the Lessor, the Agent and the Lenders that:
(a) Authorization. The Company has the right and power, and has taken all
-------------
necessary action to authorize it, to execute and deliver this Amendment and to
perform its obligations under the Credit Agreement as amended by this Amendment,
in accordance with its terms. This Amendment has been duly executed and
delivered by a duly authorized officer of the Company and the Credit Agreement,
as amended by this Amendment, is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(b) Compliance with Laws, etc. The execution and delivery by the Company
--------------------------
of this Amendment and the performance by the Company of the Credit Agreement as
amended by this Amendment, in accordance with its terms, do not and will not, by
the passage of time, the giving of notice or otherwise: (i) require any
governmental approval or violate any applicable law relating to the Company;
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation or the bylaws of the Company; (iii) conflict with,
result in a breach of or constitute a default under any indenture, agreement or
other instrument to which the Company is a party or by which it or any of its
properties may be bound, which conflict, breach or default would have a Material
Adverse Effect; or (iv) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter acquired by the
Company other than in favor of the Agent or Lessor for the benefit of the
Lenders.
Section 3. Certain References. Each reference to the Credit Agreement in
------------------
any of the documents related to the Credit Agreement shall be deemed to be a
reference to the Credit Agreement as amended by this Amendment.
Section 4. Benefits. This Amendment shall be binding upon and shall inure
--------
to the benefit of the parties hereto and their respective successors and
assigns.
Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 6. Effect. Except as expressly herein amended, the terms and
------
conditions of the Credit Agreement shall remain in full force and effect.
Section 7. Effectiveness of Amendment. This Amendment shall not be
--------------------------
effective until its execution and delivery by all of the parties hereto
whereupon it shall be deemed effective as of June 26, 1998.
Section 8. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
2
<PAGE>
Section 9. Definitions. All capitalized terms not otherwise defined
-----------
herein are used herein with the respective definitions given them in the Credit
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Credit and Investment Agreement to be executed as of the date first above
written.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Wallace G. Haislip
---------------------------------------------
Name: Wallace G. Haislip
----------------------------------------
Title: Senior Vice President, Chief Financial
---------------------------------------
Officer & Treasurer
---------------------------------------
WACHOVIA BANK, N.A., as Agent
By: /s/ Karen H. McClain
--------------------------------------------
Name: Karen H. McClain
---------------------------------------
Title: Senior Vice President
--------------------------------------
WACHOVIA CAPITAL INVESTMENTS, INC.,
formerly known as WACHOVIA CAPITAL MARKETS, INC.,
as Lessor
By: /s/ Joseph J. Thomas
--------------------------------------------
Name: Joseph J. Thomas
---------------------------------------
Title: Senior Vice President
--------------------------------------
3
<PAGE>
EXHIBIT 10.14
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT dated as of November 6, 1998, by
and among SCIENTIFIC-ATLANTA, INC. (the "Borrower"), each of the financial
institutions party hereto (the "Lenders"), THE BANK OF NEW YORK and ABN AMRO
BANK N.V., acting through its Atlanta Agency, as Co-Agents (the "Co-Agents"),
and NATIONSBANK, N.A., successor to NationsBank, N.A. (South), formerly known as
NationsBank of Georgia, National Association, as Agent (the "Agent").
WHEREAS, the Borrower, the Lenders, the Co-Agents and the Agent are parties
to that certain Credit Agreement dated as of May 11, 1995, as amended prior to
the date hereof (the "Credit Agreement"); and
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
Section 1. Specific Amendment to Credit Agreement. The definition of the
--------------------------------------
term "Consolidated Net Income" contained in Section 1.1 of the Credit Agreement
is hereby deleted in its entirety and the following substituted in its place:
"Consolidated Net Income" means, with respect to the Borrower and its
-----------------------
Subsidiaries for any period of computation thereof, the net income (or loss) of
the Borrower and its Subsidiaries on a consolidated basis for such period;
provided, however, that the following shall be excluded when determining
- -------- -------
Consolidated Net Income: (i) any item of gain or loss resulting from sale,
conversion or other disposition of assets other than in the ordinary course of
business; (ii) net gains or losses on the acquisition, retirement, sale or other
disposition of capital stock and other securities of, or owned by, the Borrower
and its Subsidiaries; (iii) net gains or losses on the collection of proceeds of
life insurance policies; (iv) any write-up or write-down of any investment in
equity securities; (v) any write-up of any asset other than investments in
equity securities; and (vi) any other net gains or losses of an extraordinary
nature as determined in accordance with GAAP. The one-time charge in the amount
of $76,233,000 to the Borrower's earnings taken in the fourth fiscal quarter of
the Borrower's 1998 Fiscal Year shall be disregarded when determining
Consolidated Net Income.
Section 2. Representations of Borrower. The Borrower represents and
---------------------------
warrants to the Agent and the Lenders that:
(a) Authorization. The Borrower has the right and power, and has
-------------
taken all necessary action to authorize it, to execute and deliver this
Amendment and to perform its obligations under the Credit Agreement as amended
by this Amendment, in accordance with its terms. This
<PAGE>
Amendment has been duly executed and delivered by a duly authorized officer of
the Borrower and the Credit Agreement as amended by this Amendment, is a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.
(b) Compliance with Laws, etc. The execution and delivery by the
-------------------------
Borrower of this Amendment and the performance by the Borrower of the Credit
Agreement as amended by this Amendment, in accordance with its terms, do not and
will not, by the passage of time, the giving of notice or otherwise: (i)
require any Governmental Approval or violate any Applicable Law relating to the
Borrower or any other Loan Party; (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation or the bylaws of the
Borrower or the organizational documents of any other Loan Party; (iii) conflict
with, result in a breach of or constitute a default under any indenture,
agreement or other instrument to which the Borrower or any other Loan Party is a
party or by which it or any of its properties may be bound, which conflict,
breach or default would have a Material Adverse Effect; or (iv) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower or any other Loan Party
other than in favor of the Agent for the benefit of the Lenders.
Section 3. Certain References. Each reference to the Credit Agreement in
------------------
any of the Loan Documents shall be deemed to be a reference to the Credit
Agreement as amended by this Amendment.
Section 4. Benefits. This Amendment shall be binding upon and shall inure
--------
to the benefit of the parties hereto and their respective successors and
assigns.
Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 6. Effect. Except as expressly herein amended, the terms and
------
conditions of the Credit Agreement shall remain in full force and effect.
Section 7. Effectiveness of Amendment. This Amendment shall not be
--------------------------
effective until its execution and delivery by all of the parties hereto
whereupon its shall be deemed effective as of June 26, 1998.
Section 8. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 9. Definitions. All capitalized terms not otherwise defined
-----------
herein are used herein with the respective definitions given them in the Credit
Agreement.
[Signatures on Next Page]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
Credit Agreement to be executed as of the date first above written.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Wallace G. Haislip
------------------------------------------
Name: Wallace G. Haislip
-------------------------------------
Title: Senior Vice President-Finance
-----------------------------------
Chief Financial Officer & Treasurer
-----------------------------------
NATIONSBANK, N.A., individually and as Agent
By: /s/ Pamela S. Kurtzman
------------------------------------------
Name: Pamela S. Kurtzman
-------------------------------------
Title: Vice President
------------------------------------
THE BANK OF NEW YORK, individually and as Co-Agent
By: /s/ R.R. Reedy
------------------------------------------
Name: Ronald R. Reedy
-------------------------------------
Title: Vice President
------------------------------------
ABN AMRO BANK N.V., acting through its Atlanta
Agency, individually and as Co-Agent
By: /s/ Larry K. Kelley
-----------------------------------------
Name: Larry K. Kelley
-------------------------------------
Title: Group Vice President
------------------------------------
By: /s/ Robert A. Budnek
-----------------------------------------
Name: Robert A. Budnek
-------------------------------------
Title: Vice President
------------------------------------
[Signatures Continued on Next Page]
-3-
<PAGE>
[SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT DATED AS OF
NOVEMBER 6, 1998 WITH SCIENTIFIC-ATLANTA, INC.]
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
By:___________________________________
Name:______________________________
Title:_____________________________
WACHOVIA BANK, N.A.
By: /s/ Karen H. McClain
-----------------------------------
Name: Karen H. McClain
------------------------------
Title: Senior Vice President
-----------------------------
THE BANK OF TOKYO LIMITED,
ATLANTA AGENCY
By: /s/ Gary L. England
-----------------------------------
Name: Gary L. England
------------------------------
Title: Vice President and Manager
-----------------------------
-4-
<PAGE>
EXHIBIT 10.15
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purposes of the plan ("Plan") are to advance the interests
of Scientific-Atlanta, Inc. ("Company") and its shareholders by (i)
encouraging increased share ownership by members of the Board of Directors
("Board") of the Company who are not employees of the Company or any of its
subsidiaries, (ii) enhancing the Company's ability to attract and retain
the services of experienced, able and knowledgeable persons to serve as
directors, and (iii) providing additional incentive for directors to
contribute their best efforts to the Company's success.
2. ADMINISTRATION. The Plan shall be administered by the Board. The Board
shall have full authority, consistent with the Plan, to interpret the Plan,
to promulgate such rules and regulations with respect to the Plan as it
deems desirable and to make all other determinations necessary or desirable
for the administration of the Plan. All decisions, determinations and
interpretations of the Board shall be binding upon all persons.
3. SHARES TO BE ISSUED. Shares of the Company's common stock ("Common
Stock") delivered on the exercise of stock options ("Options") granted
under the Plan may be authorized, but previously unissued, shares or
previously issued shares reacquired by the Company.
4. GRANTING OF OPTIONS.
(a) Eligible Directors. "Eligible Directors" are all members of the Board
------------------
who are not employees of the Company.
(b) Initial Grant. Each Non-Employee Director will receive an initial
-------------
grant of 20,000 shares upon approval by the Board of this Plan or upon
his or her initial appointment or election to the Board.
(c) Automatic Grants. An Option to purchase 5,000 shares of Common Stock
----------------
shall be granted at the annual meeting of the Board held on the date
of the Annual Meeting of Shareholders beginning in 1995 and at each
succeeding Board meeting held on that date, provided the Non-Employee
Director continues in office after the Board meeting date on which the
Option is granted.
(d) Option Agreement. Each Option shall be evidenced by a written
----------------
instrument which shall state the terms and conditions of the grant,
not inconsistent with the Plan, as the Board in its sole discretion
shall determine and approve.
(e) Option Price. The purchase price for each share of Common Stock
------------
subject to an Option shall be the fair market value of the Common
Stock on the date the Option is granted. For this purpose, as well as
other purposes under the Plan, fair market value shall be deemed to be
the closing selling price of a share of Common Stock as reported on
the New York Stock Exchange Composite on the date on which the Option
is granted or, if there is no trade on such Exchange on that date,
then on the next preceding date on which there was a trade of Common
Stock on such Exchange. (In the event the Company's Common Stock is
not listed on the New York Stock Exchange on the date of
1
<PAGE>
an Option grant, the fair market value shall be determined as stated
above but with reference to trades on the largest stock exchange on
which the Common Stock is then traded.)
(f) Nontransferability. An Option shall be nonassignable and
------------------
nontransferable other than by will or the laws of descent and
distribution. An Option shall be exercisable during the Eligible
Director's lifetime only by him or, in the event of his incompetence,
by a duly appointed guardian.
5. OPTION EXERCISES.
(a) Exercise Timing. Except as provided in Sections 5(c) and 6 below,
---------------
each Option shall become exercisable for twenty-five percent (25%) of
the shares of Common Stock covered by the Option after the expiration
of one (1) year following the date of grant and for an additional
twenty-five percent (25%) of the shares after the expiration of each
of the succeeding three (3) years following the date of grant.
(b) Method of Exercise. Options may be exercised by delivery of written
------------------
notice of exercise to the Secretary of the Company, accompanied by the
full purchase price of the shares being purchased. The price shall be
paid at the time of exercise (i) in cash, (ii) by the transfer to the
Company of shares of the Company's Common Stock acquired by the option
holder prior to the exercise of the Option, or (iii) by any
combination of cash or such shares of the Company's Common Stock.
Each such share so transferred in full or part payment of the option
price shall be deemed to have a value equal to the closing price of a
share of the Common Stock of the Company, as traded on the New York
Stock Exchange (or the largest stock exchange on which it is then
traded), on the date of transfer to the Company, or if there is no
trade on such Exchange on that date, on the nearest date preceding the
date of transfer on which a trade on such Exchange was made, and each
such share at the time of such transfer shall be free and clear of any
and all claims, pledges, liens and encumbrances, or any restrictions
which would in any manner restrict the transfer of such shares to the
Company in full or part payment of the Option price.
(c) Effect of Change of Control. In the event of "Change of Control" of
---------------------------
the Company, all Options held by Eligible Directors on the date of
Change of Control shall be immediately exercisable in full,
irrespective of the amount of time that has elapsed from the date of
grant. "Change of Control" means a change of twenty-five percent
(25%) or more of the membership of the Board (excluding membership
changes resulting from normal retirement of directors) within a
twenty-four (24) month period following the acquisition of beneficial
ownership by any person or entity, or group of persons or entities and
their affiliates acting in concert, of twenty percent (20%) or more of
the voting securities of the Company. "Affiliates" and "beneficial
ownership" shall be defined in accordance with Rules 12b-2 and 13d-3
of the Securities and Exchange Commission, as the same may from time
to time be amended.
6. EXPIRATION OF OPTIONS. Except as hereinafter provided, all Options shall
expire on the earlier of (i) the last day of the tenth (10th) year after
the date of grant or (ii) the date that an Eligible Director ceases to be a
member of the Board; provided, however, that to the extent any unexpired
Options are otherwise exercisable on the date that an Eligible Director
ceases to be a member of the Board for any reason other than Cause (as
defined below), death, Early
2
<PAGE>
Retirement (as defined below) or Mandatory Retirement (as defined below),
such Options shall remain exercisable for one (1) year following the last
day of the Eligible Director's Board membership and shall expire if not
exercised within said one (1) year period. If Board membership ceases on
account of death or Mandatory Retirement, all unexpired Options held by the
Eligible Director on the last day of Board membership, whether exercisable
or not exercisable, shall be immediately exercisable and remain exercisable
for three (3) years following the last day of the Eligible Director's Board
membership and shall expire at the end of such three (3) year period if not
exercised within said three (3) year period. If Board membership ceases on
account of Early Retirement, all unexpired Options held by the Eligible
Director on the last day of Board membership, which are then exercisable or
would have become exercisable had the Director continued as a member of the
Board for one (1) additional year, whether exercisable or not exercisable,
shall be immediately exercisable and remain exercisable for one (1) year
following the last day of the Eligible Director's Board membership and
shall expire if not exercised within said one (1) year period. To the
extent any otherwise unexpired Options are not exercisable in accordance
with the immediately preceding sentence, they shall expire as of the
effective date of such Eligible Director's Early Retirement. All Options
held by an Eligible Director whose membership on the Board ends after the
occurrence of Cause shall expire immediately on his or her last day of
Board membership. "Cause," for the purposes of this Section 6, means any
act or omission for which indemnification of the Director is prohibited by
the Georgia Business Corporation Code (Sections 14-2-171 of the Code until
July 1, 1989 and Section 14-2-856, as amended, on and after July 1, 1989).
"Mandatory Retirement," for the purposes of this Section 6, means an
Eligible Director's ineligibility to be re-elected to the Board due to the
terms of the retirement policy adopted by the Board (as amended from time
to time), provided such ineligibility occurs after at least thirty-six (36)
consecutive months of service on the Board. "Early Retirement," for the
purposes of this Section 6, means an Eligible Director's voluntary
resignation from the Board after at least thirty-six (36) consecutive
months of service on the Board.
7. 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 or shares of Common Stock of the Company occurs, the
number and kind of shares authorized by this Plan, and the number, Option
price and kind of shares covered by the Options granted hereunder, shall be
automatically adjusted as required in order to prevent an unfavorable
effect upon the value of the shares covered by then outstanding Options and
shares covered by Options subsequently granted.
8. TAX WITHHOLDING. Any exercise of an Option pursuant to the Plan shall be
subject to withholding of state and federal income taxes, FICA tax or other
taxes to the extent required by applicable law.
9. LAWS AND REGULATIONS. The Plan, the grant and exercise of Options, and
the obligation of the Company to sell or deliver shares of Common Stock
under the Plan shall be subject to all applicable laws, regulations and
rules. In the event that the shares of Common Stock to be issued under
this Plan are not registered under the Securities Act of 1933 and any
applicable state securities laws prior to the delivery of such shares, the
Company may require, as a condition to the issuance thereof, that the
persons 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 own account and not with a view to, for resale in
connection with, or with an intent of participating directly or indirectly
in, any distribution of such shares within the
3
<PAGE>
meaning of that Act, and a legend to that effect may be placed on the
certificates representing such shares.
10. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any time
terminate the Plan or may at any time or times amend the Plan or amend any
outstanding Options 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:
(i) no amendment of any outstanding Option shall contain terms or
conditions inconsistent with the provisions contained in the Plan at
the time the respective Option was granted, as determined by the
Board; and
(ii) except as provided in Section 7, no such amendment shall, without the
approval of the shareholders of the Company: (a) increase the number
of shares of Common Stock for which each Option may be granted under
the Plan; (b) increase the frequency of Option grants; (c) reduce the
price at which Options may be granted or exercised below the price
provided for in Section 4(e); (d) extend the period during which any
outstanding Option may be exercised; (e) materially increase in any
other way the benefits accruing to Eligible Directors; (f) expand Plan
eligibility beyond Eligible Directors as defined herein, or (g)
disqualify an Eligible Director from being a "disinterested"
administrator, within the meaning of Rule 16b-3 (or any successor
rule) of the Securities and Exchange Commission, of any stock option
plan or other stock-based plan of the Company.
11. EFFECTIVE DATE. The Plan shall become effective on the date of approval
by the Board; provided, however, that the Plan shall be submitted to the
shareholders of the Company for approval, and if not approved by the
shareholders within one (1) year from the date of approval by the Board,
the Plan shall be of no force and effect. Options granted under the Plan
before approval of the Plan by the shareholders shall be granted subject to
such approval and shall not be exercisable before such approval.
To record the adoption of this Plan (as amended and restated) by the Board as of
May 12, 1999, the Company has caused its authorized officers to execute this
Plan in the space below.
SCIENTIFIC-ATLANTA, INC.
By: / s / Brian C. Koenig
----------------------------------
Name: Brian C. Koenig
Title: Senior Vice President - Human
Resources
By: / s / William E. Eason, Jr.
-----------------------------
Name: William E. Eason, Jr.
Title: Senior Vice President, General
Counsel and Corporate Secretary
[Corporate Seal]
4
<PAGE>
EXHIBIT 10.16
AFTER RECORDING RETURN TO: CROSS REFERENCE TO:
Michelle A. Hickerson, Esq. Deed Book 14848, Page
Jones, Day, Reavis & Pogue -----
3500 SunTrust Plaza 1, Gwinnett County,
303 Peachtree Street, N.E. --
Atlanta, Georgia 30308-3242 Georgia Records
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") dated as of
---------
October _____, 1997 is between WACHOVIA CAPITAL MARKETS, INC., a Georgia
corporation ("Lessor") and SCIENTIFIC-ATLANTA, INC., a Georgia corporation
------
("Lessee").
--------
WHEREAS Lessor and Lessee executed that certain Lease Agreement ("Lease")
-----
dated as of July 30, 1997 and filed for record on October 9, 1997 in Deed Book
14848 , Page 1 , Records of Gwinnett County, Georgia;
- ------- -----
WHEREAS Schedule 1(b) was inadvertently omitted from the Lease at the time
of recording and Lessor and Lessee wish to attach said Schedule 1(b) to the
Lease;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as
follows with respect to the Lease:
1. Schedule 1(b). Schedule 1(b), attached hereto and by this reference
-------------
made a part hereof, is hereby attached to and made a part of the Lease.
2. Continued Validity. Lessor and Lessee hereby acknowledge and agree
------------------
that, except as expressly modified hereby, the Lease has not been modified or
amended, is in full force and affect in accordance with the terms and provisions
thereof as modified hereby, and is hereby ratified and confirmed by both Lessor
and Lessee.
3. Binding Effect. This Amendment shall insure to the benefit of and be
--------------
binding upon Lessor and Lessee and their
<PAGE>
respective successors, legal representatives and permitted assigns.
4. Defined Terms. All initially-capitalized terms used but not defined
-------------
herein shall have the meaning ascribed thereto in the Lease.
IN WITNESS WHEREOF, the Lessor and Lessee have caused this Amendment to be
executed under seal as of the date first above written.
LESSOR:
Signed, sealed and delivered WACHOVIA CAPITAL MARKETS,
in the presence of: INC., a Georgia corporation
/s/ Signature Illegible
- ------------------------ By: /s/ Joseph J. Thomas
Unofficial Witness ----------------
Printed Name: Joseph J. Thomas
----------------
Printed Title: Senior Vice President
---------------------
/s/ Nadine Crawford [CORPORATE SEAL]
- -------------------
Notary Public
My Commission Expires:
[Notary Seal] Notary Public-DeKalb County, Georgia
My Commission Expires August 2, 1998
2
<PAGE>
LESSEE:
Signed, sealed and delivered
in the presence of: SCIENTIFIC-ATLANTA, INC., a
Georgia corporation
/s/ William E. Eason, Jr.
- -------------------------
Unofficial Witness By: /s/ H. A. Wagner
----------------
Printed Name: Harvey A. Wagner
----------------
Printed Title: Senior Vice President-Finance,
Chief Financial Officer &
Treasurer
----------------------------
/s/ Loretta J. Radcliff
- ----------------------- [CORPORATE SEAL]
Notary Public
My Commission Expires:
Notary Public, Fulton County, Georgia
[Notary Seal] My Commission Expires Sept. 11, 2001
3
<PAGE>
SCHEDULE 1(b)
-------------
The following terms shall have the following meanings when used in the "Credit
Agreement", the "Lease", the "Agency Agreement" and all other "Operative
Documents" (as those terms are defined below) (all terms defined in the
singular to have the same meanings when used in the plural and vice versa);
provided, however, certain terms defined below are modified in accordance with
- --------- -------
Section 2.10 of the Credit Agreement with respect to circumstances occurring
prior to the Syndication Effective Date:
"Accrued Construction Period LI Yield": as defined in Section 3.03(a)
------------------------------------
of the Credit Agreement.
"Acquisition/Construction Agent": the Company, as acquisition and
------------------------------
construction agent for the Lessor with respect to the Facility pursuant to the
Agency Agreement.
"Adjusted LIBO Rate": with respect to any Interest Period or LI Yield
------------------
Period, a rate per annum equal to the quotient obtained (rounded upwards, if
necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable LIBO
Rate for such Interest Period or LI Yield by (ii) 1.00 minus the Eurodollar
Reserve Percentage.
"Advance Notice": in connection with any Borrowing or LI Funding,
--------------
notice given by telecopy or telephone (and if by telephone, confirmed promptly
by telecopier) to be received by the Agent not later than 12:00 noon, Atlanta,
Georgia time, on the third (3rd) Business Day before the requested date of such
Borrowing, or LI Funding or continuation.
"Affiliate": with respect to the Company, (i) any Person that,
---------
directly or indirectly, through one or more intermediaries, controls the Company
(a "Controlling Person"), (ii) any Person (other than the Lessor, the Company or
------------------
a Subsidiary) which is controlled by or is under common control with a
Controlling Person, or (iii) any Person (other than a Subsidiary) of which the
Company owns, directly or indirectly, 20% or more of the common stock or
equivalent equity interests. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent": Wachovia Bank, N.A., a national banking association, in its
-----
capacity as agent for the Lenders, together with its successors in such
capacity.
"Agency Agreement": the Acquisition, Agency, Indemnity and Support
----------------
Agreement, dated as of the Closing Date, between the Lessor and the Company, as
Acquisition/Construction Agent, as amended, supplemented or otherwise modified
from time to time.
<PAGE>
"Aggregate Construction Costs": the aggregate amount of all Facility
----------------------------
Costs, including all acquisition costs for the Improvements and Capitalized
Expenses, excluding, however, the cost of the acquisition of the Site.
--------- -------
"Aggregate Loan Commitments": the sum of the Aggregate Tranche A Loan
---------------------------
Commitments and the Aggregate Tranche B Loan Commitments, as the same may be
reduced at the request of the Company in accordance with Section 2.03 of the
Credit Agreement.
"Aggregate Tranche A Loan Commitments": the lesser of (i) an amount
-----------------------------------
equal to 85% of the Facility Cost, or (ii) $30,600,000, as the same may be
reduced at the request of the Company in accordance with Section 2.03 of the
Credit Agreement.
"Aggregate Tranche B Loan Commitments": the lesser of (i) an amount
------------------------------------
equal to 12% of the Facility Cost, or (ii) $4,320,000, as the same may be
reduced at the request of the Company in accordance with Section 2.03 of the
Credit Agreement.
"Applicable Funding Office": for each Lender and the Lessor,
-------------------------
respectively, the funding office of such Lender or the Lessor (or an affiliate
of such Lender or the Lessor) designated for any Loan or LI Funding on the
signature pages of the Credit Agreement (or in an Assignment and Acceptance
executed by such Lender pursuant to Section 11.06 or the Credit Agreement) or
such other offices of such Lender or the Lessor (or of an affiliate of such
Lender or the Lessor) as such Lender or the Lessor may from time to time specify
to the Agent, the Lessor (for notices by a Lender) and the Company as the office
by which its Loans or Lessor Investments are to be made and maintained.
"Applicable Margin": with respect to the Tranche A Loans and the
-----------------
Tranche B Loans, or LI Fundings, the applicable rate per annum determined in
accordance with the Pricing Schedule.
"Applicable Permit": any Permit that is or may be necessary to own,
-----------------
renovate, construct, install, start-up, test, maintain, modify, expand, remove,
operate, lease or use all or any part of the Facility (including, without
limitation, the Site or any business conducted on or related to the Facility or
the Site) in accordance with the Operative Documents and the failure to obtain
or maintain which would have a Material Adverse Effect.
"Approved Appraisal": any appraisal, ordered by the Agent, but at
------------------
the Company's cost, from an appraiser or appraisers reasonably acceptable to
the Agent, which: (i) complies with Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, 12 U.S.C. 3331, et
--
seq., and The Regulations and Statements of General Policy on Appraisals
- ---
promulgated by the Federal Deposit Insurance Corporation, 12 C.F.R. Part 32, as
amended, (ii) is performed by a state-certified real estate appraiser certified
under the laws of any
<PAGE>
State, (iii) reflects the Market Value of the Facility on an "as completed"
basis, and (iv) estimates the Market Value of the Facility as of the expiration
of the Basic Term.
"Assignment and Acceptance": an Assignment and Acceptance Agreement,
-------------------------
in the form of Exhibit D to the Credit Agreement entered into by a Lender and
---------
an Eligible Assignee.
"Authorized Officers": with respect to the Company, the officers
-------------------
whose signatures and incumbency shall have been certified to the Agent and the
Lessor in a certificate certified by the Secretary or an Assistant Secretary of
the Company, in form and substance reasonably satisfactory to the Agent that are
authorized to sign the Lease and the other Operative Documents to which the
Lessee is a party and, until replaced by another Authorized Officer duly
authorized for that purpose, to act as its respective representative for the
purposes of signing documents and giving notices and other communications in
connection with the Lease and the Operative Documents to which it is a party.
"Banking Authority": as defined in Section 5.02 of the Credit
-----------------
Agreement.
"Base Rate": for any day, the rate per annum equal to the higher as
---------
of such day of (i) the Prime Rate, and (ii) one-half of one percent above the
Federal Funds Rate. For purposes of determining the Base Rate for any day,
changes in the Prime Rate shall be effective on the date of each such change.
"Basic Rent": for any Rental Period during the Lease Term the sum of
----------
(i) all liabilities of the Lessor for interest on the Loans and LI Yield
(excluding Accrued Construction Period LI Yield but including, without
limitation, all LI Yield accruing during the Basic Term on the Lessor
Investment) accruing during such Rental Period pursuant to and in accordance
with the Credit Agreement, and (ii) all liabilities for fees accruing during
such Rental Period pursuant to the Credit Agreement.
"Basic Term": with respect to the Lease, and subject to the terms and
----------
conditions set forth therein and in the other Operative Documents, the period
commencing on the Lease Commencement Date and ending on the earlier to occur of
(i) the Option Date, (ii) the Cancellation Date, or (iii) the Scheduled Lease
Termination Date.
"Borrowing": a borrowing consisting of Loans to the Lessor made on
---------
the same day by the Lenders.
"Building(s)": each building (singular and plural) to be constructed
-----------
on the Site and certain improvements and enhancements to the foregoing in
accordance with the Facility Plan.
<PAGE>
"Business Day": (i) for all purposes other than as set forth in
------------
clause (ii) below, any day except Saturday, Sunday or other day on which
commercial banks in Atlanta, Georgia are authorized or required by law or other
government action to close, and (ii) with respect to all notices and
determinations in connection with, and payments of principal of and interest on,
the Loans and payments of, any day that is a Business Day described in clause
(i) above and that is also a day for trading by and between banks in the London
interbank eurodollar market.
"Cancellation Date": as defined in Section 15(b) of the Lease.
-----------------
"Cancellation Event": as defined in Section 15(b) of the Lease, and
------------------
shall include a Loss Event.
"Capitalized Expenses": all acquisition, design and construction
--------------------
costs and all legal, architectural, engineering, and other professional fees
and expenses, brokerage fees, appraisal fees, environmental assessment fees,
title insurance, survey expenses, mortgage recording fees and taxes, intangible
taxes, and other "soft costs" of a nature ordinarily and reasonably incurred in
connection with the acquisition, design, engineering, construction, assembly,
installation, testing, improvement and completion of property substantially
similar to the Facility (including soft and hard costs previously incurred not
to exceed 10% of all Facility Cost) and all Basic Rent (as defined below),
commitment and other fees accrued prior to the Completion Date. "Capitalized
Expenses" shall not include fixtures, furniture or equipment included in,
attached to or otherwise relating to the Site or the Facility.
"Capitalized Lease Obligations": all obligations under a lease that
-----------------------------
is required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Capitalized Lease Obligations shall be the
capitalized amount of such obligations determined in accordance with such
principles.
"Capital Stock": any nonredeemable capital stock of the Company or
-------------
any Consolidated Subsidiaries (to the extent issued to a Person other than the
Company) whether common or preferred.
"Casualty Occurrence": any of the following events in respect of the
-------------------
Facility, (i) any material loss of the Facility or material loss of use thereof
which does not constitute a Loss Event, or (ii) the condemnation, confiscation
or seizure of, or requisition of title to or use of, any material part of the
Facility which action does not constitute a Loss Event, or (iii) any damage to
the Facility which results in an insurance settlement with respect to the
Facility.
<PAGE>
"CERLA": the Comprehensive Environmental Response Compensation and
-----
Liability Act, 42 U.S.C. Section 9601 et. seq. and its implementing regulations
and amendments.
"CERCLIS": the Comprehensive Environmental Response Compensation and
-------
Liability Inventory System established pursuant to CERCLA.
"Change of Control": any Person or two or more Persons acting in
-----------------
concert shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of the voting stock of the
Company by virtue of a hostile tender offer for, other hostile acquisition of,
such beneficial ownership.
"Change of Law": as defined in Section 5.02 of the Credit Agreement.
-------------
"Closing Date": July 30, 1997.
------------
"Closing Documentation": as defined in Section 6.01 of the Credit
---------------------
Agreement.
"Code": the Internal Revenue Code of 1986, as amended, and any
----
successor Federal tax code.
"Collateral": as defined in Section 26 of the Lease.
----------
"Co-Lessee": as defined in Section 21(b) of the Lease.
---------
"Commerical Paper": any negotiable draft having a maturity at the
----------------
time of issuance not exceeding 270 days and which is exempt from the
registration requirements of the Securities Act under Section 3(a)(3)
thereof.
"Commercial Paper Program": any one arrangement among the Company,
------------------------
a Placement Agent and a Paying Agent regarding the issuance by the Company of
Commercial Paper.
"Commitment": as to each Lender or the Lessor, respectively, an
----------
amount equal to such Lender's Loan Commitment then in effect or the Lessor
Investment Commitment then in effect.
"Commitment Fee": as defined in Section 2.04(a) of the Credit
--------------
Agreement.
"Commitment Fee Rate": as defined in the Pricing Schedule.
-------------------
"Company": as defined in the preamble hereto, and its successors.
-------
<PAGE>
"Completion": the occurrence and satisfaction of all of the events
----------
and conditions (with respect to all Buildings) described on Schedule 1.02(a)
----------------
to the Credit Agreement on a single date to the reasonable satisfaction of the
Required Lenders.
"Completion Certificate": a certificate of the Acquisition/
----------------------
Construction Agent in substantially the form of Exhibit A to the Agency
---------
Agreement, certifying that Completion of all Buildings constituting the Facility
has occurred.
"Completion Costs": at any time the sum of (x) the aggregate amount
----------------
of Construction Costs (including acquisition costs, except with respect to the
Site, and soft costs) expended or incurred as of the time of a Non-Completion
Event and which it will be necessary thereafter to expend in order to achieve
Completion, plus (y) all Impositions thereon.
"Completion Costs Payment": an amount, which is payable upon the
------------------------
occurrence of a Non-Completion Event, equal to the sum of (i) the acquisition
cost of the ground lease of the Site, (ii) the aggregate amount of all
Completion Costs, up to but not in excess of the Completion Costs Payment
Limitation, and (iii) all Supplemental Rent and other amounts owing by the
Company under the Operative Documents (other than any Completion Costs in
excess of the Completion Costs Payment Limitation).
"Completion Costs Payment Limitation": means an amount equal to 89%
-----------------------------------
of the Aggregate Construction Costs.
"Completion Date": the earlier to occur of (i) the date on which the
---------------
Company, as Acquisition/Construction Agent for the Lessor, delivers the
Completion Certificate and (ii) the date that is 24 months after the Lease
Commencement Date (unless there shall have occurred Casualty Occurrence during
the Construction Period, in which event such 24-month period shall be extended
for an additional period ending 6 months from the date of the occurrence of
such Casualty Occurrence).
"Compliance Certificate": as defined in Section 8.01(c) of the
----------------------
Credit Agreement.
"Consolidated Current Maturities": with respect to the Company and
-------------------------------
its Subsidiaries for any period of computation thereof, the aggregate amount of
all regularly scheduled payments of principal to be made during such period with
respect to the long-term debt portion of Consolidated Funded Debt of the
Borrower and its Subsidiaries.
"Consolidated Debt": at any date the Debt of the Company and its
-----------------
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated EBITDA": with respect to the Company and its
-------------------
Subsidiaries for any period of computation thereof, the sum
<PAGE>
of, without duplication, (i) Consolidated Net Income plus (ii) Consolidated
----
Interest Expense for such period plus (iii) taxes on income accrued during such
----
period plus (iv) amortization for such period plus (v) depreciation for such
---- ----
period.
"Consolidated Funded Debt": at the time of computation thereof, all
------------------------
of the following of the Company and its Subsidiaries as determined on a
consolidated basis (without duplication): all Debt less (a) all reimbursement
obligations under standby letters of credit and acceptances (whether or not the
same have been presented for payment) and less (b) obligations arising under
Guarantees.
"Consolidated Interest Expense": with respect to the Company and its
-----------------------------
Subsidiaries for any period of computation thereof, the total interest expense
(including, without limitation, interest expense attributable to Capitalized
Lease Obligations in accordance with GAAP) of the Company and its Subsidiaries
on a consolidated basis and in any event shall include (i) the amortization of
debt discounts and (ii) amortization of all fees payable in connection with the
incurrence of Debt to the extent included in interest expense.
"Consolidated Net Income": with respect to the Company and its
-----------------------
Subsidiaries for any period of computation thereof, the net income (or loss) of
the Company and its Subsidiaries on a consolidated basis for such period;
provided, however, that the following shall be excluded when determining
- -------- -------
Consolidated Net Income: (i) any item of gain or loss resulting from sale,
conversion or other disposition of assets other than in the ordinary course of
business; (ii) net gains or losses on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Company and its
Subsidiaries; (iii) net gains or losses on the collection of proceeds of life
insurance policies; (iv) any write-up of any asset; (v) any other net gains or
losses of an extraordinary nature as determined in accordance with GAAP, (vi)
the amount of $9,916,000 representing in-progress research and development costs
expensed by the Company for the fourth Fiscal Quarter of the Fiscal Year ending
on June 28, 1996, in connection with its acquisition of Atx Telecom Systems,
Inc. from Amoco Technology Company, and (vii) the amount of $19,516,000
representing the charge to the Company's earnings incurred during the relevant
Fiscal Quarter in effect on July 24, 1996.
"Consolidated Operating Lease Expense": for any period of computation
------------------------------------
thereof, the aggregate of all amounts paid or accrued (whether or not
constituting rental expense) during such period by the Company and its
Subsidiaries under all leases other than leases giving rise to Capitalized Lease
Obligations), as determined on a consolidated basis.
"Consolidated Subsidiary": a Subsidiary, the accounts of which are
-----------------------
customarily consolidated with those of the Company
<PAGE>
for the purpose of reporting to stockholders of the Company or to the Agent and
each of the Lenders, or, in the case of a recently acquired Subsidiary, the
accounts of which would, in accordance with the Company's regular practice, be
so consolidated for that purpose.
"Consolidated Tangible Net Worth": means, as at any date, (a) the
-------------------------------
total shareholder's equity (including capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) of the Company and its
Subsidiaries determined on a consolidated basis (without duplication) which
would appear as such on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP minus (b) all intangible items
-----
reflected therein, including all intangible plant expansion costs, all
unamortized debt discount and expense, unamortized research and development
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, unamortized excess cost of investment in
Subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP.
"Construction Period": the period commencing on the Lease
-------------------
Commencement Date and ending on the Completion Date.
"Construction Period LI Yield": as defined in Section 3.03(a) of
----------------------------
the Credit Agreement.
"Controlled Group": all members of a controlled group of corporations
----------------
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company, are treated as a single employer under
Section 414 of the Code.
"Credit Agreement": the Credit Agreement, dated as of the Closing
----------------
Date, among the Company, the Lessor, the Agent and the Lenders, as amended,
supplemented, renewed, extended or otherwise modified from time to time.
"Debt": means with respect to a Person, at the time of computation
----
thereof, all of the following (without duplication): (a) obligations of such
Persons in respect of money borrowed; (b) obligations of such Person (other than
trade debt incurred in the ordinary course of business), whether or not for
money borrowed (i) represented by notes payable, or drafts accepted, in each
case representing extensions of credit, (ii) evidenced by bonds, debentures,
notes or similar instruments, or (iii) constituting purchase money indebtedness,
conditional sales contracts, title retention debt instruments or other similar
instruments, upon which interest charges are customarily paid or that are issued
or assumed as full or partial payment for property; (c) Capitalized Lease
Obligations of such Person; (d) all reimbursement obligations of such Person
under any standby letters of credit or acceptance (whether or not the same have
been presented for
<PAGE>
payment); and (e) all Debt of other Persons which (i) such Person has Guaranteed
or (ii) are secured by a Lien on any property of such Person.
"Default": any condition or event that constitutes an Event of
-------
Default or that with the giving of notice or the lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate": with respect to any Loan, LI Funding or any other
------------
amount payable under any Operative Document, on any day, the sum of 2.0% plus
the rate otherwise in effect for such Loan or LI Funding, or in the case of any
other amount, the Adjusted LIBO Rate.
"Dollars" and "S": dollars in lawful currency of the United States
------- -
of America.
"Eligible Assignee": with respect to any particular assignment under
-----------------
Section 11.06 of the Credit Agreement, any bank or other financial institution
consented to by the Company and the Agent if such bank of other financial
institution is not already a Lender or an affiliate of a Lender; provided that
--------
neither the Agent's nor the Company's consent shall be unreasonably withheld
and, provided, further that such consent of the Company shall not be required if
an Event of Default is in existence.
"Environmental Assessment": collectively, a Phase 1 report conducted
------------------------
by an independent engineering firm reasonably acceptable to the Lessor and the
Agent in scope and substance satisfactory to the Lessor and the Agent, and in
any event satisfying the minimum standards set forth in ASTME 1527-94 (and, if
recommended in or indicated by the Phase 1 report, a Phase 2, environmental soil
test or other environmental report or reports), reflecting compliance of the
Facility in all material respects with all applicable Environmental
Requirements.
"Environmental Authority": any foreign, federal, state, local or
-----------------------
regional Governmental Authority that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations": all licenses, permits, orders,
----------------------------
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Company or any Subsidiary, or for the uses and activities
of, on or relating to the Facility, required by any Environmental Requirement.
"Environmental Closing Certificate": as defined in Section 6.02(k).
---------------------------------
"Environmental Damages": any and all claims, losses, costs, damages,
---------------------
penalties and expenses which are incurred at any
<PAGE>
prior or subsequent time as a result of the existence or release of Hazardous
Materials upon, about or beneath the Facility or migrating or threatening to
migrate to or from the Facility, or the existence of a violation of
Environmental Requirements pertaining to the Facility, regardless of whether the
existence of such Hazardous Materials or the violation of Environmental
Requirements arose prior to the present ownership or operation of the Facility.
"Environmental Judgments and Orders": all Judgments arising from or
----------------------------------
in any way associated with any Environmental Requirements, whether or not
entered upon consent or written agreements with an Environmental Authority or
other entity arising from or in any way associated with any Environmental
Requirement, whether or not incorporated in a Judgment.
"Environmental Liabilities": any liabilities or Liens, whether
-------------------------
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"Environmental Notices": notice from any Environmental Authority or
---------------------
by any other Person, of possible or alleged noncompliance with or liability
under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings": any judicial or administrative
-------------------------
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Release": any actual or threatened release defined in
---------------------
CERCLA or under any state or local environmental law or regulation.
"Environmental Requirements": any statue, rule, regulation,
--------------------------
ordinance, permit, license administration or judicial decision or order (whether
by consent or otherwise) or the requirement of law with respect to: (i) the
protection of human health and/or the environment; (ii) the existence, handling,
use, generation, treatment, storage, packaging, labelling, removal or
Environmental Release of Hazardous Materials on, under, about and/or from any
real property, including the Facility; and (iii) the effects on the environment
of any activity now, previously, or hereinafter conducted on any real property,
including the Facility. The Environmental Requirements shall include, but not be
limited to, the following: CERCLA; the Superfund Amendments and Reauthorization
Act, Public Law 99-499, 100 Stat. 1613; the Resource Conservation and Recovery
Act, 42 U.S.C. (S)(S) 6901, et seq.; the Toxic Substances Control Act, 15
-- ---
U.S.C. (S)(S) 2601, et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
------
(S)(S) 1251, et seq.; the Clean Air Act, 42 U.S.C. (S)(S) 7401, et seq.; the
------ ------
<PAGE>
Occupational Safety and Health Act, 29 U.S.C. (S)(S) 651, et seq.; the
-- ---
Emergency Planning and Community Right-To-Know Act of 1986, 42 U.S.C. (S)(S)
11001, et seq.; the state and local analogies thereto, all as amended or
-- ---
superseded from time to time; and any common-law doctrine, including but not
limited to, negligence, nuisance, strict liability, trespass, personal injury,
or property damage related to or arising out of the presence, Environmental
Release or exposure to a Hazardous Material; and all federal, state and local
ordinances, regulations, orders, writs and decrees.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law and the regulations promulgated
and rulings issued from time to time thereunder. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Eurocurrency Liabilities": as defined in Regulation D of the Board
------------------------
of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar Reserve Percentage": for any day the percentage
-----------------------------
(expressed as a decimal) that is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of Eurocurrency Liabilities (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on loans made at the LIBO Rate is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of any Lender to United States residents). The Adjusted LIBO Rate shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default": as defined in Section 9.01 of the Credit
----------------
Agreement or in Section 17 of the Lease.
"Facility": the collective reference to (i) the Lessor's leasehold
--------
interest in the Site, (ii) the Buildings and the other Improvements, and (iii)
all plans, specifications, warranties and related rights and operating,
maintenance and repair manuals related thereto and all replacements of any of
the above.
"Facility Cost": an aggregate amount equal to the lessor of: (i)
-------------
the sum of (a) all costs associated with the Lessor's acquisition of a ground
lease of the Site and title to the Improvements and any refinancing thereof, and
(b) all of the capitalized costs and expenses of any kind or character incurred
to design, construct, install and implement the Facility, including, without
limitation, all Capitalized Expenses to be provided by the Lenders; and (ii)
$38,000,000.
<PAGE>
"Facility Plan": the architectural and engineering plans and
-------------
specifications for the Facility and list of Facility Plan documents, as the same
may be amended, supplemented or otherwise modified form time to time in
accordance with applicable laws and the Permitted Use, and, solely during the
existence of an Event of Default, after the prior written consent of the Agent.
"Federal Funds Rate": for any day, the rate per annum (rounded
------------------
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions, with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be
--------
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate charged to the Agent on such day on such transactions,
as determined by the Agent.
"Final Rent Payment": an amount determined as of the date payment
------------------
thereof is required equal to the sum of (i) the aggregate outstanding principal
amount of the Tranche A Loans, plus (ii) all accrued and unpaid interest on the
----
Tranche A Loans and Tranche B Loans accrued through the end of the Lease Term,
plus (iii) all unpaid LI Yield (including, without limitation, all Accrued
- ----
Construction Period Yield) accrued through the end of the Lease Term, plus (iv)
----
all other amounts owing by the Lessee under the Operative Documents (including
in any event all unpaid Impositions accrued, arising or payable in connection
with the Facility or otherwise pursuant to the Lease through or as at the end
of the Lease Term, but excluding in any event the unpaid principal amount of the
Tranche B Loans and the unpaid principal amount of the Lessor Investment).
"Fiscal Quarter": any fiscal quarter of the Company.
--------------
"Fiscal Year": the 52 or 53 week period, as the case may be, ending
-----------
on the Friday closest to June 30 of each year.
"Four-Quarter Period": a period of four full consecutive fiscal
-------------------
quarters of the Company, taken together as one accounting period, and unless set
forth herein to the contrary, shall mean the four full consecutive fiscal
quarters of the Company most recently ending before the day of any computation
of any given financial ratio or covenant contained herein.
"Funded Amount": the aggregate amount of principal, interest, LI
-------------
Fundings, LI Yield, expenses and indemnities owing or to be owing by the
Lessor to the Lenders, plus Commitment Fees, expenses and indemnities owing or
to be owing by the Lessor
<PAGE>
to the Agent or the Lenders pursuant to the Credit Agreement or any other
Operative Document.
"GAAP": generally accepted accounting principles in the United States
----
of America applied on a basis consistent with those which, in accordance with
Section 1.03 of the Credit Agreement, are to be used in making the calculations
for purposes of determining compliance by the Company with the provisions of the
Operative Documents applicable thereto.
"Governmental Authority": to include the country, state, county, city
----------------------
and political subdivisions in which any Person or any such Person's property is
located or that exercises valid jurisdication over any such Person or any such
Person's property, any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities that exercise
valid jurisdiction over any such Person or any such Person's property. Unless
otherwise specified, all references to Governmental Authority herein shall
mean a Governmental Authority having jurisdiction over, where applicable, the
Company, the Site, the Facility, the Lessor, the Agent, any Lender, any
Applicable Funding Office or any Operative Document.
"Governmental Requirement": any law, statute, code, ordinance, order,
------------------------
determination, rule, regulation, Judgment, injunction, franchise, permit,
certificate, license, authorization or other direction or requirement (whether
or not having the force of law), including, without limitation, Environmental
Requirements, and occupational, safety and health standards or controls, or any
Governmental Authority.
"Ground Lease": the Ground Lease, dated as of even date with the
------------
Credit Agreement, pertaining to the Sites between the Company as ground lessor
and the Lessor as ground lessee.
"Guarantee": with respect to any Person, any obligation, contingent
---------
or otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation of such other Person
(whether arising by virtue of partnership arrangements, by agreement to keep-
well, to purchase assets, goods, securities or services, to provide collateral
security, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
- --------
or deposit in the ordinary course of business. The term "Guarantee used as a
verb has a corresponding meaning.
<PAGE>
"Guaranty": the Guaranty, dated as of the Closing Date, from the
--------
Company to the Agent for the benefit of the Agent and the Lenders, pursuant to
which the Company guarantees, as primary obligor, all obligations of (but in no
event obligations greater than those of) the Lessor to the Agent and the Lenders
under the Credit Agreement, the Notes, as amended, supplemented or otherwise
modified from time to time.
"Hazardous Materials": to include, without limitation, (i) solid or
-------------------
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. (S) 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (ii)
"hazardous substance", "pollutant", or "contaminant", as defined in CERCLA, or
in any applicable federal, state or local law or regulation, (iii) gasoline, or
any other petroleum product or by-product, including, crude oil or any fraction
thereof, (iv) insecticides, fungicides, or rodenticides, as defined in the
Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any
applicable federal, state or local law or regulation, as each such Act, statute
or regulation may be amended from time to time, or (v) any toxic or hazardous
materials, wastes, polychlorinated biphenyls ("PCBs"), lead-containing
materials, asbestos or asbestos-containing materials, urea formaldehyde,
radioactive materials, pesticides, the discharge of sewage or effluent, or any
other materials or substances defined as or included in the definition of
"hazardous materials," "hazardous waste," "contaminants" or similar terms under
any Environmental Requirement.
"Hedging Obligations": with respect to a Person, any and all
-------------------
obligations and liabilities, whether absolute or contingent and whether now owed
or hereafter arising, of such Person under or with respect to (a) Interest Rate
Agreements and (b) agreements or other arrangements intended to protect such
Person or any other Person a party thereto from fluctuations of currency
exchange rates or forward rates applicable to a Person's assets, liabilities, or
exchange transactions. The term "Hedging Obligations" shall in no event include
any obligations or liabilities in respect of any reasonable and customary
provision in any agreement regarding the sale or purchase of goods which
provision provides for adjustments in the sale or purchase price to reflect
changes in currency exchange rates.
"Highest Lawful Rate": with respect to each Lender and the Lessor,
-------------------
the maximum non-usurious interest rate or yield, as applicable, if any, that at
any time or from time to time may be contracted for, taken, reserved, charged or
received on the Notes, or on other amounts owing hereunder under laws applicable
to such Lender or the Lessor which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable laws now
allow.
<PAGE>
"Impositions": without duplication, as to any Person, (i) all Taxes,
-----------
assessments, levies, fees, water and sewer rents and charges, inspection fees
and other authorization fees and all other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, of every character
(including all penalties and interest thereon) that, at any time prior or
subsequent to the Closing Date, are imposed or levied upon or assessed against
or may be or constitute a Lien upon such Person or such Person's Property, or
that arise in respect of the ownership, operation, occupancy, possession, use,
non-use, condition, leasing or subleasing of such Person's Property; (ii) all
charges, levies, fees, rents or assessments for or in respect of utilities,
communications and other services rendered or used on or about such Person's
Property; (iii) payments required in lieu of any of the foregoing; but excluding
any penalties or fines imposed on the Lessor, the Agent of any Lender,
respectively, for violation by it of any banking laws or securities law; and
(iv) any and all taxes, recording fees and other charges (including penalties
and interest) relating to or arising out of the execution, delivery, or
recording of any of the Operative Documents for the amounts evidenced, secured
or referred to be paid thereby, including without limitation, documentary stamp
taxes, intangible taxes, recording fees and sales and rent taxes.
"Improvements": collectively, each of the Buildings, together with
------------
all accessions thereto and replacements thereof, and together with all
accessories, equipment, parts and devices necessary to achieve Completion, and
all fixtures now or hereafter included in or attached to the Site, such
buildings and such enhancements and improvements and modifications, and such
roadways, utility lines and parking lots necessary to reach and use the Site,
but excluding from the foregoing the Site.
"Indemnified Party": as defined in Section 11.03(b) of the Credit
-----------------
Agreement.
"Indemnified Risks": as defined in Section 11.03(b) of the Credit
-----------------
Agreement.
"Initial Funding Date": the date on which the conditions precedent
--------------------
set forth in Sections 6.01 and 6.02 of the Credit Agreement have been satisfied.
"Initial Loans": the initial Loans made pursuant to Section 2.01 of
-------------
the Credit Agreement on or after the Initial Funding Date.
"Insurance Requirements": all terms of any insurance policy
----------------------
(including, without limitation, casualty and general liability) covering or
applicable to the Facility or any portion thereof maintained in accordance with
Section 14 of the Lease and all requirements of the issuer of any such policy.
<PAGE>
"Interest Period": with respect to each Loan, the period beginning
---------------
on the date of such Loan and ending on the numerically corresponding date (or,
if applicable, last calendar date) three months thereafter and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the numerically corresponding date (or, if
applicable, last calendar date) three months thereafter; provided, however,
-------- -------
that:
(i) the duration of any Interest Period that commences before the
Scheduled Lease Termination Date and would otherwise and after the Scheduled
Lease Termination Date shall end on the Scheduled Lease Termination Date;
(ii) the duration of the initial Interest Period with respect to each
Loan shall end on the first Quarterly Date occurring after the date of such
Loan; and
(iii) if the last day of such Interest Period would otherwise occur
on a day that is not a Business Day, such last day shall be extended to the
next succeeding Business Day, except if such extension would cause such last
------
day to occur in a new calendar month, then such last day shall occur on the
next preceding Business Day.
"Interest Rate Agreement": any interest rate swap agreement, interest
-----------------------
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement intended to protect a Person against fluctuations in interest rates.
"Interim Special Rent": as defined in Section 3(b) of the Lease.
--------------------
"Investment": any investment in any Person, whether by means of
----------
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, capital
contribution to such Person, loan or advance to such Person, making a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Judgment": any judgment, decree, writ, order, determination,
--------
injunction, rule or other direction or requirement of any arbitrator or any
court, tribunal or other Governmental Authority.
"Lease": the Lease Agreement, dated as of the Closing Date, as
-----
amended, supplemented or otherwise modified from time to time, pursuant to which
the Company, as Lessee, has agreed to lease the Facility on and after the Lease
Commencement Date for the Permitted Use in accordance with the terms and
conditions set forth in the Lease.
"Lease Commencement Date": the date on which all conditions set
-----------------------
forth in Sections 6.01 and 6.02 are satisfied.
<PAGE>
"Lease Term": the period of time commencing on the Lease Commencement
----------
Date and ending on the Lease Termination Date.
"Lease Termination Date": the earlier to occur of (i) the Option Date,
----------------------
(ii) the Cancellation Date (iii) the date of termination as a result of a
Termination Event and (iv) the Scheduled Lease Termination Date.
"Lender": any Person who from time to time is or becomes a Tranche A
------
Lender or a Tranche B Lender; collectively, the "Lenders".
-------
"Lessee": the Company in its capacity as Lessee under the Lease and
------
any successor or permitted assign in such capacity.
"Lessor": Wachovia Capital Markets, Inc. and any successor permitted
------
by the terms of the Credit Agreement or the Lease.
"Lessor Investment": as to the Lessor, the aggregate outstanding
-----------------
amount from time to time of the equity investment in the Facility, which shall
equal the sum of the unrecovered LI Fundings.
"Lessor Investment Commitment": as to the Lessor, its commitment to
----------------------------
(a) make a Lessor Investment in an amount equal to $38,000,000 prior to the
Syndication Effective Date, and (b) retain its Lessor Investment in an amount
equal to $1,140,000 upon and after the Syndication Effective Date.
"Lessor Mortgage": the Deed to Secure Debt, Assignment of leases and
---------------
Security Agreement executed by the Lessor and delivered to the Agent, for the
benefit of the Agent and the Lenders, as amended, supplemented, or otherwise
modified from time to time.
"Leverage Ratio": The ratio of (i) Total Debt at any time to (ii)
--------------
Consolidated EBITDA.
"LI Funding": any payment in respect of the Lessor Investment to be
----------
made by the Lessor pursuant to Section 2.01(b) of the Credit Agreement.
"LI Yield": all yield accruing from time to time with respect to the
--------
Lessor Investment, including all Accrued Construction Period LI Yield.
"LI Yield Period": with respect to each LI Funding or the Lessor
---------------
Investment, as applicable, the period beginning on the date of such LI Funding
and ending on the numerically corresponding date (or, if applicable, last
calendar date) three months thereafter and, thereafter, each subsequent period
commencing on the last day of the immediately corresponding date
<PAGE>
(or, if applicable, last calendar date) three months thereafter, provided,
--------
however, that:
- -------
(i) The duration of any LI Yield Period that commences before
the Scheduled Lease Termination Date and would otherwise end after the
Scheduled Lease Termination Date shall end on the Scheduled Lease
Termination Date;
(ii) The duration of the initial LI Yield Period with respect
to each LI Funding shall end on the first Quarterly Date occurring after the
date of such LI Funding; and
(iii) if the last day of such LI Yield Period would otherwise
occur on a day that is not a Business Day, such last day shall be extended
to the next succeeding Business Day, except if such extension would cause
------
such last day to occur in a new calendar month, then such last day shall
occur on the next preceding Business Day.
"LIBO Rate": with respect to any Loan for the applicable Interest
---------
Period therefor, or any LI Funding for the applicable LI Yield Period therefor,
or any other amount, the rate per annum determined on the basis of the offered
rate for deposits of three months in Dollars of amounts equal or comparable to
the principal amount of such Loan or LI Funding, as the case may be, or any such
other amount, as applicable, which rates appear on Telerate Page 3750 as of
11:00 A.M., London time, two Business Days prior to the first day of such
Interest Period, provided that will be the arithmetic average (rounded upward,
--------
if necessary, to the next higher 1/16th of 1%) of such offered rates; (b) if no
such offered rates appear on such page, the "LIBO Rate" for such Interest Period
will be the arithmetic average (rounded upward, if necessary, to the next higher
1/16th of 1%) of rates quoted by not less than two major banks in New York City,
selected by the Agent, at approximately 10:00 A.M., New York City time, two
Business Days prior to the first day of such Interest or LI Yield Period, as
applicable, Period for deposits in Dollars offered to leading European banks for
a period comparable to such Interest Period or LI Yield Period, as applicable,
in an amount comparable to the principal amount of such Loan or LI Funding or
any such other amount.
"Lien": with respect to any asset, any mortgage, deed to secure debt,
----
deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this definition, each of the Company and any Subsidiary thereof
shall be deemed to own subject to a Lien ant asset which it has
<PAGE>
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan": any Tranche A Loan or Tranche B Loan made by the Lenders
----
pursuant to Section 2.01(a) of the Credit Agreement; the Tranche A Loans and/or
Tranche B Loans; collectively, as the context shall require, "Loans."
-----
"Loan Commitment": as to each Lender, an amount equal to the sum of
---------------
such Lender's Tranche A Loan Commitment and Tranche B Loan Commitment then in
effect.
"Loan Percentage Share": as to each Lender, the percentage of the
---------------------
Tranche A Loans and/or Tranche B Loans and the Tranche A Loan Commitment and/or
Tranche B Loan Commitment, as applicable, to be provided by such Lender under
the Credit Agreement as indicated on the counterpart agreement pursuant to which
such Lender becomes a party to the Credit Agreement, as modified from time to
time to reflect any assignments permitted by Section 11.06(b) of the Credit
Agreement.
"Long-Term Debt": at any date any Consolidated Debt which matures (or
--------------
the maturity of which may at the option of the Lessee or any Consolidated
Subsidiary be extended such that it matures) more than one year after such date.
"Loss Event": any of the following events in respect of the Facility:
----------
the permanent condemnation, confiscation or seizure of, or requisition of title
to or use of, all or substantially all of the Facility including, but not
limited to, a permanent taking by eminent domain of such scope that the untaken
part of the Facility is insufficient to permit the restoration of the Facility
for continued use in the Company's business or that causes the remaining part of
the Facility to be incapable of being restored to a condition that would permit
the remaining portion of the Facility (without the portion of the Facility taken
by eminent domain) to continue to have the capacity and functional ability to
perform on a continuing basis (subject to normal interruptions in the ordinary
course of business for maintenance, inspection, service, repair and testing) and
in commercial operation, the function for which the Facility (as a whole) was
designed as specified in the Facility Plan or a temporary taking of such nature
for a period exceeding 180 consecutive days; or (iv) the occurrence of any event
or the discovery of any condition in, on, beneath or involving the Facility or
any portion thereof (including, but not limited to the presence of hazardous
substances or the violation of any applicable Environmental Requirement) that
would have a material adverse effect on the use, occupancy, possession,
condition, value or operation of the Facility or any portion thereof, which
event or condition requires remediation (A) the cost of which is anticipated, in
the opinion of the Agent, in consultation with an independent environmental
engineering firm, to exceed 15% of the
<PAGE>
Termination Value, and (B) that could not reasonably be expected to be completed
substantially in its entirety prior to the date that is 30 days prior to the
then-applicable Scheduled Lease Termination Date or is not actually completed
substantially in its entirety on or before the date that is 30 days prior to the
then-applicable Scheduled Lease Termination Date.
"Margin Stock": "margin stock" as defined in Regulations U or G.
------------
"Market Value": as defined in (S) 323.2(f) of the Regulations
------------
and Statements of General Policy on Appraisals promulgated by the Federal
Deposit Insurance Corporation, 12 C.F.R. (S) 323.2(f), as amended from time
to time.
"Material Adverse Effect": with respect to any event, act, condition
-----------------------
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the financial
condition, operations, business, or properties of the Company and its
Consolidated Subsidiaries taken as a whole, (ii) the rights and remedies of the
Agent or the Lenders under the Operative Documents, or the ability of the
Lessor, the Company to perform its respective obligations under the Operative
Documents to which it is a party, as applicable, (iii) the legality, validity or
enforceability of any Operative Document, or (iv) the use, occupancy,
possession, condition, value or operation of the Facility.
"Material Subsidiary": as of the date of determination, a Subsidiary
-------------------
that, as of the date of any determination thereof, accounts for 5% or more of
the Consolidated Tangible Net Worth of the Company and its Subsidiaries
determined in accordance with GAAP as of the last day of the Fiscal Quarter of
the Company most recently ended as of such date of determination and for which
financial statements have been delivered to the Agent and the Lenders pursuant
to Sections 8.01 and 8.02 of the Credit Agreement.
"Maturity Date": the earlier of (a) the Completion Date, in the event
-------------
the Basic Term does not commence for any reason, or (b) following the
commencement of the Basic Term, the earlier to occur of (i) the Option Date,
(ii) the Cancellation Date, or (iii) the Lease Termination Date.
"Multiemployer Plan": has the meaning set forth in Section 4001(a)(3)
------------------
of ERISA.
"Net Income" means, as applied to any Person for any period, the
----------
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.
<PAGE>
"Non-Completion Event": the failure of both (i) Completion and (ii)
--------------------
the commencement of the Basic Term to occur on or before the Completion Date.
"Non-U.S. Domestic Lender": as defined in Section 4.06(b) of the
------------------------
Credit Agreement.
"Notes": collectively, the Tranche A Notes and Tranche B Notes.
-----
"Operative Documents": collectively, the Credit Agreement, the Lease
-------------------
the Agency Agreement, the Guaranty, the Notes, the Lessor Mortgage and the other
Security Instruments and any and all other agreements or instruments now or
hereafter executed and delivered, or required to be executed and delivered, by
the Lessor, the Company in connection with the Notes, or the Credit Agreement,
as such agreements or instruments may be amended, supplemented, renewed,
extended, increased or otherwise modified from time to time.
"Option Date": as defined in Section 15(c) of the Lease.
-----------
"Other Taxes": all taxes (other than Taxes), assessments, levies,
-----------
fees, water and sewer rents and charges, inspection fees and other authorization
fees and all other governmental charges, general and special, ordinary and
extraordinary, foreseen and unforeseen, or every character (including all
penalties and interest thereon) and all recording fees and other charges
(including penalties and interest) relating to or arising out of (i) the
execution, delivery, recording or enforcement of any of the Operative Documents,
whether for the amounts evidenced, secured or referred to be paid thereby, or
otherwise, or (ii) to the ownership, use, operation or transfer of the Facility
or any other Property or (iii) any other event or circumstance, including
without limitation, transfer taxes, documentary stamp taxes, intangible taxes,
recording fees and sales, use and rent taxes.
"Other Transaction Expenses": as defined in Section 3.05(a)(1) of
--------------------------
the Credit Agreement.
"PBGC": the Pension Benefit Guaranty Corporation or any successor
----
thereto.
"Party": as defined in Section 11.13 of the Credit Agreement.
-----
"Paving Agent": any Person engaged by the Company to accept delivery
------------
of Commercial Paper tendered by the holder thereof for payment and to make
payment to such holder on behalf of the Company.
<PAGE>
"Permit": any approval, consent, waiver, exemption, variance,
------
franchise, order, permit, authorization, right or license of or from any
Governmental Authority or other Person.
"Permitted Claims": as defined in Section 11.14(b) of the Credit
----------------
Agreement.
"Permitted Liens": (i) with respect to the Lease or the Facility
---------------
(including without limitation, the Site) or any Property included in or
comprising the Facility or any portion thereof, any of the following:
(a) rights reserved to or vested in any Governmental Authority by
the terms of any right, power, franchise, grant, license, permit or
provision of law affecting the Facility to (1) terminate, or take any other
action which has the effect of modifying, such right, power, franchise,
grant, license, permit or provision of law, provided that such termination
--------
or other action, when taken, shall not have resulted in a Loss Event and
shall not have had a Material Adverse Effect, or (2) purchase, condemn,
appropriate or recapture, or designate a purchaser of, the Facility;
(b) any Liens thereon for Impositions or Taxes and any Liens of
mechanics, materialmen and laborers for work or services performed or
materials furnished which (1) are not overdue, or (ii) are being contested
in good faith in the manner described in Section 13 of the Lease;
(c) Liens of mechanics, materialmen and laborers for work or services
performed or materials furnished (1) existing during the Construction Period
and (2) in and aggregate amount not to exceed $4,500,000 at any time;
(d) rights reserved to or vested in any Governmental Authority to
control or regulate the use of such Property or to use the Facility in any
manner;
(e) in the case of the Site, encumbrances, easements, and other
similar rights the existence or exercise of which do not have a Material
Adverse Effect; and
(f) any Liens created under the Operative Documents and any financing
statements filed in connection therewith; and
(ii), with respect to any other Property, any of the following:
(a) Liens securing taxes, assessments and other charges or levies
imposed by any Governmental Authority (excluding any Lien imposed pursuant
to any of the provisions of ERISA) or the claims of materialmen, mechanics,
carriers, warehousemen or landlords for labor, materials, supplies or
<PAGE>
rentals incurred in the ordinary course of business, which are not at the
time required to be paid or discharged pursuant to the terms of the Credit
Agreement;
(b) Liens consisting of deposits or pledges made, in the ordinary
course of business, in connection with, or to secure payment of, obligations
under workmen's compensation unemployment insurance or similar applicable
law;
(c) Liens consisting of encumbrances in the nature of zoning
restrictions, easements, and rights or restrictions of record on the use of
real property, which do not materially detract from the value of such
property or impair the use thereof in the business of such Person;
(d) Liens in existence as of the Closing Date and otherwise permitted
under the Revolving Credit Agreement;
(e) Purchase Money Liens but only to the extent the Debt secured by
such Liens is permitted under the Credit Agreement;
(f) Liens securing other Debt of the Company in an aggregate amount
not to exceed $1,000,000 at any time outstanding; and
(g) Liens created under any of the Operative Documents.
"Permitted Use": with respect to the Facility, the occupation and use
-------------
of the Site and the Improvements for commercial office space and light
assemblage in compliance with all applicable Governmental Requirements and
Insurance Requirements.
"Person": an individual, a corporation, a limited liability company,
------
a partnership, an unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or political
subdivision or other Governmental Authority.
"Placement Agent": any Person engaged by the Company to act as the
---------------
Company's placement agent in connection with the issuance and sale of Commercial
Paper under a Commercial Paper Program.
"Plan": at any time an employee pension benefit plan which is covered
----
by Title IV or ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an
<PAGE>
obligation to make contributions or has within the preceding 5 plan years made
contributions.
"Pricing Schedule": the Pricing Schedule attached as Schedule 1.02(b)
----------------
to the Credit Agreement.
"Prime Rate": that rate of interest so denominated and set by
----------
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Wachovia, and is set by
Wachovia as a general reference rate of interest, taking into account such
factors as Wachovia may deem appropriate, it being understood that many of
Wachovia's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate actually charged to any customer
and that Wachovia may make various commercial or other loans at rates of
interest having no relationship to such rate.
"Principal Office": the principal office of the Agent and Wachovia
----------------
presently located at 191 Peachtree Street, N.E., Atlanta, Georgia 30303 or any
other office designated by Wachovia.
"Principal Officer": means any of the following officers of the
-----------------
Company: Chairman, President, General Counsel, Executive Vice Presidents, Senior
Vice Presidents, Chief Financial Officer, Treasurer, Assistant Treasurer and
Corporate Controller.
"Process Agent": as defined in Section 11.14(b) of the Credit
-------------
Agreement.
"Progress Report": a Progress Report reflecting a comparison of the
---------------
actual renovation, construction and development of the Facility through the date
of such Progress Report with the schedule for such renovation, construction and
development set forth in the Facility Plan.
"Property": any kind of property or asset, whether real, personal or
--------
mixed, or tangible or intangible, and any interest therein.
"Purchase Closing Date": as defined in Section 15(e) of the Lease.
---------------------
"Purchase Money Lien": a Lien on any item of equipment acquired by the
-------------------
Company or any Subsidiary after the Closing Date; provided, however, that: (a)
-------- -------
such Lien attaches only to the equipment to be acquired; (b) if the purchase
price of the equipment to be acquired exceeds $7,500,000, the Debt incurred in
connection with such acquisition shall not be less that 60% nor greater than the
purchase price of such item of equipment then being financed; and (c) such Lien
shall secure only such Debt.
<PAGE>
"Purchase Price": at any time of determination, the sum of (i) the
--------------
aggregate outstanding principal amount of the Loans and LI Fundings, plus (ii)
----
all accrued and unpaid interest and fees on or in respect of the Loans and all
accrued and unpaid LI Yield (including, without limitation, all Accrued
Construction Period LI Yield) and fees on or in respect of the LI Fundings
through the Purchase Closing Date, plus (iii) all other amounts owing by the
----
Company under the Operative Documents (including in any event all unpaid
Impositions accrued, arising or payable in connection with the Facility or
otherwise pursuant to the Lease whether in connection with the purchase of the
Facility pursuant to Section 14(d) of the Lease or pursuant to any provision of
Section 15 of the Lease, or otherwise).
"Quarterly Dates": means the last Business Day of each March, June,
---------------
September and December, provided that if any such day is not a Business Day,
--------
then such Quarterly Date shall be the next Business Day.
"Real Property": as defined in Section 26 of the Lease.
-------------
"Redeemable Preferred Stock": of any Person means any preferred sock
--------------------------
issued by such Person (i) required (by the terms of the governing instruments or
at the option of the holder thereof) to be mandatorily redeemed for cash at any
time prior to the Maturity date (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof at any time
prior to the Maturity Date.
"Register": as defined in Section 11.06(d) of the Credit Agreement.
--------
"Regulation A": Regulation A of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation D": Regulation D of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation G": Regulation G of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation T": Regulation T of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
<PAGE>
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation X": Regulation X of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Related Contract": any agreement, contract, bill of sale, receipt or
----------------
Vendor's warranty relating to or for the purchase, acquisition, design,
engineering, testing, manufacture, renovation, assembly, construction or
installation of the Facility or any part thereof or the provision of
enhancements and improvements to the Facility, or otherwise in connection with
the acquisition, ownership, use, operation or sale or other disposition of the
Facility, made, entered into or received by the Acquisition/Construction Agent
on behalf of the Lessor pursuant to the Agency Agreement or by the Company and
assigned to the Lessor pursuant to the Agency Agreement, with or from one or
more Vendors or other Persons, including, without limitation, all contracts,
bills of sale, receipts and Vendor's warranties.
"Rent": Basic Rent, Interim Special Rent, Supplemental Rent and the
----
Final Rent Payment, collectively.
"Rental Period": with respect to Basic Rent, the period beginning on
-------------
the Lease Commencement Date and ending on the first Rent Payment Date occurring
after the Lease Commencement Date and, thereafter, each subsequent period
commencing on each Rent Payment Date and ending on the next Rent Payment Date or
on the Lease Termination Date.
"Rent Payment Date": with respect to Basic Rent, each March 31st, June
-----------------
30th, September 30th and December 31st of each year, commencing on the first
such date occurring after the Lease Commencement Date, and the Lease Termination
Date.
"Reported Net Income": for any period, the Net Income of the Company
-------------------
and its Consolidated Subsidiaries determined on a consolidated basis.
"Required Lenders": at any time while no Loans are outstanding,
----------------
Lenders having at least sixty-six and two-thirds (66 2/3%) of the aggregate
amount of the Aggregate Loan Commitments, and without regard to any sale by a
Lender of a participation in any Loan under Section 11.06(f) of the Credit
Agreement).
"Required Percentage Composition": (i) with respect to the
------------------------------
Commitments, a requirement that not less than 3% of the aggregate amount of the
Lessor's Investment Commitment and the Loan Commitments be comprised of Lessor's
Investment Commitment; (ii) with respect to the Lease Term, a requirement that
not less
<PAGE>
than 3% of Facility Cost, and not less than 3% of the amount that is the sum of
(a) the aggregate outstanding principal amount of the Loans and (b) the Lessor's
Investment, be provided by or comprised of the Lessor Investment; (iii) with
respect to each Borrowing, a requirement that no more than 85% (rounded) of such
Borrowing, and 85% of Facility Cost, shall be comprised of Tranche A Loans, and
no more than 12% rounded) of such Borrowing, and 12% of Facility Cost, shall be
provided by or comprised of Tranche B Loans; (iv) with respect to each
Borrowing, a requirement that after giving effect thereto, 3% of the amount that
is the sum of (a) the aggregate outstanding principal amount of the Loans and
(b) the Lessor Investment be comprised of the Lessor Investment; and (v) with
respect to each Borrowing, a requirement that after giving effect thereto the
aggregate outstanding amount of Loans shall not exceed the Aggregate Loan
Commitments, and after giving effect to the LI Advances, the Lessor Investment
shall not exceed the Lessor Investment Commitment.
"Restoration Account": the interest bearing account maintained with
-------------------
the Agent by the Lessor pursuant to Section 14(e) of the Lease and styled the
"Restoration Account."
"Restricted Payment": (i) any dividend or other distribution on any
------------------
shares of the Company's Capital Stock (except dividends payable solely in shares
of its Capital Stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Company's Capital
Stock (except shares acquired upon the conversion thereof into other shares of
its Capital Stock) or (b) any option, warrant or other right to acquire shares
of the Company's Capital Stock.
"Revolving Credit Agent": the "Agent", as defined in the Revolving
----------------------
Credit Agreement.
"Revolving Credit Agreement": the Credit Agreement dated as of May
---------------------------
11, 1995 by and among the Company, as borrower, the financial institutions party
thereto as Lenders, The Bank of New York and ABN AMRO Bank N.V., Atlanta Agency,
as Co-Agents, and NationsBank of Georgia, National Association, as Agent, as
amended by First Amendment to Credit Agreement dated as of December 29, 1995.
"Revolving Credit Lenders": the "Lenders", as defined in the Revolving
------------------------
Credit Agreement.
"Scheduled Amount": as defined in Section 4(a) of the Lease.
----------------
"Scheduled Lease Termination Date": July 30, 2004 or such later date
--------------------------------
to which it may be extended pursuant to Section 2(b) of the Lease.
<PAGE>
"Secured Amount": as defined in Section 26 of the Lease.
--------------
"Secured Party": as defined in Section 26 of the Lease.
-------------
"Security Instruments": collectively, the Lessor Mortgage and any and
--------------------
all agreements or instruments, including, without limitation, financing
statements, now or hereafter executed and delivered by the Company as security
for the payment or performance of the Notes or the Credit Agreement, as such
agreements or instruments may be amended, supplemented or otherwise modified
from time to time.
"Site": certain real property located in Gwinnett County, Georgia
----
described in greater detail in Exhibit A to the Credit Agreement and the Lease
---------
limited to the portion of the 280+/- acres necessary for the operation of the
Facility.
"Soil Test Reports": soil test reports as to soil borings on the Site
-----------------
by a soil testing firm satisfactory to the Lenders, including (a) the number and
location of such borings shall be in accordance with the recommendations of the
soil testing firm and also satisfactory to the Lenders and (b) the
recommendations of the soil testing firm as to the preparation of the soil
needed to adequately support the Facility.
"Stockholders' Equity": at any time, the stockholders' equity of the
--------------------
Company and its Consolidated Subsidiaries, as set forth or reflected on the most
recent consolidated balance sheet of the Company and its Consolidated
Subsidiaries prepared in accordance with GAAP; but excluding any Redeemable
--- ---------
Preferred Stock of the Company or any of its Consolidated Subsidiaries.
Stockholders' Equity generally would include, but not be limited to: (i) the par
or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various deductions such as (a) purchase of treasury
stock, (b) valuation allowances, (c) receivables due from an employee stock
ownership plan, (d) employee stock ownership plan debt guarantees and (e)
translation adjustments for foreign currency transactions.
"Sublease Rent": as defined in Section 3(a) of the Lease.
-------------
"Subsidiary": any corporation or other entity of which securities or
----------
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by the Company.
"Supplemental Rent": as defined in Section 3(d) of the Lease.
-----------------
<PAGE>
"Support Expenses": all (i) reasonable and necessary costs associated
----------------
with the continued normal operation, preservation and maintenance of the Site
and the Facility incurred after the payment of the Final Rent Payment, and (ii)
all payments of rent and other charges payable by Wachovia Capital Markets, Inc.
under the Ground Lease during the period beginning on the first day of the
Occupancy Period (defined in the Ground Lease) and ending on the last day of the
12th month after the commencement of the Occupancy Period.
"Survey": a current ALTA-ACSM boundary survey of the Site and existing
------
improvements in form and substance satisfactory to the Agent, and containing
such certifications as the Agent may request.
"Syndication Effective Date": the date on which the conditions
--------------------------
precedent set forth in Section 6.03 have been satisfied.
"Taxes": as defined in Section 4.06(a) of the Credit Agreement.
-----
"Termination Event": as defined in Section 15(a) of the Lease.
-----------------
"Termination Value": at any time of determination, an amount equal to
-----------------
the sum of (i) the Final Rent Payment, plus (ii) the aggregate outstanding
----
principal amount of the Tranch B Loans, plus (iii) the aggregate outstanding
----
principal amount of the Lessor Investment, plus (iv) without duplication of
----
amounts included in the Final Rent Payment, all unpaid Impositions payable in
connection with the purchase of the Facility pursuant to Section 14(d) of the
Lease or pursuant to any provision of Section 15 of the Lease.
"Third Party": any Person other than (i) the Lessor, (ii) the Company
-----------
or (iii) any Affiliate of any of the foregoing.
"Total Debt": means, at the time of computation thereof, all of the
----------
following of the Company and its subsidiaries as determined on a consolidated
basis (without duplication): (a) all Debt less (b) all reimbursement obligations
under documentary letters of credit and acceptances (whether or not the same
have been presented for payment).
"Tranche A Lender": any person who from time to time becomes or has
----------------
agreed to become a holder of a Tranche A Note and is a signatory to a
counterpart of the Credit Agreement as a Tranche A Lender or becomes a party
thereto as provided in Section 11.06 thereof, and their respective successors
and assigns; collectively, the "Tranche A Lenders."
-----------------
"Tranche A Loan Commitment": as to any Tranche A Lender, the
-------------------------
commitment of such Lender to make loans pursuant to
<PAGE>
Section 2.01(a) of the Credit Agreement in an amount equal to such Lender's Loan
Percentage Share of the Tranche A Loans, as set forth in the counterpart
agreement pursuant to which such Lender becomes a party to the Credit Agreement.
"Tranche A Loans": collectively, all Loans make by the Tranche A
---------------
Lenders to the Lessor pursuant to the Tranche A Loan Commitments in an aggregate
principal amount not to exceed the Aggregate Tranche A Loan Commitments.
"Tranche A Note" and "Tranche A Notes": as defined in Section 2.05(a)
-------------- ---------------
of the Credit Agreement.
"Tranche B Lender": any person who from time to time becomes or has
----------------
agreed to become a holder of a Tranche B Note and is a signatory to a
counterpart of the Credit Agreement as a Tranche B Lender or becomes a party
thereto as provided in Section 11.06 thereof, and their respective successors
and assigns; collectively, the "Tranche B Lenders."
-----------------
"Tranche B Loan Commitment": as to any Tranche B Lender, the
-------------------------
commitment of such Lender to make loans pursuant to Section 2.01(a) of the
Credit Agreement in an amount equal to such Lender's Loan Percentage Share of
the Tranche B Loans, as set forth in the counterpart agreement pursuant to which
such Lender becomes a party to the Credit Agreement.
"Tranche B Loans": collectively, all Loans make by the Tranche B
---------------
Lenders to the Lessor pursuant to the Tranche B Loan Commitments in an aggregate
principal amount not to exceed the Aggregate Tranche B Loan Commitments.
"Tranche B Note" and "Tranche B Notes": as defined in Section 2.05(b)
-------------- ---------------
of the Credit Agreement, as the same may be amended, supplemented, renewed,
extended for any period of time increased, rearranged or otherwise modified from
time to time.
"UCC": the Uniform Commercial Code as enacted in the State of Georgia
---
and any other jurisdiction whose laws may be mandatorily applicable.
"Vendor": any designer, supplier, manufacturer or installer of, or
------
provider of Property or services with respect to the Facility or any Property
included therein or any party thereof.
"Wachovia": Wachovia Bank, N.A., a national banking association, in
--------
its individual capacity, and its successors.
"Wholly Owned Subsidiary": any Subsidiary all of the shares of
-----------------------
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Company.
<PAGE>
EXHIBIT 10.17
AFTER RECORDING RETURN TO: CROSS REFERENCE TO:
Michelle A. Hickerson, Esq. Deed Book 14848, Page
Jones, Day, Reavis & Pogue 0001, Gwinnett County,
3500 SunTrust Plaza Georgia Records
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT ("Amendment") dated as of
---------
November ___, 1997 is between WACHOVIA CAPITAL MARKETS, INC., a Georgia
corporation ("Lessor") and SCIENTIFIC-ATLANTA, INC., a Georgia corporation
------
("Lessee").
------
WHEREAS Lessor and Lessee executed that certain Lease Agreement (as
amended, the "Lease") dated as of July 30,1997 and filed for record on October
-----
9, 1997 in Deed Book 14848, Page 0001, Records of Gwinnett County, Georgia;
WHEREAS Lessor and Lessee wish to amend certain provisions of the Lease,
subject to the terms set forth below;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as
follows with respect to the Lease:
1. Amendments to Lease. (a) Section 3(d) is amended so that (A) the term
-------------------
"and" located after the semicolon in paragraph (i) is deleted; (B) paragraph
(ii) is renumbered as paragraph (iii), and (C) a new paragraph (ii) is added
thereto as follows:
(ii) the amount that the Lessor determines, in the exercise of its
sole good faith discretion, to be its total losses and costs incurred in
connection with the Fixed Funding Rate as a result of the termination of
this Lease prior to July 30, 2004, such losses and costs to include,
without limitation, any loss of bargain, cost of funding, or, at the
election of the Lessor (but without duplication) losses or costs incurred
as a result of the Lessor's terminating, liquidating, obtaining or re-
establishing any hedge, interest rate swap, or similar or related trade
<PAGE>
position obtained by the Lessor with respect to the Loans and/or Lessor
Investment; and
(b) The following new definition is added to Schedule 1(b) to the Lease in
proper alphabetical order:
"Fixed Funding Rate": (x) a per annum fixed rate equal to 6.51%, plus
------------------
(y) the Applicable Margin for the Adjusted LIBO Rate.
(c) The following definition contained in Schedule 1(b) to the Lease is
amended in its entirety as set forth below:
"Basic Rent": (a) for any Rental Period (1) during the Lease Term from
----------
the Commencement Date up to and including January 30, 1999, or (2) after
July 30, 2004, if any, the sum of (i) all liabilities of the Lessor for
interest on the Loans and LI Yield (excluding Accrued Construction Period
LI Yield but including, without limitation, all LI Yield accruing during
the Basic Term on the Lessor Investment) accruing during such Rental
Period pursuant to and in accordance with the Credit Agreement, and (ii)
all liabilities for fees accruing during such Rental Period pursuant to
the Credit Agreement, and (b) for each Rental Period commencing on and
after January 31, 1999 and ending on or before July 30, 2004, (i) all LI
Yield (excluding Accrued Construction Period LI Yield but including,
without limitation, all LI Yield accruing during the Basic Term on the
Lessor Investment) accruing at the Fixed Funding Rate during such Rental
Period, and (ii) all liabilities for fees accruing during such Rental
Period pursuant to the Credit Agreement.
2. Binding Effect. This Amendment shall insure to the benefit of and
--------------
be binding upon Lessor and Lessee and their respective successors, legal
representatives and permitted assigns.
3. Defined Terms. All initially-capitalized terms used but not
-------------
defined herein shall have the meaning ascribed thereto in the Lease.
2
<PAGE>
IN WITNESS WHEREOF, the Lessor and Lessee have caused this Amendment to be
executed under seal as of the date first above written.
LESSOR:
Signed, sealed and delivered WACHOVIA CAPITAL MARKETS,
in the presence of: INC., a Georgia corporation
/s/ Gloria J. O'Brien By: /s/ Joseph J. Thomas
- ---------------------------- ------------------------------------
Unofficial Witness Printed Name: Joseph J. Thomas
---------------------
Printed Title: Senior Vice President
---------------------
/s/ Christie L. Steele
- ---------------------------- [CORPORATE SEAL]
Notary Public
My Commission Expires Notary Public, Clayton County, Georgia
My Commission Expires March 27, 1998.
[NOTARIAL SEAL]
LESSEE:
SCIENTIFIC-ATLANTA, INC., a
Georgia corporation
Signed, sealed and delivered
in the presence of:
By:/s/ H. A. WAGNER
------------------------------------
Printed Name: Harvey A. Wagner
-----------------------
/s/ William A. Mayer Printed Title: Senior Vice President-
Finance, Chief Financial
Officer & Treasurer
- ---------------------------- ------------------------
Unofficial Witness
[CORPORATE SEAL]
/s/ Julia S. Keating
- ----------------------------
Notary Public
My Commission Expires: Notary Public: Gwinnett County, Georgia
My Commission Expires: Sept. 26, 1999.
[NOTARIAL SEAL]
<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 Three Months Ended
April 2, 1999 March 27, 1998
--------------------------------------- --------------------------------------
PER SHARE PER SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- ------- ---------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER
COMMON SHARE
Earnings from continuing operations
available to common stockholders $ 20,814 75,859 $ 0.27 $ 17,137 78,725 $ 0.22
EFFECT OF DILUTIVE SECURITIES
Options -- 2,367 -- -- 939 --
------- ------- ----- ------ ------- ------
DILUTED EARNINGS PER
COMMON SHARE
Earnings from continuing operations
available to common stockholders
and assumed conversions $ 20,814 78,226 $ 0.27 $ 17,137 79,664 $ 0.22
======= ======= ====== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
April 2, 1999 March 27, 1998
--------------------------------------- -------------------------------------
PER SHARE PER SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER
COMMON SHARE
Earnings from continuing operations
available to common stockholders $ 54,996 76,763 $ 0.71 $ 48,453 78,619 $ 0.62
EFFECT OF DILUTIVE SECURITIES
Options -- 1,539 -- -- 1,294 --
------- ------ ------ ------ ------- ------
DILUTED EARNINGS PER
COMMON SHARE
Earnings from continuing operations
available to common stockholders
and assumed conversions $ 54,996 78,302 $ 0.71 $ 48,453 79,913 $ 0.62
======= ====== ====== ====== ======= ======
</TABLE>
The following information pertains to options to purchase shares of common stock
which were not included in the computation of Diluted Earnings per Common Share
because the options' exercise price was greater than the average market price
of the common shares:
<TABLE>
<CAPTION>
April 2, 1999 March 27, 1998
------------- --------------
<S> <C> <C>
Number of options outstanding 16 3,915
Weighted average exercise price $32.05 $21.67
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED APRIL 2, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-02-1999
<PERIOD-START> JUN-27-1998
<PERIOD-END> APR-02-1999
<CASH> 174,623
<SECURITIES> 61,043
<RECEIVABLES> 293,375
<ALLOWANCES> 9,804
<INVENTORY> 178,178
<CURRENT-ASSETS> 737,897
<PP&E> 255,121
<DEPRECIATION> 90,275
<TOTAL-ASSETS> 974,805
<CURRENT-LIABILITIES> 259,190
<BONDS> 612
0
0
<COMMON> 39,808
<OTHER-SE> 619,758
<TOTAL-LIABILITY-AND-EQUITY> 974,805
<SALES> 888,244
<TOTAL-REVENUES> 888,244
<CGS> 638,669
<TOTAL-COSTS> 638,669
<OTHER-EXPENSES> 86,967
<LOSS-PROVISION> (21)
<INTEREST-EXPENSE> 731
<INCOME-PRETAX> 78,566
<INCOME-TAX> 23,570
<INCOME-CONTINUING> 54,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,996
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</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
(including, but not limited to, the continued weak economic conditions in the
Asia Pacific region and the Latin America region); 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 development and / or deployment of new
products, including digital set-top products and the applications to be used on
such digital set-top products; 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 as both competitors and customers; reliance on software programs used by
the company or its suppliers containing problems related to computations that
must be made in 1999, 2000, and beyond ("Year 2000 Problems"); Year 2000
Problems that may exist in products currently or historically sold to customers
of the company; and delays in providing upgrades to customers to prevent Year
2000 problems in products sold by the company; 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.
